AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (8) TMI 1314
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....resh 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 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 for a period of one and half years without any rent in satisfaction and discharge of the claim for refund of Rs. 100,000/-. In pursuance of the said 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 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....
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....(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 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. 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 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 as respondents and made the awards. They contended that the awards made by the arbitrator and the decrees made in terms of the awards were lawful and valid. The Proceedings 7. In the two suits filed by appellants (C.S.Nos.63 ....
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....ered; that 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 could be challenged or contested only by an application under section 33 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 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 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 b....
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....at has been lost sight 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 12.3.1992 and the awards dated 13.3.1992 and the proceedings initiated under sections 14 and 17 of the Arbitration Act, 1940 seeking decrees in terms of the awards were all fraudulent. Therefore, sections 32 and 33 of Arbitration Act, 1940 were not a bar to the suits (C.S.Nos. 63 and 64 of 1997) filed by the appellants. Re : Question (ii) 12. The manner in which the agreements dated 12.3.1992 were entered, the awards dated 13.3.1992 were made and the said awards were made rule of the court, clearly disclose a case of fraud. Fraud can be of different forms and different hues. It is difficult to define it with precision, as the shape of each fraud depends upon the fertile imagination and cleverness who conceives of and perpetrates the fraud. Its ingredients are an intention to deceive, use of unfair means, deliberate concealment of material facts, or abuse of position of confidence. `....
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....d conveyances of lands, and bargains and sales of goods, etc., to the damage of another person which may be either by suppression of the truth, or suggestion of a falsehood. (Tomlin) The colour of fraud in public law or administrative law, as it is developing, is assuming different shade. It arises from a deception committed by disclosure of incorrect facts knowingly and deliberately to invoke exercise of power and procure an order from an authority or tribunal. It must result in exercise of jurisdiction which otherwise would not have been exercised. That is misrepresentation must be in relation to the conditions provided in a section on existence or non-existence of which power can be exercised." 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 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 to a fraud. 15. One of the plaint....
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.... identified them as their counsel before the court. On further questioning, he admitted that he was not aware about the transaction of sale and purchase between the parties or whether there was any dispute at all in regard to sale or purchase of land. He stated that the parties submitted an arbitration agreement in regard to a loan and that he gave the awards in regard to the loan; and that the reference agreements dated 12.3.1992 were not in regard to any dispute relating to property nor about the sale or purchase thereof nor about specific performance of any agreement of sale and that the dispute was only in regard to money and he was not appointed as arbitrator to settle any dispute in regard to any land. He also stated that he did not charge any fee in regard to the arbitration or making the awards. 19. DW2 - Ram Kumar, (son of Furu Ram), power of attorney holder of defendants, stated that the agreement of sale in regard to 98 kanals 19 marlas was got executed for a consideration of Rs. 14 lakhs in favour of three sons of Furu Ram (Ram Swaroop, Veer Singh and Ram Kumar) and four sons of Kalu Ram (Bhagat Ram, Jagir Singh, Ramesh Kumar and Lala Ram); that Rs.One lakh ....
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.... stated (in cross-examination) that the payment of Rs. 15 lakhs was made after the appellants made statements before court agreeing for a decree in terms of awards. 21. DW-4 Chander Pal Singh stated that he was instrumental in getting the parties to enter into the agreement of sale; that dispute arose as respondents wanted to register sale deeds showing a lesser consideration and appellants wanted the sale deed for the full consideration; that therefore a panchayat was conveyed; that he was present when the negotiations took place before the panchayat and settlement was reached by agreeing for a price of Rs. 16 lakhs; that Rs. 15 lakhs was paid by Ram Kumar (Power of Attorney Holder of respondents) to appellants in the presence of Panchayat consisting of himself, Purushottam, Harbhajan and Sudhir Sharma. Sudhir Sharma, counsel for respondents got C.B.Sharma as Arbitrator to make an award. After the decrees were made in terms of the awards, he tore the receipt for Rs. 15 lakhs given by appellants. 22. The respondents' version of what transpired as emerging from the evidence of their four witnesses (DW1 to DW4) (shorn of inconsistencies in the evidence) can thus be su....
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....and to Furu Ram and 49 kanals 9 marlas of land to Kalu Ram and delivered possession and confirmed the same before the arbitrator. The arbitral awards stated that the disputes relating to payment of Rs. 8 lacs with interest thereon were referred to the Arbitrator, that the appellants had admitted borrowing Rs. 8 lacs from Furu Ram and Rs. 8 lacs from Kalu Ram and further admitted that being unable to pay the said amount, had given 49 kanals 10 marlas of land to Furu Ram and 49 kanals 9 marlas of land to Kalu Ram and therefore, Furu Ram has become the owner of 49 Kanals and 10 Marlas of land and Kalu Ram had become the owner of 49 kanals and 9 marlas of land. 25. The identical plaints dated 13.3.1992 in the two suits (CS Nos.366-367 of 1992) under sections 14 and 17 of the Arbitration Act, 1940 filed by Furu Ram and Kalu Ram read as under : "Application u/s 14/17 of the Arbitration Act to make the award dated 13.3.1992 the rule of the court. Sir, It is prayed as under:- 1. That the respondents no.1 and 2 had borrowed a sum of Rs. 8,00000/- from the applicant-plaintiff. 2. That the respondents no.1 and 2 failed to repay the amount and interest to....
