sajikoduvath

BURDEN of PROOF – Initial Burden and Shifting Onus of Proof in Indian Law

Saji Koduvath, Advocate, Kottayam & Jojy George Koduvath, Kottayam.

Taken from: Rules on Burden of proof and Adverse Inference

Key Takeaways

1. Burden of proof is always static and does not shift; onus of proof shifts.
- Burden of proof it is upon whom who suffers, if no evidence on the question in dispute.
- Burden of proof would be on the party who asserts the affirmative of the issue.
- Plaintiff has to win on title – A Plaintiff has to win the title-suit on his evidence; not on the weakness of the adversary.
- But it must be noted that the plaintiff need to show only a high degree of probability and that it shifts the onus on the defendant.
- Court is Entitled to Consider the Title set up by the Defendants also.
2. Burden of Proof loses significance if both parties adduced evidence.
3. Suit on title & high degree of probability– If plaintiff discharges his burden by showing high degree of probability (that the title vests in him), onus shifts.
- Onus of proof ‘shifts’ on adducing adequate evidence by the party concerned.
- If the defendant fails to release the onus shifted, the burden on plaintiff shall stand discharged (and the title with the plaintiff is inferred).
4. Adverse inference is drawn when a party withholds documents, even if he has no burden.
- If a party does not examine himself: Adverse inference is drawn if a party does not examine himself: But, it is Not an Invariable Rule.
- Adverse inference is taken after considering (a) pleadings, (b) relevancy of the withheld evidence and (c) burden of proof.
- Presumption and adverse inference for non-production of evidence are always optional.
5. If the defendant establishes his right as lessee etc. If the defendant establishes his right to continue possession as lessee, licencee, mortgagee etc. (honouring title of the plaintiff) the plaintiff’s suit for possession will fail.
6. Burden of proof is static; Contrary Observations are Legally Incorrect.
7. When burden of proof is discharged?
When there is (i) sufficient evidence is adduced or (ii) admission by other side

Burden and Standard of Proof in English Law

The Evidence Act in force in India systematically codifies the rules of evidence in civil and criminal cases; and provides clear guidelines on what is admissible in court and how evidence is to be presented. But, in the UK (especially England and Wales), there is no full-fledged or comprehensive single enactment similar to the ‘Evidence Act’ in India.

Fundamentally, English courts follow the Common Law (judge-made law), with respect to the basic doctrines of evidence, such as Burden of proof, Standard of proof, Probative evidence, Relevancy, Res gestae rule, Direct evidence, Circumstantial evidence, Primary evidence. Various procedural enactments provide piecemeal statutory provisions, also. The important statutes in this regard are-

Police and Criminal Evidence Act 1984 (PACE)
Criminal Justice Act 2003
Youth Justice and Criminal Evidence Act 1999
Civil Evidence Act 1995.

‘Burden of Proof’ and ‘Onus’ used in English Courts

‘Burden of proof’ is related to the requirement as to the standard of evidence placed upon each party to the legal proceedings. The burden or standard in criminal cases (“beyond a reasonable doubt”) is different from that in civil cases (“preponderance or balance of probabilities,” “a good arguable case,” or “much the better of the argument”).

The term ‘onus’ is also used in English courts in place of ‘burden of proof‘.

Indian Law: Abstract – Primary Principles

Burden of proof is static ; It never shifts

The burden of proof is always static and does not shift.

Burden of proof lies on the person, who would fail if no evidence is adduced on either side.
Ordinarily, the burden of proof would be on the party who asserts the affirmative of the issue and it rests, after evidence is gone into, upon the party against whom, at the time the question arises, judgment would be given, if no further evidence were to be adduced by either side.

See:

Kundanlal v. Custodian Evacuee Property, AIR 1961 SC 1316,
Raghavamma v. A. Chenchamma,AIR 1964 SC 136,
Bharat Barrel v. Amin Chand, (1999) 3 SCC 35,
Gian Chand & Brothers v. Rattan Lal, AIR 2013 SC 1078,
Rajesh Jain v. Ajay Singh, AIR 2023 SC 5018; 2023-10 SCC 148.

What is ‘Onus’ used in Indian Courts?

Onus means – ‘the responsibility or duty to do something‘.
Though the Indian Evidence Act does not contain the word “onus”, it is made clear by judicial pronouncements that it differs from the ‘static’ burden of proof. The onus of proof ‘shifts’ the duty of proving a fact upon one party when it is discharged, as the reply evidence is required from the other party.
Burden of Proof and Onus of Proof (as used in Indian Law) are recognized in English Law as ‘Legal Burden‘ and ‘Evidential Burden‘ respectively.

Halsbury’s Laws of England – ‘Legal burden‘ and ‘Evidential burden‘

Distinction between the legal burden of proof and evidential burden of proof is expounded in Halsbury’s Laws of England, 4th Edition, Volume 17 [para 13 and 14]. It reads as under:

“13. The legal burden is the burden of proof which remains constant throughout a trial; it is the burden of establishing the facts and contentions which will support a party’s case. If at the conclusion of the trial he has failed to establish these to the appropriate standard, he will lose. The legal burden of proof normally rests upon the party desiring the court to take action; thus, a claimant must satisfy the court or tribunal that the conditions which entitle him to an award have been satisfied. In respect of a particular allegation, the burden lies upon the party for whom substantiation of that particular allegation is an essential of his case. There may therefore be separate burdens in a case with separate issues.”
“14. The legal burden is discharged by way of evidence, with the opposing party having a corresponding duty of adducing evidence in rebuttal. This constitutes evidential burden. Therefore, while both the legal and evidential burdens initially rested upon the appellant, the evidential burden may shift in the course of trial, depending on the evidence adduced. As the weight of evidence given by either side during the trial varies, so will the evidential burden shift to the party who would fail without further evidence?”

Onus of proof ‘shifts’

Onus of proof ‘shifts’ on adducing ‘satisfactory’ (or high degree of) evidence by the party upon whom the onus lies, and thus discharging his burden.

Burden of proof Loses its Importance

(a) if both parties adduced evidence
(b) if there is sufficient evidence on an issue.

Burden of proof remains academic

In such a situation, it remains academic:

Chidambara Sivaprakasa Pandara Sannadhigal v. Veerama Reddi, 49 IA 286 303: AIR 1922 PC 292 (referred to in: Seturatnam Aiyar v. Venkatachala Gounden, (1919) 47 IA 76 and Kumbham Lakshmanna v. Tangirala Venkateswarlu, AIR 1949 PC 278);
Union of India v. Sugauli Sugar Works (P) Ltd., 1976-3 SCC 32 (referred to in Sushil Kumar v. Rakesh Kumar, , 2003-8 SCC 673; Rakesh Kumar v. Sunil Kumar, 1999-2 SCC 489; Mohd. Abdullah Azam Khan v. Nawab Kazim Ali Khan, 2022 (11 ) JT 214: 2022 (16 ) SCALE 689: 2023 KLT OnLine 1084 (SC)
Cox and Kings (Agents) Ltd. v. Workmen [(1977) 2 SCC 705 (referred to in Sushil Kumar v. Rakesh Kumar, , 2003-8 SCC 673; Rakesh Kumar v. Sunil Kumar, 1999-2 SCC 489; Mohd. Abdullah Azam Khan v. Nawab Kazim Ali Khan, 2022 (11 ) JT 214: 2022 (16 ) SCALE 689: 2023 KLT OnLine 1084 (SC)
Raghunathi v. Raju Ramappa Shetty, AIR 1991 SC 1040;
Sushil Kumar v. Rakesh Kumar, 2003-8 SCC 673,
Mohd. Abdullah Azam Khan v. Nawab Kazim Ali Khan, 2022 (11 ) JT 214: 2022 (16 ) SCALE 689: 2023 KLT OnLine 1084 (SC)

Burden of proof gets significance

(a) when no evidence at all on the question in dispute
(b) when a person on whom the burden of proof lay, failed to adduce any evidence altogether
(c) when no adequate evidence so as to shift onus, or
(d) when best evidence is withheld.
(e) when Court cannot “Make Up its Mind” from the evidence adduced (Kumbhan Lakshmanna v. Tangirala Venkateswarlu, AIR 1949 PC 278).

When burden of proof is discharged?

When there is (i) sufficient evidence is adduced or (ii) admission by other side

National Insurance Co. Ltd. vs. Rattani (2009) 2 SCC 75: AIR 2009 SC 1499, answers this question. It says –

1. The question as to whether burden of proof has been discharged by a party to the lis or not, would depend upon the facts and circumstances of the case.
2. If the facts are admitted or, if otherwise,sufficient materials have been brought on record so as to enable a Court to arrive at a definite conclusion, it is idle to contend that the party on whom the burden of proof lies would still be liable to produce direct evidence.

See also: Mohd. Abdullah Azam Khan Vs. Nawab Kazim Ali Khan, 2022 (11 ) JT 214: 2022 (16 ) SCALE 689: 2023 KLT OnLine 1084 (SC), National Insurance Company Ltd. v. Savitri Devi, 2013-11 SCC 554.

Kumbhan Lakshmanna v. Tangirala Venkateswarlu, AIR 1949 PC 278, where it was held as under:

“When, after the entire evidence is adduced, the tribunal feels it cannot make up its mind as to which of the versions is true, it will hold that the party on whom the burden lies has not discharged the burden; but if it has on the evidence no difficulty in arriving at a definite conclusion, then the burden of proof on the pleadings recedes into the background.”
Quoted in: Dulhin Mahabati Kuer v. Raghunandan Prasad Singh, AIR 1958 Pat 249, Surajbhan Kailash Chand v. Hari Shanker Vashsist, AIR 1976 Delhi 70, Krishne Gowda v. Ningegowda, ILR 1987 Kar 2883, Patel Ramanbhai Mathurbhai v. Govindbhai Chhotabhai Patel, 2020-1 GLH 261, Vinod Agrawal v. Bharat Kumar Lathi, ILR 2012 MP 84.

In R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami, AIR 2003 SC 4548: (2003) 8 SCC 752, it is held as under:

“In our opinion, in a suit for possession based on title once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant it is for the defendant to discharge his onus and in the absence thereof the burden of proof lying on the plaintiff shall be held to have been discharged so as to amount to proof of the plaintiff’s title.“
Quoted in: Anil. Rishi vs. Gurbaksh Singh, (2006) 5 SCC 558; City Municipal. Council, Bhalki Vs. Gurappa, (2016) 2 SCC 200.

Duty to produce ‘helpful documents’

The Supreme Court held in Gopal Krishnaji Ketkar v. Mahomed Haji Latif, AIR 1968 SC 1413, that adverse inference has to be drawn (even if no burden), if a party to the suit withheld documents.
In National Insurance Co. Ltd., New Delhi v. Jugal Kishore, 1988-1 SCC 626, it was stated as under:
- “This Court has consistently emphasized that it is the duty of the party which is in possession of a document which would be helpful in doing justice in the cause to produce the said document and such party should not be permitted to take shelter behind the abstract doctrine of burden of proof.”
See also:
- Union of India v. Vijay Krishna Uniyal, 2018-11 SCC 382.

“Legal Burden” and Sec. 101 Evidence Act

In Rajesh Jain v. Ajay Singh, AIR 2023 SC5018; 2023-10 SCC 148, it is observed as under:

“29. There are two senses in which the phrase ‘burden of proof ’ is used in the Indian Evidence Act, 1872 (Evidence Act, hereinafter). One is the burden of proof arising as a matter of pleading and the other is the one which deals with the question as to who has first to prove a particular fact. The former is called the ‘legal burden’ and it never shifts, the latter is called the ‘evidential burden’ and it shifts from one side to the other. [See Kundanlal v. Custodian Evacuee Property (AIR 1961 SC 1316)].
30. The legal burden is the burden of proof which remains constant throughout a trial. It is the burden of establishing the facts and contentions which will support a party’s case. …. On the other hand, the evidential burden may shift from one party to another as the trial progresses according to the balance of evidence given at any particular stage; the burden rests upon the party who would fail if no evidence at all, or no further evidence, as the case may be is adduced by either side (See Halsbury’s Laws of England, 4th Edition para 13). While the former, the legal burden arising on the pleadings is mentioned in Section 101 of the Evidence Act, the latter, the evidential burden, is referred to in Section 102 thereof. [G. Vasu V. Syed Yaseen (AIR 1987 AP139) affirmed in Bharat Barrel Vs. Amin Chand [(1999) 3 SCC 35].”

‘Onus Probandi’ and Sec. 106 of the Evidence Act

The Latin maxim, Onus Probandi, means ‘burden of proof’. This maxim generally conveys the rule and impression that one who asserts a positive fact has to prove it.

Sec. 101 to 103 of the Indian Evidence Act, 1872, deal with the burden of proof in general. Sec. 104 to 106 deal with specific situations.

Sec. 101 to 106, Indian Evidence Act, reads as under:

S. 101. Burden of proof. Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.
S. 102. On whom burden of proof lies. The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.
S. 103. Burden of proof as to particular fact. The burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.
S.104. The burden of proving the fact to be proved to make evidence admissible. The burden of proving any fact necessary to be proved in order to enable any person to give evidence of any other fact is on the person who wishes to give such evidence.
S.105. The burden of proving that the case of accused comes within exceptions. When a person is accused of any offence, the burden of proving the existence of circumstances bringing the case within any of the General Exceptions in the Indian Penal Code, (45 of 1860), or within any special exception or proviso contained in any other part of the same Code, or in any law defining the offence, is upon him, and the Court shall presume the absence of such circumstances.
S.106. The burden of proving fact specially within knowledge. When any fact is specially within the knowledge of any person, the burden of proving that fact is upon him.

In an election case, referring Sec. 106 and Sec. 114 of the Evidence Act, the Supreme Court, observed in Puneet Rai v. Dinesh Chaudharv, (2003) 8 SCC 204, that the onus was on the respondent to prove that he belongs to ‘Passi’ community which falls in the Schedule caste category.

In Sushil Kumar v. Rakesh Kumar, (2003) 8 SCC 673, the Supreme Court found that the burden of proving the age of the elected candidate (above 25 years) was upon him. The Apex Court held as under:

“28. It is no doubt true that the burden of proof to show that a candidate who was disqualified as on the date of the nomination would be on the election petitioner.
29. It is also true that the initial burden of proof, that nomination paper of an elected candidate has wrongly been accepted, is on the election petitioner.
30. In terms of Section 103 of the Indian Evidence Act, however, the burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.
31. Furthermore, in relation to certain matters, the fact being within the special knowledge of the respondent, the burden to prove the same would be on him in terms of Section 106 of the Indian Evidence Act. However, the question as to whether the burden to prove a particular matter is on the plaintiff or the defendant would depend upon the nature of the dispute.
32. The age of a person, in an election petition has to be determined not only on the basis of the materials placed on records but also upon taking into consideration the circumstances attending thereto. The initial burden to prove the allegations made in the election petition although was upon the election petitioner but for proving the facts which were within the special knowledge of the respondent, the burden was upon him in terms of Section 106 of the Evidence Act.
It is also trite that when both parties have adduced evidence, the question of onus of proof becomes academic [See: Union of India and Others vs. Sugauli Sugar Works (P) Ltd., (1976) 3 SCC 32,(Para 14) and M/s Cox and Kines (Azents) Ltd. vs. Their Workmen and Others, AIR 1977 SC 1666, (Para 36)]. Furthermore, an admission on the part of a party to the lis shall be binding on him and in any event a presumption must be made that the same is taken to be established.”

‘Onus Probandi’ and Rule of ‘Best Evidence’

Rule of ‘Best Evidence’ requires a party to suit to produce all material evidence with him. If he fails to produce the best evidence, then illustration ‘g’ of Section 114 Evidence Act allows the court to take the presumption that, if that evidence had been produced, it would have been unfavourtable to him. In Dharampal v. State of Haryana (P& H, 2020) it is observed as under:

“20. Chapter VII in Part-Ill of the Evidence Act, 1872 examines the burden of proof and onus of proof or “onus probandi”. Section 101 lays down that whosoever, wants the court to give judgment as to any legal right or liability dependent on the existence of fact, which he asserts, must prove that those facts exist. However, Section 106 provides that any fact which is essentially within the knowledge of any person, the burden of proving that fact is upon him. Illustration-b to Section 106 specifically provides that if A is charged with travelling on a railway train without ticket, the burden of proving that he had bought a ticket is on the person who was found travelling. Still further, illustration ‘g’ of Section 114 require production of best evidence before the Court/authority. It lays down that the evidence which could be but is not produced, would be deemed to be unfavourable to the person who holds it from the Court/authority. It means that if a person fails to produce the best evidence which he could produce then the presumption would be that the aforesaid evidence, if had been produced, would be unfavorable to the person, who withholds it.”

Suit on Title – Weakness of the Defence & High Degree of Probability

A Plaintiff has to win the title-suit on his evidence; not on the weakness of the adversary. But it must be noted that the plaintiff need to show only a high degree of probability; and that it shifts the onus on the defendant.

This principle applies in both civil and criminal cases. In M. Srinivasulu Reddy v. State Inspector of Police, 1991 (3) ALT 542, 1993 CriLJ 558, it is held as under:

“The prosecution cannot take advantage of the weaknesses of the defence or cannot take advantage of the inconsistent stand taken by the accused from time to time. The prosecution must stand on its own legs basing on the evidence that has been let in by it.”

The Supreme Court of India, in Ratnagiri Nagar Parishad v. Gangaram Narayan Ambekar, (2020) 7 SCC 275, held as under:

“The initial burden of proof is on the plaintiffs to substantiate his cause, if he failed to discharge the same, the weakness in the defense cannot be the basis to grant relief to the plaintiffs and burden cannot be shifted on the defendants.”

In R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami, AIR 2003 SC 4548: (2003) 8 SCC 752, the law is stated in the following terms :

“A fact is said to be ‘proved’ when, if considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of a particular case, to act upon the supposition that it exists. It is the evaluation of the result drawn by applicability of the rule, which makes the difference. …”
In a suit for recovery of possession based on title it is for the plaintiff to prove his title and satisfy the court that he, in law, is entitled to dispossess the defendant from his possession over the suit property and for the possession to be restored to him. However, as held in A. Raghavamma v. A. Chenchamma there is an essential distinction between burden of proof and onus of proof:
- burden of proof lies upon a person who has to prove the fact and which never shifts. Onus of proof shifts. Such a shifting of onus is a continuous process in the evaluation of evidence.
In our opinion, in a suit for possession based on title once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant it is for the defendant to discharge his onus and in the absence thereof the burden of proof lying on the plaintiff shall be held to have been discharged so as to amount to proof of the plaintiff’s title.
In the present case, the trial Court and the first appellate Court have noted that the plaintiff has not been able to produce any deed of title directly lending support to his claim for title and at the same time the defendant too has no proof of his title much less even an insignia of title. Being a civil case, the plaintiff cannot be expected to proof his title beyond any reasonable doubt; a high degree of probability lending assurance of the availability of title with him would be enough to shift the onus on the defendant and if the defendant does not succeed in shifting back the onus, the plaintiff’s burden of proof can safely be deemed to have been discharged. In the opinion of the two Courts below, the plaintiff had succeeded in shifting the onus on the defendant and, therefore, the burden of proof which lay on the plaintiff had stood discharged. …”.
The suit property, which is a shop, is situated just adjoining the property owned by the temple. It has come in the evidence that the property which is now owned by the temple was at one time owned by the forefathers of the plaintiff and they made an endowment in favour of the temple. The father of the plaintiff, and then the plaintiff, continued to be the trustees. The trouble erupted when in the late sixties the Charity Commissioner appointed other trustees and Chief Executive Officer of the trust dislodging the plaintiff from trusteeship. The plaintiff staked his claim to trusteeship of the temple submitting that the office of the trustee of the temple was hereditary and belonged to the plaintiff. The plaintiff was managing the trust property as trustee while the property adjoining to the property of the temple, i.e. the suit property, was in possession of the plaintiff as owner occupied by the tenant, the defendant No.2., inducted as such by the father of the plaintiff. At the instance of the Chief Executive Officer of the trust, the defendant No.2, during the continuance of the tenancy in favour of the plaintiff, executed a rent note in favour of the temple attorning the latter as his landlord. This the defendant no.2 could not have done in view of the rule of estoppel as contained in Section 116 of the Evidence Act. It was at the instance of the newly appointed trustees and the Chief Executive Officer who on behalf of the temple started claiming the suit property in occupation of the tenant, defendant No.2, to be trust property belonging to the temple. But for this subsequent development the title of the plaintiff to the suit property would not have been in jeopardy and there would have been no occasion to file the present suit.
The learned counsel for the temple, defendant-respondent No.1, faintly urged that the appellant being a trustee of the temple was trying to misappropriate the property belonging to the temple. For such an insinuation there is neither any averment in the written statement nor any evidence laid. Such a submission made during the course of hearing has been noted by us only to be summarily rejected. We have already held that the appellant is the owner of the suit property entitled to its possession and recovery of arrears of rent from the defendant No.2.
… A high degree of preponderance of probability proving title to the suit property was raised in favour of the appellant and the courts below rightly concluded the burden of proof raised on the plaintiff having been discharged while the onus shifting on the defendant remaining undischarged. ..”
(Quoted in: Anil. Rishi vs. Gurbaksh Singh, (2006) 5 SCC 558; City Municipal. Council, Bhalki Vs. Gurappa, (2016) 2 SCC 200)

In Smriti Debbarma v. Prabha Ranjan Debbarma, 2023 SCC OnLine SC 9,it is held bu our Apex Court as under:

“31. The burden of proof
- ^{[See Paragraph 19 in Anil Rishi v. Gurbaksh Singh, (2006) 5 SCC 558 where the expression ‘burden of proof’ is used in three ways, namely, (i) to indicate the duty of bringing forward evidence in support of a proposition at the beginning or later; (ii) to make that of establishing a proposition as against all counter-evidence; and (iii) an indiscriminate use in which it may mean either, or both of the others.]}
to establish a title in the present case lies upon the plaintiff as this burden lies on the party who asserts the existence of a particular state of things on the basis of which she claims relief [See Addagada Raghavamma v. Addagada Chenchamma and Another, AIR 1964 SC 136.] This is mandated in terms of Sec. 101
- ^{[Sec. 101: Burden of Proof.- Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.]}
of the Evidence Act, which states that burden on proving the fact rests with party who substantially asserts in the affirmative and not on the party which is denying it. This rule may not be universal and has exceptions,[See Ss. 103, 104 and 105 of the Evidence Act.] but in the factual background of the present case, the general principle is applicable. In terms of Sec. 102
- ^{[Sec. 102: On whom the burden of proof lies.- The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.]}
of the Evidence Act, if both parties fail to adduce evidence, the suit must fail.[See Anil Rishi v. Gurbaksh Singh, (2006) 5 SCC 558.] Onus of proof, no doubt shifts and the shifting is a continuous process in the evaluation of evidence, but this happens when in a suit for title and possession, the plaintiff has been able to create a high degree of probability to shift the onus on the defendant. In the absence of such evidence, the burden of proof lies on the plaintiff and can be discharged only when he is able to prove title.[See R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami V.P. Temple and Another, (2003) 8 SCC 752.] The weakness of the defence cannot be a justification to decree the suit. [See Union of India and Others v. Vasavi Cooperative Housing Society Limited and Others, (2014) 2 SCC 269.] The plaintiff could have succeeded in respect of the Schedule ‘A’ property if she had discharged the burden to prove the title to the Schedule ‘A’ property which squarely falls on her. This would be the true effect of Ss. 101 and 102 of the Evidence Act. [See Sebastiao Luis Fernandes (DEAD) Through LRs. And Others v. K.V.P. Shastri (DEAD) Through LRs. And Others, (2013) 15 SCC 161.]
Therefore, it follows that the plaintiff should have satisfied and discharged the burden under the provisions of the Evidence Act, failing which the suit would be liable to be dismissed.”

Court is Entitled to Consider the Title set up by the Defendants also

In Ram Chandra Sakharam Mahajan Vs. Damodar Trimbak, AIR 2007 SC 2577, it is observed –

In a recovery on title suit, the burden is on the plaintiff to establish title.
Court is also entitled to consider the rival title set up by the defendants
Weakness of defence to establish title, would not enable plaintiff to a decree.

