# RAMESH KUMAR & ANR v. FURU RAM & ANR. ETC

- **Citation:** [2011] 10 S.C.R. 453
- **Court:** Supreme Court of India
- **Decided:** 2011-08-18
- **Case number:** Civil Appeal Nos. 7085-7086 of 2011
- **Bench:** R.V. Raveendran, A.K. Patnaik
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ramesh-kumar-anr-v-furu-ram-anr-etc-27132
- **Pages:** 43

## Headnote

SUIT:
Suits for declaration that the decrees obtained in suits
C
filed ulss 14 and 17 of Arbitration Act were null and void as
they were vitiated by fraud - Decreed by trial court on the
ground that the arbitration awards were not registered - First
appellate court and High Court dismissed the suits holding
that the suits were filed only for declaring that the arbitration
0
agreements and awards were invalid and the suit for such
declaration were not maintainable in view of ss. 32 and 33 of
Arbitration Act - HELD: Challenge to the validity of the
arbitration agreement and the awards was incidental to
challenge to the order making the awards rule of the court and
the decrees drawn in pursuance of such orders - Therefore,
E
ss. 32 and 33 were no bar to the suits - The decrees in suits
uls 14 and 17 of Arbitration Act were obtaining by committing
fraud upon the plaintiffs, the court and the State Government
evading liability to pay stamp duty and registration charges
- Judgment of first appellate court and High Court set aside
F
and judgments and decrees of trial court decreeing the suits
restored.
ARBITRATION ACT, 1940:
ss. 14 and 17 - Reference agreements - Awards -
G
Applications for making the awards rule of the court- HELD:
The entire procedure was fraudulent as (i) there was no dispute
between the parties, (ii) there was no reference of any dispute
to arbitration, (iii) the reference agreements were prepared
453
H
454
SUPREME COURT REPORTS
[2011] 10 S.C.R.
A and executed in pursuance of a pre-existing arrangement to
have collusive awards and (iv) the arbitrator was not required
to decide any dispute between the parties nor was there any
adjudication of the dispute by the arbitrator - Reference to
arbitration was to avoid stamp duty and registration charges
B - Obtaining sham and collusive arbitration awards when there
was no dispute and then obtaining a nominal decree in terms
of the said awards would be a fraud committed upon the court
and the State Government by evading liability to pay the
stamp duty and registration charges -
The irregularities,
c illegalities, suppressions and misrepresentations which
culminated in the orders making the awards the rule of the
court and directing that the awards be made decrees of the
court, show that the decrees in terms of the awards were
obtained by fraud - Stamp fraud - Registration Act, 1908 -
D s. 17 - Administration of justice - Fraud committed upon
court.
E
FRAUD - Connotation of - Explained.
REGISTRATION ACT, 1908:
ss. 17 and 49 - Compulsorily registrable documents -
Held: If the decree or order of the court is not rendered on
merits, but expressed to be made on a compromise and
comprises any immoveable property which was not the subject
mater of the suit or proceeding, such order or decree is
F compulsorily registrable - Further, clause (iv) of sub-s. (2) of
s. 17 excludes decrees or orders but does not exclude awards
of arbitrator- Any arbitration award which purports or operates
to create, declare any right, title or interest in any immovable
property of the value of more than Rs. 100 is compulsorily
G registrable - In the instant case, the awards are clearly
. documents which purport or operate to create and ·declare a
right, title or interest in an immoveable property of the value
of more than Rs. 100 which was not the subject matter of the
dispute or reference to arbitration - Therefore, the awards were
H compulsorily registrable, but as they were not registered they
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
455
ETC.
could not be acted upon u/s 49 of the Registration Act, 1908
A
nor could a decree be passed in terms of such unregistered
awards.
CONSTITUTION OF IND/A, 1950:
Article 136 - Scope of - Held: Normally Supreme Court
B
would not interfere with a finding of fact relating to fraud and
misrepresentation - But, in the instant case, as material
evidence produced by the plaintiffs-appellants had been
ignored and as the courts below failed to draw proper
inferences theref

## Text

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[2011] 10 S.C.R. 453
RAMESH KUMAR & ANR.
A
V.
FURU RAM & ANR. ETC.
(Civil Appeal Nos. 7085-7086 of 2011)
AUGUST 18, 2011
8
[R.V. RAVEENDRAN AND A.K. PATNAIK, JJ.]
SUIT:
Suits for declaration that the decrees obtained in suits
C
filed ulss 14 and 17 of Arbitration Act were null and void as
they were vitiated by fraud - Decreed by trial court on the
ground that the arbitration awards were not registered - First
appellate court and High Court dismissed the suits holding
that the suits were filed only for declaring that the arbitration
0
agreements and awards were invalid and the suit for such
declaration were not maintainable in view of ss. 32 and 33 of
Arbitration Act - HELD: Challenge to the validity of the
arbitration agreement and the awards was incidental to
challenge to the order making the awards rule of the court and
the decrees drawn in pursuance of such orders - Therefore,
E
ss. 32 and 33 were no bar to the suits - The decrees in suits
uls 14 and 17 of Arbitration Act were obtaining by committing
fraud upon the plaintiffs, the court and the State Government
evading liability to pay stamp duty and registration charges
- Judgment of first appellate court and High Court set aside
F
and judgments and decrees of trial court decreeing the suits
restored.