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....he rule of the court. Decree sheet be prepared accordingly and the award dated 13.3.1992 - Ex C1 shall form the part of the decree sheet. The file be consigned to the record room." 28. We find three different versions from the pleadings and evidence led by the respondents. The case set forth in their written statements was completely different from the case made out in the evidence of their witnesses DW1, DW2, DW3 and DW4. 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. Let us refer to them briefly. (a) The written statements filed by the respondents merely stated that the appellants did not execute the sale deed, on the date fixed for sale, as per agreement of sale dated 18.10.1991 and therefore, and the said dispute was referred to arbitration and awards were made by the arbitrator on the basis of their statements and decrees were made in terms of the award. (b) The evidence of DW1 to DW4 was that appellants unreasonably demanded the price to be increased from Rs. 14,22,000/- to Rs. 16,00,000/-, that the resultant dispute was refer....
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.... the evidence of DW1 (C.B. Sharma) and DW3 (Sudhir Sharma) that appellants had knowledge of the full facts and circumstances of the cases filed under sections 14 and 17 of the Arbitration Act and that with such knowledge, they had filed written statements therein, admitting the facts and, therefore it could not be said that the judgments and decrees dated 30.3.1992 were obtained by misrepresentation and fraud. But the documentary evidence produced by the respondents clearly showed that in CS Nos. 366 and 367 of 1992, no notice/summons were issued to defendants; that appellants (defendants 1 & 2) did not sign the written statements which admitted the plaint averments; that the arbitrator who was the third defendant in those suits, very strangely appeared as advocate for defendants 1 and 2 (appellants) and signed the written statement and made a statement before the court on 30.3.1992 that defendants did not have any objection to the awards. All this lends credence to the case of appellants that respondents had conspired with DW1 and DW3 and got certain documents prepared and persuaded appellants who were barely literate, to give their consent on 16.3.1992 by misrepresenting to....
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.... sham and nominal, that an alleged Panchayat had settled the dispute on 12.3.1992, that thereafter, Sushil Sharma, advocate for respondents and C.B. Sharma, an advocate who was made to act as an Arbitrator at the instance of respondents created a bunch of documents and obtained the signatures of the appellants and created proceedings for obtaining decrees in terms of the awards. 31. C. B. Sharma was an advocate engaged by respondents through their counsel Sushil Sharma, 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 herein) in the proceedings under sections 14 and 17 of Arbitration Act, 1940 as their counsel. Though he is the third defendant in the said two suits (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. We fail to understand how a counsel can do these things. His acts are fraudulent. 32. We may next refer to the in....
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.... In short 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 awards which declared their title. 34. Let us refer to 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 dispute by arbitration. If the parties had already settled the disputes before a panchayat for sale of half of the property to Furu Ram and another half to Kalu Ram for a consideration of Rs. 8,00,000 plus Rs. 8,00,000/-, and appellant had received the entire consideration, and delivered possession, there was no dispute between the parties, that could be referred to arbitration. The respondents, on the advice of their advocate Sudhir Sharma decided to have a nominal and sham arbitration proceedings and awards by C.B. Sharma and get decrees made 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....
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....36. 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 failed to draw proper inferences therefrom and had ignored a cause of fraud, we are 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 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 transaction and arbitration proceedings were fraudulent and the decree was also a result of fraud. Be that as it may. Re : Point (iii) 37. Chapter III 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 which are compulsoril....
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....ily registrable. 39. As noticed above, 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 regarding immoveable property was referred to arbitration or was the subject matter of the arbitration. The alleged subject matter of arbitration was non-payment of Rs. 8,00,000 said to have been borrowed by each of the appellants. The arbitrator recorded an alleged statement by the borrowers (appellants) that they had received Rs. 8,00,000 from Furu Ram and Rs. 8,00,000/- from Kalu Ram; that they were not able to refund the same and therefore they had given lands measuring 49 Kanals 10 Marlas to Furu Ram and another 49 Kanals 9 Marlas to Kalu Ram; and that Furu Ram and Kalu Ram confirmed that they had obtained possession of the said land. The awards therefore declared that Furu Ram and Kalu Ram had become the absolute owners of the lands in question. Thus the awards are clearly documents which purport or operate to create and declare a right, title or interest in an immoveable property....