The Apex Court held:

“The suit is for recovery of possession on the strength of title. Obviously, the burden is on the plaintiff to establish that title. No doubt in appreciating the case of title set up by the plaintiff, the Court is also entitled to consider the rival title set up by the defendants. But the weakness of the defence or the failure of the defendants to establish the title set up by them, would not enable the plaintiff to a decree. There cannot be any demur to these propositions.”
“14. We find that the trial Court and the appellate Court were not justified in refusing the amendment of the plaint sought for by the plaintiff. No doubt there had been delay in seeking amendment but that delay could have been compensated by awarding costs to the contesting defendants 1 to 9. Therefore, we are satisfied that the amendment sought for by the plaintiff ought to have been allowed. We are inclined to allow the amendment sought for, since it would enable the Court to pin-pointedly consider the real dispute between the parties and would enable it to render a decision more satisfactorily to its conscience. We, therefore, allow the amendment as sought for by the plaintiff at a belated stage. The amendment will be carried out by the plaintiff in the trial Court within three months from this date as per the practice followed in the trial Court. Obviously defendants 1 to 9 would have an opportunity to file an additional written statement to the amended plaint. They will be entitled to file an additional written statement within a period of four months from the date of this judgment.”

Document ex-facie reveals no title – specific declaration as to invalidity not necessary

The Supreme Court held in Kizhakke Vattakandiyil Madhavan v. Thiyyurkunnath Meethal Janaki (Aniruddha Bose & Sudhanshu DhuliaJJ.), 2024(2) KLT 789 (SC), held as under:

“18. …. If a document seeking to convey immovable property ex-facie reveals that the conveyer does not have the title over the same, specific declaration that the document is invalid would not be necessary. The Court can examine the title in the event any party to the proceeding sets up this defence. Chiruthey could not convey any property over which she did not have any right or title. Her right, if any, would stem from the second deed of lease (Exhibit A-1). We are conscious of the fact that no claim was made before any forum for invalidating the deed dated 14th July 1910 (Exhibit A-20).”

By proving a deed, title of the executing person is not automatically confirmed

The Supreme Court held in Kizhakke Vattakandiyil Madhavan v. Thiyyurkunnath Meethal Janaki (Aniruddha Bose & Sudhanshu DhuliaJJ.), 2024(2) KLT 789 (SC), also held as under:

“18. … It would be trite to repeat that even if subsistence of a deed is proved in evidence, the title of the executing person (in this case Chiruthey) does not automatically stand confirmed. ….. … But in absence of proper title over the subject property, that lease deed even if she was its sole lessor would not have had been legally valid or enforceable. If right, title or interest in certain property is sought conveyed by a person by an instrument who herself does not possess any such form of entitlement on the subject being conveyed, even with a subsisting deed of conveyance on such property, the grantee on her successors-in-interest will not have legal right to enforce the right the latter may have derived from such an instrument.”

Easement of Necessity – Who has the Burden to show Alternate Way

In Sree Swayam Prakash Ashramam v. G. Anandavally Amma, AIR 2010 SC 622, it is held that the plaintiff claiming easement of necessity or grant has only a primary burden to prove the absence of any alternate pathway.

“In a case where the original plaintiff was claiming easement right either as grant or as of necessity the plaintiff has only a primary burden to prove the absence of any alternate pathway. As the defendants have not proved the existence of any pathway for access to Plaint `A’ schedule property the version of the plaintiff that there is no alternate pathway shall be accepted. … The defendants have not entered the witness box to disprove the evidence led by the plaintiff.”

Who has the Onus to show Alternate Way Could Not be Used ‘As Of Right’

When the existence of alternate way is shown by the alleged servient owner of easement of necessity, the onus to prove that the way cannot be used “as of right” is upon the dominant owner. In Antony @ Anthappan v. George, LAWS(KER) 2012-11-179 it is held by t6he Kerala High Court as under:

“11. When the existence of an alternate way is shown, the appellants ought to have shown that they could not use it as of right. That is because that is a matter within the knowledge of the appellants. The appellants did not adduce evidence in that line.”

The High Court then remanded the case giving the dominant owners an opportunity to adduce evidence to show that the alternate way was not one which they were entitled to use as of right.

No pleading; but, Issue Covered by Implication – Evidence can be relied on

The Supreme Court, in the matter of Standard Chartered Bank v. Andhra Bank Financial Services Ltd., (2006) 6 SCC 94, held that if parties know that a plea was involved in trial and if such a plea is covered by issue by implication then in such a case mere fact that the plea was not expressly taken in pleading would not necessary disentitle a party from relying upon it if it is satisfactorily proved by evidence.

Plaintiff Fails to Establish ‘Probability‘ and Defendant ‘Withholds Documents‘

From R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami, AIR 2003 SC 4548: (2003) 8 SCC 752, the law is clear –

in a suit for possession based on title once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant it is for the defendant to discharge his onus and in the absence thereof the burden of proof lying on the plaintiff shall be held to have been discharged so as to amount to proof of the plaintiff’s title.

Adverse Inference Drawn (Even if no burden), if Withheld Documents

The Supreme Court held in Gopal Krishnaji Ketkar v. Mahomed Haji Latif, AIR 1968 SC 1413, as under:

Even if a party to the suit has no burden, the Court can draw an adverse inference if he withholds important documents in his possession.

From the above, it is definite that, in a proper case, if the defendant who withholds important document (admittedly) in his possession, the court can take the adverse presumption against the defendant, even if the plaintiff (who has the burden of proof or who is bound to create a high degree of probability) did not adduce any evidence.

Duty to produce helpful document

In National Insurance Co. Ltd., New Delhi v. Jugal Kishore, 1988-1 SCC 626, Our Apex Court stated the law as under:

“This Court has consistently emphasized that it is the duty of the party which is in possession of a document which would be helpful in doing justice in the cause to produce the said document and such party should not be permitted to take shelter behind the abstract doctrine of burden of proof.” (quoted in: Sushil Kumar v. Rakesh Kumar, (2003) 8 SCC 673)

Also Read: Best Evidence Rule in Indian Law

Party Does Not Examine -Adverse Inference if only he is a Material Witness

In Bijoy Kumar Karnani vs Lahori Ram Prasher, AIR 1973 Cal 465, the High Court considered the argument as to non-examination of the plaintiff as a witness in the light of Section 114, illustration (g) of the Evidence Act which provides that the Court may presume that evidence which could be and is not produced would, if produced be unfavourable to the person who withholds it. The court pointed out that the plaintiff was not a material witness as to the disputed facts, sans admitted facts. Citing Gurbakhsh Singh v. Gurdial Singh, AIR 1927 PC 230, it was observed that the argument of the defendant would be apt if only the plaintiff was a material witness, as stated by the Privy Council as under:

“The true object to be achieved by a Court of Justice can only be furthered with propriety by the testimony of the party who personally knowing the whole circumstances of the case can dispel the suspicions attaching to it. The story can then be subjected to all its particulars to cross-examination.”

Adverse Inference – if a Party Not Examine Himself: Not an Invariable Rule

In Iswar Bhai C. Patel vs. Harihar Behera, (1999) 3 SCC 457, the Supreme Court observed as under:

“17…..Having not entered into the witness-box and having not presented himself for cross-examination, an adverse presumption has to be drawn against him on the basis of the principles contained in Illustration (g) of Section 114 of the Evidence Act, 1872.” (Quoted in: Iqbal Basith v. N. Subbalakshmi, (2021) 2 SCC 718)

The Supreme Court also observed in Vidhyadhar v. Manikrao, AIR 1999 SC 1441, as under:

“Where a party to the suit does not appear in the witness box and states his own case on oath and does not offer himself to be cross examined by the other side, a presumption would arise that the case set up by him is not correct.”

Party Not Examine Himself: Not an Invariable Principle

But, it is not an invariable principle. Two contra-situations are pointed out by Kerala High Court:

It is applied only against the party on whom the burden of proof lies;
It is not applicable where there is no much scope for any oral evidence.

In Mammu Haji and Company Vs. Vasanthalakshmi, 2014 -3 KHC 213 that this proposition of law laid down by the Apex Court applies only in cases where the party on whom the burden of proof lies withholds himself from adducing evidence. It is held as under:

“In short, this decision can be applied against the party on whom the burden of proof lies; but did not adduce evidence. In the instance case, the burden of proof absolutely lies on the defendant who claims protection under S.106 of the Act. Therefore, the non-examination of the plaintiff is not fatal and no adverse inference can be drawn against the plaintiff, where the lease arrangement is admitted as such by the defendant, and the entire burden of proof lies on the defendant.”

In Upendra Rao v. Ammini, ILR 2017-1 Ker 466, the Kerala High Court pointed out that the principle in Vidhyadhar v. Manikrao (that when a party to a suit does not appear in the witness-box and does not offer himself to be cross-examined by the other side, adverse presumption can be taken) cannot be applied to the facts of a case where there is not much scope for any oral evidence.

In P. Sukumaran v. K. A. Hamza Haji, ILR 2015-2 Ker 166, the Kerala High Court distinguished Vidhyadhar v. Manikrao observing as under”

“13. In Vidhyadhar’s case , the Apex Court was dealing with a case where the first defendant in the suit contended that, the sale deed executed by the second defendant in favour of the plaintiff was fictitious and the whole transaction was a bogus transaction as only Rs. 500/- was paid as sale consideration to the second defendant. He further claimed that payment of Rs. 4500/- to the second defendant at his home before the registration of the deed was wholly incorrect. This plea was not supported by the first defendant as he did not enter the witness box. It was in such circumstances, the Apex Court held that, the non-examination of the first defendant, by itself, is enough to reject his claim that the transaction of sale between second defendant and the plaintiff was a bogus transaction.
14. But, in the case on hand, the tenancy in respect of the petition schedule building and the rate of rent are not in dispute. When a plea of discharge of rent is set up by the tenant, the burden is upon him to prove that plea of discharge and no adverse inference or a presumption under Section 114(g) of the Evidence Act, 1872, can be drawn against the landlord on his omission to appear as a witness and to state his own case on oath.”

In Janki Vashdeo Bhojwani v. Indusind Bank Ltd., (2005) 2 SCC 217, our Apex Court followed Vidhyadhar v. Manikrao, AIR 2005 SC 439, and held as under:

“No one can delegate the power to appear in witness box on behalf of himself. To appear in a witness box is altogether a different act. A general power of attorney holder cannot be allowed to appear as a witness on behalf of the plaintiff in the capacity of the plaintiff.”

Adverse Inference –When Court cannot “Make Up its Mind”

It is only if the Tribunal or the Court feels it cannot “make up its mind” as to which of the version is true, it will be held that the party on whom the burden lies has not discharged the burden. See, Kumbhan Lakshmanna v. Tangirala Venkateswarlu, AIR 1949 PC 278, where it was held as under:

“This section (Sec. 102) shows that the initial burden of proving a prima facie case in his favour is cast on the plaintiff; when he gives such evidence as will support a prima facie case, the onus shifts on to the defendant to adduce rebutting evidence to meet the case made out by the plaintiff. As the case continues to develop the onus may shift back again to the plaintiff. It is not easy to decide at what particular stage in the course of the evidence the onus shifts from one side to the other. When, after the entire evidence is adduced, the tribunal feels it cannot make up its mind as to which of the versions is true, it will hold that the party on whom the burden lies has not discharged the burden; but if it has on the evidence no difficulty in arriving at a definite conclusion, then the burden of proof on the pleadings recedes into the background.”
(Quoted in: Dulhin Mahabati Kuer v. Raghunandan Prasad Singh, AIR 1958 Pat 249, Surajbhan Kailash Chand v. Hari Shanker Vashsist, AIR 1976 Delhi 70, Krishne Gowda v. Ningegowda, ILR 1987 Kar 2883, Patel Ramanbhai Mathurbhai v. Govindbhai Chhotabhai Patel, 2020-1 GLH 261, Vinod Agrawal v. Bharat Kumar Lathi, ILR 2012 MP 84)

Burden of Proof Not Relevant when “Both Sides had Adduced Evidence”

In Moran Mar Basselios Catholicos v. Thukalan paulo Avira, AIR 1959 SC 31, the Constitution bench of the Supreme Court held as under:

The question of burden of proof at the end of the case when both the parties have adduced their evidence is not of very great importance and the Court has to come to a decision on a consideration of all the materials.

In Kalwa Devadattam v. Union of India, (1964) 3 SCR 191, the Supreme Court held as under:

“The question of onus probandi is certainly important in the early stages of a case. It may also assume importance where no evidence at all is led on the question in dispute by either side; in such a contingency the party on whom the onus lies to prove a certain fact must fail. Where however evidence has been led by the contesting parties on the question in issue; abstract considerations of onus are out of place; truth or otherwise of the case must always be adjudged on the evidence led by the parties. ”

In Arumugham v. Sundarambal, AIR 1999 SC 2216, it has been held as under:

“On the question of burden of proof we are of the view that even assuming burden of proof is relevant in the context of the amended provision of Sec. 100 C.P.C., the same would not be relevant when both sides had adduced evidence. It would be relevant only if a person on whom the burden of proof lay, failed to adduce any evidence altogether.”

The Supreme Court, in Anil Rishi v. Gurbaksh Singh, AIR 2006 SC 1971, referring Sec. 102 of the Evidence Act (The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side), explained ‘burden of proof’ as under:

“Pleading is not evidence, far less proof. Issues are raised on the basis of the pleadings. The defendant-appellant having not admitted or acknowledged the fiduciary relationship between the parties, indisputably, the relationship between the parties itself would be an issue. The suit will fail if both the parties do not adduce any evidence, in view of Section 102 of the Evidence Act. Thus, ordinarily, the burden of proof would be on the party who asserts the affirmative of the issue and it rests, after evidence is gone into, upon the party against whom, at the time the question arises, judgment would be given, if no further evidence were to be adduced by either side.”

Burden of proof remains only academic

In Raghunathi v. Raju Ramappa Shetty, AIR 1991 SC 1040, it is observed that it is a settled law that once the parties have been permitted to produce evidence in support of their respective cases and it is not their grievance that any evidence was shut out the question of burden of proof loses significance and remains only academic.

It is held by the Supreme Court in Thiruvengada Pillai v. Navaneethammal, AIR 2008 SC 1541, that when the execution of an unregistered document put forth by the plaintiff was denied by the defendants, it was for the plaintiffs to establish that the document was forged or concocted. It is observed that the party who asserts something has to prove that thing. It is pointed out that when the plaintiff had come to Court alleging that the first defendant had executed an agreement of sale in his favour and when the defendant denied it, the burden was on the plaintiff to prove that the defendant had executed the agreement, and not on the defendant to prove the negative.

Even if No Plea, Propouner has to clear Suspicion

In K. Laxmanan v. Thekkayil Padmini, AIR 2009 SC 951, the Apex Court held that when there were suspicious circumstances regarding the execution of a Will, the onus was on the propounder to explain them to the satisfaction of the Court; and only when such responsibility was discharged, the Court would accept the Will as genuine. It was further observed that even where there were no such pleas, but circumstances gave rise to doubt, it was on the propounder to satisfy the conscience of the Court. These decisions are followed in Joseph John Peter Sandy v. Veronica Thomas Rajkumar, AIR 2013 SC 2028.

The Privy Council in Seturatnam v. Venkatachella, AIR 1920 PC 67, observed that where the parties have led all the evidence and relevant facts were before the court and all that remained for decision was what interference was to be drawn from them, the question of burden of proof was not important. In Chidambara v. Veerama, AIR 1922 PC 292, the Privy Council held that when entire evidence was once before the court, the debate as to onus of proof was purely academic. (See: Legal Heirs of Renushree Lahkar v. Pradip Kumar Lahkar, 2018-4 Gau LT 733).

What is Collateral Purpose?

Jojy George Koduvath, Kottayam.

Introspection

Does the law allow to use unstamped or insufficiently stamped document in evidence?	No	Sec. 35 of the Indian Stamp Act is the relevant provision. But, it can be used for collateral purposes; or the substantive purpose after payment of penalty (except promissory note).
Does the law allow to use unregistered (compulsory registrable) deed in evidence?	No	Sec. 49 of the Registration Act bars. But, it can be used for collateral purposes.
Should the court exclude an unregistered (compulsory registrable) deed even if marked without objection?	Yes	(2008) 8 SCC 564 But, it can be used for collateral purposes.
When does question of using a document for ‘collateral purpose‘ arise?	….	In case of an unregistered (compulsorily registrable) document: Sec. 49 of the Registration Act.
Can the court allow to use an unstamped or insufficiently stamped document for ‘collateral purpose‘?	No	It is the duty of every Judge not to admit a document that is not duly stamped, even if no objection to other side. 2017-3 AIR(Kar)(R) 570; AIR 2015 Kar 175.
Can a document, required to be registered, but not registered, be used in a suit for specific performance.	Yes	It may be used in a suit for specific performance under Proviso to Sec. 49 of the Registration Act. And, it can be received as evidence of an oral agreement of sale. S. Kaladevi v. V.R. Somasundaram, (2010) 5 SCC 401; Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar, 2018 (7) SCC 639.

What is Collateral Purpose?

The word ‘collateral’ signifies something beyond or parallel. According to Law Lexicon it means “that which is by the side, and not the direct line; that which is additional to or beyond a thing” (Amit Khanna. Vs Suchi Khanna, 2008-10 ADJ 426; 2009-75 AllLR 34; 2009-1 AWC 929).

The Apex Court in K.B. Saha and Sons Private Limited v. Development Consultant Ltd., (2008) 8 SCC 564: 2008 AIR SCW 4829, held as under:

“A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.”
“A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immovable property of the value of one hundred rupees and upwards.”

Yellapu Uma Maheswari v. Buddha Jagadheeswararao, (2015) 16 SCC 787, is an authority to see, what is ‘collateral purpose’. It is held that following matters can be proved with an unregistered partition deed, as ‘collateral purpose’-

severancy of title,
nature of possession of various shares;
- but not primary purpose, i.e. division of joint properties by metes and bounds.

It is held as under:

“In a suit for partition, an unregistered document can be relied upon for collateral purpose i.e. severancy of title, nature of possession of various shares but not for the primary purpose i.e. division of joint properties by metes and bounds. An unstamped instrument is not admissible in evidence even for collateral purpose, until the same is impounded. Hence, if the appellant-defendant wants to mark these documents for collateral purpose it is open for them to pay the stamp duty together with penalty and get the document impounded and the trial court is at liberty to mark Exts. B-21 and B-22 for collateral purpose subject to proof and relevance.”

Should an opportunity be given to cure defect, by paying deficit Stamp Duty?

In Kalaivani @ Devasena v. J. Ramu, 2010(1) CTC 27, it was held that an opportunity should be given to the party who produces the document with insufficient stamp, to pay the deficit stamp duty and penalty so that the document could be exhibited; and that if penalty is not paid, the document should be impounded. It is held as under:

“24. .. It is well settled that even an unregistered document is admissible in evidence for collateral purpose provided it is adequately stamped under the Stamp act. If the document is both unstamped and unregistered, as the document in question here, it is no doubt true that it cannot be looked into for collateral purpose also. But such a document should not be thrown out at the threshold itself and an opportunity must be extended to the party who wants to mark the document on his side by directing him to pay the deficit stamp duty along with the penalty upto date, then the document could be admitted in evidence for collateral purpose. If the person does not pay the Court, then the document is to be impounded and sent to the Collector for taking action under the law.”

Unstamped or Insufficiently Stamped Pro-note

Unstamped or insufficiently stamped promissory note cannot be marked in evidence. The weight of authority is on the side that says it is incurable. Hence no secondary evidence can also be lead on the same. It cannot be used for collateral purpose also. But the creditor can prosecute a suit upon ‘original consideration’.

See Blog: (CLICK): Adjudication as to Proper Stamp under Stamp Act

No Adjudication Needed If Power of Attorney is Sufficiently Stamped

Can Unregistered Agreement be admitted in a suit for specific performance?

It is held in S. Kaladevi Vs. V.R. Somasundaram, (2010) 5 SCC 401, that a document required to be registered, if unregistered, can be admitted in evidence as evidence of a contract in a suit for specific performance.
It is followed in Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar, 2018 (7) SCC 639.

Relevant Provisions in the Registration Act:

Sec. 17(1) (g) and 49 are the relevant provisions. They read as under:

“17. Documents of which registration is compulsory– (1) The following documents shall be registered, …, namely:
…
…
(State Amendment –AP) Agreement of sale of immovable property of the value of one hundred rupee and upwards. (Similar State Amendment in Tamil Nadu and Kerala also.)
“49. Effect of non-registration of documents required to be registered.– No document required by section 17 …. to be registered shall-
(a) affect any immovable property comprised therein
(b) ….
(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:
- Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877), or as evidence of any collateral transaction not required to be effected by registered instrument.”

K.B. Saha and Sons Private Limited v. Development Consultant Ltd.

The Apex Court in K.B. Saha and Sons Private Limited v. Development Consultant Ltd., (2008) 8 SCC 564: 2008 AIR SCW 4829, has laid down the principle in respect of the collateral purpose.

“34. From the principles laid down in the various decisions of this Court and the High Courts, as referred to here-in-above, it is evident that :-
A document required to be registered is not admissible into evidence under section 49 of the Registration Act.
Such unregistered document can however be used as an evidence of collateral purpose as provided in the Proviso to section 49 of the Registration Act.
A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.
A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immovable property of the value of one hundred rupees and upwards.
If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose.

‘Collateral Purpose‘ under Sec. 49 Registration Act

Section 49 of the Registration Act expressly states admissibility of unregistered documents in evidence for collateral purposes.

The Supreme Court observed in Sri Venkoba Rao Pawar v. Sri S. Chandrashekar, that the collateral purpose/transaction must be independent of, or divisible from the transaction which requires registration.

In S. Kaladevi Vs. V.R. Somasundaram, (2010) 5 SCC 401, Our Apex Court held as under:

“11. The main provision in Section 49 provides that any document which is required to be registered, shall not affect any immovable property comprised therein nor such document shall be received as evidence of any transaction affecting such property. The proviso, however, would show that an unregistered document affecting immovable property and required by the 1908 Act or the Transfer of Property Act, 1882 to be registered may be received as an evidence to the contract in a suit for specific performance or as evidence of any collateral transaction not required to be affected by registered instrument. By virtue of the proviso, therefore, an unregistered sale deed of an immovable property of the value of Rs.100 and more could be admitted in evidence as evidence of a contract in a suit for specific performance of the contract. Such an unregistered sale deed can also be admitted in evidence as an evidence of any collateral transaction not required to be effected by registered document. When an unregistered sale deed is tendered in evidence, not as evidence of a completed sale, but as proof of an oral agreement of sale, the deed can be received in evidence making an endorsement that it is received only as evidence of an oral agreement of sale under the proviso to Section 49 of the 1908, Act.”
12. Recently in the case of K.B. Sahaand Sons Private Limited v. Development Consultant Limited ,(2008) 8 SCC 564, this Court noticed the following statement of Mulla in his Indian Registration Act, 7th Edition, at page 189:
- “……The High Courts of Calcutta, Bombay, Allahabad, Madras, Patna, Lahore, Assam, Nagpur, Pepsu, Rajasthan, Orissa, Rangoon and Jammu & Kashmir; the former Chief Court of Oudh; the Judicial Commissioner’s Court at Peshawar, Ajmer and Himachal Pradesh and the Supreme Court have held that a document which requires registration under Section 17 and which is not admissible for want of registration to prove a gift or mortgage or sale or lease is nevertheless admissible to prove the character of the possession of the person who holds under it……”
“This Court then culled out the following principles (K.B. Saha case, SCC p. 577, para 334):
- “1. A document required to be registered, if unregistered is not admissible into evidence under Section 49 of the Registration Act.
- 2. Such unregistered document can however be used as an evidence of collateral purpose as provided in the proviso to Section 49 of the Registration Act.
- 3. A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.
- 4. A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immovable property of the value of one hundred rupees and upwards.
- 5. If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose.
To the aforesaid principles, one more principle may be added, namely, that a document required to be registered, if unregistered, can be admitted in evidence as evidence of a contract in a suit for specific performance.”

