1) It is submitted that while considering the application
u/s 8 of Arbitration and Conciliation Act, 1996, the court
has to consider an issue that whether there exists any
Arbitration Agreement between the parties. Such right
is certainly vested in Civil Court. The Plaintiff is
challenging the legality of agreement dated 20.05.2006
on the ground that the same is obtained by fraud and
is therefore seeking further declaration that the said
agreement is null and ab initio void. As such, the very
Arbitration clause as contained in the said agreement
is not enforceable. In spite of the fact that Section 16
of the said Act empowers the Arbitral Tribunal to
decide its own jurisdiction in view of particular
circumstances narrated in the plaint, the present
application deserves to be rejected.”
v. By a judgment dated 19.07.2011, the Additional Judge, Small
Causes Court, Pune, after hearing both sides, held as follows:
“11. After perusing the above mentioned cited cases, it
shows that when there is a clause of arbitration it is
mandated on the Civil Court to refer the dispute and
parties for arbitration as per agreement. In present
case the plaintiffs have materially contention about
playing fraud by Defendant No.3 but there is no any
contents in agreement as alleged by plaintiff in plaint
about keeping faith on Defendant No.3. It shows about
signing by Defendant No.3 for agreement dated
20.05.2006 and he was also party to said agreement.
The plaintiff alleged about playing fraud after resigning
by Defendant No.3 from partnership firm of Defendant
No.1 and signing the confirmation deed dated
13.07.2006 but as per Partnership Act remedy is
provided. Moreover, from the documents, it shows that
the confirmation deed dated 13.07.2007 was executed
by Defendant No.3 as Authorized Partner of M/s
Regency Mahavir Properties and another partner Dilip
Jain. The fraud alleged by the plaintiff is in respect of
the documents for which the remedy is also provided.
After considering the arbitration clause I find that the
application is to be allowed and the disputes have to
be referred for arbitration. Hence, I pass the following
order:
1) Application is allowed.
2) The plaintiff is directed to get the alleged dispute
resolved through the process of arbitration by
referring the plaintiff to invoke the process of
arbitration as per the arbitration clause 14
mentioned in the agreement dated 20.05.2006.”
Finding thus, the learned Judge referred the parties to arbitration.
2) High court dismissed writ petition with the result that the
parties stood referred to arbitration.
3) When sections 34 and 35 are seen, the position becomes even
clearer. Unlike section 31, under section 34, any person entitled to
any legal character may institute a suit for a declaration that he is
so entitled. Considering that it is possible to argue on a reading of
this provision that the legal character so declared may be against
the entire world, section 35 follows, making it clear that such
declaration is binding only on the parties to the suit and persons
claiming through them, respectively. This is for the reason that
under section 4 of the Specific Relief Act, specific relief is granted
only for the purpose of enforcing individual civil rights. The principle
contained in section 4 permeates the entire Act, and it would be
most incongruous to say that every other provision of the Specific
Relief Act refers to in personam actions, section 31 alone being out
of step, i.e., referring to in rem actions.
25. The reasoning in the aforesaid judgment would again expose the
incongruous result of section 31 of the Specific Relief Act being
held to be an in rem provision. When it comes to cancellation of a deed by an executant to the document, such person can approach the Court under section 31, but when it comes to cancellation of a deed by a non-executant, the non-executant must approach the
Court under section 34 of the Specific Relief Act, 1963.
Cancellation of the very same deed, therefore, by a non-executant would be an action in personam since a suit has to be filed under section 34. However, cancellation of the same deed by an
executant of the deed, being under section 31, would somehow
convert the suit into a suit being in rem. All these anomalies only
highlight the impossibility of holding that an action instituted under
section 31 of the Specific Relief Act, 1963 is an action in rem.
26. Given this finding of law, it is clear that the judgments of the District
Court and the High Court in this case need no interference.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5147 OF 2016
DECCAN PAPER MILLS CO. LTD. Vs REGENCY MAHAVIR PROPERTIES
R.F. Nariman, J.