ARBITRATION ACT, 1940:
ss. 14 and 17 - Reference agreements - Awards -
G
Applications for making the awards rule of the court- HELD:
The entire procedure was fraudulent as (i) there was no dispute
between the parties, (ii) there was no reference of any dispute
to arbitration, (iii) the reference agreements were prepared
453
H
454
SUPREME COURT REPORTS
[2011] 10 S.C.R.
A and executed in pursuance of a pre-existing arrangement to
have collusive awards and (iv) the arbitrator was not required
to decide any dispute between the parties nor was there any
adjudication of the dispute by the arbitrator - Reference to
arbitration was to avoid stamp duty and registration charges
B - Obtaining sham and collusive arbitration awards when there
was no dispute and then obtaining a nominal decree in terms
of the said awards would be a fraud committed upon the court
and the State Government by evading liability to pay the
stamp duty and registration charges -
The irregularities,
c illegalities, suppressions and misrepresentations which
culminated in the orders making the awards the rule of the
court and directing that the awards be made decrees of the
court, show that the decrees in terms of the awards were
obtained by fraud - Stamp fraud - Registration Act, 1908 -
D s. 17 - Administration of justice - Fraud committed upon
court.
E
FRAUD - Connotation of - Explained.
REGISTRATION ACT, 1908:
ss. 17 and 49 - Compulsorily registrable documents -
Held: If the decree or order of the court is not rendered on
merits, but expressed to be made on a compromise and
comprises any immoveable property which was not the subject
mater of the suit or proceeding, such order or decree is
F compulsorily registrable - Further, clause (iv) of sub-s. (2) of
s. 17 excludes decrees or orders but does not exclude awards
of arbitrator- Any arbitration award which purports or operates
to create, declare any right, title or interest in any immovable
property of the value of more than Rs. 100 is compulsorily
G registrable - In the instant case, the awards are clearly
. documents which purport or operate to create and ·declare a
right, title or interest in an immoveable property of the value
of more than Rs. 100 which was not the subject matter of the
dispute or reference to arbitration - Therefore, the awards were
H compulsorily registrable, but as they were not registered they
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
455
ETC.
could not be acted upon u/s 49 of the Registration Act, 1908
A
nor could a decree be passed in terms of such unregistered
awards.
CONSTITUTION OF IND/A, 1950:
Article 136 - Scope of - Held: Normally Supreme Court
B
would not interfere with a finding of fact relating to fraud and
misrepresentation - But, in the instant case, as material
evidence produced by the plaintiffs-appellants had been
ignored and as the courts below failed to draw proper
inferences therefrom and had ignored a cause of fraud, the
C
Court is constrained to interfere with reference to a question
of fact - When the first appellate court and High Court held
that the decree was not null and void, the plaintiffs-appellants
were entitled to urge all grounds to show that the entire
transaction and arbitration proceedings were fraudulent and D
. the decree was also a result of fraud - In the instant case,
there is variance and divergence between the pleading and
documentary evidence, pleading and oral evidence and
between the oral and documentary evidence - It is well settled
that no amount of evidence contrary to the pleading can be
E
relied on or accepted - It is thus clear that the entire case of
the respondents is liable to be rejected -
The different
versions clearly demonstration fraud and misrepresentation
on the part of the respondents - Pleadings - Evidence.
ADVOCATE:
Acts of an advocate in arbitration proceedings and before
the court- An advocate engaged by respondents through their
counsel to make awards in their favour - He was appointed
F
as an arbitrator - On the following day, he made the awards
G
and gave the same to respondents - He signed the written
statements of defendants (appellants) in the proceedings u/
ss 14 and 17 of Arbitration Act as their counsel - Though he
was the third defendant in the said two suits, he appeared as
the counsel for defendants 1 and 2 without !heir co~sent or . hl
456
SUPREME COURT REPORTS
[2011] 10 S.C.R.
A knowledge - He made a statement before the court in the
proceedings ulss 14 and 17 of the Arbitration Act on behalf
of defendants 1 and 2 that they have no objection for decrees
being made - Held: The acts of the advocate are fraudulent.
8
The appellants filed two suits bearing C.S. No. 63 of
1997 and C.S. No. 64 of 1997 in the Court of the Civil
Judge, Junior Division, Kurukshetra against 'FR' and 'KR'
(the respondents in the instant appeals) seeking
declaration that the judgments and decrees dated
30.3.1992 in two suits bearing C. S. No. 366 of 1992 and
C C.S. No. 367 of 1992 ulss 14 and 17 of the Arbitration Act,
• 1940 were null and void. It was also claimed that the
agreements dated 12.3.1992 and the awards dated
13.3.1992 and the proceedings in the said suits before the
Court of Sr. Sub-Judge, Kurukshetra and the mutation
D proceedings pursuant to the said decrees were all null
and void. The case of the plaintiffs-appellants was that
they were brothers and co-owners of lands measuring 98
kanals and 19 marlas; that they entered into an
agreement to sell the said lands to the sons of two
E brothers, namely, 'FR' and 'KR' for a sum of Rs.
