2006 Supreme(SC) 202

2006(2) Supreme 498
Supreme Court of India
(From Punjab and Haryana High Court)
H.K. Sema and Dr. A.R. Lakshmanan, JJ.
N. Khosla —Appellant
versus
Rajlakshmi (dead) & Ors. —Respondents
Civil Appeal No. 3280 of 2002
Decided on 6-3-2006
Counsel for the Parties :
For the Appellant : C.A. Sundaram, Sr. Advocate, Amitabh Chaturvedi, John Thomas and Dr. (Mrs.) Vipin Gupta, Advocates.
For the Respondents : Manish Vasisth, A.K. Thakur, K.K. Jha, S. Vasistha, Debasis Misra and Rakhi Ray, Advocates.

Important points1. Where the award of the Arbitrator does not create any right or extinguish any right in praesenti or in future, it being a declaration of pre-existing rights, it would not require registration u/s 17 of the Registration Act.2. Fraud avoids all judicial acts. A decree obtained by playing fraud is a nullity and it can be challenged in any Court, even in collateral proceedings.

Headnote:(i) Arbitration Act, 1940—Section 14—Registration Act, 1908—Section 17(1)(b)—Arbitration Award—Whether requires registration—Award was a declaration of pre-existing rights—Arbitrator recorded the finding on pre-existing facts, namely, Gift Deed, revocation of gift and partition of property between his sons subsequent to revocation of Gift Deed—Whether award of Arbitrator purports or operates to create, declare, assign, limit or extinguish in praesenti or in future any right, title or interest of the value of one hundred rupees and upwards to or in immovable property which requires registration u/s 17(1)(b) of the Registration Act—(No).

       Held : The Arbitrator examined the contentious issues presented from both sides and after threadbare discussion delivered his award on 10.7.1979. The Arbitrator in his award found inter-alia that the gift in question in favour of daughters was revoked and the plots were resumed by late Dewan Niranjan Prasad with the consent of the two daughters and Sh. B.S. Tawlani - husband of Smt. Saraswati in lieu of cash payment received by them. The Arbitrator also found that the mutation in favour of the respondents was obtained by fraudulent means and therefore, non-est. On 1.8.1979, S/Sh. K.J. Khosla and N. Khosla, the two sons of Dewan Niranjan Prasad filed an application under Section 14 of the Arbitration Act, 1940 for making the award a Rule of the Court. It appears that on 24.5.1981, notice of the application was issued to the respondents who filed objections contending inter-alia that the award dated 10.7.1979 created, declared, assigned, limited or extinguished right, title and interest of the value of Rs. 100 and upwards to or in immovable property and, therefore, the award was compulsorily registrable under Section 17(1)(b) of the Registration Act, 1908 (hereinafter as ‘the Act’) and since the award was not registered, it could not be made a rule of the Court. The Sub-Judge, by his order dated 25.5.1981 held that the award purports/operates to extinguish the rights of the daughters and create/declare rights, title and interest in the sons in immovable property, the value of which was more than Rupees One hundred only and thus, it compulsorily required registration under Section 17 of the Act. On this reasoning, the Sub-Judge declined to make the award as a rule of the Court. (Paras 6 & 7)

       Clause (b) of Section 17(1) enjoined registration of non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property. This section speaks of creating rights or extinguishing rights in praesenti or in future. Any right created or extinguished in the past is conspicuously absent. The creation of any right or extinguishment of any right is expressly excluded by the Act itself. (Para 22)

       Before we examine the award of the Arbitrator, we may at this stage notice the mutual agreement entered into between the parties referring the dispute to the Arbitrator. The dispute, which was referred to the Arbitrator by the parties, was with regard to Gift Deed and the resumption of the property gifted in favour of his three daughters - Smt. Rajlakshmi, Smt. Nirmala and Smt. Sarsaswati survived by her husband, B.C. Talwani. (Para 25)

       The award of the Arbitrator, as quoted above, would clearly show that by the award the Arbitrator simply recorded the finding on the basis of the pre-existing facts, namely, the Gift Deed, the revocation of the gift and the partition of the property between his sons subsequent to the revocation of Gift Deed. It is a declaration of pre-existing rights. It neither creates any right nor extinguishes any right in praesenti or in future. What Section 17(1)(b) of the Act requires is the creation of rights by decree in praesenti or in future. In the present case the award of the Arbitrator, as noted above, clearly delineated the pre-existing facts, on the basis of which the award was passed. (Para 27)

       Looking at the award of the Arbitrator and the law laid down by this Court the arguments of learned counsel for the respondents that the award created any right or extinguished any right in praesenti or in future which would require registration under the Act is noted only to be rejected. (Para 31)

       (ii) Arbitration Act, 1940—Section 14—Constitution of India—Article 136—Abatement of appeal—Original owner of property, ex-Minister and a retired Senior Judge of the High Court had an ancestral kothi—He had two sons and three daughters—He gifted three plots of land forming part of the kothi to his three daughters—In 1966, one of the daughters died—None of the three daughters having taken possession of plots, father revoked the Gift Deed and resumed plots—He paid Rs. 10,000/- to each of the daughters—After his death, daughters obtained mutation in their favour fraudulently—Arbitration proceedings initiated—Arbitrators examined contentious issues presented from both sides and delivered his award—Sub-Judge declined to make the award as a rule of Court—Appeal—Death of another daughter—Substitution application dismissed on ground of delay—Whether with abatement of appeal in respect of deceased daughter, whole appeal qua other respondents abated—(No)—Appeal qua other respondents is maintainable.

       Held : The Gift Deed was revoked by a memorandum dated 10.5.1971 and the two daughters and husband of the deceased daughter were paid Rs. 10,000/- each in lieu of the plots. It appears from the record that on 2.9.1971 Smt. Rajlakshmi and Sh. B.S. Talwani, husband of Smt. Sarswati had written a letter to Dewan Niranjan Prasad that they have received the full amount of Rs. 10,000/- as their share. (Para 13)

       The facts, as adumbrated above, would clearly show that each of the daughters had a distinct and separate share by metes and bounds and also that each one of them had received Rs. 10,000/- in lieu of the plots of land and therefore, it cannot be held that abatement of respondent No. 1 would abate the appeal qua the other respondents. (Para 14)

       In the facts and circumstances of the present case and the well settled position of law, as referred to above, we are of the view that the abatement of appeal in respect of Smt. Rajlakshmi would not abate the appeal qua other respondents. We hold that the appeal qua other respondents is maintainable. (Para 20)