Dated:August 19, 2020.
1. The hearing in this appeal followed in the wake of the hearing in
Civil Appeal Nos. 5145 of 2016, 5158 of 2016, and 9820 of 2016.
The brief facts necessary to appreciate the controversy in this
appeal are as follows:
i. By an agreement dated 22.07.2004 between the Appellant,
Deccan Paper Mills Co. Ltd. [hereinafter referred to as “Deccan”]
and the Respondent No. 2 company, M/s Ashray Premises Pvt.
Ltd. [hereinafter referred to as “Ashray”], Deccan, being the
owner of approximately 80,200 sq. meters of land bearing Survey
Nos. 96B, 96C, and 96D at village Mundhwa, District Pune,
decided to develop a portion of the said land, i.e., 32,659 sq.
meters. It is not necessary to enter into the nitty-gritty of the said
agreement. However, it is enough to note that this agreement
contained clause 7(m), in which it is stated :
“7. The Owner and the Developer hereto covenant that
upon the execution of these presents:
xxx xxx xxx
m. The Owner shall have no objection if at any stage
during the continuance of this agreement the
Developer assigns, delegates the rights, under this
agreement or the Power of Attorney/writings executed
in furtherance hereof to any other person, firm or party
without violating or disturbing any of the terms and
conditions of this agreement.”
ii. This agreement did not contain any arbitration clause. Pursuant to
clause 7(m), on 20.05.2006, an agreement was entered into
between Respondent No. 2 – Ashray, and Respondent No.1 –
Regency Mahavir Properties, a partnership firm [hereinafter
referred to as “Regency”], by which Ashray assigned the
execution of the agreement dated 22.07.2004 to Regency. The
aforesaid agreement contained an arbitration clause, which is set
out as follows:
“14. If during the continuance of the said
Agreement/these presents or at any time afterwards
any difference shall arise between the parties herein
and the heirs, executors or administrators of the other
of them or between their respective heirs, executors or
administrators in regard to the construction of any of
the articles herein contained or to any division
(..illegible) thing to be made or done in pursuance
hereto or to any other matter or thing relating to the
said Agreement/these presents the same shall be
forthwith referred to one arbitrator if the parties agree
or otherwise to two arbitrators, one to be appointed by
each party to the reference or to an Umpire to be
chosen by the Arbiters before entering upon the
reference and every such reference shall be deemed
to be an Arbitration in accordance with and subject to
the provisions of The Arbitration & Conciliation Act,
1996 or any statutory modification or re-enactment
thereof for the time being in force.”
iii. A deed of confirmation dated 13.07.2006 followed, by which it was
stated that this deed was to be treated as part of the 20.05.2006
agreement, in which the assignment by Ashray to Regency was
reaffirmed. According to Deccan, a fraud had been played by one
Mr. Atul Chordia, Respondent No.3 herein (Defendant No. 3 in the
suit filed by Deccan), which is pleaded in Special Civil Suit No.
1400 of 2010, which was filed on 13.07.2010, as follows:
“6. In the year 2006 or thereabout, the Defendant No.3
approached directors of the Plaintiff Company and
represented to them that for diverse reasons, he
intends to develop the said property through a
partnership firm by name Regency Mahavir Properties.
The Defendant No.3 further assured Plaintiff Company
that he will be one of the leading partners of the said
M/s Regency Mahavir Properties i.e. the Defendant
No.1 and the development of the said property and the
same shall be carried out as quickly as possible. The
directors of Plaintiff Company, relying on the strength
of assurance given by Mr. Atul Chordia agreed to be
joined a Consenting Party to a formal agreement of
assignment to be executed between Defendant No.1
and Defendant No.2. It is pertinent to note that
Defendant No.3 holding out to be an authorized
partner of Defendant No.1 has signed the said
agreement. The directors of Plaintiff Company under a
bonafide belief that the said agreement of assignment
was formal and Defendant No.3 will be responsible for
development of the said property. Now directors of
Plaintiff Company realize that Defendant No. 3 had
different intentions.”