14,22,0001- and received Rs. 1,00,0001- as earnest money.
Since the respondents did not pay the money and failed
to get the sale completed by the stipulated date, it was
decided in a panchayat that the appellants would permit
F the respondents to cultivate their said lands for a period
of one and a half years without any rent in satisfaction
and discharge of the claim of refund of Rs. 1,00,0001-. The
respondents on the pretext of reducing the terms of the
settlement into writing took the plaintiffs to Kurukshetra
G and got some papers signed by them and, made them to
appear in court in that regard. Subsequently, during the
pendency of a pre-emption suit, the plaintiffs came to
know about the proceedings and the decrees drawn in
C.S. No. 36611992 and C.S. No. 36711992. The
H respondents-defendants in their written statements
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
457
ETC.
alleged that they were ready to get the sale deeds
A
registered but the appellants evaded and, therefore, the
matter was referred to arbitration and the awards made
by the arbitrator and the decrees made in terms of the
awards were lawful and valid. The trial court decreed the
suits holding that the awards were compulsorily
B
registrable and as the same were not registered under
the Registration Act, they were invalid and the
consequent judgments and decrees were also invalid.
However, the first appellate court and the High Court in
, secqnd appeal held in favour of the defendants- c
respondents holding that the suits for declaration were
not maintainable.
In the instant appeals filed by the plaintiffs, the
questions for consideration before the Court were: (i)
whether the suits by appellants were not maintainable;
D
(ii) whether the courts below were justified in holding that
there was no fraud or misrepresentation on the part of
the respondents in obtaining the decrees in terms of the
awards dated 13.3.1992; (iii) whether the arbitration
awards dated 13.3.1992 were invalid for want of E
registration; and (iv) whether the orders dated 30.3.1992
directing that the said awards be made the rule of the
court were invalid.
Allowing the appeals, the Court
HELD:
Question (i):
F
1.1 The appellants were seeking a declaration in C.S.
G
Nos. 63 and 64 of 1997 that the proceedings before the
Court of Sr. Sub-Judge, Kurukshetra, in the two suits No.
366 and 367 of 1992 u/ss 14 and 17 of the Arbitration Act
1940 resulting in the orders dated 30.3.1992 and decrees
made purtiuant to the said orders dated 30.3.1992 were
H
458
SUPREME COURT REPORTS
[2011] 10 S.C.R.
A null and void as they were vitiated by fraud and
misrepresentation and for the consequential relief of
setting aside the mutations based on such decrees and
possession of the lands. The challenge to the validity of
the agreements dated 12.3.1992 and awards dated
B 13.3.1992 was incidental to challenge the orders dated
30.3.1992 and the decrees drawn in pursuance of such
orders. [para 11) [473-F-H]
1.2 The first appellate court and the High Court have,
therefore, erroneously proceeded on the basis that the
C suits were filed only for declaring that the arbitration
agreements dated 12.3.1992 and awards dated 13.3.1992
were invalid and that the suits for such declaration were
not maintainable having regard to the bar contained in ss.
32 and 33 of the Arbitration Act. What has been lost sight
D of is the fact that the challenge was to the orders dated
30.3.1992 making the awards rule of the court. To
establish that the said judgments and decrees were
obtained by fraud and misrepresentation and, therefore,
invalid, it was also contended that the agreements dated
E 12.3.1992 and the awards dated 13.3.1992 and the
proceedings initiated u/ss 14 and 17 of the Arbitration Act
seeking decrees in terms of the awards were all
fraudulent. Therefore, ss. 32 and 33 of Arbitration Act
were not a bar to the suits (C.S. Nos. 63 and 64 of 1997)
F filed by the appellants. [para 11) [473-H; 474-A-D]
Question (ii):
2.1 The manner in which the agreements dated
12.3.1992 were entered, the awards dated 13.3.1992 were
G made and the said awards were made rule of the court,
clearly discloses a case of fraud. Ingredients of fraud are
an Intention to deceive, use of unfal.1" means, dellberate
concealment of material facts, or abuse ofl>C>sttton-of
confidence. 'Fraud' Is 'knowing misrepresentation of the
H truth or concealment of a material fact to Induce another
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
459
ETC.
concealment or false representation through a statement A
or conduct that injures another who relies on it in acting.
Any conduct involving deceit resulting in injury, loss or
damage to some one is fraud. [para 12] [474-E-G]
The Black's Law Dictionary and P.Ramnatha Aiyar's
Advanced Law Lexicon (3rd Edition, Book 2, Page 19148
1915). - referred to.
