The Delhi High Court has set aside a 2008 ex parte arbitral award that had ordered specific performance of an Agreement to Sell executed by an illiterate villager. Justice Jasmeet Singh held that the Agreement to Sell was vitiated by fraud and once the underlying contract itself failed, the arbitration clause also collapsed, ‘rendering the subject matter non-arbitrable.’
The dispute arose from a 2005 document purportedly executed by the petitioner, an illiterate villager displaced from Nangal Dewat, allegedly agreeing to sell her share in an allotted rehabilitation plot for ?1.23 crore. It was submitted that her thumb impressions had been taken on blank papers by relatives and property dealers, and that the family only learnt of the alleged transaction when execution proceedings were initiated. The respondent claimed the agreement was genuine and that ?7 lakh had been paid as an advance.
The High Court, however, held that the document was inherently suspicious. The Agreement showed Petitioner owning half the property, while all official records, including the Relinquishment Deed, established she owned only 1/12th. The Court noted this inconsistency as clear evidence of manipulation.
Further, as an illiterate woman putting only thumb impressions, the petitioner required the protection of law: the respondent had to prove that the document was read over and explained to her in the vernacular. No such endorsement, witness testimony, or explanatory proof existed. Referring to Damodar Sahoo & Others v. Natabar Sahoo & Others, SA No.144 of 1987, and Krishna Mohan Kul v. Pratima Maity, O.M.P. 548/2008, the Court held that due execution was not established.
The Court also found that the arbitration proceedings were void as no valid notice under Section 21 of the Arbitration and Conciliation Act, 1996, a mandatory requirement, was served either on the petitioners. On the date of the alleged notice, the entire village had already been under evacuation for airport acquisition, as shown in the public notice. Service at a vacated address and an AD card with disputed signatures were held to be unreliable. The court also noted that the petitioner, despite being a necessary party to the dispute, was never served any Section 21 notice at all.
Since the Agreement to Sell itself was found to be vitiated by fraud, its core terms based on misrepresentation of ownership, and execution obtained without informed consent, the Court held that the arbitration clause perishes with the fraudulent contract, relying on Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1. Steps taken to enforce such an agreement cannot stand in law.
Holding that the arbitral award was ex-parte, unsupported by proper notice, and founded on a fraudulent document, the Court allowed the petition and set aside the award in its entirety.
Appearances
Petitioners- Mr. I.S. Dahiya, Adv
Respondents- Mr. K Solanki, Adv.