xxx xxx xxx
“8. Recently, the director of Plaintiff Company
approached Mr. Dilip R. Jain, one of the partners of
Defendant No. 1. Directors of Plaintiff Company
inquired with Mr. Jain about the delay in progress of
construction and informed Mr. Jain that they will hold
Defendant No.3 responsible for the deal. Mr. Jain, to
the shock and surprise of directors of Plaintiff
Company informed them that Mr. Chordia was no more
responsible for development of the said property, since
he has assigned development rights in respect thereof,
way back in the year 2006 itself. Directors of Plaintiff
Company took the said shock and approached
Defendant No.3 and inquired with him about the
aforesaid state of affairs. The Defendant No.3 avoided
giving any explanation. The Directors of Plaintiff
Company, took a search in the office of Registrar of
Firms and for the first time came to know that the
Defendant No.3 had opted to retire from business of
Defendant No.1 with effect from 30.05.2006. It is
pertinent to note that the Defendant No. 3 representing
himself to be authorized partner of Defendant No.1 has
signed deed of Confirmation dated 13.07.2006,
confirming the terms and conditions of agreement
dated 20.05.2006, executed between Defendant No.1
and 2 in respect of development of the suit property.
9. As stated earlier, Directors of Plaintiff Company
have granted development rights in respect of the said
property to Defendant No.2, only because Defendant
No.3 was its leading Director. The Plaintiff Company
has joined the agreement of assignment dated
20.05.2006 and Deed of Confirmation dated
13.07.2006 executed by Defendant No.2 in favour of
Defendant No.1 with understanding that Defendant
No.3 was its partner. Directors of Plaintiff Company
therefore say that Defendant No.1 in collusion with
Defendant No.2 and in active concealment of material
fact, by misrepresenting Plaintiff Company and by
practicing fraud upon the Plaintiff Company have
obtained consent of Plaintiff Company on the
agreement of assignment and Deed of Confirmation.
Directors of Plaintiff Company therefore say that said
agreement of assignment and Deed of Confirmation
being tainted with fraud are ab initio null and void and
not binding on Plaintiff Company. Since the Plaintiff
Company has recently come to know the aforesaid
fraud, they have decided to inform the Defendant that
the agreement dated 20.05.2006 and the Deed of
Confirmation dated 13.07.2006 in respect of the said
property are not binding upon the Plaintiff Company
and hence Defendant No.1 has no legal right to
continue with further development of the said property.
10. Directors of Plaintiff Company, from reliable
sources, have come to know that Defendant No.1 has
no intention to develop the said property, further and
hence Defendant No.1, again in collusion with
Defendant No.3 is negotiating to transfer/assign
development rights in respect of the said property to
third person. Since the agreement of assignment dated
20.05.2006 and Deed of Confirmation dated
13.07.2006 are illegal and void, Defendant No.1 has
no right to deal with the suit property. Inspite of such
position, if Defendant No.1 attempts to transfer such
rights, the same shall be illegal and in any case shall
not be binding upon Plaintiff Company.”
As a result of the fraud played, it was then stated:
“12. The cause of action for this suit first arose on or
about 22.07.2004 when the Defendant No.1 obtained
agreement for development of the suit property, it
further arose when the Defendant No.1 and 2 obtained
agreement of assignment dated 20.05.2006 and Deed
of Confirmation dated 17.07.2006. It further arose, in
the month of April/May 2010, when the Plaintiff for the
first time came to know that the Defendant No.3 is no
more partner of the Defendant No.1 and that the
Defendants have committed fraud upon the Plaintiff.
The cause of action also arose, when the Defendants
failed to comply with the demands made in notice
dated 10.07.2010.
13. The present suit, being suit for declaration and
cancellation, is properly valued as per the provisions of
Section 6(4)(h-a) of Bombay Court Fee Act, 1959 and
maximum court fee of Rs.3,00,000/- is paid.
