Back
2025 Supreme(Online)(Del) 9917
IN THE HIGH COURT OF DELHI AT NEW DELHI
Jasmeet Singh, J
Raj Singh – Appellant
Versus
Sandeep Lakra – Respondent
O.M.P. 548/2008
For the Appellants/Petitioners: I.S. Dahiya
For the Respondents: K Solanki
Service of notice under Section 21 of the 1996 Act is a mandatory prerequisite for commencing arbitration. Furthermore, any document executed by an illiterate person is invalid if the beneficiary fails to prove that the contents were clearly explained, especially if the document is tainted by fraud.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 21 and 34(2)(a)(iii) - Challenge to arbitral award - Initiation of proceedings - Mandatory requirement of notice - Service of notice under Section 21 is a sine qua non for the commencement of arbitral proceedings - Absence of such notice strikes at the root of the arbitral process and violates procedural requirements. (Paras 42, 44)
(B) Fraud and Misrepresentation - Burden of proof - Transactions involving illiterate persons - Principles of equity mandate that a beneficiary must demonstrate that the transaction represents the conscious and voluntary act of the executant, beyond the mere physical act of signing - Failure to explain the contents of a legal document in a vernacular language to an illiterate party renders the agreement susceptible to being set aside on grounds of fraud. (Paras 51, 52, 53)
Facts of the case:
The petition challenged an arbitral award passed in an ex-parte proceeding. The petitioners contended that no notice under Section 21 was served upon them at the commencement of the arbitration, and that the alleged agreement to sell was fraudulent, as the executant was an illiterate person upon whom the contents of the document had never been explained. The respondents argued that proper notice was attempted and that the transaction was legitimate.
Findings of Court:
The court observed that the record failed to establish that a valid notice invoking arbitration was served upon the affected parties. Additionally, given the illiteracy of the person who purportedly executed the agreement, the beneficiary failed to discharge the burden of proving that the document was read over and explained to her. The document demonstrated a fundamental mismatch in the share of the property involved, confirming it was fabricated.
Issues: Whether the arbitral proceedings were vitiated due to non-service of the mandatory notice under Section 21 of the Act, and whether the agreement to sell was a product of fraud and misrepresentation, thus rendering the resulting award unsustainable.
Ratio Decidendi: A notice under Section 21 of the act is a mandatory condition precedent to the commencement of arbitral proceedings; its absence vitiates the process. Furthermore, when a transaction involves an illiterate party, the burden lies on the beneficiary to establish that the document was explained and understood, and failure to do so, combined with evidence of fraudulent fabrication, renders the agreement void and non-arbitrable.
Result: Petition allowed. The impugned award is set aside.
| Table of Content |
|---|
| 1. factual background involving property acquisition and dispute over ownership and allotment. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9) |
| 2. contentions regarding ex-parte arbitration, improper service of notice, and allegations of contractual fraud. (Para 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27) |
| 3. mandatory nature of section 21 notice as a condition precedent for initiating arbitral proceedings. (Para 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44) |
| 4. fraudulent contracts with illiterate individuals are void and render the entire arbitration agreement non-arbitrable. (Para 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58) |
| 5. final judicial setting aside of the arbitral award. (Para 59 , 60) |
JUDGMENT
1. This is a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“1996 Act”) seeking to challenge the Arbitral Award dated 08.03.2008 passed by the Arbitral Tribunal (“Tribunal”) in the matter of “Sh. Sandeep Lakra v. Smt. Keshar & Anr.” The original petition was filed by the petitioner Nos. 1 and 2, i.e. Smt. Keshar and her son Shri Raj Singh, who were respondents before the Arbitrator. The respondent No.1 was the claimant before the Arbitrator. During the pendency of present petition, the petitioner No. 1 died on 26.12.2023. The same was duly recorded vide order dated 22.03.2024. Therefore, petitioner No. 2 (“petitioner”) is the only contesting party in the present petition.
FACTUAL BACKGROUND
2. In 1972, the entire village abadi of Nangal Dewat (“village”), measuring approximately 700 bighas, was notified for compulsory acquisition for the expansion of the airport. The acquisition was undertaken under Section 4 of the Land Acquisition Act, 1894 vide Award No. 16/1985-86.
3. A writ petition was filed by the villagers challenging the acquisition of the residential sites located in Lal Dora Abadi and Extended Lal Dora Abadi before this Court bearing Writ No. 481 of 1982, which was later withdrawn upon an assurance from the Government and the Airport Authority of India that the villagers would be rehabilitated.
4. An area of 700 bighas in Revenue Estate of Village Rangpuri, Delhi was acquired by the Airport Authority of India for rehabilitation of evictees, which later came to be known as village Rangpuri. The Delhi Development Authority (“DDA”) was assigned the task of development of said area and allotment of the plots to eligible persons.
5. On 06.10.2005, DDA held a draw of lot for allotment of plots to 308 eligible persons. Sh. Shib Lal, predecessor-in-interest of the petitioner and Smt. Keshar, also had his residential home in the village. He got allotted an alternative residential plot under the rehabilitation scheme, being Plot No. 44, Block C measuring 550 square meters in village Rangpuri, Delhi. (“subject property”).
6. Sh. Shib Lal died on 06.12.2002 intestate, leaving behind two daughters, one son of the predeceased son, two daughters of the predeceased son along with the widow of the predeceased son. The family chart is reproduced as below:-
Shib Lal
(PREDECEASED) Randhir Singh (son) | Santosh (daughter) | Sumitra (daughter)
Smt. Keshar(wife) | Raj Singh(son) | Sunita (daughter) | Saroj(daughter)
(Smt. Keshar and Raj Singh are petitioners here)
7. The subject property was allotted to Sh. Shib Lal vide letter No. F-18(270)/2005/LSB(R)/799 dated 19.01.2007. Since there were relinquishment deeds dated 01.05.2006 and 07.11.2006 already in the favour of the petitioner, DDA vide its letter dated 01.08.2007 bearing No. F.18/2702005/LSB/7681 sanctioned the mutation of the said subject property in his favour. Thereafter, through allotment letter dated 06.08.2007 bearing No. F18/(270)/2005/LSB(R)/7795, the DDA formally allotted the said subject property to petitioner. Subsequently, possession of the same was handed over.
8. Facts as per the petitioner:-
8.1 In November 2005, Smt. Keshar wen