It is held in Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar, 2018 (7) SCC 639, after quoting Sec. 17 Registration Act, as under:

10. On a plain reading of this provision, it is amply clear that the document containing contract to transfer the right, title or interest in an immovable property for consideration is required to be registered, if the party wants to rely on the same for the purposes of Section 53A of the 1882 Act to protect its possession over the stated property. If it is not a registered document, the only consequence provided in this provision is to declare that such document shall have no effect for the purposes of the said Section 53A of the 1882 Act.
The issue, in our opinion, is no more res integra. In S. Kaladevi Vs. V.R. Somasundaram and Ors., (2010) 5 SCC 401, this Court has restated the legal position that when an unregistered sale deed is tendered in evidence, not as evidence of a completed sale, but as proof of an oral agreement of sale, the deed can be received as evidence making an endorsement that it is received only as evidence of an oral agreement of sale under the proviso to Section 49 of the 1908 Act.

After quoting Sec. 49 Registration Act it is observed by the Apex Court as under:

11. In the reported decision (i.e. S. Kaladevi Vs. V.R. Somasundaram, (2010) 5 SCC 401), this Court has adverted to the principles delineated in K.B. Saha and Sons Private Limited v. Development Consultant Limited, (2008) 8 SCC 564 and has added one more principle thereto that a document is required to be registered, but if unregistered, can still be admitted as evidence of a contract in a suit for specific performance. In view of this exposition, the conclusion recorded by the High Court in the impugned judgment that the sale agreement dated 9th July, 2003 is inadmissible in evidence, will have to be understood to mean that the document though exhibited, will bear an endorsement that it is admissible only as evidence of the agreement to sell under the proviso to Section 49 of the 1908 Act and shall not have any effect for the purposes of Section 53A of the 1882 Act. In that, it is received as evidence of a contract in a suit for specific performance and nothing more. The genuineness, validity and binding nature of the document or the fact that it is hit by the provisions of the 1882 Act or the 1899 Act, as the case may be, will have to be adjudicated at the appropriate stage as noted by the Trial Court after the parties adduce oral and documentary evidence.”

Basis of the Erudite Decision in S Kaladevi (as stated in Para 11 of the decision)

Proviso in Section 49:
1. “The proviso, however, would show that an unregistered document affecting immovable property and a document ‘required to be registered, but if unregistered’, may, still, be received as an evidence to the contract in a suit for specific performance …. “
Admitted as proof of an oral agreement of sale
1. “Such an unregistered sale deed … can be received in evidence ….. as evidence of an oral agreement of sale.”

Unregistered Agreement can be used in Specific performance Even After the Amendment on Sec. 17

In C. Ramya Vs. C. Ganambal, 2020-5 Mad LJ 416 the Madras Court pointed out that the Madras and Andhra High Courts took the view that even after the amendment on Sec. 17 (Agreement of sale of immovable property is a compulsorily registrable document), non-registration of an agreement of sale does not operate as a total bar to look into the contract, since proviso to Section 49 has carved out two exceptions –

(i) a document ‘required to be registered, but if unregistered,’ may, still, be received as an evidence to the contract in a suit for specific performance, and
(ii) it can be used for any ‘collateral purpose’.

The following are the cases referred to by the Madras High Court:

G. Veeramani Vs. N. Soundaramoorthy, 2019(6) CTC 580;
D. Devarajan v. Alphonsa Mary, 2019 (2) CTC 290;
Minor Ravi Bharathi Vs. P. Balasubramani, 2014(3) MWN (Civil) 578.

Unregd. Partition Deed Admissible to see Severance & No Suit for Partition lie

In Chinnapareddigari Pedda Muthyalareddy v. Chinnappareddigari Venkatareddy,AIR 1969 AP 242, unregistered partition lists were drawn up showing the properties allotted to the respective sharers. The lists were construed as partition deeds and were held by the trial Court to be inadmissible in evidence for proving division by metes and bounds. No oral evidence was held to be admissible under section 91 of the Evidence Act to prove the factum of partition or the nature of possession.

In appeal the Andhra Pradesh High Court (FB-Jaganmohan Reddy, C.J.) held that the unregistered partition deed was admissible not for proving terms of the partition or as the source of title, but for the purpose of showing that there was a disruption (division/severance) in status and that no suit for partition would lie on the basis that the properties were still joint family properties. This decision is relied on in Booraswami v. Rajakannu, 1978-1 MLJ 248; and held further, relying on K. Kanna Reddy v. K. Venkata Reddy, AIR 1965 AP 274, that for determining status and the nature of the possession oral evidence was also admissible (for proving the factum of partition).

Effect of Marking a Document Without Objection

Unregistered (Compulsorily Registrable) Documents:

With respect to unregistered documents it is held by the Apex Court in K.B. Saha and Sons Private Limited v. Development Consultant Ltd, (2008) 8 SCC 564: 2008 AIR SCW 4829, held as under:

“34. From the principles laid down in the various decisions of this Court and the High Courts, as referred to here-in-above, it is evident that :
A document required to be registered is not admissible into evidence under section 49 of the Registration Act.
Such unregistered document can however be used as an evidence of collateral purpose as provided in the Proviso to section 49 of the Registration Act. ….”

In the light of the Supreme Court decision in K.B. Saha and Sons Private Limited , it appears that the observation of the Karnataka High Court in Nanda Behera v. Akhsaya Kumar Behera, 2017AIR (CC) 1893, that once the Court, rightly or wrongly, decides to admit the documents in evidence, so far as the parties are concerned, the matter is closed, is not applicable to unregistered (compulsorily registrable) documents.

However, the Calcutta High Court in Dipak Kumar Singh v. Park Street Properties (P) Limited, AIR 2014 Cal 167, distinguished K.B. Saha & Sons Private Limited, (2008) 8 SCC 564, and other decisions saying that ‘the question of admissibility of a document, which had been admitted in evidence, was not taken up for consideration’ in those decisions.

The High Court relied on Javer Chand v. Pukhraj Surana, AIR 1961 SC 1655 (question as to admissibility on the ground that it has not been stamped), which held that once a document had been marked as an exhibit in a case and the trial had proceeded all along on the footing that the document was an exhibit in the case and had been used by the parties in examination and cross-examination of their witnesses, it was not open either to the trial court itself or to a court of appeal or revision to go behind that order.

The other decisions referred to and distinguished in Dipak Kumar Singh v. Park Street Properties (P) Limited are the following:

Ram Kumar Das v. Jagdish Chandra Deo, Dhabal Deb: AIR 1952 SC 23,
Satish Chand Makhan v. Govardhan Das Byas: (1984) 1 SCC 369,
Anthony v. K.C. Ittoop: (2000) 6 SCC 394,
Surya Kumar Manji v. Trilochan Nath: AIR 1955 Cal 495,
Kunju Kesavan v. M.M. Philip: AIR 1964 SC 164,
Prasanta Ghosh v. Pushkar Kumar Ash: 2006 (2) CHN 277.

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Book No, 1 – Civil Procedure Code

Power of attorney

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Admission, Relevancy and Proof

Land Laws/ Transfer of Property Act

Evidence Act – General

Sec. 65B

Law on Documents

Contract Act

Easement

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Will

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General

N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. and Ground Realities of Indian Situation in Arbitration Process

Saji Koduvath, Advocate, Kottayam.

Contents in a Nutshell

The Seven Judge Bench of the Supreme Court, in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., overruling Earlier Decision of the Five Judge Bench, on 13, Dec. 2023, held as under:

Defects on unstamping or inadequate stamping of documents are curable defects.
They are not void (though such documents would be “inadmissible” under Sec. 35 of the Stamp Act)
Though the courts (in proceedings for appointment of arbitrators) under Sec. 8 and 11 of the Arbitration Act only examines whether the arbitration agreement “prima facie exists”, and the objection as to non-stamping fall within the ambit of the arbitral tribunal.

Earlier Decision of the Five Judge Bench

The 5-Judge Bench of our Apex Court, in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1, by majority (3:2), held that existence of a valid arbitration agreement (with sufficient stamp) was necessary, for ‘reference to arbitrator’ under Sec. 8 of the Arbitration and Conciliation Act, 1996.
After 2015 Amendment on Arbitration and Conciliation Act, for ‘referring’ parties to arbitration (under Sec. 8) the courts should have “FOUND“ ‘PRIMA FACIE’ –
- (i) the EXISTENCE of the arbitration agreement and
- (ii) the VALIDITY thereof.
Sec. 8(1), as amended, reads as under:
- “A judicial authority …. shall … refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”
The scope of judicial review and jurisdiction of the court under Sec. 8 (for reference to arbitrator) and Sec. 11 (for appointing arbitrator) of the Arbitration Act are identical.

Existence of Arbitration Dispute

Section 16 of the Arbitration and Conciliation Act 1996 declares the competence of arbitration tribunal to determine the existence or validity of the arbitration agreement . It reads as under:

“16. Competence of arbitral tribunal to rule on its jurisdiction. – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,–
- (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
- (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) Where an award is remitted under sub- section (1) the Court shall fix the time within which the arbitrator or umpire shall submit his decision to the Court: Provided that any time so fixed may be extended by subsequent order of the Court.
(3) An award remitted under sub- section (1) shall become void on the failure of the arbitrator or umpire to reconsider it and submit his decision within the time fixed.”

PART I

N.N. Global Mercantile v. Indo Unique Flame – Contentions, in Substance

The legal disputes in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1, 2023 SCC OnLine SC 495, was placed before the Apex Court, treading following course:

A suit was filed by the appellant, to enforce a contract.
The defendant applied for reference under Section 8 of the Arbitration and Conciliation Act, the contract being contained an arbitration clause.
Trial Court rejected the application.
A Writ Petition was filed by the defendant challenging the Order. It was contended that the Arbitration Agreement was unenforceable as the (main) contract was unstamped.
The High Court allowed the Writ Petition. (Hence the plaintiff became the appellant before the Supreme Court.)

It was argued before the Apex Court that the Arbitration Agreement in the contract was enforceable and could have been acted upon, even if the contract was unstamped and unenforceable under the Indian Stamp Act. The 2-Judge Bench of the Supreme Court, referred the matter to 3-Judge Bench.

The 3-Judge Bench of the Supreme Court, referred the case to 5-Judge Bench, pointing out that an arbitration clause would stand as a distinct, separate and independent from the substantive contract. This is based on the doctrine of severability or separability. That is, when the parties enter into such a contract, there are two separate agreements,

(i) the substantive contract and
(ii) the arbitration agreement.

In this premise, the 3-Judge Bench opined as under:

Even if the main contract was bad for it was unstamped or insufficiently stamped, the arbitration clause could be enforced.
The defect on insufficiency of stamp could be cured as provided in the Stamp Act, and therefore, it could not be said that an unstamped or insufficiently stamped instrument did not exist in the eye of the law.
The failure to stamp a document, did not affect the validity or unenforceability of the document, but it merely rendered the document inadmissible in evidence.

Before the 5-Judge Bench of the Supreme Court, it was argued –

by the respondents/defendants, on the basis of the relevant provisions of the Arbitration Act (especially Sec. 16), that an arbitration clause would stand as a distinct, separate and independent from the substantive contract and that an arbitration reference can be made by the court even if the arbitration agreement was insufficiently stamped; and
by the appellant/plaintiff, in view of the provisions in the Indian Stamp Act (especially Sec. 33 and 35), that the arbitration reference could not be made by the court on the basis of an insufficiently stamped agreement. It was pointed out that unstamped or insufficiently stamped documents cannot be used as evidence for any purpose, as provided in the Stamp Act; and that for reference under Sec. 8 of the Arbitration Act the court has to specifically find that prima facie a “valid arbitration agreement exists“.

N.N. Global held – If Arb. Agreement Unstamped, No ‘Valid Arb. Agreement Exists‘

It is held, by majority (3:2), in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, that an arbitration reference cannot be made by the court under Sec. 8 of the Arb. Act, on the basis of an unstamped or insufficiently stamped agreement.

The Majority affirmed the findings in this regard, in the two earlier 3-Judge Bench decisions.

(i) Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 (it was held that an arbitration reference cannot be made on the basis of an unstamped or insufficiently stamped agreement).
(ii) Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1 (it was held that landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations).

The majority judgment Para 110 and 111 of N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, reads as under:

“110. An instrument, which is eligible to stamp duty, may contain an Arbitration Clause and which is not stamped, cannot be said to be a contract, which is enforceable in law within the meaning of Section 2(h) of the Contract Act and is not enforceable under Section 2(g) of the Contract Act. An unstamped instrument, when it is required to be stamped, being not a contract and not enforceable in law, cannot, therefore, exist in law. Therefore, we approve of paragraphs-22 and 29 of Garware (supra). To this extent, we also approve of Vidya Drolia (supra), insofar as the reasoning in paragraphs-22 and 29 of Garware (supra) is approved.
111. The true intention behind the insertion of Section 11(6A) in the Act was to confine the Court, acting under Section 11, to examine and ascertain about the existence of an Arbitration Agreement.”

PART II -_Relevant Provisions of Law

Arbitration and Conciliation Act on Arbitrability

Sec. 8(1), Sec. 11(6A) and Sec. 16 of the Arbitration Conciliation Act requires consideration in this regard.

There is a major change in the concept of ‘separability’ of the arbitration clause in a contract, after 2015 Amendment. The Amendment directed that the existence or validity of an arbitration agreement has to be ‘found’ by the Court, before referring the parties to arbitration, and appointing arbitrator, under the Arbitration and Conciliation Act.

Sec. 8(1) of the Arbitration Conciliation Act reads (after 2015 Amendment) as under:

“8. Power to refer parties to arbitration where there is an arbitration agreement – (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

Sec. 11(6A) of the Arbitration Act (inserted by 2015 Amendment) reads as under:

“11. Appointment of arbitrators – (1) … (2) … (3) … (4) … (5) …
(6A). The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.”

Sec. 16, Arbitration and Conciliation Act reads as under:

“16. Competence of arbitral tribunal to rule on its jurisdiction – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose –
- (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
- (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) … (3) ….“

Section 33 and 35 of the Indian Stamp Act, 1899

Section 33 of the Indian Stamp Act, 1899 reads as under:

33. Examination and impounding of instruments – (1) Every person having by law or consent of parties, authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.
(2) … (3) …

Section 35 of the Indian Stamp Act, 1899 reads as under:

35. Instruments not duly stamped inadmissible in evidence, etc. – No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped:
Provided that – (a) any such instrument shall, be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion;
(b) …. (c) ….. (d) …. (e) …..

PART III -_Decisive Earlier Decisions

SBP and Co. v. Patel Engg. Ltd.

Our Apex Court had occasion to consider the apparent inconsistency between Sec. 16 and Sec. 11 of the Arbitration Act, in SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618.

Sec.16 enjoins the arbitral tribunal ‘to rule on its own jurisdiction’, including ruling on any objections with respect to the ‘existence or validity’ of the arbitration agreement and it is made clear that the arbitration clause shall be treated as an agreement independent of the other terms of the contract.
Sect. 11(7) conferred finality to the decision of the Chief Justice, as regards the ‘reference’ to arbitration.

The explanation placed by the learned Senior Counsel, Mr. K.K. Venugopal, was pointed out by the Court. He argued that Sect. 16 had ‘full play’ only when an Arbitral Tribunal was constituted without intervention under Sec. 11.

In SBP and Co. our Apex Court held as under:

“Prima facie, it would be difficult to say that in spite of the finality conferred by sub-section (7) of Section 11 of the Act, to such a decision of the Chief Justice, the Arbitral Tribunal can still go behind that decision and rule on its own jurisdiction or on the existence of an arbitration clause.”

In Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209, it was observed as under:

“It is settled by SBP & Co. that Section 16 of the 1996 Act has full play only after the arbitral tribunal is constituted, without intervention of the Court under Section 11.”

Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.

As regards the enforceability of an unstamped agreement and the bifurcation of an arbitration clause, it is held in Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209, as under:

“… A close look at Section 11(6A) would show that when the Supreme Court or the High Court considers an application under Sections 11(4) to 11(6), and comes across an arbitration clause in an agreement or conveyance which is unstamped, it is enjoined by the provisions of the Stamp Act to first impound the agreement or conveyance and see that stamp duty and penalty (if any) is paid before the agreement, as a whole, can be acted upon. It is important to remember that the Stamp Act applies to the agreement or conveyance as a whole. Therefore, it is not possible to bifurcate the arbitration clause contained in such agreement or conveyance so as to give it an independent existence, as has been contended for by the respondent. The independent existence that could be given for certain limited purposes, on a harmonious reading of the Registration Act, 1908 … “
“22. When an arbitration Clause is contained “in a contract”, it is significant that the agreement only becomes a contract if it is enforceable by law. We have seen how, under the Indian Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped. Therefore, even a plain reading of Section 11(6A), when read with Section 7(2) of the 1996 Act and Section 2(h) of the Contract Act, would make it clear that an arbitration Clause in an agreement would not exist when it is not enforceable by law. This is also an indicator that SMS Tea Estates has, in no manner, been touched by the amendment of Section 11(6A).”
“29. This judgment in Hyundai Engg. case is important in that what was specifically under consideration was an arbitration Clause which would get activated only if an insurer admits or accepts liability. Since on facts it was found that the insurer repudiated the claim, though an arbitration Clause did “exist”, so to speak, in the policy, it would not exist in law, as was held in that judgment, when one important fact is introduced, namely, that the insurer has not admitted or accepted liability. Likewise, in the facts of the present case, it is clear that the arbitration Clause that is contained in the sub-contract would not “exist” as a matter of law until the sub-contract is duly stamped, as has been held by us above. The argument that Section 11(6A) deals with “existence”, as opposed to Section 8, Section 16, and Section 45, which deal with “validity” of an arbitration agreement is answered by this Court’s understanding of the expression “existence” in Hyundai Engg. Case as followed by us.”

Vidya Drolia v. Durga Trading Corporation

Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, made it clear-

For appointing an arbitrator, Courts shall make a Prima Facie ‘finding’ under Sec. 11(6A) as to “Non-arbitrability of disputes”; and
the prima facie examination is to make a “check”and to protect parties from being forced to arbitrate when the matter is demonstrably “non-arbitrable”.

It is held in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, as under:

“133. Prima facie case in the context of Section 8 is not to be confused with the merits of the case put up by the parties which has to be established before the Arbitral Tribunal. It is restricted to the subject-matter of the suit being prima facie arbitrable under a valid arbitration agreement. Prima facie case means that the assertions on these aspects are bona fide.
134. Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and non-arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straight forward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. Only when the court is certain that no valid arbitration agreement exists or the disputes/subject-matter are not arbitrable, the application under Section 8 would be rejected. At this stage, the court should not get lost in thickets and decide debatable questions of facts. Referral proceedings are preliminary and summary and not a mini trial… …
139. … Conversely, if the court becomes too reluctant to intervene, it may undermine effectiveness of both the arbitration and the court. There are certain cases where the prima facie examination may require a deeper consideration. The court’s challenge is to find the right amount of and the context when it would examine the prima facie case or exercise restraint. The legal order needs a right balance between avoiding arbitration obstructing tactics at referral stage and protecting parties from being forced to arbitrate when the matter is clearly non-arbitrable.”

The Apex Court further observed as under:

“146. We now proceed to examine the question, whether the word “existence” in Section 11 merely refers to contract formation (whether there is an arbitration agreement) and excludes the question of enforcement (validity) and therefore the latter falls outside the jurisdiction of the court at the referral stage. On jurisprudentially and textualism it is possible to differentiate between existence of an arbitration agreement and validity of an arbitration agreement. Such interpretation can draw support from the plain meaning of the word “existence”. However, it is equally possible, jurisprudentially and on contextualism, to hold that an agreement has no existence if it is not enforceable and not binding. Existence of an arbitration agreement presupposes a valid agreement which would be enforced by the court by relegating the parties to arbitration. Legalistic and plain meaning interpretation would be contrary to the contextual background including the definition clause and would result in unpalatable consequences. A reasonable and just interpretation of “existence” requires understanding the context, the purpose and the relevant legal norms applicable for a binding and enforceable arbitration agreement. An agreement evidenced in writing has no meaning unless the parties can be compelled to adhere and abide by the terms. A party cannot sue and claim rights based on an unenforceable document. Thus, there are good reasons to hold that an arbitration agreement exists only when it is valid and legal. A void and unenforceable understanding is no agreement to do anything. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law.
147. We would proceed to elaborate and give further reasons:
147.1. In Garware Wall Ropes Ltd. [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324], this Court had examined the question of stamp duty in an underlying contract with an arbitration clause and in the context had drawn a distinction between the first and second part of Section 7(2) of the Arbitration Act, albeit the observations made and quoted above with reference to “existence” and “validity” of the arbitration agreement being apposite and extremely important, we would repeat the same by reproducing para 29 thereof : (SCC p. 238)
- “29. This judgment in Hyundai Engg. case [United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530] is important in that what was specifically under consideration was an arbitration clause which would get activated only if an insurer admits or accepts liability. Since on facts it was found that the insurer repudiated the claim, though an arbitration clause did “exist”, so to speak, in the policy, it would not exist in law, as was held in that judgment, when one important fact is introduced, namely, that the insurer has not admitted or accepted liability. Likewise, in the facts of the present case, it is clear that the arbitration clause that is contained in the sub-contract would not “exist” as a matter of law until the sub-contract is duly stamped, as has been held by us above. The argument that Section 11(6-A) deals with “existence”, as opposed to Section 8, Section 16 and Section 45, which deal with “validity” of an arbitration agreement is answered by this Court’s understanding of the expression “existence” in Hyundai Engg. case [United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530] , as followed by us.”
Existence and validity are intertwined, and arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. Invalid agreement is no agreement.”
“153. Accordingly, we hold that the expression ‘existence of an arbitration agreement’ in Section 11 of the Arbitration Act, would include aspect of validity of an arbitration agreement, albeit the court at the referral stage would apply the prima facie test on the basis of principles set out in this judgment. In cases of debatable and disputable facts, and good reasonable arguable case, etc., the court would force the parties to abide by the arbitration agreement as the Arbitral Tribunal has primary jurisdiction and authority to decide the disputes including the question of jurisdiction and non-arbitrability.”
154.2. Scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. ”
- The afore stated passages from Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, is quoted and followed in NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389.

BSNL and Anr. v. Nortel Networks India (P) Ltd.

In BSNL and Anr. v. Nortel Networks India (P) Ltd., (2021) 5 SCC 738, it is held held as under:

“45.1 …While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere “only” when it is “manifest” that the claims are ex facie time-barred and dead, or there is no subsisting dispute…” (quoted and followed in NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).

NTPC Ltd. v. SPML Infra Ltd.

NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389, without changing the foundations laid down by the Apex Court in earlier decisions, Dr. DY Chandrachud; CJI, made clear the position of law with clarity and emphasis. It is observed as under:

“24. Following the general rule and the principle laid down in Vidya Drolia (supra), this Court has consistently been holding that the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. In Pravin Electricals Pvt. Ltd. v. Galaxy Infra and Engg. Pvt. Ltd., (2021) 5 SCC 671, Sanjiv Prakash v. Seema Kukreja, (2021) 9 SCC 732, and Indian Oil Corporation Ltd. v. NCC Ltd., (2022) SCC OnLine SC 896, the parties were referred to arbitration, as the prima facie review in each of these cases on the objection of non-arbitrability was found to be inconclusive. Following the exception to the general principle that the court may not refer parties to arbitration when it is clear that the case is manifestly and ex facie non-arbitrable, in BSNL and Anr. v. Nortel Networks India (P) Ltd., (2021) 5 SCC 738, and Secunderabad Cantonment Board v. B. Ramachandraiah , arbitration was refused as the claims of the parties were demonstrably time-barred.
25. Eye of the Needle: The above-referred precedents crystallise the position of law that the pre-referral jurisdiction of the courts under Section 11(6) of the Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant’s privity to the said agreement. These are matters which require a thorough examination by the referral court. The secondary inquiry that may arise at the reference stage itself is with respect to the non- arbitrability of the dispute.
27. The standard of scrutiny to examine the non-arbitrability of a claim is only prima facie. Referral courts must not undertake a full review of the contested facts; they must only be confined to a primary first review and let facts speak for themselves. This also requires the courts to examine whether the assertion on arbitrability is bona fide or not. The prima facie scrutiny of the facts must lead to a clear conclusion that there is not even a vestige of doubt that the claim is non-arbitrable. On the other hand, even if there is the slightest doubt, the rule is to refer the dispute to arbitration.
28. The limited scrutiny, through the eye of the needle, is necessary and compelling. It is intertwined with the duty of the referral court to protect the parties from being forced to arbitrate when the matter is demonstrably non-arbitrable. It has been termed as a legitimate interference by courts to refuse reference in order to prevent wastage of public and private resources. Further, as noted in Vidya Drolia (supra), if this duty within the limited compass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. Therefore, this Court or a High Court, as the case may be, while exercising jurisdiction under Section 11(6) of the Act, is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator, as explained in DLF Home Developers Limited v. Rajapura Homes Pvt. Ltd., 2021 SCC OnLine SC 781″

In N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., , (2023) 7 SCC 1, taking note of the divergence in the debated points among Judges, Hrishikesh Roy, J., one of the (two) judges who dissented from the view of the majority, laid down the following-

“… Let our minority opinion (self and Learned Brother Justice Ajay Rastogi, who has written a separate opinion), appeal to the brooding spirit of the future as also the powers of the legislature to examine the interplay between the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899; and to emphatically resolve the imbroglio to avoid any confusion in the minds of the stakeholders in the field of arbitration.”