14. The suit property is situated at Pune. The cause of
action for the present suit has arisen at Pune and
therefore this Honourable Court has got jurisdiction to
entertain, try and decide this suit.
15. It is therefore prayed that:
A. It be declared that the Agreement dated
22.07.2004 and Agreement dated 20.05.2006
and Deed of Confirmation dated 13.07.2006
are obtained by fraud and hence they are ab
initio null, void and not binding upon the
Plaintiff.
В. It be declared that the Agreement dated
22.07.2004 and Agreement dated 20.05.2006
and Deed of Confirmation dated 13.07.2006
are illegal.
C. The Defendants, by order of mandatory
injunction directed to execute and register
Deed of Cancellation of Agreement dated
22.07.2004 and Agreement dated 20.05.2006
and Deed of Confirmation dated 13.07.2006.
D. The Defendants may be restrained by an
order of perpetual injunction from carrying out
any further development activity in the said
property or to enter the same or remain
therein, either by themselves or through any
person claiming through it, or to create any
third party interests therein or to deal with the
same in any manner whatsoever.
E. Interim orders in terms of Clause C above
may be passed.
F. Costs of the suit may be awarded to the
Plaintiff from the Defendants.
G. Any other just and other equitable orders in
the interest of justice may be pleased to be
passed.”
It is important to note that Defendant No. 3 did not file any written
statement in the said suit.
iv. Almost immediately thereafter, by an application dated 19.07.2010
under section 8 of the Arbitration and Conciliation Act, 1996
[hereinafter referred to as the “1996 Act”] on behalf of Regency,
the arbitration clause in the agreement dated 20.05.2006 was set
out and the Civil Judge (Senior Division), Pune was asked to refer
the parties to arbitration. The reply to the said application on
behalf of the plaintiff, Deccan, stated:
“2. The averments in para 1 of the application to the
extent of reproduction of clause No.14 of agreement
dated 20.05.2006, being matter of record are not
disputed for the purpose of this reply. The plaintiff shall
rely upon and explain the true effect and interpretation
of the said clause at the proper time. It is pertinent to
note Defendant Nos.1 and 2 have avoided to make
any comment with regard to merits of their defense.
3. It is submitted that while considering the application
u/s 8 of Arbitration and Conciliation Act, 1996, the court
has to consider an issue that whether there exists any
Arbitration Agreement between the parties. Such right
is certainly vested in Civil Court. The Plaintiff is
challenging the legality of agreement dated 20.05.2006
on the ground that the same is obtained by fraud and
is therefore seeking further declaration that the said
agreement is null and ab initio void. As such, the very
Arbitration clause as contained in the said agreement
is not enforceable. In spite of the fact that Section 16
of the said Act empowers the Arbitral Tribunal to
decide its own jurisdiction in view of particular
circumstances narrated in the plaint, the present
application deserves to be rejected.”
v. By a judgment dated 19.07.2011, the Additional Judge, Small
Causes Court, Pune, after hearing both sides, held as follows:
“11. After perusing the above mentioned cited cases, it
shows that when there is a clause of arbitration it is
mandated on the Civil Court to refer the dispute and
parties for arbitration as per agreement. In present
case the plaintiffs have materially contention about
playing fraud by Defendant No.3 but there is no any
contents in agreement as alleged by plaintiff in plaint
about keeping faith on Defendant No.3. It shows about
signing by Defendant No.3 for agreement dated
20.05.2006 and he was also party to said agreement.
The plaintiff alleged about playing fraud after resigning
by Defendant No.3 from partnership firm of Defendant
No.1 and signing the confirmation deed dated
13.07.2006 but as per Partnership Act remedy is
provided. Moreover, from the documents, it shows that
the confirmation deed dated 13.07.2007 was executed
by Defendant No.3 as Authorized Partner of M/s
Regency Mahavir Properties and another partner Dilip
Jain. The fraud alleged by the plaintiff is in respect of
the documents for which the remedy is also provided.