2.2 Any wilful attempt to defeat or circumvent any tax
law in order to illegally reduce one's tax liability is a tax
evasion which is termed as a tax fraud. The stamp duty c
payable under Stamp Act is considered to be a species
of tax levied on certain transfer documents and
instruments. Any wilful attempt to defeat the provision of
the Stamp Act or illegally evade one's liability to pay
stamp duty will be a stamp evasion which would amount 0
to a fraud. [para 14] [476-D-E]
2.3 In the instant case, one of the plaintiffs was
examined as PW-1 and a member of the Panchayat was
examined as PW-2. The evidence of PW1 and PW2 is
consistent and narrate the events described in the plaints
E
in the two suits showing the deceit and fraud practiced
upon the plaintiffs. The plaintiffs exhibited two
documents, that is, revenue extracts show-ing the
mutation in favour of the respondents and the decrees
made in pursuance of the orders dated 30.3.1992 by the
F
Sr. Sub-Judge in CS Nos.366 and 367 of 1992. [para 15]
[475-F-G]
2.4 The defendants - respondents did not step into
the witness box to give their version, which leads to an
G
adverse Inference that if the defendants had examined
themselves, their evidence would
have been
unfavourable to them (s.114 of Evidence Act, 1872 read
'with Illustration (g)). They however examined five
witnesses : the arbitrator, as DW-1; their power of
iattorney holder as OW 2, their Advocate who appeared
H
460
SUPREME COURT REPORTS
[2011] 10 S.C.R.
A in C.S.No.366 and 367 of 1992, as DW-3; a member of the
panchayat as DW4; and, a court officer, as DW-5
examined in connection with the production of
documents from the court. The oral evidence of DW1 to
DW4 unfolds a story, different from what was pleaded by
B the respondents in their written statement. [para 16-17)
[475-H; 476-A-C, E]
2.5 The respondents' version of what transpired as
emerging from the evidence of OW1 to DW4 indicates the
C sale in terms of the agreement of sale dated 18.10.1991
did not take place, and it was agreed before the
panchayat that the respondents should pay a sum of
Rs.15,00,000 in addition to earnest money of Rs.1,00,000/
-, thereby increasing the price to Rs.16,00,000/- instead
of Rs.14,22,000/-; the respondents paid the entire balance
D of Rs.15,00,000/- in cash in a lump sum to the appellants
in the presence of the pan .. hayat; to avoid the heavy
expenditure towards stamp duty and registration charges
for the sale deed, it was agreed that arbitration awards
would be obtained in favour of respondents and the
E appellants would agree for decrees in terms of the
awards, so as to confer title upon the respondents,
instead of executing sale deeds; two agreements dated
12.3.1992 were entered into appointing DW-1, as
arbitrator; the said arbitrator recorded the statements of
F parties on 12.3.1992 and made awards dated 13.3.1992
declaring 'FR' to be the owner in possession of 49 Kanals
10 Marlas of land and 'KR' to be the owner of 49 Kanals
and 9 Marlas of land; thereafter, and by orders dated
30.3.1992 the court directed that decrees be drawn up in
G terms of the award. [par~ 22) [480-A-G]
2.6 However, the documentary evidence produced
by the defendants - respondents narrate a completely
different story: The reference agreements dated
12.3.1992, the statements recorded by the arbitrator on
H 12.3.1992 and the awards dated 13.3.1992, all stated that
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
461
ETC.
appellants had borrowed Rs.8 lacs from 'FR' and Rs.8
A
lacs from 'KR' in November 1991 and had agreed to repay
the same with interest at the rate of 2% per month that
B
as they were not able to repay the amounts borrowed
with interest, they agreed to give 49 kanals 10 marlas of
land to 'FR' and 49 kanals 9 marlas of land to 'KR' and
delivered possession and confirmed the same before the
arbitrator. The identical plaints dated 13.3.1992 in the two
suits (CS Nos.366 and 367 of 1992) u/ss 14 and 17 of the
Arbitration Act, 1940 filed by 'FR' and 'KR' state about the
loan of Rs.8,00,000/- and making 'FR' and 'KR', owners c
of land in question. The written statements were also filed
on the same day the suits were filed, that is, 16.3.1992.
The written statements were not signed by either of the
appellants but were signed by Advocate (DW-1)
(defendant no.3 in tho.se suits) as advocate for the 0
defendants 1 and 2 (appellants). The brief written
statements stated that paras 1 to 7 of the plaint were
correct and admitted and that paras 8 and 9 were legal
and that, therefore, the suit be decreed. The order-sheets
dated 16.3.1992 in the said two suits, recorded that the
E
appellants (defendants 1 and 2 in the suits) appeared and
stated that they had no objection to decrees being made
F
in terms of the award. The appellants signed the ordersheets and were identtfied by the arbitrator as their
counsel. The cases (C.S.Nos.366 and 367 of 1992)
thereafter came up before the Sr. Sub-Judge on 30.3.1992.
The parties were not present. The orders of the court
dated 30.3.1992 in both suits were identical, and the
awards dated 13.3.1992 were made rule of the court. All
this lends credence to the case of the appellants that the
respondents had conspired with DW1 and DW3 and got G
certain documents prepared and persuaded appellants
who were barely literate, to give their consent on
16.3.1992 by misrepresenting to them that they were
giving consent for giving their lands for cultivation to
respondents for a period of one and half years as per th~ H
462
SUPREME COURT REPORTS
[2011] 10 S.C.R.
A settlement. The trial court ignored relevant evidence and
drew a wrong inference that there was no fraud or
misrepresentation. [paras 23-27 and 29] [480-H; 481-A-D;
482-G-H; 483-A-C; 485-E·G]
8
2.7 Thus, there are different versions in the pleadings
and evidence led by the respondents. The case set forth
in the written statements of defendants-respondents was
completely different from the case made out in the
evidence of their witnesses DW1, DW2, DW3 and DW4.
