Justice Laxmi Narayana Alishetty, sitting as a single judge in the Telangana High Court, ruled that an unregistered award can be admitted as evidence solely for collateral purposes. This includes establishing details such as the severance of title, nature of possession concerning various shares, and other aspects like character, nature, identity, and location related to the subject matter. However, it cannot be used to prove the actual partition of the properties in question.
Brief Background:
The Petitioner contested the validity and legality of an order issued by the III Additional District Judge, which concerned the rejection of an unregistered Award as evidence in favor of the plaintiff. The rejection was based on a violation of Section 17 of the Registration Act. The lawsuit itself was initiated for the partition of properties into five equal shares, with one share allocated to the plaintiff. After the defendants filed their written statements and trial issues were settled, the trial commenced. During the trial proceedings, the plaintiff submitted her chief-examination affidavit and attempted to introduce an unregistered Award by Arbitrators regarding the partition of family properties. However, the defendants objected to the admission of this Award.
The Petitioner contended that the trial court overlooked the potential utility of the unregistered Arbitral Award for collateral purposes, specifically to establish details like character, nature, identity, and location related to the subject matter. It argued that the trial court’s refusal to admit the document as evidence due to its lack of registration, as mandated by Section 17 of the Registration Act, was erroneous.
Observations by the High Court:
The High Court referred to the Supreme Court’s ruling in M. Anasuya Devi v. M. Manik Reddy, where it was held that the admissibility of an award in arbitration proceedings is separate from the requirements for its enforcement under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).
Additionally, in Bipin Shantilal Panchal v. State of Gujarat & Anr, the Supreme Court stressed that objections to the admissibility of evidence, including documents, could be raised during the evidence-taking stage. However, the final decision on such objections is deferred until the conclusion of the trial, except in cases of stamp duty deficiency, which require immediate resolution.
Therefore, the High Court determined that unregistered documents can be admitted as evidence solely for collateral purposes, not for primary purposes, citing the proviso to Section 49 of the Registration Act. According to this provision, collateral purpose refers to using the contents of a document for a different purpose than its original intent or for a purpose unrelated to the main transaction. The High Court specified that an unregistered Award could only be admissible for collateral purposes, such as establishing the character, nature, identity, and location of the subject matter, but not for proving the fact of partition of the properties in question.
The High Court observed that the trial court had declined to accept the unregistered Award as evidence. However, given that the lawsuit itself was initiated for the partition of properties, any purpose other than the division of properties could be considered collateral. Therefore, the High Court ruled that an unregistered Award could indeed serve a collateral purpose, specifically in defining the nature, identity, and location of the properties intended for partition.
Nevertheless, the High Court emphasized an important caveat concerning unstamped instruments. It reaffirmed that an unstamped document is not admissible even for collateral purposes unless it is properly stamped and impounded. Therefore, the High Court determined that if the plaintiff wishes to use the unregistered Award for collateral purposes, she must first pay the necessary stamp duty along with any penalties and ensure that the document is impounded. Only then can the trial court consider admitting the document, subject to proof and relevance, for the limited purpose of establishing the nature, identity, and location of the properties intended for partition.
As a result, the order issued by the III Additional District Judge, Warangal, was overturned.