After considering the arbitration clause I find that the
application is to be allowed and the disputes have to
be referred for arbitration. Hence, I pass the following
order:
1) Application is allowed.
2) The plaintiff is directed to get the alleged dispute
resolved through the process of arbitration by
referring the plaintiff to invoke the process of
arbitration as per the arbitration clause 14
mentioned in the agreement dated 20.05.2006.”
Finding thus, the learned Judge referred the parties to arbitration.
vi. A writ petition filed by Deccan in the Bombay High Court was then
disposed of by the impugned judgment dated 18.03.2015, in
which it was held, following the judgment of the Single Judge in
Swiss Timing Ltd. v. Commonwealth Games 2010 Organising
Committee, (2014) 6 SCC 677 [hereinafter referred to as “Swiss
Timing”] that the decision in N. Radhakrishnan v. Maestro
Engineers, (2010) 1 SCC 72 [hereinafter referred to as “N.
Radhakrishnan”] being per incuriam, it would not be possible to
follow the same, as a result of which the “fraud exception” was
rejected. It was then held that there is no conflict between the
Division Bench judgment in Avitel Post Studioz Limited & Ors.
v. HSBC PI Holding (Mauritius) Ltd., Appeal No. 196 of 2014
in Arbitration Petition No. 1062 of 2012 (which is the judgment
under appeal in Civil Appeal Nos. 5145 and 5158 of 2016) and
another judgment in Satish Sood v. Gujarat Tele Links Pvt. Ltd.,
2014 (1) AIR Bom R 27 [hereinafter referred to as “Satish
Sood”]. The Court felt that it would not be possible to follow the
decision of the Division Bench in the case of Satish Sood (supra)
as it was rendered prior to the judgment of the learned Single
Judge of the Supreme Court in Swiss Timing (supra). This being
so, the writ petition was then dismissed, with the result that the
parties stood referred to arbitration.
2. Smt. Meena Doshi, learned advocate appearing on behalf of the
Appellant, has taken us through the record and argued on the basis
of N. Radhakrishnan (supra) that when it comes to serious
allegations of fraud, an arbitrator’s jurisdiction gets ousted and
reading the pleadings in the Special Civil Suit, it is obvious that
serious allegations of fraud being raised in the present case, the
dispute is thus rendered non-arbitrable. She then referred to
section 8 of the 1996 Act, as amended by the Arbitration and
Conciliation (Amendment) Act, 2015 [hereinafter referred to as the
“2015 Amendment Act”] to further argue that both the District
Judge as well as the High Court did not look into the requirements
of the amended section 8, and that the aforesaid judgments are
infirm on this count alone. She also argued, basing herself on the
seven-Judge Bench judgment in S.B.P. & Co. v. Patel Engg. Ltd.,
(2005) 8 SCC 618 that the correct application of section 8 is not a
mere mechanical incantation of the section, the Court having to
apply its mind as to whether there exists an arbitration agreement
at all, which would include whether the subject matter of the
proceeding is at all arbitrable. She also argued that the original
agreement between Deccan and Ashray did not contain an
arbitration clause, and since the suit was to set aside that
agreement as well, the dispute could not be decided piecemeal,
and on this ground also, ought not to have been referred to
arbitration. She then relied heavily upon section 31 of the Specific
Relief Act, 1963 and stated that a reading of the plaint and the
prayers in the suit would show that the suit is one for cancellation
of three “written instruments”. This being so, and the proceeding
under section 31 being a proceeding in rem, would fall within one of
the exceptions made out in Booz Allen & Hamilton Inc. v. SBI
Home Finance Ltd., (2011) 5 SCC 532 [hereinafter referred to as
“Booz Allen”]. For this purpose, she relied heavily upon a judgment
of the High Court of Judicature at Hyderabad for Telangana and
Andhra Pradesh in Aliens Developers Pvt. Ltd. v. M. Janardhan
Reddy, (2016) 1 ALT 194 (DB) [hereinafter referred to as “Aliens
Developers”]. On all these grounds, therefore, the cryptic
judgment of the Bombay High Court ought to be set aside and the
suit should be set down for hearing, to be disposed of within a short
timeframe.