PART III

Seven-Judge-Bench reconsiders NN Global Mercantile v Indo Unique Flame

Seven-Judge Bench of the Supreme Court (D.Y. Chandrachud, CJI, and S.K. Kaul, Sanjiv Khanna, B.R. Gavai, Surya Kant, J.B. Pardiwala and Manoj Misra JJ.) was constituted to reconsider the five-judge bench decision in NN Global Mercantile v Indo Unique Flame, (2023) 7 SCC 1.

It was in a Curative Petition.

The seven-judge bench heard it on the “larger ramifications and consequences”.

The main arguments were the following:

The lack of a stamp was “rectifiable and curable”.
It cannot render the arbitration agreement void.
NN Global Mercantile declared an unstamped arbitration agreement was void.
It is not correct (If ‘Void’, it cannot be resurrected later).

The matter was referred to Seven–Judge Bench on the following order-

“Having regard to the larger ramifications and consequences of the view of the majority in NN Global Mercantile Private Limited vs Indo Unique Flame Limited and Others, we are of the considered view that the proceedings should be placed before a seven-Judge Bench to reconsider the correctness of the view of the five-Judge Bench.”

Findings of the Seven-Judge Bench – on Stamp Act

The Stamp Act is a fiscal statute only.
The Act itself provided for curing defects on non-stamping.
Hence such unstamped agreements are not void.

Findings of the Seven-Judge Bench – on Arbitration Act

The Arbitration Act provided for minimum judicial interference.
Arbitration Act is a self-contained code.
It provides for the separability of the arbitration agreement from the main contract.
Arbitral tribunals had jurisdiction to determine the limits of their own jurisdiction
“At the referral stage by deferring to the jurisdiction of the arbitral tribunal in issues pertaining to the existence and validity of an arbitration agreement”.

Harmonious interpretation of Stamp Act and Arbitration Act

The Arbitration Act, a comprehensive legal code.
It is a “special” statute.
It did not specify stamping as a pre-condition of a valid arbitration agreement.
It requires courts to confine at the referral stage to examination of the existence of arbitration agreement.

The Seven Judge Bench of the Supreme Court held:

Defects on Unstamping or inadequate stamping is a curable defect.
They are not void (though “inadmissible” under Sec. 35 of the Stamp Act)
Though the courts (in proceedings for appointment of arbitrators) under Sec. 8 and 11 of the Arbitration Act only examines whether the arbitration agreement “prima facie exists”, and the objection as to non-stamping fall within the ambit of the arbitral tribunal.

The Supreme Court has Overruled

NN Global Mercantile v Indo Unique Flame, (2023) 7 SCC 1;
SMS Tea Estates v Chandmari Tea Co, (2011) 14 SCC 66;
Garware Wall Ropes v Coastal Marine Constructions, (2019) 9 SCC 209.

OBSERVATIONS AND FINDINGS OF THE APEX COURT

Non-Stamping Does Not Render a Document Invalid or Nonexistent.

“194. The interpretation accorded to the Stamp Act by this Court in the present judgment does not allow the law to be flouted. The arbitral tribunal continues to be bound by the provisions of the Stamp Act, including those relating to its impounding and admissibility. The interpretation of the law in this judgment ensures that the provisions of the Arbitration Act are given effect to while not detracting from the purpose of the Stamp Act. 195. The interests of revenue are not jeopardised in any manner because the duty chargeable must be paid before the agreement in question is rendered admissible and the lis between the parties adjudicated. The question is at which stage the agreement would be impounded and not whether it would be impounded at all. The courts are not abdicating their duty but are instead giving effect to:
- a. The principle of minimal judicial intervention in Section 5 of the Arbitration Act;
- b. The prima facie standard applicable to Sections 8 and 11 of the Arbitration Act; and
- c. The purpose of the Stamp Act which is to protect the interests of revenue and not arm litigants with a weapon of technicality by which they delay the adjudication of the lis.
- d. The interpretation of the law must give effect to the purpose of the Arbitration Act in addition to the Stamp Act.” (bold in original).

Referral Court (Sec. 11 & 8 Stage) is Not Constrained From Acting Upon Certified Copy

The Apex Court held as under:

“217. An arbitration agreement or its certified copy is not rendered void or unenforceable because it is unstamped or insufficiently stamped. We accordingly clarify that the position of law laid down in Jupudi Kesava Rao (supra) and Hariom Agrawal (supra) cannot constrain a referral court at Section 11 stage (as well as Section 8 stage) from acting upon a certified copy of an arbitration agreement and referring the parties to arbitral tribunal.”

Referral Court Not to Impound Unstamped Stamped Instrument

The Apex Court further held as under:

“218. The discussion in preceding segments indicates that the referral court at Section 11 stage should not examine or impound an unstamped or insufficiently stamped instrument, but rather leave it for the determination by the arbitral tribunal. When a party produces an arbitration agreement or its certified copy, the referral court only has to examine whether an arbitration agreement exists in terms of Section 7 of the Arbitration Act. The referral court under Section 11 is not required to examine whether a certified copy of the agreement/ instrument/ contract discloses the fact of payment of stamp duty on the original. Accordingly, we hold that the holding of this Court in SMS Tea Estate (supra), as reiterated in N N Global 2 (supra), is no longer valid in law.”

Conclusions of the Apex Court

“224. The conclusions reached in this judgment are summarised below:
- a. Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable;
- b. Non-stamping or inadequate stamping is a curable defect;
- c. An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists;
- d. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal; and
- e. The decision in NN Global 2 (supra) and SMS Tea Estates (supra) are overruled. Paragraphs 22 and 29 of Garware Wall Ropes (supra) are overruled to that extent.”

Conclusion

In any event, the legislatures (and the courts also) – as they are duty bound to ponder the welfare of the ‘downtrodden which is the majority’ – will have to consider whether the following are ground realities-

1. The majority of Execution Petitions that come before the Execution (civil) Courts are for realisation of amounts below Rupees 10 Lakh ; and the lion’s share of it is filed by the persons who are engaged, directly or indirectly, in Money Lending activity, or initiated by similar “Service Providers”; and the opposite parties thereof belong (comparatively) to lower strata.
2. A large number of Execution Petitions that come before the Execution (civil) Courts are that from the uncontested Arbitration Awards from “Outside-States”.
3. There is no effective “legal frame” (rules) for fixing remuneration of the Arbitrators.

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Book No. 2: A Handbook on Constitutional Issues

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Book No. 4: Common Law of TRUSTS in India

General Principles
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Law on Hindu Religious Endowments
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Temples, Gurudwaras, Churches and Mosques – General
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Constitutional Principles
Ayodhya and Sabarimala Disputes
- Ayodhya Disputes: M. Siddiq case – Pragmatic Verdict
- Sabarimala Review Petitions & Reference to 9-Judge Bench
- SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
General

No Valid Arbitration Agreement ‘Exists’ – Can Arbitration Clause be Invoked?

No; Courts to make a “Finding”, Prima Facie, as to Existence of a Valid Arb. Agreement, for ‘Reference to, or Appointment of’, Arbitrator.

Jojy George Koduvath & Saji Koduvath Advocate, Kottayam.

PART – I

Contents in a Nutshell

There is a major change by 2015 Amendment on Arbitration and Conciliation Act, 1996 as regards (i) the reference for arbitration under Sec. 8, and (ii) the appointment of arbitrator under Sec. 11.
After 2015 Amendment, for referring parties to arbitration and for appointing arbitrator, the courts should have “FOUND“, ‘PRIMA FACIE’ –
- (i) the EXISTENCE of the arbitration agreement and
- (ii) the VALIDITY thereof
- (in short, legitimacy of arbitrability).
Sec. 8(1), as amended, reads as under:
- “A judicial authority …. shall … refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”
The arbitration agreement should be a ‘binding’ and ‘subsisting’ one, for qualifying it to be “valid” and “existing”.
Referral proceedings are preliminary and summary in nature, and do not envisage a “mini trial”. But, there are certain cases where the prima facie examination may require a deeper consideration. This prima facie examination is to make a “check” and to protect parties from being forced to arbitrate when the matter is demonstrably “non-arbitrable” (See: Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1).
The limited scrutiny, “through the eye of the needle”, is necessary and compelling. ” If there is the slightest doubt, the rule is to refer the dispute to arbitration” (NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).
The 5-Judge Bench of our Apex Court, in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, affirmed the views in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, as to the requirement of a valid arbitration agreement for reference under Sec. 8 of the Arbitration Act.
It is held by majority (3:2) in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. that an arbitration reference cannot be made by the court on the basis of an insufficiently stamped agreement.

Appointment of Arbitrators, Before 2015

Sec. 16(1)(a) of the Arbitration and Conciliation Act, 1996 provides that the arbitration clause in a contract is treated as independent of the other terms of the contract.

There being no specific direction (to the court) in the Arbitration Act, before 2015 Amendment, to decide on existence or validity of an arbitration agreement, while referring the parties to arbitration, under Sec. 8(1), and appointing arbitrator under Sec. 11, courts could have taken a liberal stand.

After 2015 Amendment

Courts Decide – Existence of Arb. Agreement and its Non-arbitrability

There is a major change in the concept of ‘separability’ of the arbitration clause, after 2015 Amendment. The Amendment directed that the existence or validity of an arbitration agreement has to be ‘found’ by the Court, before referring the parties to arbitration, and appointing arbitrator, under the Arbitration and Conciliation Act..

Even before 2015, the general rule prevailed was that the arbitration agreement would cease to ‘exist’ by the expiry (end) of contract by efflux of time. It was made clear in P. Manohar Reddy & Bros. v. Maharashtra Krishna Valley Development Corporation, (2009) 2 SCC 494. It was pointed out-

“An arbitration clause, as is well known, is a part of the contract. It being a collateral term need not, in all situations, perish with coming to an end of the contract. It may survive. This concept of separability of the arbitration clause is now widely accepted.”

Sec. 8(1) – Existence of a Valid Arbitration Agreement must be “Found”

Sec. 8(1) of the Arbitration Conciliation Act reads (after 2015 Amendment) as under:

“8. Power to refer parties to arbitration where there is an arbitration agreement – (1). A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

Sec. 11(6A) existence of an arbitration agreement

Sec. 11(6A) of the Arbitration Act (inserted by 2015 Amendment) reads as under:

“11. Appointment of arbitrators – (1) … (2) … (3) … (4) … (5) …
(6A). The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.”

Arbitration Agreement is a Collateral Term, Independent of other Terms

In SMS Tea Estates Pvt Ltd. v. Chandmari Tea Co Pvt. Ltd., 2011-14 SCC 66, it is observed as under:

“12. When a contract contains an arbitration agreement, it is a collateral term relating to the resolution of disputes, unrelated to the performance of the contract. It is as if two contracts — one in regard to the substantive terms of the main contract and the other relating to resolution of disputes — had been rolled into one, for purposes of convenience. An arbitration clause is therefore an agreement independent of the other terms of the contract or the instrument. Resultantly, even if the contract or its performance is terminated or comes to an end on account of repudiation, frustration or breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract.”

In Garware Wall Ropes Ltd. v. Coastal Marine Constructions and Engineering Ltd., SCC 2019-9 SCC 209, it is pointed out that “these principles found statutory recognition” in Sec. 16(1). It reads as under:

“16. Competence of arbitral tribunal to rule on its jurisdiction – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose –
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.”
- See also: SMS Tea Estates Pvt Ltd. v. Chandmari Tea Co Pvt. Ltd., 2011-14 SCC 66, Enercon (India) Ltd. v. Enercon GMBH, 2014-5 SCC 1; Avitel Post Studioz Limited v. HSBC Holdings (Mauritius) Limited, 2021-4 SCC 713.
Note: It is beyond doubt that the intention of Sec. 16(1) the Act is not to resurrect an arbitration clause that cannot be invoked in cases –
- (i) where the period of limitation provided for suits is elapsed;
- (ii) where there is death or end of contract by ‘breach’ by one party; or
- (iii) where there is a rescission or alteration of contract under Sec. 62 of the Contract Act, and thereby the parties need not have performed the original contract.

‘Existence’ of Contract, Necessary – for Operation of Arbitration Clause

It was held by the Supreme Court, in Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362 (a case on rescission or alteration of contract under Sec. 62 of the Contract Act), as under:

“10. The following principles relevant to the present case emerge from the aforesaid discussion:
- (1) An arbitration clause is a collateral term of a contract as distinguished from its substantive terms; but nonetheless it is an integral part of it;
- (2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract;
- (3) … (4) … (5) … (6) …..”
The afore-stated passage in Union of India v. Kishorilal Gupta is quoted in:
- Indian Drugs and Pharmaceuticals Limited v. Indo Swiss Synthetics Gem Manufacture Company Limited, 1996-1 SCC 54;
- Sanjiv Prakash v. Seema Kukreja, 2021-9 SCC 732;
- Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1.

The Apex Court decision, Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, is referred to in Union of India v. Jagdish Kaur, AIR 2007 All- 67, as under:

“20. The suit was instituted by the landlady on 1 -7-2004 after expiry of term of agreement. Courts below have rightly held that after expiry of five years, the agreement was non-existent and the arbitration clause was not applicable. This view finds support from the law laid down by Hon’ble the Apex Court in Union of India v. Kishori Lal Gupta and Brothers, (1959) AIR SC 1362.”

See also: Cosme Farma Laboratories Ltd. v. Shwarde Pharmaceutical Pvt. Ltd., 2013-2 GoaLR 559.

Expiry of Contract by Efflux of Time – Can Arbitration Clause be Invoked?

It is beyond doubt that the arbitration clause cannot be invoked in a case where the period of limitation provided for suits is elapsed.

If the period fixed in a contract for sale of a property (where time is essence of contract) is over, and the vendor alleges breach from the part of purchaser, there will not be a valid and subsisting contract from the viewpoint of the vendor. In such a case –

if a dispute arises (even within the limitation period for taking legal action), the “existence or validity of an arbitration agreement” has to be decided by the Court, for referring the parties to arbitration, under Sec. 8(1), and appointing arbitrator under Sec. 11, of the Arbitration and Conciliation Act.

End of Contract by Breach – Court to decide – Whether Arb. Clause be Invoked

Before the 2015 amendment, in Branch Manager, Magma Leasing & Fin. Ltd. v. Potluri Madhavilata (2009) 10 SCC 103, the core question considered was whether the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract even if its performance has come to an end on account of termination due to breach. It was held as under:

“18. The statement of law expounded by Viscount Simon, L.C. in the case of Heyman as noticed above, in our view, equally applies to situation where the contract is terminated by one party on account of the breach committed by the other particularly in a case where the clause is framed in wide and general terms. Merely because the contract has come to an end by its termination due to breach, the arbitration clause does not get perished nor rendered inoperative; rather it survives for resolution of disputes arising “in respect of” or “with regard to” or “under” the contract. This is in line with the earlier decisions of this Court, particularly as laid down in Kishori Lal Gupta & Bros.”

It is legitimate to say that this position does not continue in view of the amended provisions, after 2015.

If the Contract (with arbitration clause) says that the contract will “stand cancelled” or “become void” or “come to an end”, on breach of that contract, whether the arbitration clause will work in such a case, for fixing damages, may be, still, a matter of adjudication by the arbitrator. In any case, ‘arbitrability’ of the same has to be decided by the “court”, in the light of Sec. 8(1) and 11(6A).

Why ‘Prima Facie’ Review and Finding by ‘Court‘ u/S. 8(1) and 11 ?

For referring the parties to arbitration, under Sec. 8(1) of the Arbitration and Conciliation Act, 1996 (as amended in 2015), and for appointing arbitrator under Sec. 11 –
- the standard of scrutiny to examine the non-arbitrability of a claim by Referral courts is only prima facie; and the referral courts must not undertake a full review of the contested facts; they must only be confined to a primary first review (See: Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1; NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389)); and
- the court has to (prima facie) “find” that a “valid arbitration agreement exists“.
That is, the arbitration agreement should be a ‘binding’ and ‘subsisting’ one, for qualifying it to be “valid” and “existing”.
There will be no “arbitrable” dispute if-
- the contract is ‘ended’ (by virtue of the provisions of the contract), for breach by one party, and the party in breach is ready to pay the predetermined damages for breach (and nothing remains for arbitration).

Arbitration Clause in a Perished/Expired Contract, Arbitrator Not Appointed

Relying on Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, it is held in Eigen Technical Service Pvt. Ltd. v. Vatika Limited, 2013-172 Pun LR 27: 2013-4 Arb LR 367, that arbitration clause in a redundant and perished contractby efflux of time, cannot be invoked. The court relied on an Allahabad decision stating as under:

“High Court of Allahabad in a judgment dated 10.11.2006 passed in Writ Petition No. 21275 of 2006 titled as Union of India Thru. Secry., Ministry of Postal v. Jagdish Kaur has also observed that arbitration clause contained in an expired agreement is also deemed as expired and is no more valid.”

Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1

Our Apex Court, in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, made it clear-

For appointing an arbitrator, Courts shall make a Prima Facie ‘finding’ under Sec. 11(6A) as to “Non-arbitrability of disputes”; and
the prima facie examination is to make a “check” and to protect parties from being forced to arbitrate when the matter is demonstrably “non-arbitrable”.

It is held in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, as under:

“133. Prima facie case in the context of Section 8 is not to be confused with the merits of the case put up by the parties which has to be established before the Arbitral Tribunal. It is restricted to the subject-matter of the suit being prima facie arbitrable under a valid arbitration agreement. Prima facie case means that the assertions on these aspects are bona fide.
134. Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and non-arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straight forward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. Only when the court is certain that no valid arbitration agreement exists or the disputes/subject-matter are not arbitrable, the application under Section 8 would be rejected. At this stage, the court should not get lost in thickets and decide debatable questions of facts. Referral proceedings are preliminary and summary and not a mini trial… …
139. … Conversely, if the court becomes too reluctant to intervene, it may undermine effectiveness of both the arbitration and the court. There are certain cases where the prima facie examination may require a deeper consideration. The court’s challenge is to find the right amount of and the context when it would examine the prima facie case or exercise restraint. The legal order needs a right balance between avoiding arbitration obstructing tactics at referral stage and protecting parties from being forced to arbitrate when the matter is clearly non-arbitrable.”

The Apex Court further observed as under:

“153. Accordingly, we hold that the expression ‘existence of an arbitration agreement’ in Section 11 of the Arbitration Act, would include aspect of validity of an arbitration agreement, albeit the court at the referral stage would apply the prima facie test on the basis of principles set out in this judgment. In cases of debatable and disputable facts, and good reasonable arguable case, etc., the court would force the parties to abide by the arbitration agreement as the Arbitral Tribunal has primary jurisdiction and authority to decide the disputes including the question of jurisdiction and non-arbitrability.”
154.2. Scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. ”
- The afore stated passages from Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, is quoted and followed in NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389.

Though Scope of scrutiny is Limited, it is Necessary and Compelling

“24. Following the general rule and the principle laid down in Vidya Drolia (supra), this Court has consistently been holding that the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. In Pravin Electricals Pvt. Ltd. v. Galaxy Infra and Engg. Pvt. Ltd., (2021) 5 SCC 671, Sanjiv Prakash v. Seema Kukreja, (2021) 9 SCC 732, and Indian Oil Corporation Ltd. v. NCC Ltd., (2022) SCC OnLine SC 896, the parties were referred to arbitration, as the prima facie review in each of these cases on the objection of non-arbitrability was found to be inconclusive. Following the exception to the general principle that the court may not refer parties to arbitration when it is clear that the case is manifestly and ex facie non-arbitrable, in BSNL and Anr. v. Nortel Networks India (P) Ltd., (2021) 5 SCC 738, and Secunderabad Cantonment Board v. B. Ramachandraiah , arbitration was refused as the claims of the parties were demonstrably time-barred.
25. Eye of the Needle: The above-referred precedents crystallise the position of law that the pre-referral jurisdiction of the courts under Section 11(6) of the Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant’s privity to the said agreement. These are matters which require a thorough examination by the referral court. The secondary inquiry that may arise at the reference stage itself is with respect to the non- arbitrability of the dispute.
26. As a general rule and a principle, the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. …
27. The standard of scrutiny to examine the non-arbitrability of a claim is only prima facie. Referral courts must not undertake a full review of the contested facts; they must only be confined to a primary first review and let facts speak for themselves. This also requires the courts to examine whether the assertion on arbitrability is bona fide or not. The prima facie scrutiny of the facts must lead to a clear conclusion that there is not even a vestige of doubt that the claim is non-arbitrable. On the other hand, even if there is the slightest doubt, the rule is to refer the dispute to arbitration.
28. The limited scrutiny, through the eye of the needle, is necessary and compelling. It is intertwined with the duty of the referral court to protect the parties from being forced to arbitrate when the matter is demonstrably non-arbitrable. It has been termed as a legitimate interference by courts to refuse reference in order to prevent wastage of public and private resources. Further, as noted in Vidya Drolia (supra), if this duty within the limited compass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. Therefore, this Court or a High Court, as the case may be, while exercising jurisdiction under Section 11(6) of the Act, is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator, as explained in DLF Home Developers Limited v. Rajapura Homes Pvt. Ltd., 2021 SCC OnLine SC 781″

In BSNL and Anr. v. Nortel Networks India (P) Ltd., (2021) 5 SCC 738, it is held held as under:

“45.1 …While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere “only” when it is “manifest” that the claims are ex facie time-barred and dead, or there is no subsisting dispute…” (quoted and followed in NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).

N.N. Global Mercantile v. Indo Unique Flame – Contentions, in Substance

The legal disputes in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, was placed before the Apex Court, treading following course:

A suit was filed by the appellant, to enforce a contract.
The defendant applied for reference under Section 8 of the Arbitration and Conciliation Act, the contract being contained an arbitration clause.
Trial Court rejected the application.
A Writ Petition was filed by the defendant challenging the Order. It was contended that the Arbitration Agreement was unenforceable as the (main) contract was unstamped.
The High Court allowed the Writ Petition. (Hence the plaintiff became the appellant before the Supreme Court.)

(i) the substantive contract and
(ii) the arbitration agreement.

In this premise, the 3-Judge Bench opined as under:

Even if the main contract was bad for it was unstamped or insufficiently stamped, the arbitration clause could be enforced.
The defect on insufficiency of stamp could be cured as provided in the Stamp Act, and therefore, it could not be said that an unstamped or insufficiently stamped instrument did not exist in the eye of the law.
The failure to stamp a document, did not affect the validity or unenforceability of the document, but it merely rendered the document inadmissible in evidence.

Before the 5-Judge Bench of the Supreme Court, it was argued –

by the respondents/defendants, on the basis of the relevant provisions of the Arbitration Act (especially Sec. 16), that an arbitration clause would stand as a distinct, separate and independent from the substantive contract and that an arbitration reference can be made by the court even if the arbitration agreement was insufficiently stamped; and
by the appellant/plaintiff, in view of the provisions in the Indian Stamp Act (especially Sec. 33 and 35), that the arbitration reference could not be made by the court on the basis of an insufficiently stamped agreement. It was pointed out that unstamped or insufficiently stamped documents cannot be used as evidence for any purpose, as provided in the Stamp Act; and that for reference under Sec. 8 of the Arbitration Act the court has to specifically find that prima facie a “valid arbitration agreement exists“..