C More interestingly, the case set forth in the written
statements and the case made out in the oral evidence
were completely different from what is stated in the
documentary evidence. [para 28] [483-E-F]
2.8 It is well settled that no amount of evidence
D contrary to the pleading can be relied on or accepted. In
the instant case, there is variance and divergence
between the pleading and documentary evidence,
pleading and oral evidence and between the oral and
documentary evidence. It is thus clear that the entire case
E of the respondents is liable to be rejected. The di_fferent
versions clearly demonstrate fraud and misrepresentation
on the part of the respondents. [para 28] [484-H; 485-AB]
2.9 The fraudulent manner in which the orders were
F obtained from the Sr. Sub-Judge, Kurukshetra for making
decrees in terms of the awards is evident from the
proceedings in the case. [para 30] [485-G-H]
2.10 DW-1 was an advocate engaged by respondents
G through their counsel DW-3, to make awards in their
favour. On 12.3.1992, he is appointed as arbitrator. On
13.3.1992, he makes the awards and gives them to
respondents. On 16.3.1992, he signs the written
statements of defendants (appellants) in the proceedings
H u/ss 14 and 17 of Arbitration Act, 1940 as their counsel.
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
463
ETC.
Though he is the third defendant in the said two suits
A
(C.S. Nos.366 and 367 of 1992), he appears .as the
counsel for defendants 1 and 2 without their consent or
knowledge. On 30.3.1992, he makes a statement on behalf
of defendants 1 and 2 that they have no objection for
decrees being made. His acts are fraudulent. [para 31)
B
[487-H; 488-A-C]
.
2.11 There is also the stamp fraud committed by the
respondents. According to DW-1 to DW-4 under the
agreement of sale dated 18.10.1991, the sale price agreed
was Rs.14,22,000/-; that in the presence of a panchayat,
C
there was a settlement and the price was increased to
Rs.16,00,000 for 98 kanals 19 marlas of land; the
respondents wanted to avoid payment of stamp duty and
registration charges on the sale deeds. They were advised
by their lawyer that they could get decrees from a civil D
court in terms of an arbitration award so that sale deeds
need not be executed and stamp duty and registration
charges need not be paid. It was decided by the
respondents on the advice of their lawyer to get arbitration
awards declaring them as owners and also get court E
decrees in terms of the awards. Thus, the agreements,
arbitration awards and decrees were sham and nominal,
the object of respondents being to evade the stamp duty
and registration charges payable with respect to a sale
deed, by obtaining decrees from the court in terms of the
F
awards which declared their title. [para 33) [488-H; 489A-E)
2.12 The case shows another facet of such stamp
fraud. There can be a reference to arbitration only if there
is a dispute and there is an agreement to settle the G
dispute by arbitration. If the parties had already settled
the disputes before a panchayat for sale of half of the
property to 'FR' and another half to 'KR' for a
consideration of Rs.8,00,000 plus Rs.8,00,000/-, and
appellant had received the entire consideration, and
H
464
SUPREME COURT REPORTS
[2011) 10 S.C.R.
A delivered possession, there was no dispute between the
parties that could be referred to arbitration. The
respondents, on the advice of their advocate DW·3
decided to have nominal and sham arbitration
proceedings and awards by DW-1 and get decrees made
B in terms of the awards, only to avoid stamp duty and
registration charges. The entire procedure was
fraudulent because (i) there was no dispute between the
parties; (ii) there was no reference of any dispute to
arbitration; (iii) the reference agreements dated 12.3.1992
c were prepared and executed in pursuance of a preexisting arrangement to have a collusive awards; (iv) the
arbitrator was not required to decide any dispute
between the parties, nor was there any adjudication of the
dispute by the arbitrator. The references to arbitration,
0 the proceedings before the arbitrator, the awards of the
arbitrator, and the proceedings in court to get decrees in
terms of the awards, and the decrees in terms of the
award were all, thus, sham and bogus, the sole
fraudulent object being to avoid payment of stamp duty
and registration charges. [para 34] [489-F-H; 490-A-B·E·
E F]
2.13 The modus operandi adopted by the
respondents to obtain title to lands without a conveyance
and without incurring the stamp duty and registration
F charges due in respect of a conveyance by obtaining
sham and collusive arbitration awards when there was
no dispute, and then obtaining a nominal decree in terms
of the said awards would be a fraud committed upon the
court and the state government by evading liability to pay
G the stamp duty and registration charges. The
irregularities,
illegalities,
suppressions
and
misrepresentations which culminated in the orders dated
30.3.1992 in CS NOs.366 and 367 of 1992 directing that
the awards dated 13.3.1992 be made decrees of the court,
H show that the decrees in terms of the awards were
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
465
ETC.
obtained fraudulently. [para 35] [490-G-H; 491-A-B]
A
2.14 Normally, this Court would not interfere with a
finding of fact relating to fraud and misrepresentation.