3. Shri Vinay Navre, learned Senior Advocate appearing on behalf of
Respondent No.1, referred us to the case law on the “fraud
exception” and stated that after the judgment in Rashid Raza v.
Sadaf Akhtar, (2019) 8 SCC 710 (see paragraph 4), this exception
would only apply if it can be stated that the agreement itself was
never executed, in which case the arbitration clause itself would
fall, but not otherwise. Also, since there are no public ramifications
in the present proceeding, and in particular, no ramifications of a
criminal nature, neither of the conditions precedent for the
application of the “fraud exception” being present in this case, it is
clear that the judgments of the Courts below were correct in law.
When it came to section 31 of the Specific Relief Act, Shri Navre
stated that a correct reading of the section would show that the
Court’s jurisdiction, being discretionary and for the benefit of the
party interested in setting aside a written instrument, the
proceeding would have to be considered to be one in personam.
According to him, the judgment in Aliens Developers (supra) does
not lay down the law correctly and should be overruled by us. In
answer to the argument that the agreement dated 22.07.2004,
which did not contain an arbitration clause, was also sought to be
cancelled in the suit, he argued that this was inserted only in the
prayer clause in order to camouflage the suit so as to get out of
arbitration. If the body of the suit were to be seen, it is clear that
what was sought to be impugned was only the latter two
agreements, the first being of historical significance only. This being
the case, it is clear that the dispute is arbitrable. Further, all that is
to be seen under section 8 of the 1996 Act after its amendment is
that prima facie, a valid arbitration agreement exists. Here, as a
matter of fact, it was admitted, according to Shri Navre, in the
affidavit filed in reply to the section 8 application that the agreement
between the parties did exist, but was vitiated on account of fraud,
which only made it voidable.
4. We have, in our judgment in Avitel Post Studioz Limited & Ors. v.
HSBC PI Holding (Mauritius) Ltd., Civil Appeal No. 5145 of
2016, laid down the law on invocation of the “fraud exception” in
some detail, which reasoning we adopt and follow. The said
judgment indicates that given the case law since N.
Radhakrishnan (supra), it is clear that N. Radhakrishnan (supra),
as a precedent, has no legs to stand on. If the subject matter of an
agreement between parties falls within section 17 of the Indian
Contract Act, 1872, or involves fraud in the performance of the
contract, as has been held in the aforesaid judgment, which would
amount to deceit, being a civil wrong, the subject matter of such
agreement would certainly be arbitrable. Further, we have also held
that merely because a particular transaction may have criminal
overtones as well, does not mean that its subject matter becomes
non-arbitrable. We have no doubt that Shri Navre is right in his
submission that there is no averment that the agreement dated
20.05.2006 and the deed of confirmation dated 13.07.2006 were
not entered into at all, as a result of which the arbitration clause
would be non-existent. Further, it is equally clear that the suit is one
that is inter parties with no “public overtones”, as has been
understood in paragraph 14 of Avitel (supra), as a result of which
this exception would clearly not apply to the facts of this case.
5. Smt. Doshi then cited State of A.P. & Anr. v. T. Suryachandra
Rao, (2005) 6 SCC 149 and read paragraphs 8 to 16 of the
judgment to impress upon us that fraud vitiates every solemn act
and that a conspiracy with a view to deprive the rights of others in
relation to a property would render the transaction void ab initio.
This case arose out of an order of the Land Reforms Tribunal which
held against the respondent, stating that they had fraudulently
taken advantage of the ceiling limit under the Andhra Pradesh Land
Reforms (Ceiling on Agricultural Holdings) Act, 1973 by
suppression of facts. In this case, the Tribunal reopened the matter
when it found that the land which was surrendered had already
been acquired in proceedings under the Land Acquisition Act,
1898. The question was whether the Tribunal was justified in
modifying the earlier order and leaving out such land. It was held,
by a concurrent finding of fact, that the Tribunal was capable of so
varying the order. It was in this backdrop that the general
observations on fraud were made. This case has no relevance to
the exact issue before this Court.