N.N. Global held – If Arb. Agreement Unstamped, No ‘Valid Arb. Agreement Exists‘

It is held, by majority (3:2), in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, that an arbitration reference cannot be made by the court under Sec. 8 of the Arb. Act, on the basis of an unstamped or insufficiently stamped agreement.

The Majority affirmed the findings in this regard, in the two earlier 3-Judge Bench decisions.

(i) Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 (it was held that an arbitration reference cannot be made on the basis of an unstamped or insufficiently stamped agreement).
(ii) Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1 (it was held that landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations).

The majority judgment Para 110 and 111 of N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, reads as under:

“110. An instrument, which is eligible to stamp duty, may contain an Arbitration Clause and which is not stamped, cannot be said to be a contract, which is enforceable in law within the meaning of Section 2(h) of the Contract Act and is not enforceable under Section 2(g) of the Contract Act. An unstamped instrument, when it is required to be stamped, being not a contract and not enforceable in law, cannot, therefore, exist in law. Therefore, we approve of paragraphs-22 and 29 of Garware (supra). To this extent, we also approve of Vidya Drolia (supra), insofar as the reasoning in paragraphs-22 and 29 of Garware (supra) is approved.
111. The true intention behind the insertion of Section 11(6A) in the Act was to confine the Court, acting under Section 11, to examine and ascertain about the existence of an Arbitration Agreement.”

Section 33 and 35 of the Indian Stamp Act, 1899

Section 33 of the Indian Stamp Act, 1899 reads as under:

33. Examination and impounding of instruments – (1) Every person having by law or consent of parties, authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.
(2) … (3) …

Section 35 of the Indian Stamp Act, 1899 reads as under:

35. Instruments not duly stamped inadmissible in evidence, etc. – No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped:
Provided that – (a) any such instrument shall, be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion;
(b) …. (c) ….. (d) …. (e) …..

PART – II

Dispute Must have been Covered by the Arbitration Clause

It is held by the Supreme Court, in Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419, that for appointment of an arbitrator, there must have been an arbitration agreement, and the existence of the arbitration dispute must have been covered by an arbitration clause.

Effect of Fraud on Arbitration Agreement

In A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386, it was held as under:

“25. ……..It is only in those cases where the court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the civil court on the appreciation of the voluminous evidence that needs to be produced, the court can sidetrack the agreement by dismissing the application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration clause or the validity of the arbitration clause itself…….”. (Quoted in: Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419)

It was pointed out in Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419, that the plea of fraud being raised in entering the compromise, the merits of such a plea could be decided only by the Civil Court upon consideration of the evidence adduced by the parties.

Validity Decided by Court; Arbitrators have no Conclusive Power

In Uttar Pradesh Rajkiya Nirman Nigam Limited v. Indure Private Limited, 1996-2 SCC 667: AIR 1996 SC 1373, it is held (even prior to 2015 Amendment) as under:

14. In “Law of Arbitration” by Justice Bachawat (2nd Edn.) at page 155 it is stated that
- “the question whether matters referred to were within the ambit of clause for reference of any difference or dispute which may arise between the parties, it is for the Court to decide”. ….
15. The clear settled law thus is that the existence or validity of an arbitration agreement shall be decided by the Court alone. Arbitrators, therefore, have no power or jurisdiction to decide or adjudicate conclusively by themselves the question since it is the very foundation on which the arbitrators proceed to adjudicate the disputes.”

Conclusion

In N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, it was argued –

by one side, on the basis of the relevant provisions of the Arbitration and Conciliation Act, that an arbitration reference can be made by the court even if the arbitration agreement was insufficiently stamped; and,
by the other side, in view of the provisions in the Indian Stamp Act, that the arbitration reference could not be made by the court on the basis of an insufficiently stamped agreement.

The Majority (3 Judges) pronounced the verdict accepting the latter contention.

Taking note of the divergence in the debated points, among Judges, it is observed by Hrishikesh Roy, J., one of the (two) judges who dissented from the view of the majority, laid down the following-

“… Let our minority opinion (self and Learned Brother Justice Ajay Rastogi, who has written a separate opinion), appeal to the brooding spirit of the future as also the powers of the legislature to examine the interplay between the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899; and to emphatically resolve the imbroglio to avoid any confusion in the minds of the stakeholders in the field of arbitration.”

Let the pointers be that as it may.

In any event, the legislature – as it is duty bound to ponder the welfare of the downtrodden, which is the majority – will have to consider the following are ground realities-

1. The majority of Execution Petitions that come before the Execution (civil) Courts are for realisation of amounts below Rupees 10 Lakh ; and the lion’s share of it is filed by the persons who are engaged, directly or indirectly, in Money Lending activity, or initiated by similar “Service Providers”; and the opposite parties thereof belong (comparatively) to lower strata.
2. A large number of Execution Petitions that come before the Execution (civil) Courts are that from the uncontested Arbitration Awards from “Outside-States”.
3. There is no effective “legal frame” (rules) for fixing remuneration of the Arbitrators.

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Foot Note:

Sec. 8 of the Arbitration And Conciliation Act, 1996 (after 2015 Amendment)
Power to refer parties to arbitration where there is an arbitration agreement.
 (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.


Sec. 11 A of the Arbitration And Conciliation Act, 1996
11. Appointment of arbitrators.
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,
the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.
(6) Where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.
(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, different High Courts or their designates, the High Court or its designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the "Supreme Court or, as the case may be, the High Court" in those sub-sections shall be construed as a reference to the "Supreme Court"; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to the Supreme Court or, as the case may be, the High Court in those sub-sections shall be construed as a reference to the "High Court" within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.
(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation.— For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.

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General

What are Arbitrable Disputes?What are Non-Arbitrable Disputes? When does a Dispute, in spite of Arbitration Clause, Not Referred to Arbitration?

Jojy George Koduvath.

Introspection

1. For referring the parties to arbitration, as per Sec. 8(1) and appointing arbitrator under Sec. 11 of the Arbitration Conciliation Act (as amended in 2015), the court has to (“prima facie“) find that a “valid arbitration agreement exists“.
- That is, the Arbitration agreement should be one that is ‘binding’ and ‘subsisting’.
2. SBP & Co. v. Patel Engg. Ltd., 2005-8 SCC 618 (seven-Judge Bench decision), conferred larger powers to arbitrators, it being held –
- it was the Arbitral Tribunal that had to decide, whether there existed a live claim.
- Note: It was prior to 2015 Amendment in the Arbitration Act. (After the Amendment it is not in the exclusive domain of the Arbitrator.)
3. The legislative policy, as revealed from Sect. 11(6) of the Arbitration Act, is to minimise court’s interference at the pre-arbitral stage.
- (See: SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618, National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267, Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, and Pravin Electricals v. Alaxy Infra and Engineering Pvt. Ltd., (2021) 5 SCC 671)
4. Sec. 11(6A) was inserted (in 2015) also with a view to minimise judicial interference at the pre-arbitral stage.
- It said – Courts jurisdiction, while considering arbitration-application, shall stand confined to the examination of the “existence of an arbitration agreement“.
5. The scope of the judicial interference was (indirectly) increased for the following-
- (i) under Sec. 8(1) of the Arbitration Conciliation Act (as amended in 2015), the court has to (prima facie) “find” that a “valid arbitration agreement exists“.
- (ii) the insertion of Sec. 11(6A) directed – Courts shall examine as to “existence of an arbitration agreement“.
6. Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, made it clear – Courts shall make a Prima Facie finding under Sec. 11(6A) – as to “NonArbitrability of disputes”.
- It is held that it is to make a “check” and to protect parties from being forced to arbitrate when the matter is demonstrably “nonarbitrable”, and it is also to cut off the deadwood.
7. The limited scrutiny, “through the eye of the needle”, is necessary and compelling. “If there is the slightest doubt, the rule is to refer the dispute to arbitration” (NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).

Non-arbitrable matters

Existence of a valid, binding and concluded arbitration agreement is necessary for appointment of an arbitrator by the court.

Sundaram Finance Ltd. v NEPC India Ltd., 1999 2 SCC 479
Wellington Associates Limited v. Kirit Mehta, 2000 4 SCC 272
Panchsheel Constructions v. Davinder Pal Singh Chauhan, 2019 SCCOnlineDel 7176
Quick Heal Technologies Limited v. NCS Computech Private Limited and another, 2020 SCCOnlineBom 693

Following are non-arbitrable matters –

(i) criminal offences
(ii) matrimonial disputes
(iii) guardianship matters
(ix) discharge of the contract – National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd, (2009) 1 SCC 267; New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd.[2015) 2 SCC 424
(x) disputes between licensor/ landlord and licensee/ tenant – Natraj Studios (P) Ltd. v. Navrang Studios, 1981-1 SCC 523
(xi) obtained by fraud, coercion, duress or undue influence, and prima facie, appears it to be lacking in credibility – Union of India v. Master Construction Co.[(2011) 12 SCC 349.
(xii) time-expired contract – Arshad Hussain v. General Officer Commanding , (2022, J&K High Court); Royal Orchid Associated Hotels Private Limited Vs. Kesho Lal Goyal, 2021-276 DLT 713,
(iv) testamentary matters
(v) eviction or tenancy matters (Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., 2011-5 SCC 532)
(vi) absence of a concluded contract (Enercon (India) Ltd. v. Enercon GMBH, 2014-5 SCC 1)
(vii) dead claim and long-barred claim
(viii) insolvency and winding-up matters

Sec. 7(3) of the Arbitration Act – Arbitration arises from a Specific Written Contract

In Harsha Construction v. Union of India, (2014) 9 SCC 246, it is held as under:

“18. Arbitration arises from a contract and unless there is a specific written contract, a contract with regard to arbitration cannot be presumed. Sec. 7(3) of the Act clearly specifies that the contract with regard to arbitration must be in writing. Thus, so far as the disputes which have been referred to in Clause 39 of the contract are concerned, it was not open to the Arbitrator to arbitrate upon the said disputes as there was a specific clause whereby the said disputes had been “excepted “. Moreover, when the law specifically makes a provision with regard to formation of a contract in a particular manner, there cannot be any presumption with regard to a contract if the contract is not entered into by the mode prescribed under the Act.

Arbitrator NOT to decide Matters which are Not Arbitrable, even if an Issue framed

In Harsha Construction v. Union of India, (2014) 9 SCC 246, it is held as under:

“19. If a nonarbitrable dispute is referred to an Arbitrator and even if an issue is framed by the Arbitrator in relation to such a dispute, in our opinion, there cannot be a presumption or a conclusion to the effect that the parties had agreed to refer the issue to the Arbitrator. In the instant case, the respondent authorities had raised an objection relating to the arbitrability of the aforestated issue before the Arbitrator and yet the Arbitrator had rendered his decision on the said “excepted ” dispute. In our opinion, the Arbitrator could not have decided the said “excepted ” dispute. We, therefore, hold that it was not open to the Arbitrator to decide the issues which were not arbitrable; and the award, so far as it relates to disputes regarding nonarbitrable disputes is concerned, is bad in law and is hereby quashed. ” (Referred to in- Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)

Sec. 8(1) – Existence of a Valid Arbitration Agreement must be “Found”

Sec. 8(1) of the Arbitration Conciliation Act reads (after 2015 Amendment) as under:

“(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

Sec. 11(6A) Amendment – Courts are bound to decide on “Nonarbitrability”

Sec. 11(6A) of the Arbitration Act reads as under:

“(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.”

An Arbitral Tribunal may lack jurisdiction for several reasons and nonarbitrability has multiple meanings. (See: Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)

If only there is an arbitrable dispute, on the facet of the matter, then only the dispute should be left to the arbitrator. (See: Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1)

It is with a view to protect parties from being forced to undergo an empty formality and a cumbersome procedure.
When it is manifestly and ex facie NOT certain – whether the dispute is arbitrable or not, it should be best left to the arbitrator in an application under Sec. 16 of the Arbitration Act
That is, if it is found at Sec. 8 or 11 stage that it requires further/deeper consideration, it should be best left to the arbitrator.
In such a case, it is for the arbitrator to decide the arbitrability of the dispute, first.

Non-Arbitrable Dispute – After Sec. 11(6A) Amendment, in 2015

NTPC Ltd. v. SPML Infra Ltd. (2023 SCC OnLine SC 389) – discharge of the contract, (i) for, the SPML had withdrawn the Writ Petition, and therefore, there was discharge of the contract by accord and satisfaction, and (ii) for the Contract stood discharged/novated in terms of the Settlement Agreement.
VGP Marine Kingdom Pvt Ltd v. Kay Ellen Arnold, 2023-1 SCC 597 – unless on the facet it is found that the dispute is not arbitrable, and if it requires further/deeper consideration, the dispute with respect to the arbitrability should be left to the arbitrator.
Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1 – the court should determine the level and nature of judicial scrutiny as to the arbitrability. It should not be left to the arbitrator when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are nonarbitrable. At the stage of Sec. 11, a preliminary inquiry is permissible if a dispute is raised with respect to the arbitrability.
Arshad Hussain v. General Officer Commanding , (2022, J&K High Court) it is pointed out that for appointing an arbitrator under Sec. 11, there should be a live dispute/claim subsisting which is capable of being arbitrated upon; and the Chief Justice or his designate in appointing an arbitrator under Sec. 11(6) of the Act was enjoined upon to examine the existence of the arbitration agreement between the parties and whether there existed a live arbitral claim/dispute. In this case the petition for appointment of an independent arbitrator to resolve the dispute regarding renewal of allotment of shop was dismissed, inter alia, for the agreement clearly provided that it was valid only for a period of one year and be renewed for the next year. It was not mandatory to renew the agreement and it was not renewed. Therefore, it was held that the petitioner was not entitled for appointment of an arbitrator for want of an arbitration agreement, existence of arbitral dispute.

Expiry of Contract by Efflux of Time – Arbitration Clause Cannot be Invoked

It was held by the Supreme Court, in Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, as under:

“10. The following principles relevant to the present case emerge from the aforesaid discussion:
- (1) An arbitration clause is a collateral term of a contract as distinguished from its substantive terms; but nonetheless it is an integral part of it;
- (2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract;
- (3) … (4) … (5) … (6) …..”

The aforesaid Apex Court decision, Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, was referred to in Union of India v. Jagdish Kaur, AIR 2007 All- 67 as under:

“20. The suit was instituted by the landlady on 1 -7-2004 after expiry of term of agreement. Courts below have rightly held that after expiry of five years, the agreement was non- existent and the arbitration clause was not applicable. This view finds support from the law laid down by Hon’ble the Apex Court in Union of India v. Kishori Lal Gupta and Brothers, (1959) AIR SC 1362.”

See also: Cosme Farma Laboratories Ltd. Vs. Shwarde Pharmaceutical Pvt. Ltd., 2013-2 GoaLR 559.

Expiry of Contract by Efflux of Time – Can Arbitration Clause be Invoked?

It is beyond doubt that the arbitration clause cannot be invoked in a case where the period of limitation provided for suits is elapsed.

If the period fixed in a contract for sale of a property (where time is essence of contract) is over and the vendor alleges breach from the part of purchaser, there will not be a valid and subsisting contract from the view of the vendor. In such a case –

if a dispute arises (even within the limitation period for taking legal action), the “existence or validity of an arbitration agreement” has to be decided by the Court, for referring the parties to arbitration, under Sec. 8(1), and appointing arbitrator under Sec. 11, of the Arbitration Conciliation Act.

Arbitration Clause in an Expired Contract, Cannot be invoked

Relying on Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362 it is held in Eigen Technical Service Pvt. Ltd. v. Vatika Limited, 2013-172 Pun LR 27: 2013-4 Arb LR 367, that one cannot invoke arbitration clause in a redundant, and perished contract by efflux of time. The court relied on an Allahabad decision stating as under:

“ High Court of Allahabad in a judgment dated 10.11.2006 passed in Writ Petition No. 21275 of 2006 titled as Union of India Thru’ Secry., Ministry of Postal v. Jagdish Kaur has also observed that arbitration clause contained in an expired agreement is also deemed as expired and is no more valid.”

Validity of Arbn. Agmnt. Decided by Court; Arbitrators have no Conclusive Power

In Uttar Pradesh Rajkiya Nirman Nigam Limited v. Indure Private Limited, 1996-2 SCC 667: AIR 1996 SC 1373, it is held as under:

14. In “Law of Arbitration” by Justice Bachawat (2nd Edn.) at page 155 it is stated that
- “the question whether matters referred to were within the ambit of clause for reference of any difference or dispute which may arise between the parties, it is for the Court to decide”. ….
15. The clear settled law thus is that the existence or validity of an arbitration agreement shall be decided by the Court alone. Arbitrators, therefore, have no power or jurisdiction to decide or adjudicate conclusively by themselves the question since it is the very foundation on which the arbitrators proceed to adjudicate the disputes.”

An arbitration clause is to be strictly construed

The parties are bound by the clauses in the agreement. The Court will not rewrite any clause in equity. An arbitration clause is required to be strictly construed. (See: Oriental Insurance Co Ltd. v. Narbheram Power and Steel (P) Ltd., (2018) 6 SCC 534; (Referred to in- Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)).

In Rajasthan State Industrial Development and Investment Corporation v. Diamond and Gem Development Corporation Ltd.; (2013) 5 SCC 470, it is held that a party cannot claim anything more than what is covered by the terms of the contract, for the reason that the contract is a transaction between two parties and has been entered into with open eyes and by understanding the nature of contract; and that thus the contract being a creature of an agreement between two or more parties has to be interpreted giving literal meanings unless there is some ambiguity therein. The contract is to be interpreted giving the actual meaning to the words contained in the contract and it is not permissible for the Court to make a new contract, however reasonable, if the parties have not made it themselves. It is further observed that the terms of the contract have to be construed strictly without altering the nature of a contract as it may affect the interest of either of the parties adversely. (Referred to in- Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)

Different Facets of Non-Arbitrability

In Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, (on a reference to three-judge-bench) referring Booz Allen and Hamiltan Inc. Vs. SBI Home Finance Ltd., (2011) 5 SCC 532, it is held that there are facets of nonarbitrability, as under:

“(i) Whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the Arbitral Tribunal) or whether they would exclusively fall within the domain of public fora (courts).
(ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the “excepted matters ” excluded from the purview of the arbitration agreement.
(iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the Arbitral Tribunal, or whether they do not arise out of the statement of claim and the counterclaim filed before the Arbitral Tribunal.
A dispute, even if it is capable of being decided by arbitration and falling within the scope of an arbitration agreement, will not be “arbitrable ” if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such a joint list of disputes, does not form part of the disputes raised in the pleadings before the Arbitral Tribunal. “

It is ultimately concluded in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, in para 76 as under:

“45. In view of the above discussion, we would like to propound a fourfold test for determining when the subject matter of a dispute in an arbitration agreement is not arbitrable:
(1) When cause of action and subject-matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.
(2) When cause of action and subject-matter of the dispute affects thirdparty rights; have erga omnes effect; require centralized adjudication, and mutual adjudication would not be appropriate and enforceable;
(3) When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable;
(4) When the subject-matter of the dispute is expressly or by necessary implication nonarbitrable as per mandatory statute(s).
These tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject matter is nonarbitrable. Only when the answer is affirmative that the subject matter of the dispute would be nonarbitrable.
However, the aforesaid principles have to be applied with care and caution as observed in Olympus Superstructures (P) Ltd. Vs. Meena Vijay Khetan and Ors.; (1999) 5 SCC 651: (SCC p. 669, para 35)
“35. …Reference is made there to certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, which cannot be referred to arbitration.
It has, however, been held that if in respect of facts relating to a criminal matter, say, physical injury, if there is a right to damages for personal injury, then such a dispute can be referred to arbitration (Keir v. Leeman). Similarly, it has been held that a husband and a wife may refer to arbitration the terms on which they shall separate, because they can make a valid agreement between themselves on that matter (Soilleux v. Herbst, Wilson v. Wilson and Cahill v. Cahill). ” (Quoted in- Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)

As regards the Prima facie examination of Courts, it is held in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, as under:

“87. Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and non-arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straight forward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage.”

In Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, our Apex Court overruled two decisions.

1. N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 (which, inter alia, observed that allegations of fraud can be made a subject matter of arbitration when they relate to a civil dispute).
2. Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 (which held that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration).

It was pointed out in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, (i) that fraud, which would vitiate and invalidate the arbitration clause, is an aspect relating to non- arbitrability; they are non-arbitrable; and (ii) that the landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. Such rights and obligations can only be adjudicated and enforced by the specified court/forum, and not through arbitration.

Who Decides Nonarbitrability – Prima Facie Test by Court

As to ‘who decides on nonarbitrability of the dispute’, it is observed in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, there is only limited scope for review by the court. It is to check and protect parties from being forced to arbitrate when the matter is demonstrably “nonarbitrable” and to cut off the deadwood. It is held in Vidya Drolia v. Durga Trading Corporation as under:

“96. Discussion under the heading ‘Who decides Arbitrability?’ can be crystallized as under:
(a) Ratio of the decision in Patel Engineering Ltd. (SBP & Co. v. Patel Engg. Ltd., 2005 8 SCC 618) on the scope of judicial review by the court while deciding an application under Sections 8 or 11 of the Arbitration Act, post the amendments by Act 3 of 2016 (with retrospective effect from 23.10.2015) and even post the amendments vide Act 33 of 2019 (with effect from 9.8.2019), is no longer applicable.
(b) Scope of judicial review and jurisdiction of the court under Section 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
(c) The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence competence, is that the arbitral tribunal is the preferred first authority to determine and decide all questions of non arbitrability. The court has been conferred power of “second look” on aspects of nonarbitrability post the award in terms of-
- subclauses (i), (ii) or (iv) of Section 34(2)(a) or
- subclause (i) of Section 34(2)(b) of the Arbitration Act.
(d) Rarely as a demurrer the court may interfere at the Section 8 or 11 stage when it is manifestly and ex facie certain that–
- the arbitration agreement is nonexistent,
- invalid or
- the disputes are nonarbitrable,
though the nature and facet of nonarbitrability would, to some extent, determine the level and nature of judicial scrutiny.
The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably “nonarbitrable”, and to cut off the deadwood. The court by default would refer the matter when contentions relating to nonarbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the arbitral tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism.” (Quoted in: Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678; NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389)

In NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389, it is held (Dr. Dhananjaya Y. Chandrachud; CJI) as under:

“25. Eye of the Needle: The above-referred precedents crystallise the position of law that the pre-referral jurisdiction of the courts under Section 11(6) of the Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant’s privity to the said agreement. These are matters which require a thorough examination by the referral court. The secondary inquiry that may arise at the reference stage itself is with respect to the nonarbitrability of the dispute.”

In NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389, sub-section (6A) added to Section 11, with respect to “pre-referral jurisdiction”, was referred to, and the following decisions were relied on-

Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1,
National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267,
Union of India v. Master Construction Co., (2011) 12 SCC 349,
New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd., (2015) 2 SCC 424,
United India Insurance Co. Ltd. v. Antique Art Exports Pvt. Ltd., (2019) 5 SCC 362.

In Union of India v. Master Construction Co., (2011) 12 SCC 349, it was observed as under:

“18. In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or no-claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be a necessity to refer the dispute for arbitration at all.”

In New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd., (2015) 2 SCC 424, it was observed as under:

“10. In our considered view, the plea raised by the respondent is bereft of any details and particulars, and cannot be anything but a bald assertion. Given the fact that there was no protest or demur raised around the time or soon after the letter of subrogation was signed, that the notice dated 31-3-2011 itself was nearly after three weeks and that the financial condition of the respondent was not so precarious that it was left with no alternative but to accept the terms as suggested, we are of the firm view that the discharge in the present case and signing of letter of subrogation were not because of exercise of any undue influence. Such discharge and signing of letter of subrogation was voluntary and free from any coercion or undue influence. In the circumstances, we hold that upon execution of the letter of subrogation, there was full and final settlement of the claim. Since our answer to the question, whether there was really accord and satisfaction, is in the affirmative, in our view no arbitrable dispute existed so as to exercise power under Section 11 of the Act. The High Court was not therefore justified in exercising power under Section 11 of the Act.”

