Unregistered Arbitral Award Can Be Admissible In Evidence Only For Collateral Purposes: Telangana High Court

Brief Facts:

The Petitioner challenged the validity and legality of an order issued by the III Additional District Judge. This order pertained to the trial court's decision to reject an unregistered Award as evidence on behalf of the plaintiff, stating that there was an infringement of Section 17 of the Registration Act. The suit itself was initiated for the partition of properties into five equal shares, with one share allotted to the plaintiff. Following the filing of written statements by the defendants and the settlement of trial issues, the trial commenced. Subsequently, during trial proceedings, the plaintiff submitted her chief-examination affidavit and sought to introduce the unregistered Award by Arbitrators concerning the partition of family properties. However, the defendants opposed the admission of the Award.

The Petitioner argued that the trial court failed to recognize that the unregistered Arbitral Award could still be utilized for collateral purposes. Specifically, it could serve to establish the character, nature, identity, and location of the subject matter. It argued that the trial court erred in refusing to admit the document as evidence based on its lack of registration, as stipulated by Section 17 of the Registration Act.

Observations by the High Court:

The High Court referred to the decision of the Supreme Court in M. Anasuya Devi v. M. Manik Reddy where the Supreme Court held that the admissibility of an award in arbitration proceedings is distinct from the requirements for its enforcement under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).

Further., in Bipin Shantilal Panchal v. State of Gujarat & Anr, the Supreme Court emphasized that objections to the admissibility of evidence, including documents, could be noted during the evidence-taking stage. However, the final decision on such objections is deferred until the last stage of the trial, except in cases of stamp duty deficiency, where immediate resolution is required.

Therefore, the High Court held that unregistered documents can only be admitted as evidence for collateral purposes, not for primary purposes. It referred to the proviso to Section 49 of the Registration Act. According to this provision, collateral purpose implies using the contents of a document for a purpose other than that for which it was executed or for a purpose remote to the main transaction. The High Court held 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 factum of partition of the suit properties.

The High Court noted that the trial court, however, declined to mark the unregistered Award as evidence. Yet, the nature of the suit itself—filed for partition of properties—dictates that any purpose other than the division of properties could be considered collateral. Therefore, the High Court held that an unregistered Award could serve a collateral purpose, specifically in delineating the nature, identity, and location of the properties to be partitioned.

However, the High Court highlighted an important caveat regarding unstamped instruments. It reiterated that an unstamped document is inadmissible even for collateral purposes unless it is impounded. Thus, it held that if the plaintiff intends to use the unregistered Award for collateral purposes, she must first pay the requisite stamp duty along with any penalty and ensure the document is impounded. Only then can the trial court consider marking the document, subject to proof and relevancy, for the limited purpose of establishing the nature, identity, and location of the suit properties sought to be partitioned.

Consequently, the order passed by the III Additional District Judge, Warangal, was set aside.

Case Title: Gugilla Aruna vs Adluri Ramesh Babu

Case Number: CIVIL REVISION PETITION No.476 of 2021

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