But as material evidence produced by the defendants -
respondents had been ignored and as the courts below . 8
failed to draw proper inferences therefrom and had
ignored a cause of fraud, this Court is constrained to
interfere with 'reference to a question of fact. The suits
were decreed by the trial court on the ground that the
decrees were null and void and all the reliefs sought were
C
granted. When the decrees dated 30.3.1992 were held to
be null and void, the question of plaintiffs challenging
any other finding in the judgment did not arise. Therefore,
when the first appellate court and High Court held that
the decree was not null and void, the plaintiffs-appellants
were entitled to urge all grounds to show that the entire
D
transaction and arbitration proceedings were fraudulent
and the decree was also _a result of fraud. [para 36] [491B-E]
Question (iii):
E
3.1 Chapter Ill of Registration Act, 1908 relates to
registrable documents. Section 17 enumerates the
documents which are compulsorily registrable and the
exceptions to the categories of documents. If the decree
F
or order of the court is not rendered on merits, but
expressed to be made on a compromise and comprises
any immoveable property which was not the subject
mater of the suit or proceeding, such order or decree is
compulsorily registrable. Further, as clause (iv) of sub-s.
(2) of s.17 excludes decrees or orders of court, but does
G
not exclude awards of arbitrator, any arbitration award
which purports or operates to create, declare any right,
title or interest in any immoveable property of the value
of more than Rs.100 is compulsorily registrable. [paras
37-38] [491-F; 492-G-H; 493-A-B]
H
466
SUPREME COURT REPORTS
[2011) 10 S.C.R.
A
3.2 In the instant case, the reference agreements
dated 12.3.1992 were not in regard to any agreement of
sale or any dispute relating to immoveable property, or
in regard to the lands in regard to which the award was
made. It did not refer to the lands In question. No dispute
B regarding immoveable property was referred to
'arbitration or was the subject matter of the arbitration.
The alleged subject matter· of arbitration was nonpayment of Rs.8,00,000 said to have been borrowed by
each of the appellants. The arbitrator recorded an alleged
c statement by the borrowers (appellants) that they had
received Rs.8,00,000 from 'FR' and Rs.8,00,000/- from
'KR'; that they were not able to refund the same and,
therefore, they had given lands measuring 49 Kanals · 10
Marlas to 'FR' and another 49 Kanals 9 Marlas to 'KR'; and
0 that 'FR' and 'KR' confirmed that they had obtained
possession of the said land. The awards, therefore,
declared that 'FR' and 'KR' had become the absolute
owners of the lands in question. Thus, the awards are
clearly documents which purport or operate to create
E and declare a right, title or interest in an immoveable
property of the value of more than Rs.100 which was not
the subject of the dispute or reference to arbitration.
Therefore, the awards were compulsorily registrable. If
they were not registered, they could not be acted upon
u/s 49 of the Registration Act, 1908 nor could a decree
F be passed in terms of such unregistered awards.
Unregistered awards which are compulsorily registrable
u/s 17(1)(b) could neither be admitted in evidence nor
could decrees be passed in terms of the same. The courts
below have not considered or decided this aspect at all.
G [para 39-40) [493-B-G; 495-A]
H
Ratan Lal Sharma vs. Purshottam Harit 1974
(3) SCR 109 =AIR 1974 SC 1066; and Lachhman Dass vs.
Ram Lal - 1989 (2) SCR 250=1989 (3) SCC 99 - relied on.
•
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
467
ETC.
Question (iv)
A
..
4.1 If an award was not genuine, but was collusive
and sham, the court will not and in fact can not make it a
rule of the court. There should be a dispute, there should
be an agreement to refer the dispute to arbitration, there
8
should be reference to arbitration, there should be an
adjudication or decision by the arbitrator after hearing
parties, for a valid arbitration. If the parties had already
settled their disputes and the arbitration award was only
a ruse to avoid payment of stamp duty and registration C
with respect to a sale deed and declare a title in persons
who did not have title earlier, then the entire proceedings
is sham and bogus. In fact, DW-1 was not really an
arbitrator, nor the proceedings before him were
arbitration proceedings and the awards were not really
arbitration awards. If all these facts which have a bearing
D
on the making of the award and the validity of the award
are suppressed before the court and the court was misled
info making decrees in terms of the awards, necessarily
the proceedings are fraudulent and amounted to
committing fraud on the court. In these circumstances the
E
decrees in CS Nos.366·and 367 of 1992 on the file of the
Sr. Sub.Judge, Kurukshetra were invalid. [para 41] [4958-F]
.
4.2 The judgments of the first appellate court and
F
High Court are set aside and the decrees of the trial court
decreeing the suits filed by the appellants restored. [para
42] [495-G]
Case Law Reference:
1974 (3) SCR 109
1989 (2) SCR 250
relied on
relied on
para 40
para 40
CIVIL APPELLATE JURISDICT.ION : Civil Appeal No.
G
7085-7086 of 2011.
H
•
468
SUPREME COURT REPORTS
[2011) 10 S.C.R.
A
From the Judgment & Order dated 11.08.2009 of the High
Court of Punjab & Haryana at Chandigarh in R.S.A. Nos. 3229
& 3230 of 2004.
Abhay Kumar, Ashutosh Pande, Tenzing Tsering for the
8 Appellants.
c
Ajay Pal, Prashant Shukla, Abhinav Ramkrishna for the
Respondents.