In United India Insurance Co. Ltd. v. Antique Art Exports Pvt. Ltd., (2019) 5 SCC 362, it was observed as under:

“21. In the instant case, prima facie no dispute subsisted after the discharge voucher being signed by the respondent without any demur or protest and claim being finally settled with accord and satisfaction and after 11 weeks of the settlement of claim a letter was sent on 27-7-2016 for the first time raising a voice in the form of protest that the discharge voucher was signed under undue influence and coercion with no supportive prima facie evidence being placed on record in absence thereof, it must follow that the claim had been settled with accord and satisfaction leaving no arbitral dispute subsisting under the agreement to be referred to the arbitrator for adjudication.
22. In our considered view, the High Court has committed a manifest error in passing the impugned order and adopting a mechanical process in appointing the arbitrator without any supportive evidence on record to prima facie substantiate that an arbitral dispute subsisted under the agreement which needed to be referred to the arbitrator for adjudication.”

Earlier View

Arbitrator to decide – whether valid arbitration agreement, claim barred

In SBP & Co. v. Patel Engg. Ltd., 2005 8 SCC 618, a seven-Judge Bench of the Apex Court held as under:

“39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense, whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection.”

Matters that Require Evidence

In SBP & Co. v. Patel Engg. Ltd., 2005 8 SCC 618, a seven-Judge Bench of the Apex Court held further as under:

“It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral Tribunal. (quoted in: Ashapura Mine -Chem Ltd. v. Gujarat Mineral Development Corporation, 2015-8 SCC 193)

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End Notes:

Sec. 8 of the Arbitration And Conciliation Act, 1996 (after 2015 Amendment)
Power to refer parties to arbitration where there is an arbitration agreement.
 (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.


Sec. 11 A of the Arbitration And Conciliation Act, 1996
11. Appointment of arbitrators.
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,
the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.
(6) Where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.
(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, different High Courts or their designates, the High Court or its designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the "Supreme Court or, as the case may be, the High Court" in those sub-sections shall be construed as a reference to the "Supreme Court"; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to the Supreme Court or, as the case may be, the High Court in those sub-sections shall be construed as a reference to the "High Court" within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.
(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation.— For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.

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Termination or Nullity of Contract Will Not Cease Efficacy of the Arbitration Clause

Jojy George Koduvath.

PART – I

Introspection

Will the arbitration clause survive, on the termination of the agreement/contract?
Will the arbitration clause survive, notwithstanding a declaration of the contract being null and void?

Arbitration clause is treated as an independent contract

Sec. 16(1)(a) of the Arbitration and Conciliation Act, 1996 provides that the arbitration clause forming part of a contract shall be treated as an agreement independent of such a contract. (Enercon (India) Ltd. v. Enercon GMBH, 2014-5 SCC 1).

Therefore-
Even on the termination of the agreement/contract, the arbitration clause will survive.
Even when the agreement/contract comes to an end by efflux of time, the arbitration clause will not come to an end.
In spite of the declaration that a contract is null and void, the arbitration clause continues to be enforceable.

Sec. 16(1) of the Arbitration and Conciliation Act, 1996 provides as under:

“16. Competence of arbitral tribunal to rule on its jurisdiction – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose –
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.”

Sec. 16(1) of the Arbitration and Conciliation Act, 1996 has been enacted in the light of Article 16 of the UNCITRAL Model Law. It reads as under:

“Article 16 – Competence of arbitral tribunal to rule on its jurisdiction –
(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) …… (3) ……..”

In Everest Holding Limited Vs. Shyam Kumar Shrivastava, 2008 (16) SCC 774, it is held as under:

“Though the JVA (Joint Venture Agreement) may have been terminated and cancelled as stated but it was a valid JVA containing a valid arbitration agreement for settlement of disputes arising out of or in relation to the subject matter of the JVA. The argument of the respondent that the disputes cannot be referred to the arbitration as the agreement is not in existence as of today is therefore devoid of merit.”

Referring Everest Holding Limited Vs. Shyam Kumar Shrivastava, 2008 (16) SCC 774, it is held in Reva Electric Car Co. Ltd v. Green Mobil, (2012) 2 SCC 93, it is held as under:

“Section 16(1)(a) presumes the existence of a valid arbitration clause and mandates the same to be treated as an agreement independent of the other terms of the contract. By virtue of Section 16(1)(b), it continues to be enforceable notwithstanding a declaration of the contract being null and void. In view of the provisions contained in Section 16(1) of the Arbitration and Conciliation Act, 1996, it would not be possible to accept the submission of Ms.Ahmadi that with the termination of the MOU on 31st December, 2007, the arbitration clause would also cease to exist.”

In Reliance Industries Limited v. Union of India, 2014-7 SCC 603, referring Sec. 16 of the Arbitration and Conciliation Act, 1996 it is held as under:

“61. A bare perusal of the aforesaid would show that the arbitration agreement is independent of the other terms of the contract. Further, even if the contract is declared null and void, it would not lead to the foregone conclusion that the arbitration clause in invalid. The aforesaid provision has been considered by this Court in a number of cases, which are as follows-
- Reva Electric Car Company P. Ltd. v. Green Mobil, 2012-2 SCC 93,
- Today Homes and Infrastructure Pvt. Ltd . v. Ludhiana Improvement Trust and Anr., 2013-7 SCALE 327,
- Enercon (India) Ltd. v. Enercon GMBH, 2014-1 ArbLR 257,
- World Sport Group (Mauritius) Ltd . v. MSM Satellite (Singapore) PTC Ltd. [Civil Appeal No. 895 of 2014]”

Arbitration Clause Forms Independent Contract

In Enercon (India) Ltd. v. Enercon GMBH, 2014-5 SCC 1, it is held as under:

83. The concept of separability of the arbitration clause/agreement from the underlying contract is a necessity to ensure that the intention of the parties to resolve the disputes by arbitration does not evaporate into thin air with every challenge to the legality, validity, finality or breach of the underlying contract. The Indian Arbitration Act, 1996, as noticed above, under Section 16 accepts the concept that the main contract and the arbitration agreement form two independent contracts. Commercial rights and obligations are contained in the underlying, substantive, or the main contract. It is followed by a second contract, which expresses the agreement and the intention of the parties to resolve the disputes relating to the underlying contract through arbitration. A remedy is elected by parties outside the normal civil court remedy. It is true that support of the national courts would be required to ensure the success of arbitration, but this would not detract from the legitimacy or independence of the collateral arbitration agreement, even if it is contained in a contract, which is claimed to be void or voidable or unconcluded by one of the parties.” (Quoted in: Ashapura Mine -Chem Ltd. v. Gujarat Mineral Development Corporation, 2015-8 SCC 193).

Note: It is beyond doubt that the intention of Sec. 16(1) the Act is not-

to resurrect an arbitration clause that cannot be invoked in cases (i) where the period of limitation provided for suits is elapsed; or (ii) where there is a rescission or alteration of contract under Sec. 62 of the Contract Act, and thereby the parties need not have performed the original contract (as shown below).

PART – II

Sea Change by 2015 Amendment on Arbitration and Conciliation Act, 1996

There is a sea change by 2015 Amendment on Arbitration and Conciliation Act, 1996 (i) as regards reference for arbitration under Sec. 8, and (ii) for appointment of arbitrator under Sec. 11.
After 2015 Amendment, for referring parties to arbitration and for appointing arbitrator, the courts should have “FOND“ ‘PRIMA FACIE’ –
- (i) the EXISTENCE of the arbitration agreement and
- (ii) the VALIDITY thereof
- (in short, legitimacy of arbitrability).
Sec. 8(1), as amended, reads as under:
- “A judicial authority …. shall … refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”
The arbitration agreement should be a ‘binding’ and ‘subsisting’ one, for qualifying it to be “valid” and “existing”.
Referral proceedings are preliminary and summary and not a “mini trial”. But, there are certain cases where the prima facie examination may require a deeper consideration. This prima facie examination is to make a “check” and to protect parties from being forced to arbitrate when the matter is demonstrably “non-arbitrable” (See: Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1).
The limited scrutiny, “through the eye of the needle”, is necessary and compelling. “If there is the slightest doubt, the rule is to refer the dispute to arbitration” (NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).

Expiry of Contract by Efflux of Time – Can Arbitration Clause be Invoked?

It is beyond doubt that the arbitration clause cannot be invoked in a case where the period of limitation provided for suits is elapsed.

if a dispute arises (even within the limitation period for taking legal action), the “existence or validity of an arbitration agreement” has to be decided by the Court.

Existence of Contract – Necessary Condition for Operation of Arbitration Clause

It was held by the Supreme Court, in Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362 (a case on rescission or alteration of contract under Sec. 62 of the Contract Act – where the parties to need not have performed the original contract), as under:

“10. The following principles relevant to the present case emerge from the aforesaid discussion:
- (1) An arbitration clause is a collateral term of a contract as distinguished from its substantive terms; but nonetheless it is an integral part of it;
- (2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract;
- (3) … (4) … (5) … (6) …..”
(The aforestated passage in Union of India v. Kishorilal Gupta is quoted in: Indian Drugs and Pharmaceuticals Limited v. Indo Swiss Synthetics Gem Manufacture Company Limited, 1996-1 SCC 54; Sanjiv Prakash v. Seema Kukreja, 2021-9 SCC 732; Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1)

Dispute Mut have been covered by the arbitration clause

Effect of Fraud on Arbitration Agreement

In A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386, it was held as under:

“25. ……..It is only in those cases where the court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the civil court on the appreciation of the voluminous evidence that needs to be produced, the court can sidetrack the agreement by dismissing the application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration clause or the validity of the arbitration clause itself…….”. (Quoted in: Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419)

Arbitration Clause in a Perished/Expired Contract, Arbitrator Not Appointed

Relying on Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362 it is held in Eigen Technical Service Pvt. Ltd. v. Vatika Limited, 2013-172 Pun LR 27: 2013-4 Arb LR 367, that arbitration clause in a redundant and perished contract by efflux of time, cannot be invoked. The court relied on an Allahabad decision stating as under:

“ High Court of Allahabad in a judgment dated 10.11.2006 passed in Writ Petition No. 21275 of 2006 titled as Union of India Thru’ Secry., Ministry of Postal v. Jagdish Kaur has also observed that arbitration clause contained in an expired agreement is also deemed as expired and is no more valid.”

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Is Certified Copy of Registered Deed a Public Document? Is it Admissible in Evidence Under S. 65(e) or S. 65(f)?

Jojy George Koduvath

Contents in Nutshell

Certified copy of registered (sale/gift) deed is NOT a public document under section 74.
Original of a (sale/gift) deed being not a public document, it does not fall under S. 65(e).
Original of a (sale/gift) deed is a NOT a document of which a certified copy is permitted by this Act (or by any other law in force in India) to be given in evidence. Hence it does not fall Under S. 65(f) also.
A registered (sale/gift) deed being not a document that falls under S. 65(e) and 65(f), any kind of its secondary evidence (including certified copy) can be given in evidence.
A registered (sale/gift) deed being not a document that falls under S. 65(e) and 65(f), secondary evidence of it cannot be given in evidence without ‘laying of foundation for acceptance of secondary evidence’ under Section 65(a), 65(b) or 65(c).
The courts being required to examine the probative value of admissibility of a secondary evidence, in a proper case (like a collusive suit), the court can take the view that the probative value of (other kinds of) secondary evidence of a deed (certified copy of which is provided) is low or nil.

Public and Private Documents

Sec. 74 of the Evidence Act enumerates the documents that are accepted as public documents. All other documents are identified as private, as laid down in Sec. 75.

Sec. 74 and 75 read as under:

Sec. 74. Public documents—

“The following documents are public documents-
Documents forming the acts, or records of the acts—
- of the sovereign authority,of official bodies and tribunals, and
- of public officers, legislative, judicial and executive, of any part of India or of the Commonwealth, or of a foreign country; of any part of India or of the Commonwealth, or of a foreign country;”
Public records kept in any State of private documents.”

Sec. 75. Private Documents—

“All other documents are private.”

Characteristics of Public Documents

It is held by the Madras High Court in Rangaraju v. Kannayal, 2012 SCC Online Mad. 138, as under:

“22. It has to be pointed out that a document cannot be said to be a public document within Section 74 of the Indian Evidence Act, unless it is shown to have been prepared by a public servant in discharge of his official duty as per the decision rendered in S.V. Chimanlal’s case reported in AIR 1942 Bombay 161.
23. Whenever there is a duty to record official doings, the record thus kept is admissible. As a general principle, it may be laid down that wherever there is a duty to do so, then there is also a duty to record the things done (Wigmore S 1639).
24. A public document is one made by a public officer for the purpose of the public making use of it and being able to refer it as per the decision made in Sturla v. Ferriccia (1882) 5 App Cas 623 HL at 643 per Lord Blackburn.
25. The rule as to public document is that the publicity must be contemporaneous and publicity means such publicity as would afford an opportunity of correcting anything that is wrong.
26. The test of publicity is that the public are interested in it and entitled to see it so that if there is anything wrong in it, they are entitled to protest.
27. When a public has a right to inspect an official document, it becomes a public document and the certified copy of the same will be given to that person who has applied for it, provided his right of inspection is not taken away by any other provisions of the Indian Evidence Act or by any other law, as opined by this court.
28. As a matter of fact, a certified copy of a public document need not be proved by calling a witness as per the decision of the Honourable Supreme Court reported in AIR 1963 SC 1633 in the case of Madamanchi Ramappa and another v. Muthalur Bojjappa.”

Proof of Public Documents by Certified Copies

76. Certified copies of public documents—

Every 1public officer having the custody of a public document, which any person has a right to inspect, shall give that person on demand a copy of it on payment of the legal fees therefor, together with a certificate written at the foot of such copy that it is a true copy of such document or part thereof, as the case may be, and such certificate shall be dated and subscribed by such officer with his name and his official title, and shall be sealed, whenever such officer is authorized by law to make use of a seal; and such copies so certified shall be called certified copies
Explanation.—Any officer who, by the ordinary course of official duty, is authorized to deliver such copies, shall be deemed to have the custody of such documents within the meaning of this section.

77. Proof of documents by production of certified copies—

Such certified copies may be produced in proof of the contents of the public documents or parts of the public documents of which they purport to be copies.
- Madamanchi Ramappa v. Muthalur Bojjappa, AIR 1963 SC 1633, it is held as under:
  - “The document in question being a certified copy of a public document need not have been proved by calling a witness.”

78. Proof of other official documents—

The following public documents may be proved as follows:—

1. Acts, orders or notifications of the Central Government in any of its departments, or of the Crown Representative or of any State Government or any department of any State Government—
by the records of the departments, certified by the head of those departments respectively, or by any document purporting to be printed by order of any such Government or as the case may be, of the Crown Representative;
2. The proceedings of the Legislatures—
by the journals of those bodies respectively, or by published Acts or abstracts, or by copies purporting to be printed by order of the Government concerned;
3. Proclamations, orders or regulations issued by Her Majesty or by the Privy Council, or by any department of Her Majesty’s Government—
by copies or extracts contained in the London Gazette, or purporting to be printed by the Queen’s printer;
4. The acts of the Executive or the proceedings of the Legislature of a foreign country—
by journals published by their authority, or commonly received in that country as such, or by a copy certified under the seal of the country or sovereign, or by a recognition thereof in some Central Act;
5. The proceedings of a municipal body in a State—
by a copy of such proceedings, certified by the legal keeper thereof, or by a printed book purporting to be published by the authority of such body;
6. Public documents of any other class in a foreign country—
by the original, or by a copy certified by the legal keeper thereof, with a certificate under the seal of a Notary Public, or of an Indian Consul or diplomatic agent that the copy is duly certified by the officer having the legal custody of the original, and upon proof of the character of the document according to the law of the foreign country.

Presumption as To Genuineness of Certified Copies

79. Presumption as to genuineness of certified copies.—

The Court shall presume to be genuine every document purporting to be a certificate, certified copy, or other document, which is by law declared to be admissible as evidence of any particular fact and which purports to be duly certified by any officer of the Central Government or of a State Government, or by any officer in the State of Jammu and Kashmir who is duly authorized thereto by the Central Government:
Provided that such document is substantially in the form and purports to be executed in the manner directed by law in that behalf. The Court shall also presume that any officer by whom any such document purports to be signed or certified held, when he signed it, the official character which he claims in such paper.

Is Certified Copy of a Sale Deed, Public Document that fall u/S. 65(e) or 65(f)

No.

Section 65 Evd. Act states as to the cases in which secondary evidence as to the documents may be given. It says-

65. Cases in which secondary evidence relating to documents may be given—Secondary evidence may be given of the existence, condition, or contents of a document in the following cases:—
(a) When the original is shown or appears to be in the possession or power— of the person against whom the document is sought to be proved, or of any person out of reach of, or not subject to, the process of the Court, or of any person legally bound to produce it, and when, after the notice mentioned in section 66, such person does not produce it;
(b) when the existence, condition or contents of the original have been proved to be admitted in writing by the person against whom it is proved or by his representative in interest;
(c) when the original has been destroyed or lost, or when the party offering evidence of its contents cannot, for any other reason not arising from his own default or neglect, produce it in reasonable time;
(d) when the original is of such a nature as not to be easily movable;
(e) when the original is a public document within the meaning of section 74;
(f) when the original is a document of which a certified copy is permitted by this Act, or by any other law in force in India to be given in evidence;
(g) when the originals consists of numerous accounts or other documents which cannot conveniently be examined in Court, and the fact to be proved is the general result of the whole collection.
In cases (a), (c) and (d), any secondary evidence of the contents of the document is admissible.
In case (b), the written admission is admissible.
In case (e) or (f), a certified copy of the document, but no other kind of secondary evidence, is admissible.
In case (g), evidence may be given as to the general result of the documents by any person who has examined them, and who is skilled in the examination of such documents.

“Original is a document of which a Certified Copy is Permitted by this Act …. to be given in evidence” – Meaning

It means the following-

Certified copy of a document is permitted (by the Evid. Act, or by any other law in force) to be given in evidence ‘without laying of any foundation for acceptance of secondary evidence’ [as provided in Sec. 65 (a), (b) and (c) ].
- Note: 1. A sale deed or gift deed continues to be a private document , even if it is registered.
- 2. The Evid. Act, or by any other law in force does not allow to give such a deed (its original) ‘to be given in evidence’ – without ‘laying of any foundation for acceptance of secondary evidence’.

In Rekha Rana v. Ratnashree Jain, AIR 2006 MP 107, RV Raveendran, J., scholarly considered whether certified copy of a sale deed (which is always a private document), obtained from the sub-registrar’s office is a public document, so that its certified copy can be given in evidence without ‘laying of any foundation for acceptance of secondary evidence’ under Section 65(e) or 65(f). It was authoritatively pointed out-

If the original is a public document, secondary evidence by way of certified copy can be (Sec. 65 says – certified copy alone has to be) given in evidence to prove the contents of the original document without ‘laying of foundation for acceptance of secondary evidence’, under Section 65(e) or 65(f).
But, where the original is a private document, secondary evidence (by way of certified copy) can be given in evidence only after ‘laying of any foundation for acceptance of secondary evidence’. Such ‘laying of foundation’ for admitting certified copy must be according to Section 65, clause (a), (b) or (c).

Reveendran, J. held as under:

“8. A deed of sale is a conveyance. A deed of conveyance or other document executed by any person is not an act nor record of an act of any sovereign authority or of any official body or tribunal, or of any public officer, legislative, judicial and executive. Nor is it a public record kept in a State of any private documents. A sale deed (or any other deed of conveyance) when presented for registration under the Registration Act, is not retained or kept in any public office of a State after registration, but is returned to the person who presented such document for registration, on completion of the process of registration. An original registered document is not therefore a public record kept in a state of a private document. Consequently, a deed of sale or other registered document will not fall under either of the two classes of documents described in Section 74, as ‘public documents’. Any document which is not a public document is a private document. We therefore have no hesitation in holding that a registered sale deed (or any other registered document) is not a public document but a private document.
9. This position is made abundantly clear in Gopal Das v. Shri Thakurji AIR 1943 Privy Council 83, wherein the Privy Council considering the question whether a registered receipt is a public document observed thus:
“It was contended by Sir Thomas Strongman for the respondents that the receipt comes within para 2 of Section 74, Evidence Act, and was a ‘public document’; hence under Section 65(e) no such foundation is required as In cases coming within Clauses (a), (b) and (c) of that section. Their Lordships cannot accept this argument since the original receipt, of 1881 is not ‘a public record of a private document’. The original has to be returned to the party. A similar argument would appear at one time to have had some acceptance in India but it Involves a misconstruction of the Evidence Act and Registration Act and later decisions have abandoned it.” (Emphasis supplied)
We may also refer to the following passage from Ratanlal’s Law of Evidence’ (19th Edition page 237):
“Public document, (clause (e)] – This clause is intended to protect the originals of public records from the danger to which they would be exposed by constant production in evidence. Secondary evidence is admissible in the case of public documents mentioned in Section 74. What Section 74 provides is that public records kept in any state of private documents are public documents, but private documents of which public records are kept are not in themselves public documents. A registered document, therefore, does not fall under either Clause (e) or (f). The entry in the register book is a public document, but the original is a private document.”
- The above passage from Rekha Rana v. Ratnashree Jain is quoted in: Deccan Paper Mills Co. Ltd. Vs. Regency Mahavir Properties. 2021-4 SCC 786, AIR 2020 SC 4047.

Raveendran, J. cogently held as to the status of the certified copy of a sale as under:

• “A certified copy of a registered document, copied from Book 1 and issued by the Registering Officer, is neither a pubic document, nor a certified copy of a private document, but is a certified copy of a public document.”

Proof of Certified Copies Permitted by S. 77; Correctness Presumed by S. 79

As shown earlier, Sec. 77 of the Evidence Act permits to produce certified copies of public documents in proof of its contents.

In Kalyan Singh v. Chhoti, AIR 1990 SC 396, our Apex Court did not act upon the ‘just an ordinary copy‘, for, there was “also no evidence regarding content of the original sale deed”. It reads as under:

“Section 63 of the Evidence Act mentions five kinds of secondary evidences. Clause (1), (2) and (3) refer to copies of documents; clause (4) refers to counterparts of documents and clause (5) refers to oral accounts of the contents of documents. Correctness of certified copies referred to in clause (1) is presumed under Section 79; but that of other copies must be proved by proper evidence. A certified copy of a registered sale deed may be produced as secondary evidence in the absence of the original. But in the present case Ex. 3 is not certified copy. It is just an ordinary copy. There is also no evidence regarding content of the original sale deed. Ex. 3 cannot, therefore, be considered as secondary evidence. The appellate Court has a right and duty to exclude such evidence.”

Referring relevant provisions of Himachal Land Revenue Act, 1954 and Sec. 35 of the Indian Evidence Act, 1872, it is held in Partap Singh v. Shiv Ram: AIR 2020 SC 1382, that Record-of-rights (Revenue document) carries the ‘presumption of correctness‘.

Certified Copy alone Admitted for Equitable Mortgage, Not Xerox Copy

Relying on Kalyan Singh v. Chhoti, AIR 1990 SC 396, the Madras High Court, in Ananthkrishnan V. K G Rangasamy, 2020-1 Mad LW 355, observed that when a document was a registered one, the xerox copy of the same was not admissible as secondary evidence; and the court found it bad to create an equitable mortgage with xerox copy. The same view is taken by the Kerala High Court in Syndicate Bank v. Modern Tile and Clay Works, 1980 KLT 550. It is followed in Biju Paul Vs. Nedungadi Bank,2012-245 KerLR 291.

But, the AP High Court observed in G Balamani v. Parimi Manga Devi, 2019-4 ALD 401,
2019-3 CIVCC 590, 2019-4 ALT 203, that a valid equitable mortgage could be created by deposit of photostat copies of title deeds.

Best Evidence Rule insists Evidence of High Probative Value

Though various kinds of secondary evidences are provided under Sec. 63, the probative value of one kind (say, a photograph of an original, as stated in Illustration (a) of Sec. 63) will definitely be higher when compared with another (say, oral account). The best evidence rule insists evidence bearing high probative value.

The Calcutta High Court quoting Life Insurance Corporation of India Vs. Ram Pal Singh Bisen [2010-4 SCC 491] it is observed in Bajaj Allianz General Insurance Company Vs. Smt. Santa (2019-2 ACC 36) that ‘even if the document had been marked as Exhibit-A without objection, without a formal proof thereof in accordance with the provisions of the Evidence Act, such document lost its credibility and is of no probative value’.

Admission of contents: may dispense proof; but probative value may be less or nil

Admissibility & probative value – two matters. State of Bihar Vs. Radha Krishna Singh (AIR 1983 SC 684) it is observed:

“Admissibility of a document is one thing and its probative value quite another—these two aspects cannot be combined. A document may be admissible and yet may not carry any conviction and weight or its probative value may be nil.”

Court examines probative value of secondary evidence

It is well settled that if a party wishes to lead secondary evidence, the Court is obliged to examine the probative value of the document produced in the Court or their contents and decide the question of admissibility of a document in secondary evidence [Rakesh Mohindra Vs. Anita Beri: 2015 AIR(SCW) 6271].

Court is obliged to examine the Probative Value

In Kaliya Vs. State of MP: 2013-10 SCC 758 (relying on H. Siddiqui Vs. A. Ramalingam: AIR 2011 SC 1492, and Rasiklal Manikchand Vs. MSS Food Products: 2012-2 SCC 196) held as under:

“The court is obliged to examine the probative value of documents produced in court or their contents and decide the question of admissibility of a document in secondary evidence.”
[Note: Further held: “In case, an objection is not raised at that point of time, it is precluded from being raised at a belated stage.”]

Is ‘Registration’, “Proof” of ‘Execution’?

There is a presumption – registered document is validly executed.

Prem Singh v. Birbal, AIR 2006 SC 3608;
Abdul Rahim v. Abdul Zabar, AIR 2010 SC 211
Jamila Begum v. Shami Mohd., AIR 2019 SC 72;
Manik Majumder v. Dipak Kumar Saha, AIR 2023 SC 506.
A registered document carries with it a presumption that it was executed in accordance with law – Bellachi v. Pakeeran, AIR 2009 SC 3293.
The facts spelled out by the endorsements made under Sections 58 and 59 of the Registration Act may be presumed to be correct without formal proof thereof – Bhagat Ram v. Suresh, AIR 2004 SC 43.
The certificate endorsed on a registered deed by the registering officer is a relevant piece of evidence for proving its execution – Piara v. Fatnu, AIR 1929 Lah 711.

‘Presumption’ in Law – Is it Truth of a Fact Alleged?

Two views exist-

First, Presumption is an inference of a fact. This, by itself (invariably) embraces ‘truth’.
Second (and more cogent), under Sec. 114 of the Evidence Act, court may presume the existence of any fact. The inference, in most cases, will be the subsistence of a fact, like existence of a document or its authorship (rather than its truth). In proper cases, a further presumption could be added – so that the ‘truth’ may also be deduced (Eg. regularity of official acts, sale under a registered sale deed).

Is there presumption as to “Truth” in ‘Presumption’ under the Indian Evidence Act?

The Indian Evidence Act does not specifically correlate “truth” or “correctness” with ‘presumption’. But, ‘any fact’ stated in Sec. 114 of the Evidence Act (Court may presume the existence of any fact) includes ‘truth’. As shown above, it is clear from the Stroud’s Legal Dictionary that presumption is a probable consequence drawn from facts as to the truth of a fact alleged. It is clear that, in presumption, the existence or truth of a fact, otherwise doubtful, is inferred from certain other proved facts. Here, the Court exercises a process of reasoning and reach a logical conclusion as the most probable position (See: St. of West Bengal Vs. Mir Mohammad Omar, AIR 2000 SC 2988).

It is observed in Izhar Ahmad Khan v. Union of India, AIR 1962 SC 1052, that the term ‘presumption’ in its largest and most comprehensive signification, may be defined to bear inference, affirmative or disaffirmative of the truth or falsehood of a doubtful fact or proposition drawn by a process of probable reasoning from something proved or taken for granted. Our courts usually draw presumptions as to truth or correctness in documents covered by Sec. 35 Evd. Act and Registered deeds, as detailed below.

Section 67, Evid. Act requires – facts to be proved; It includes invocation of ‘Presumption‘

Section 35 in the Registration Act, 1908 reads as under:

“35. Procedure on admission and denial of execution respectively—(1) (a) If all the persons executing the document appear personally before the registering officer and are personally known to him, or if he be otherwise satisfied that they are the person they represent themselves to be, and if they all admit the execution of the document, or ….”

In Sumathi Amma v. Kunjuleskhmi Amma (1964 Ker LT 945) it was observed that Section 67, Evidence Act only says that facts have to be proved, and, unlike Section 68, does not prescribe any particular mode of proof. The facts required to be proved under Section 67 can be proved by any kind of evidence, and there is nothing in the section to indicate that the evidence furnished by the registration certificate by virtue of Sub-section (2) of Section 60 of the Registration Act and by the presumption in Illustration (e) of Section 114 of the Evidence Act, is to be excluded.’

In Kunhamina Umma v. Special Tahsildar, AIR 1977 Ker 41, the Kerala High Court observed that the facts required to be proved under Section 67 could be proved by any kind of evidence, and there was nothing in the section to indicate that the evidence furnished by the registration certificate by virtue of Sub-section (2) of Section 60 of the Registration Act and by the presumption in Illustration (e) of Section 114 of the Evidence Act, was to be excluded. It is held as under:

“The Privy Council said in Gangamoy Debi v. Troilukhya Nath (1906) 33 Ind App 60 : ILR 33 Cal 537 (PC)–‘The registration is a solemn act, to be performed in the presence of a competent official appointed to act as registrar, whose duty it is to attend the parties during the registration and see that the proper persons are present and are competent to act, and are identified to his satisfaction; and all things done before him in his official capacity and verified by his signature will be presumed to be duly and in order‘.
15. On the strength of this observation of the Privy Council and on a consideration of Section 60 of the Registration Act, the Lahore High Court held in Piara v. Fatnu (AIR 1929 Lah 711) that the certificate endorsed on a registered deed by the registering officer is a relevant piece of evidence for proving its execution. … …..
19. The question has been considered in depth by Justice Raman Nair (as he then was) in Sumathi Amma v. Kunjuleskhmi Amma (1964 Ker LT 945). The learned Judge observed (at pages 946 and 947) :
- “… It (Section 67 Evidence Act) only says that facts have to be proved, and, unlike Section 68, does not prescribe any particular mode of proof. The facts required to be proved under Section 67 can be proved by any kind of evidence, and there is nothing in the section to indicate that the evidence furnished by the registration certificate by virtue of Sub-section (2) of Section 60 of the Registration Act and by the presumption in Illustration (e) of Section 114 of the Evidence Act, is to be excluded.’
- We have no hesitation in endorsing the view of the learned Judge as laying down the correct law on the question if we may say so with respect.”

In Vimal Chand Ghevarchand Jain v. Ramakant Eknath Jajoo, (2009) 5 SCC 713, it is held as under:

“The deed of sale dated 29.6.1978 was a registered one. It, therefore, carries a presumption that the transaction was a genuine one.”

Read Blog: Proof and Truth of Documents
Presumptions on Registered Documents & Collateral Purpose

RV Raveendran, J., took a discordant stand as to Proof Invoking Registration

In Rekha Rana v. Ratnashree Jain, AIR 2006 MP 107, RV Raveendran, J., took a discordant stand as to proof invoking the factum of registration of the document. His Lordship held as under:

“But then it will only prove the contents of the original document, and not be proof of execution of the original document. (Vide Section 57(5) of Registration Act read with Section 77 of Evidence Act). This is because registration of a document is proof that someone purporting to be ‘X’ the executant admitted execution, but is not proof that ‘X’ executed the document.”
“Such certified copy marked without laying foundation for receiving secondary evidence, though admissible for the purpose of proving the contents of the original document, will not be proof of execution of the original document.”

Conclusion

It took a long journey to come to the conclusion as to-
- (i) whether no other kind of secondary evidence, but a certified copy alone (under clause ‘e’ and ‘f’ of Sec. 65) is acceptable to prove a registered sale/gift deed;
- (ii) whether proof of execution of a document can be proved by ‘registration and registration certificate’ (invoking presumption)?
Now it is concluded-
- (i) All kinds of secondary evidence (not confined to certified copy) is acceptable to prove a registered sale/gift deed. But, in a proper case, the court can take the view that the probative value of (other kinds of) secondary evidence of a deed (certified copy of which is provided) is low or nil.
- (ii) ‘Fact of registration and registration certificate’ can be used to prove the execution of a document.

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Book No, 1 – Civil Procedure Code

Power of attorney

Title, ownership and Possession

Principles and Procedure

Land Laws/ Transfer of Property Act

Evidence Act – General

Contract Act

Easement

Stamp Act & Registration

Will

Divorce

Book No. 2: A Handbook on Constitutional Issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

General Principles
Dedication and Vesting
Trustees and Management
Breach of Trust
- Breach of Trust and Removal of Trustees
Suits by or against Trusts
- Suits By or Against Trusts and Trustees
- Remedies Under Sec. 92 CPC
Law on Hindu Religious Endowments
- Philosophy of Idol Worship
Temples, Gurudwaras, Churches and Mosques – General
- Legal Personality of Temples, Gurudwaras, Churches and Mosques
Constitutional Principles
Ayodhya and Sabarimala Disputes
- Ayodhya Disputes: M. Siddiq case – Pragmatic Verdict
- Sabarimala Review Petitions & Reference to 9-Judge Bench
- SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
General

Cancellation of Sale Deeds, Settlement Deeds and Trust Deeds

Powers of Sub-Registrar in (Registering and) Cancelling Deeds

Saji Koduvath, Advocate, Kottayam

PART I

Key Takeaways

A party to a (void or voidable) document alone need to get it cancelled; other persons can ignore it.
The true owner of a property cannot seek cancellation of a deed, executed by a stranger to the property.
When the plaintiff cannot establish his title without avoiding an instrument that stands as an insurmountable obstacle, the plaintiff has to seek a declaration.
A registered deed cannot be unilaterally cancelled by its executant. The only remedy available is to invoke Sec. 31, Sp. Relief Act.
If a person is aggrieved by a deed, the remedy open for him is to seek appropriate relief in the civil Court.
Registrar is not competent to cancel the registered document.
Does the Registering Authority hold Quasi-Judicial power? No.
Does the Registrar has duty to see – document is presented in accordance with law? Yes.
Does the Registrar hold power to desist from registering a document, submitted along with the necessary documents? No.
It forms no part of a Registering Officer’s duty to enquire into the validity of a document [except documents styled as marriage agreement] brought to him for registration (Rule 67 of the Kerala Registration Rules).

Time-Limit For Adjudication of Unstamped Documents, before Collector

Jojy George Koduvath.

Introspection

Can an unstamped or insufficiently stamped document be stamped subsequent-to-its-execution?
- Answer: Yes, under Sec. 31 of the Indian Stamp Act.
What is the time-limit prescribed for adjudication, without being fined (or impounded)?
- Answer: Within one month (if executed in India); and
- three months (of receiving it in India, if executed out of India), under Sec. 32 of the Indian Stamp Act.
What is the effect of not adjudicating the document within the time allowed?
- Answer: The document will be impounded (seized for levying the penalty), under Sec. 33 of the Indian Stamp Act.

The Relevant provisions of the Stamp Act can be summarised as under:

Sec. in Stamp Act	Entailed	Time limit
31	When any instrument is brought to the Collector, and the person bringing it applies and pays a fee of one hundred rupees, the Collector shall determine the duty.	No time limit prescribed in Sec. 31.
32	Collector may certify – full stamp-duty has been paid – if (a) already fully stamped or (b) paid the duty or deficit, after adjudication under Sec. 31.	Within one month of execution – if executed in India. Within three months of receiving documents in India – if executed out side India. If the document is – (a) an insufficiently stamped one and (b) not produced within the time provided – the Certificate under Sec. 32 cannot be granted (but, the document has to be impounded for levying penalty).
33	If document not duly stamped, impound it. (i.e., take steps to pay penalty under Sec. 39, 40 or 41)^.	No time limit prescribed

Read Blog: Adjudication as to Proper Stamp under Stamp Act

Sec. 31, 32 and 33 Stamp Act Analysed

1. Any person can apply for ‘adjudication’ by Collector. (See: Gujarat Ambuja Cements Limited (Ambuja Cements Limited) v. State of Chhattisgarh (2018).
2. Adjudication can be sought for even after the expiry of one month from the date of its execution (or three months of receipt in India, if executed outside India).
3. If the holder of the document pays the penalty (on its impounding), the document will be treated as a sufficiently stamped document.

4. Effect of Limitation Prescribed Under Proviso to Sect. 32:
- (i) Under Sec. 32, if the instrument is brought to the Collector within one month of its execution (or three months, as stated above), the Collector has to endorse the certificate, on payment of the deficit duty, if any; but, without levying any penalty.
- (ii) What is ‘not authorised’, in Sec. 32 Proviso, is that “in this section“; that is, the endorsement under Section 32 – without imposing any penalty and impounding.
  - (Note: This interdiction will not affect grant of certificate even after the stipulated time, if the document is sufficiently stamped, as shown below).
- (iii) The question of proceeding against a document for levying penalty or impounding comes only if it is
  - (i) produced after the time limit prescribed
  - and
  - (ii) insufficiently stamped (because, for impounding and imposing penalty, the collector has to invoke Sec. 33; it is not done under Sec. 32).
5. The Collector has to grant the certificate as to proper stamp even if the document is produced after one month (or three months, as stated above) if the document is a sufficiently stamped document (without imposing any penalty)-
because,
- if only the document is an insufficiently stamped one, then only the question of levying penalty or impounding comes for consideration (even under Sec. 33);
- no time limit for applying adjudication under Sec. 31; and
- (as already stated) the interdiction (‘not authorised’) in Sec. 32 Proviso, is as to making the endorsement under Section 32 – without imposing any penalty and impounding – for, the proviso speaks as to the actions “in this section” alone.

The afore-stated propositions are explained in the following decisions-

Relying on Government of Uttar Pradesh v. Raja Mohammed Amir Ahmad Khan, AIR 1961 SC 787, The Secretary to Government v. The Gwalior Rayon Silk, 1971 Ker LJ 309] and Sethuraman v. Ramanathan, AIR (33) 1946 Mad 437, it is held in M.P. Rajeswaran Nair vs The District Collector, 2009 (3) Ker LT 56, as under:

“ … if an executed instrument is produced before the Collector under Section 31, within one month, even if the Collector finds that the instrument is insufficiently stamped, the instrument would not attract penalty, and the Collector shall make the endorsement under Section 32, if the party pays the deficit stamp
whereas if it is produced after one month, it would, and the Collector cannot make the endorsement which is the effect of the limitation prescribed under the proviso to Section 32, instead the Collector has to, after adjudication of the proper stamp, proceed either under Sections 33 and 39 read with Section 41 or under Section 40 read with Section 41.”
Also see: Ambat Aboobacker v. District Collector (2012, Kerala High Court)
Wilson and Company Private Limited v. K. S. Lokavinayagam, AIR 1992 Mad 100, (A. R. Lakshmanan, J.)

In Sethuraman Chettiar v. Ramanathan Chettiar, AIR 1946 Mad 437, it is held as under:

“It cannot be said that Sections 31 and 32 contained in Chapter III form one integrated procedure for adjudication to stamps and that the limit referred to in proviso (a) to Section 32 governs applications made under Section 31. Section 31 provides no time limit for an application to the Collector for adjudication as to the proper stamp duty payable in respect of an instrument. There is nothing in the section to prevent a person from resorting to the Collector for an adjudication as to the proper stamp even after the expiry of one month from the date of its execution. If the instrument is brought to the Collector within one month of its execution, the applicant would be entitled to have the Collector’s certificate endorsed on the instrument on payment of the deficit duty, if any, but without having to pay any penalty. But if he seeks the Collector’s adjudication beyond the limit specified in Section 32. The Collector has, under Section 33, to impound the instrument and proceed under Section 40 to decide whether the instrument is duly stamped and to require the payment of the additional duty chargeable in respect of the instrument together with the prescribed penalty in case he is of opinion that it is not duly stamped. On payment of such duty and penalty, a certificate that the proper duty and penalty have been paid has to be endorsed under Section 42 on the instrument which becomes thereupon admissible in evidence and may be acted upon as if it had been duly stamped” (Quoted in: A. Karuppanna Pillai v. Nallathambi, 2000-3 CCC 35, 2000-1 CTC 341.)

Read Blogs:

Provisions of the Indian Stamp Act

Sec. 31-

“31. Adjudication as to proper stamp.
(1) When any instrument, whether executed or not and whether previously stamped or not, is brought to the Collector, and the person bringing it applies to have the opinion of that officer as to the duty (if any) with which it is chargeable, and pays a fee of such amount (not exceeding five rupees and not less than [fifty naye paise]) as the Collector may in each case direct, the Collector shall determine the duty (if any) with which, in his judgment, the instrument is chargeable.
(2) For this purpose the Collector may require to be furnished with an abstract of the instrument, and also with such affidavit or other evidence as he may deem necessary to prove that all the facts and circumstances affecting the chargeability of the instrument with duty, or the amount of the duty with which it is chargeable, are fully and truly set forth therein, and may refuse to proceed upon any such application until such abstract and evidence have been furnished accordingly:
Provided that–
(a) no evidence furnished in pursuance of this section shall be used against any person in any civil proceeding, except in an inquiry as to the duty with which the instrument to which it relates is chargeable; and
(b) every person by whom any such evidence is furnished, shall, on payment of the full duty with which the instrument to which it relates, is chargeable, be relieved from any penalty which he may have incurred under this Act by reason of the omission to state truly in such instrument any of the facts or circumstances aforesaid.”

Sec. 32

32. Certificate by Collector—
(1) When an instrument brought to the Collector under section 31 is, in his opinion, one of a description chargeable with duty, and—
(a) the Collector determines that it is already fully stamped, or
(b) the duty determined by the Collector under section 31, or such a sum as, with the duty already paid in respect of the instrument, is equal to the duty so determined, has been paid, the Collector shall certify by endorsement on such instrument that the full duty (stating the amount) with which it is chargeable has been paid.
(2) When such instrument is, in his opinion, not chargeable with duty, the Collector shall certify in manner aforesaid that such instrument is not so chargeable.
(3) Any instrument upon which an endorsement has been made under this section, shall be deemed to be duly stamped or not chargeable with duty, as the case may be; and, if chargeable with duty, shall be receivable in evidence or otherwise, and may be acted upon and registered as if it had been originally duly stamped:
Provided that nothing in this section shall authorise the Collector to endorse—
(a) any instrument executed or first executed in [India] and brought to him after the expiration of one month from the date of its execution or first execution, as the case may be;
(b) any instrument executed or first executed out of [India] and brought to him after the expiration of three months after it has been first received in [India]; or
(c) any instrument chargeable [with a duty not exceeding ten naye paise], or any bill of exchange or promissory note, when brought to him, after the drawing or execution thereof, on paper not duly stamped.

Sec. 33

33. Examination and impounding of instruments.
(1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an officer of police or any other officer empowered by law to investigate offences], before whom any instrument, chargeable in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.
(2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him in order to ascertain whether it is stamped with a stamp of the value and description required by the law in force in the Union territory of Jammu and Kashmir when such instrument was executed or first executed:
Provided that––
(a) nothing herein contained shall be deemed to require any Magistrate or Judge of a Criminal Court to examine or impound, if he does not think fit so to do, any instrument coming before him in the course of any proceeding other than a proceeding under Chapter IX or Part D of Chapter X of the Code of Criminal Procedure, 1973 (2 of 1974) ;
(b) in the case of a Judge of the High Court, the duty of examining and impounding any instrument under this section may be delegated to such officer as the Court appoints in this behalf.
(3) For the purposes of this section, in case of doubt, the Government of the Union territory of Jammu and Kashmir may determine what offices should be public offices and who shall be deemed to be persons in charge of such public offices.
(4) Where a person referred to in sub-section (1), during the course of inspection or otherwise, detects from an instrument or copy thereof that the instrument is not duly stamped, such person shall forthwith make a reference to the Collector in the matter.
(5) The Collector may, either suo motu or on a reference, call for the original instrument for ascertaining whether it is duly stamped and the instrument so produced shall be deemed to have been produced or come before him in the performance of his functions, and in case the original instrument is not produced within the period specified by the Collector, he may require the payment of the proper duty or the amount required to make up the same together with the penalty under section 40 from the person liable to pay the duty.

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Book No, 1 – Civil Procedure Code

Power of attorney

Title, ownership and Possession

Principles and Procedure

Land Laws/ Transfer of Property Act

Evidence Act – General

Contract Act

Easement

Stamp Act & Registration

Will

Divorce

Book No. 2: A Handbook on Constitutional Issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

General Principles
Dedication and Vesting
Trustees and Management
Breach of Trust
- Breach of Trust and Removal of Trustees
Suits by or against Trusts
- Suits By or Against Trusts and Trustees
- Remedies Under Sec. 92 CPC
Law on Hindu Religious Endowments
- Philosophy of Idol Worship
Temples, Gurudwaras, Churches and Mosques – General
- Legal Personality of Temples, Gurudwaras, Churches and Mosques
Constitutional Principles
Ayodhya and Sabarimala Disputes
- Ayodhya Disputes: M. Siddiq case – Pragmatic Verdict
- Sabarimala Review Petitions & Reference to 9-Judge Bench
- SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
General

UNDUE INFLUENCE and PLEADINGS thereof in Indian Law

Jojy George Koduvath, Kottayam, Kerala.

Introspection: Is there incongruity between-

Order 6 Rule 4 CPC (requires specific pleading on Undue Influence), and
Sec. 16 Contract Act (full particulars need not be pleaded to attract Undue Influence, for the statute itself stipulates that-
- (i) a person is DEEMED to be in a position to dominate the will of another if he holds a an authority over the other, or stands in a fiduciary relation to the other [Sec. 16(2) ] ; and,
- (ii) the BURDEN OF PROVING that there was no undue influence will be upon the ‘person who is in a position to dominate the will of the other‘ [Sec. 16(3) ] ).

Contents in Nutshell

Though statutory-laxity allowed in pleading on Undue Influence–
- (i) Sec. 16 itself calls for pleading and evidence as to-
  - (one person’s) authority over the other, or fiduciary relation so as to have a ‘position to dominate the will of another’, and
- (ii) to attract Sec. 16, it must appear–
  - on the face of the transaction that it is unconscionable.

PART I – ‘UNDUE INFLUENCE’

‘Undue Influence’ in Indian Contract Act, 1872

Sec. 16 defines ‘Undue influence’. It can be simplified as under:

1. A Contract will be induced by ‘undue influence’ if-
- one of the parties dominates the will of the other, and
- the dominating party uses that position to obtain an unfair advantage.
2. A person is deemed to dominate the will of another—
- (a) where he holds a an authority over the other (e.g., employer and employee, a police officer and an accused), or where he stands in a fiduciary relation to the other (e.g., lawyer and client, doctor and patient); or
- (b) where the mental capacity of one is affected by reason of age, illness, or mental or bodily distress.

3. The burden of proving that there was no undue influence will be upon the person who dominates the will of the other, where-
- the transaction appears, on the face of it or on evidence, to be unconscionable.

‘Undue influence’ defined in Sec. 16 of the Indian Contract Act, 1872.

“16. “Undue influence” defined. (1) A contract is said to be induced by ‘undue influence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another—
- (a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or
- (b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.
Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872).”

Section 111 of the Indian Evidence Act, 1872 reads-

Sec. 111. Proof of good faith in transactions where one party is in relation of active confidence. Where there is a question as to the good faith of a transaction between parties, one of whom stands to the other in a position of active confidence, the burden of proving the good faith of the transaction is on the party who is in a position of active confidence.”