The Judgment of the Court was delivered by
R.V. RAVEENDRAN, J. 1. Leave granted. For
convenience parties will also be referred by their ranks in the
suit or by name.
2. The appellants - two brothers, are the co-owners with
D equal shares, in lands measuring in all 98 Kanals and 19
marlas situated in village Udana, Tehsil lndri, District Kamal.
They entered into an agreement to sell the said lands to the
sons of Furu Ram and Kalu Ram (b:others) the respective first
respondent in these two appeals, on 18.10.1991 for a
E consideration of Rs.14,22,000/- and received Rs.1,00,000 as
earnest money. As per the terms of the agreement, the balance
was to be paid by the purchasers at the time of registration of
the sale deed and the sale was to be completed by 31.1.1992.
F The case of appellants (Ramesh Kumar & Naresh Kumar)
3. The respondents were not in a position to pay the
balance of the sale consideration and therefore failed to get
the sale completed by 31.1.1992. The respondents requested
for refund of the earnest money of Rs.100,000/-. The appellants
G were not willing to return the earnest money in view of the
breach by the respondents. There was a panchayat in that
behalf wherein it was decided that the appellants should permit
the respondents to cultivate their said lands fo( a period of one
and half years without any rent in satisfaction and discharge of
H
•
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
469
ETC. [R.V. RAVEENDRAN, J.]
the claim for refund of Rs.100,000/-. In pursuance of the said
A
panchayat settlement, appellants delivered possession of the
suit lands to the respondents. The respondents represented that
they would reduce the terms of the said settlement into writing
and requested the appellants to come to Kurukshetra to sign
some papers. The appellants trusted the respondents as it was
B
a panchayat settlement and went to Kurukshetra, and signed
the papers given by the respondents, under the bonafide belief
that they were signing papers relating to the terms of the
aforesaid settlement. The respondents also asked the
appellants to appear in court and confirm the same. The c
appellants accordingly went to the court and nodded their
assent when asked whether they were agreeable for the
settlement.
4. Some months thereafter, a suit was filed against
appellants in June 1992 by one Lal Singh and others claiming
D
pre-emption. During the pendency of that suit, the appellants
learnt that the respondents had obtained a mutation in their
• favour on the basis of some decrees obtained by them from
the court of Senior Sub-Judge, Kurukshetra. On verification, the
appellants were surprised to learn that consent orders had been
E
passed by the court of Sr. Sub-Judge, Kurukshetra on
30.3.1992 in C.S.No.366/1992 and C.S.No.367/1992, directing
decrees be drawn in terms of arbitration awards dated
13.3.1992 made by one Chandra Bhushan Sharma, Advocate,
Kurukshetra, appointed as per reference agreements dated
F
12.3.1992.
5. According to appellants, the agreements dated
12.3.1992, the arbitration awards dated 13.3.1992, the consent
decrees dated 30.3.1992 and the mutations .in favour of G
respondents were all illegal, null and void and non-est, being
the result of fraud and misrepresentation on the part of
respondents. According to appellants, the allegations in the
· said agreerpents, awards and as also the plaints in CS
Nos.366 and 367 of 1992 that appellants had borrowed Rs.8
H
470
SUPREME COURT REPORTS
(2011] 10 S.C.R.
A lacs from Furu Ram and Rs.B lacs from Kalu Ram agreeing to
repay the same with interest at 2% per month, that they had
given their lands to Furu Ram and Kalu Ram as they were riot
able to repay the two loans of Rs.800,000/- each, were all false.
· They alleged that they had not engaged any counsel for
B appearance in CS Nos.366 and 367 of 1992, nor signed any
written statements, nor participated in any arbitration
proceedings, nor made any statements agreeing for making
decrees in terms of any award. The appellants claimed that they
only signed some papers which respondents had represented
c to be documents relating_ to giving their lands on licence basis
for one and half years instead of returning the earnest money
deposit of Rupees One Lakh. The appellants therefore filed two
suits on 11.11.1993 (renumbered as CS No.63 and 64 of 1997)
in the court of the Civil Judge, Junior Division, Kurukshetra,
0 against Furu Ram and Kalu Ram respectively for a declaration
that the judgments and decrees dated 30.3.1992 in
C.S.No.366/1992 and 367/1992 (by which the awards dated
13.3.1992 were made the rule of the court), the agreements
dated 12.3.1992, the awards dated 13.3.1992, the proceedings
in C.S.No.366/1992 and 367/1992 and the mutations in
E pursuance of the said decrees were all null and void, non-est
and not binding on them and for the consequential relief of
possession of the suit properties. In the said suits (CS No.63
of 1997 and 64 of 1997) the arbitrator 'C.B. Sharma' was
impleaded as the second defendant.
F
The case of respondent (Furu Ram and Kalu Ram)
6. In their respective written statements in the two suits,
Furu Ram and Kalu Ram alleged that they were ready to get
G the sale deeds registered on the date fixed for sale as per the
agreement of sale dated 18.10.1991, but the appellants
evaded, and therefore the matter was referred to Arbitrator C
B Sharma by both parties for settlement. It was further alleged
· that the Arbitrator recorded the statements of appellants as well
H as respondents and made the awards. They contended that the
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
471
ETC. [R.V. RAVEENDRAN, J.]
awards made by the arbitrator and the decrees made in terms
A
of the awards were lawful and valid.