Dominate the Will- Instances

In Diala Ram v Sarga, AIR 1927 Lahore 536, the plaintiff was a money-lender. The defendant was indebted to the plaintiff. He again took a loan from plaintiff and executed a bond agreeing to pay interest. The court found that the contract was unconscionable; and therefore, the burden of proof was put on the plaintiff to show that there was no undue influence.
In Sher Singh v. Pirthi Singh, AIR 1975 All 259, an illiterate man of about 90 years, physically in firm and mentally in distress, executed a gift deed of his properties in favour of his nearest relative who was looking after him and managing his cultivation. The court held that donee was in a position to dominate the will of the donor.
In Krishna Mohan Kul @ Nani Charal Kul v. Pratima Maity, AIR 2003 SC 4351, the executant was more than 100 years of age at the time of alleged registration of the deed in question. He was paralytic and furthermore his mental and physical condition was not in order. He was also completely bed-ridden and though his left thumb impression was taken, there was no witness who could substantiate that he had put his thumb impression.

Undue Influence and Coercion

Undue influence (Sec. 16 Contract Act)

The position to dominate his will of another is the criterion.
No force or criminal force is envisaged.

Coercion (Sec. 15 Contract Act defines it) is attracted on-

Committing any criminal act or unlawful detaining of any property with the intention of causing any person to enter into an agreement, or
threatening to commit such acts with the said intention.

Effects of Undue Influence – Agreement Becomes Voidable

According to 14, Contract Act, consent is said to be free when it is not caused by-

(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16,or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of sections 20, 21 and 22.

Sec. 19. Voidability of agreements without free consent.—

When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.

Sec. 19A. Power to set aside contract induced by undue influence.—

When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.
Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the Court may seem just.

PART II – ‘UNDUE INFLUENCE’ and PLEADINGS

Basic Principles of Pleading

Order VI, rule 1 and 2 of Code of Civil Procedure 1908 lay down the basic principles of pleading. They read as under:

Rule 1: Pleading: “Pleading” shall mean plaint or written statement.
Rule 2: Pleading to state material facts and not evidence:
(1) Every pleading shall contain, and contain only a statement in a concise form of the material facts on which the party pleading relies for his claim or defence as the case may be, but not the evidence by which they are to be proved.
(2) Every pleading shall, when necessary, be divided into paragraphs, numbered consecutively, each allegation being, so far as is convenient, contained in a separate paragraph.
(3) Dates, sums and numbers shall be expressed in a pleading in figures as well as in words.

Pleadings – Particulars to be given where necessary

Order 6 rule 4 of the Civil Procedure Code stipulates guidelines for precise pleadings. Order 6 Rule 4 CPC reads as under:

“Rule 4. Particulars to be given where necessary: In all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, willful default, or undue influence and in all other cases in which particulars may be necessary beyond such as are exemplified in the forms aforesaid, particulars (with dates and items if necessary) shall be stated in the pleading.”

Under Order 6 rule 4, CPC, vague or general allegations are insufficient in pleading with respect to the matters laid down in this rule_{(f.n. 1)} and it requires ‘full‘ particulars of such matters in pleadings_{(f.n. 2)}.

“All other cases in which particulars may be necessary“

Order 6 rule 4 of the CPC enumerates the following:

misrepresentation,
fraud,
breach of trust,
willful default,
undue influence and
“all other cases in which particulars may be necessary”.

Following are the matters that commonly come for consideration of court under the head, “other cases in which particulars may be necessary”:

Injury,
Damages,
Illegality,
Collusion,
Victimisation,
Mala-fides,
Bias,
Unconstitutionality,
Trust,
Consent,
Irregularity.

In short, in pleadings, wherever it is required to make clear ‘abstract’ propositions, it must have been done; otherwise it will be termed ‘vague pleading’.

Guidelines for Precise Pleading undue influence

From the above it is clear that, to attract Sec. 16 of the Indian Contract Act, there should be proper pleading [particulars – with dates and items if necessary] as to-

1. (one person’s) ‘position to dominate the will‘ of another by-
- (first) one’s authority over the other, or
- from out of the fiduciary relation between the two; and
2. the transaction must appear to be unconscionable.

Illegality

While dealing with a matter pertaining to recount of votes, referring Apex Court decisions_(f.n.3), it was held in Indira Devi v. State of Bihar, 2019-1 Pat LJR 670, that the vague pleadings that illegality was committed while counting the ballot papers and that there were improper acceptance of invalid votes and improper rejection of valid votes, were not sufficient to invoke the jurisdiction of the court.

Coercion

When collusion is taken as a ground in a case, full particulars thereof are to be pleaded. In Varanaseya Sanskrit Vishwavidyalaya v. Rajkishore Tripathi, AIR 1977 SC 615, invoking Order VI, Rule 4, CPC and referring Bishundeo v. Seogeni Rai, AIR 1951 SC 280, it was held as under:

“General allegations are insufficient even to amount to an averment of fraud of which any court ought to take notice, however strong the language in which they are couched may be, and the same applies to undue influence and coercion.”

Fraud and Collusion

While considering Order VI Rule 4 of CPC in K.S. Mariyappa v. K.R. Siddalinga Setty, AIR 1989 Kar 425, it was observed that in the absence of necessary particulars pleaded by the plaintiffs regarding fraud and collusion, it was not possible to hold that the plaint contains necessary averments as to fraud and collusion.

If Insufficient Pleadings – No Investigation

In Bishundeo Narain v. Seogeni Rai, AIR 1951 SC 280: 1951 SCR 548, it was observed as under:

“… In cases of fraud, undue influence and coercion, the parties pleading it must set forth full particulars and the case can only be decided on the particulars as laid. There can be no departure from them in evidence. General allegations are insufficient even to amount to an averment of fraud of which any court ought to take notice however strong the language in which they are couched may be and the same applies to undue influence and coercion.” : Quoted in Raja Ram v. Jai Prakash Singh, AIR 2019 SC 4374; 2019-8 SCC 701).

In Kamalakanta Mohapatra Vs. Pratap Chandra Mohapatra, AIR 2010 Ori 13, it is held as under:

The words “undue influence”, “fraud” and “misrepresentation” are cognate vices and may in part overlap in some cases, they are in law distinct categories and in view of Order 6, Rule 4 read with Order 6, Rule 2 of the Code of Civil Procedure required to be separately pleaded, with specificity, particularity and precision. In other words general allegations made in the plaint does not tantamount to particulars required to be pleaded under the said provision of the Code. …
In the case of Afsar Shaikh v. Soleman Bibi, reported in AIR 1976 SC 163, the Supreme Court has reiterated the same principle and had clearly held that in a case where there are allegations with regard to fraud, undue influence and misrepresentation the said allegation/facts must be specifically indicated in the pleadings. Keeping in mind the provision of Order 6, Rule 4 of the Code of Civil Procedure, if the averments made in the plaint are examined it reveals that the basic requirement of Order 6, Rule 4 of the Code of Civil Procedure was not kept in mind while making the allegations and the same appear to be more on the basis of surmises and conjectures rather than cogent facts.
So far as the nature of proof of undue influence, fraud or misrepresentation are concerned in he case of Balabhadra Nisanka v. Suka Dibya, reported in 38 (1972) CLT 325, it was held by this Court that ‘fraud’ in a civil proceeding must be established beyond reasonable doubt as in a criminal proceeding. So far as the evidence to establish fraud is concerned, it is held by this Court in the case of Bira Jena v. Tauli Dei, respondent in 38 (1972) CLT 39 : (AIR 1972 Ori 143) that unless the particulars of fraud are pleaded in the plaint, no evidence should be allowed to be led in the suit and if any such evidence has unwittingly been introduced without any pleading, it must be ruled out of consideration. In other words, the standard of proof to establish fraud should be beyond all reasonable doubt. After discussing the evidence threadbare the appellate Court had clearly come to a conclusion that the same does not satisfy the basic requirement of mandatory requirement of law. Even otherwise in the absence of pleadings, the evidence adduced had to be ignored.”

Undue Influence – Presumption, Onus and Lack of Pleadings

It may appear that there is incongruity between-

Order 6 Rule 4 CPC (requires specific pleading on undue influence), and
Sec. 16(2) and (3) Contract Act (statutory-laxity in pleading as to undue influence).

Sec. 16 (2) and (3) Contract Act itself stipulates conditions to attract – the burden upon the ‘person in a position to dominate the will of the other‘.

That is, (i)there must be pleading and evidence as to-
- (one person’s) authority over the other, or fiduciary relation so as to have a ‘position to dominate the will of another’,
(ii) the transaction must appear–
- on the face of it, or on the evidence adduced, to be unconscionable.

Why presumption Under Sec. 16(3) – “Person dominating may suppress evidence“

The Constitution Bench of the Supreme Court, in Laldi Parshad Jaiswal v. The Karnal Distillery Co. Ltd. Karnal, reported in AIR 1963 SC 1279, observed that under Order 6, Rule 4 of the Code of Civil Procedure, in all cases where a party takes a plea of undue influence, particulars thereof should be unambiguously stated in the pleadings so as to enable the adversary to controvert the same. A vague and general plea to that effect would not serve the purpose and the pleading must be always very specific and precise in nature. This rule has been evolved with a view to narrow down the controversy and protect the party charged with improper conduct from being taken by surprise. (See: Kamalakanta Mohapatra Vs. Pratap Chandra Mohapatra, AIR 2010 Ori 13).

The Supreme Court held in Ladli Parshad Jaiswal as under:

“The doctrine of ‘undue influence’ under the common law was evolved by the Courts in England for granting protection against transactions procured by the exercise of insidious forms of influence spiritual and temporal. The doctrine applies to acts of bounty as well as to other transactions in which one party by exercising his position of dominance obtains an unfair advantage over another. The Indian enactment is founded substantially on the rules of English common law. The first sub-section of S.16 lays down the principle in general terms. By sub-section (2) a presumption arises that a person shall be deemed to be in a position to dominate the will of another if the conditions set out therein are fulfilled. Sub-section (3) lays down the conditions for raising a rebuttable presumption that a transaction is procured by the exercise of undue influence. The reason for the rule in the third sub-section is that a person who has obtained an advantage over another by dominating his will may also remain in a position to suppress the requisite evidence in support of the plea of undue influence.” (Quoted in Joseph Johan Peter Sandy vs Veronica Thomas Rajkumar, AIR 2013 SC 2028)

Onus probandi ‘arises’ on proving relations between the donor and the donee

In Subhash Chandra Das Mushib v. Ganga Prasad Das Mushib, AIR 1967 SC 878, it was held that the Court trying the case of undue influence must consider two things to start with, namely,

(1) are the relations between the donor and the donee, such that the donee is in a position to dominate the Will of the donor, and
(2) has the donee used that position to obtain an unfair advantage over the donor?
Upon the determination of these two issues a third point emerges, which is that of the onus probandi.

Merely because donor was old, no presumption of undue influence

It is held further in Subhash Chandra Das Mushib v. Ganga Prasad Das Mushib, AIR 1967 SC 878 that, if the transaction appears to be unconscionable then, the burden of proving that the contract was not induced by undue influence lies upon the person who is in a position to dominate the Will of the other. It was further said that merely because the parties were nearly related to each other or merely because the donor was old or of weak character, no presumption of undue influence can arise. Generally speaking the relations of solicitor and client, trustee and cestui que trust, spiritual adviser and devotee, medical attendant and patient, parent and child are those in which such a presumption arises.

If transaction unconscionable, burden upon person dominate

In Afsar Shaikh v. Soleman Bibi, AIR 1976 SC 163, our Apex Court held:

“The law as to undue influence in the case of a gift inter vivos is the same as in the case of a contract. Sub-section (3) of Section 16 contains a rule of evidence. According to this rule, if a person seeking to avoid a transaction on the ground of undue influence proves-
(a) that the party who had obtained the benefit was, at the material time, in a position to dominate the will of the other conferring the benefit, and
(b) that the transaction is unconscionable, the burden shifts on the party benefiting by the transaction to show that it was not induced by undue influence. If either of these two conditions is not established the burden will not shift. As shall be discussed presently, in the instant case the first condition had not been established; and consequently, the burden never shifted on the defendant. The Privy Council in Raghunath Prasad v. Sarju Prasad, (AIR 1924 PC 60) expounded three stages for consideration of a case of undue influence. It was pointed out that the first thing to be considered is, whether the plaintiff or the party seeking relief on the ground of undue influence has proved that the relations between the parties to each other are such that one is in a position to dominate the will of the other. Upto this point, ‘influence’ alone has been made out. Once that position is substantiated, the second stage has been reached – namely, the issue whether the transaction has been induced by undue influence. That is to say, it is not sufficient for the person seeking the relief to show that the relations of the parties have been such that the one naturally relied upon the other for advice, and the other was in a position to dominate the will of the first in giving it. Upon a determination of the issue at the second stage, a third point emerges, which is of the onus probandi. If the transaction appears to be unconscionable, then the burden of proving that it was not induced by undue influence is to lie upon the person who was in a position to dominate the will of the other. Error is almost sure to arise if the order of these propositions be changed. The unconscionableness of the bargain is not the first thing to be considered. The first thing to be considered is the relation of the parties. Were they such as to put one in a position to dominate the will of the other.”

If facts justify, Omission (to make allegation of undue influence) is not fatal

In Joseph Johan Peter Sandy vs Veronica Thomas Rajkumar, AIR 2013 SC 2028, after quoting the above passage from Afsar Shaikh v. Soleman Bibi, AIR 1976 SC 163, it was observed as under:

“13. If there are facts on the record to justify the inference of undue influence, the omission to make an allegation of undue influence specifically, is not fatal to the plaintiff being entitled to relief on that ground; all that the Court has to see is that there is no surprise to the defendant. In Hari Singh v. Kanhaiya Lal, AIR 1999 SC 3325, it was held that mere lack of details in the pleadings cannot be a ground to reject a case for the reason that it can be supplemented through evidence by the parties.”

Undue Influence: Simple Pleading by Plaintiff MAY NOT cast Burden on Defendant

In Chandrika Babu v. Sudhakaran, 2013 4 KLT(SN) 103 it is pointed out that the Apex Court’s judgment in Joseph John Peter Sandy’s case, AIR 2013 SC 2028; (2013) 3 SCC 801, would show that the required materials should be placed before the court in support of the plea to draw an inference of undue influence.

Even if a person is in a fiduciary relationship with another and his conduct in looking after the other in old age may have influenced the thinking of the other, that per se cannot lead to the only irresistible conclusion that the person was therefore in a position to dominate the will of the deceased. The onus would shift only after the plaintiff would have established a prima-facie case under Section 16 of the Contract Act read with Section 111 of the Evidence Act.

In Subhas Chandra Das Mushib v. Ganga Prosad Das Mushib, AIR 1967 SC 878; 1967 (1) SCR 331, it was observed that there was no presumption of imposition merely because a donor was old and weak. Mere close relation also was insufficient to presume undue influence. Influence and undue influence were distinguished in this decision as under:

“It must also be noted that merely because the parties were nearly related to each other no presumption of undue influence can arise. As was pointed out by the Judicial Committee of the Privy Council in Poosathurai v. Kappanna Chettiar, (1919) 47 IA 1, AIR 1920 PC 65.
- “It is a mistake (of which there are a good many traces in these proceedings) to treat undue influence as having been established by a proof of the relations of the parties having been such that the one naturally relied upon the other for advice and the other was in a position to dominate the will of the first in giving it. Up to that point “influence” alone has been made out. Such influence may be used wisely, judiciously and helpfully. But whether by the law of India or the law of England, more than mere influence must be proved so as to render influence, in the language of the law, undue.”
“Before, however, a court is called upon to examine whether undue influence was exercised or not, it must scrutinise the pleadings to find out that such a case has been made out and that full particulars of undue influence have been given as in the case of fraud. See Order 6, Rule 4 of the Code of Civil Procedure. This aspect of the pleading was also given great stress in the case of Ladli Prasad Jaiswal v. Karnal Distillery, Co., AIR 1963 SC 1279; (1964) 1 SCR 270 above referred to. In that case it was observed (at p. 295):
- “A vague or general plea can never serve this purpose; the party pleading must therefore be required to plead the precise nature of the influence exercised, the manner of use of the influence and the unfair advantage obtained by the other.”

(Quoted in Raja Ram v. Jai Prakash Singh, AIR 2019 SC 4374; 2019-8 SCC 701)

Krishna Mohan Kul , AIR 2003 SC 4351, Stands distinguished

In Krishna Mohan Kul @ Nani Charal Kul v. Pratima Maity, AIR 2003 SC 4351; 2004 KHC 903 (SC), the Supreme Court held that ‘when the party complaining shows such relation, the law presums everything against the transaction and the onus is cast upon the person holding the position of confidence or trust to show that the transaction is perfectly fair and reasonable, that no advantage has been taken of his position’. The relevant passage reads as under:

“When fraud, misrepresentation or undue influence is alleged by a party in a suit, normally, the burden is on him to prove such fraud, undue influence or misrepresentation. But, when a person is in a fiduciary relationship with another and the letter is in a position of active confidence the burden of proving the absence of fraud, misrepresentation or undue influence is upon the person in the dominating position, he has to prove that there was fair play in the transaction and that the apparent is the real, in other words, that the transaction is genuine and bona fide. In such a case the burden of the proving the good faith of the transaction is thrown upon the dominant, party, that is to say, the party who is in a position of active confidence. A person standing in a fiduciary relation to another has a duty to protect the interest given to his care and the Court watches with jealousy all transactions between such persons so that the protector may not use his influence or the confidence to his advantage. When the party complaining shows such relation, the law presums everything against the transaction and the onus is cast upon the person holding the position of confidence or trust to show that the transaction is perfectly fair and reasonable, that no advantage has been taken of his position.
This principle has been engrained in Section 111 of the Indian Evidence Act, 1872 …. …..
- ”When the relation between the donor and donee at or shortly before the execution of the gift has been such as to raise a presumption that the donee had influence over the donor, the Court sets aside the gift unless the donee can prove that the gift was the result of a free exercise of the donors will….
15. The corollary to that principle is contained in Clause (3) of Section 16 of the Indian Contract Act, 1872 (in short Contract Act).

Pratima Chowdhury v. Kalpana Mukherjee, AIR 2014 SC 1304, followed Krishna Mohan Kul @ Nani Charal Kul v. Pratima Maity, AIR 2003 SC 4351; but, specifically ‘illustrating instances of the authority, command and influence’ as under:

“31. … we must keep in mind the law declared by this Court on the subject of fiduciary relationship. We will also proceed by keeping in mind, … that relationship between Partha Mukherjee and Pratima Chowdhury was a relationship of faith, trust and confidence. Partha Mukherjee was in a domineering position.
- He was married to Sova Mukherjee. Sova Mukherjee is the daughter of H.P. Roy. Pratima Chowdhury has lived for a very long time in the house of H.P. Roy.
- During that period (after his marriage) Partha Mukherjee also shared the residential accommodation in the same house with Pratima Chowdhury, for over a decade.
- In Indian society the relationship between Partha Mukherjee and Pratima Chowdhury, is a very delicate and sensitive one.
- It is therefore, that Pratima Chowdhury extended all help and support to him, at all times.
- She gave him her flat when he was transferred to Calcutta.
- She also extended loans to him, when he wanted to set up an independent business at Bombay.
- These are illustrative instances of his authority, command and influence.
- Instances of his enjoying the trust and confidence of Pratima Chowdhury include, amongst others, the joint account of Pratima Chowdhury with Partha Mukherjee, which the latter operated exclusively, and the drafting of the letters on behalf of Pratima Chowdhury.
In such fact situation, we are of the view, that the onus of substantiating the validity and genuineness of the transfer of flat no. 5D, by Pratima Chowdhury, through the letter dated 11.11.1992 and the document dated 13.11.1992, rested squarely on the shoulders of Kalpana Mukherjee. …”

But, Krishna Mohan Kul (supra) is distinguished in subsequent decisions in Anil Rishi v. Gurbaksh Singh, AIR 2006 SC 1971; (2006) 5 SCC 558, and Raja Ram v. Jai Prakash Singh, AIR 2019 SC 4374; 2019-8 SCC 701, on facts of Krishna Mohan Kul–

It was brought on record that the witnesses whose names appeared in the impugned deed and which was said to have been created to grab the property of the plaintiffs were not in existence.
The executant was more than 100 years of age at the time of alleged registration of the deed in question.
He was paralytic and furthermore his mental and physical condition was not in order.
He was also completely bed-ridden and though his left thumb impression was taken, there was no witness who could substantiate that he had put his thumb impression.

Fiduciary relation and active confidence be established to draw undue influence

After quoting the aforesaid portion from Krishna Mohan Kul @ Nani Charal Kul v. Pratima Maity, AIR 2003 SC 4351, it was pointed out in Anil Rishi v. Gurbaksh Singh, AIR 2006 SC 1971; (2006) 5 SCC 558 (S.B. Sinha, P.K. Balasubramanyan, JJ.), as under:

“But before such a finding is arrived at, the averments as regard alleged fiduciary relationship must be established before a presumption of undue influence against a person in position of active confidence is drawn. The factum of active confidence should also be established.”
Anil Rishi v. Gurbaksh Singh, AIR 2006 SC 1971; (2006) 5 SCC 558 is referred to in Raja Ram v. Jai Prakash Singh, AIR 2019 SC 4374; 2019-8 SCC 701.

In Keshav v. Gian Chand, AIR 2022 SC 678 (relying on Ladli Parshad Jaiswal v. The Karnal Distillery Co. Ltd., Karnal, AIR 1963 SC 1279; and Bellachi v. Pakeeran, (2009) 12 SCC 95), it is held as under:

“The question whether a person was in a position to dominate the will of the other and procure a certain deed by undue influence is a question of fact, and a finding thereon is a finding of fact, and if arrived at fairly in accordance with the procedure prescribed, it is not liable to be reopened in second appeal.”

Read Blog: Pleadings Should be Specific; Why?

Foot Notes:

Bishundeo Narain v. Seogeni Rai, AIR 1951 SC 280; Ladli Prashad Jaiswal v. Karnal Distillery, Co., AIR 1963 SC 1279; Subhash Chandra Das v. Ganga Parsad Das, AIR 1967 SC 878; Varanasaya Sanskrit Vishwavidalaya v. Dr. Raj Kishore Tripathi, AIR 1977 SC 615; Jai Parkash Power Ventures v. State of HP, ILR 2017-6 HP 210.
Bishundeo Narain v. Seogeni Rai, AIR 1951 SC 280; Raja Ram v. Jai Prakash Singh, AIR 2019 SC 4374; Ladli Prasad Jaiswal v. Karnal Distillery, Co., AIR 1963 SC 1279.
Ram Sewak Yadav v. Hussain Kamil Kidwai, AIR 1964 SC 1249, Dr. Jagjit Singh v. Giani Kartar Singh, AIR 1966 SC 773, Beliram Bhalaik v. Jai Beharilal Khachi, (1975) 4 SCC 417, Suresh Prasad Yadav v. Jai Prakash Mishra, (1975) 4 SCC 822, Bhabhi v. Sheo Govind, (1976) 1 SCC 687, S. Raghbir Singh Gill v. S. Gurcharan Singh Tohra, (1980) Supp1 SCC 53, P.K.K. Shamsudeen v. K.A.M. Mappillai Mohindeen, (1989) 1 SCC 526, Vadivelu v. Sundaram, (2000) 8 SCC 355, VS Achuthanandan v. P J Francis (2001) 3 SCC 81, andM. Chinnasamy v. K. C. Palanisamy, (2003) 10 SCALE 103.

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Book No, 1 – Civil Procedure Code

Power of attorney

Title, ownership and Possession

Principles and Procedure

Land Laws/ Transfer of Property Act

Evidence Act – General

Contract Act

Easement

Stamp Act & Registration

Will

Divorce

Book No. 2: A Handbook on Constitutional Issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

General Principles
Dedication and Vesting
Trustees and Management
Breach of Trust
- Breach of Trust and Removal of Trustees
Suits by or against Trusts
- Suits By or Against Trusts and Trustees
- Remedies Under Sec. 92 CPC
Law on Hindu Religious Endowments
- Philosophy of Idol Worship
Temples, Gurudwaras, Churches and Mosques – General
- Legal Personality of Temples, Gurudwaras, Churches and Mosques
Constitutional Principles
Ayodhya and Sabarimala Disputes
- Ayodhya Disputes: M. Siddiq case – Pragmatic Verdict
- Sabarimala Review Petitions & Reference to 9-Judge Bench
- SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
General