The Proceedings
7. In.the two suits filed by appellants (C.S.Nos.63 and 64 ·
of 1997) the trial court framed appropriate issues as to whether
8
judgments and decrees dated 30.3.1992 were null and void;
whether plaintiffs were entitled to possession: whether the suits
were not maintainable; whether the suits were not within time:
and whether plaintiffs were estopped from ti.ling the suits, by
their own conduct; and whether the suits were bad for
C
misjoinder/non-joinder of parties. Parties led oral and
documentary evidence in support of their cases.
8. The trial court decreed the two suits of appellants by
common judgment dated 7.2.1998. The trial court held that as o
the awards dated 13.3.1992 created a right in immovable
properties in favour of the respondents who did not have any
pre-existing right therein, they were compulsorily registrable;
and as the arbitration awards were not registered under the
Registration Act, 1908, they were invalid and.consequently the
E
judgments and decrees dated 30.3.1992 of the court, making
decrees in terms of the said awards were also invalid. In view
of the said finding the trial co~rt declared that the decrees dated
30.3.1992, the agreements dated 12.3.1992, the awards dated
13.3.1992 and the mutations were illegal, null and void, not
F
binding on the plaintiffs and granted the relief of possession.
In the course of the said judgment, the trial court however held
that the evidence of the advocate Sudhir Sharma (DW-3) and
the arbitrator C.B. Sharma (DW-1) showed that the appellants
had full knowledge of the facts and circumstances of the two
G
cases (CS Nos.366 and 367 of 1992) and only thereafter they
filed written statements admitting the claims: .and that therefore
the case of the appellants that the consent decrees dated
30.3.1992 were obtained by fraud and misrepresentation could
not be accepted.
H
4 72
SUPREME COURT REPORTS
[2011] 10 S.C.R.
A
9. The respondents filed appeals against the said common
judgment and decrees dated 7.2.1998 of the trial court. The
said appeals, filed on 19.3.1998, renumbered as C.A. No.37/
2003 and 38/2003, were allowed by the first appellate court
(Addi. District Judge, Kurukshetra) by judgment dated 3.8.2004
s and the common judgment and decrees of the trial court in the
two suits were set aside and the suits filed by the appellants
were dismissed with costs. The first appellate court held that
the consent decrees in terms of the awards could not be
challenged on the ground that they were not registered; that
c having regard to section 32 of the Arbitration Act, 1940, no suit
would lie on any ground whatsoever, for a decision upon the
existence, effect or validity of an award, nor could any award
be enforced, set aside, modified or in any way affected,
otherwise than as provided under the said Act; that an award
0 could be challenged or contested only by an application under
section :}3 of the Act, and an award could be set aside only on
any of the grounds mentioned in section 30 of the said Act. The
first appellate court further held that as no application was filed
under sections 30 and 33 of the said Act by appellants for
setting aside the awards and as the awards had been made
E rule of the court, the suits for declaration filed by the appellants
were barred by section 32 of the Arbitration Act, 1940, and
were not maintainable. The second appeals filed by the
appellants against the said common judgment of the first
appellate court were dismissed by the High Court by judgment
F dated 11.8.2009 holding that decrees passed by a court in
terms of the arbitration awards under section 17 of the
Arbitration Act, 1940, did not require registration and that
arbitration awards could be challenged only by applications
under section 33 of the said Act.
G
. Questions for consideration
10. The said common judgment of the High Court is
challenged in these appeals by special leave. On the
contentions urged, the questions that arise for our consideration
H are as under:
RAMESH KUMAR & ANR. v. FURU RAM & ANR.
473
ETC. [R.V. RAVEENDRAN, J.]
(i)
Whether the suits by appellants were not
A
maintainable?
(ii)
Whether the courts below were justified in holding
that there was no fraud or misrepresentation on the
part of the respondents in obtaining the decrees in
8
terms of the awards dated 13.3.1992?
(iii)
Whether the arbitration awards dated 13.3.1992
were invalid for want of registration?
(iv)
Whether the orders dated 30.3.1992 directing that
C
the said awards be made the rule of the court,
invalid?
Re: Question (i)
11. The appellants sought a declaration that the orders
D
dated 30.3.1992 passed by the Senior Sub-Judge,
Kurukshetra in C.S.No.366 and 367 of 1992 (directing that
decrees be drawn in terms of the awards dated 13.3.1992) and
the decrees drawn in terms of the awards as also the
agreements dated 12.3.1992 and the awards dated 13.3.1992
E
which led to such decrees, were null and void, as they were the
result of fraud and misrepresentation; and that the mutations
obtained on the basis of the said decrees were also null and
void. In other words, the appellants were seeking a declaration
that the proceedings before the court of Sr. Sub-Judge,
Kurukshetra, in the two suits under sections 14 and 17 of the
Arbitration Act 1940 resulting in the orders dated 30.3.1992
F
and decrees made pursuant to the said orders dated 30.3.1992
were null and void as they were vitiated by fraud and
misrepresentation and for the consequential relief of setting
G
aside the mutations based on such decree.s and possession
of the lands.