6. We are also inclined to accept Shri Navre’s argument on section
of the 1996 Act, in view of some of the recent judgments on section
8 after the 2015 Amendment Act. (See Ameet Lalchand Shah v.
Rishabh Enterprises, (2018) 15 SCC 678 at pp. 698-700,
Mayavati Trading Pvt. Ltd. v. Pradyut Deb Burman, (2019) 8
SCC 714 at pp. 724-725, and Emaar MGF Land Ltd. v. Aftab
Singh, (2019) 12 SCC 751 at pp. 779-783). It is enough to state
that there is a sea change between section 8 of the 1996 Act and
section 20 of the Arbitration Act, 1940, as has been held in
paragraph 9 of Avitel Post Studioz Limited & Ors. v. HSBC PI
Holding (Mauritius) Ltd., Civil Appeal No. 5145 of 2016. Post
amendment, it is clear that the judicial authority before which an
action is brought shall, if the other conditions of section 8 are met,
refer the parties to arbitration unless it finds that prima facie, no
valid arbitration agreement exists. As has been held hereinabove,
in the present case, the finding that is returned is correct – a valid
arbitration agreement certainly exists as the agreements that are
sought to be cancelled are not stated not to have ever been
entered into.
7. This brings us to the interesting argument on behalf of Smt. Doshi
as to the applicability of section 31 of the Specific Relief Act and
the High Court’s judgment in Aliens Developers (supra) relied
upon by her. section 31 of the Specific Relief Act states as follows:
“31. When cancellation may be ordered.
(1) Any person against whom a written instrument is
void or voidable, and who has reasonable
apprehension that such instrument, if left outstanding
may cause him serious injury, may sue to have it
adjudged void or voidable; and the court may, in its
discretion, so adjudge it and order it to be delivered up
and cancelled.
(2) If the instrument has been registered under the
Indian Registration Act, 1908 (16 of 1908), the court
shall also send a copy of its decree to the officer in
whose office the instrument has been so registered;
and such officer shall note on the copy of the
instrument contained in his books the fact of its
cancellation.”
Referring to section 31, a Division Bench of the High Court in
Aliens Developers (supra) held:
“14. ... Under Section 31(2) of the Specific Relief Act,
Legislature conferred the power on Courts to send a
copy of the cancellation decree to the officer in whose
office the instrument has been so registered and such
officer shall note on the copy of the instrument
contained in his books, the fact of its cancellation. It is
evident from the provision under Section 31(2) that the
power of nullifying the effect of registration is conferred
only on the Court. In the judgment in Booz Allens
case (supra), the Hon'ble Supreme Court has held that
a right in rem is a right exercisable against the world at
large, as contrasted from a right in personam which is
an interest protected solely against specific individuals
and actions in personam refer to actions determining
the rights and interests of the parties themselves in the
subject matter of the case, whereas, actions in rem
refer to actions determining the title to property and the
rights of the parties, not merely among themselves but
also against all persons at any time claiming an
interest in that property. In the said judgment, it is
clearly held that if the adjudicatory effect of the Court is
a judgment in rem, only public fora i.e. Courts and
Tribunals have to adjudicate such disputes, but not the
Arbitral Tribunals as agreed by the parties. As much as
the Development Agreement-cum-Irrevocable Power
of Attorney is a registered one and is relating to title of
the property, any cancellation will affect the removal of
rights accrued to the parties, such cancellation is to be
communicated to the officer who has registered the
document, in view of the provision under Section 31(2)
of the Specific Relief Act. Therefore, we are of the
considered view that such adjudicatory function in
cases like this will operate in rem. In any event, having
regard to the power conferred on Courts by virtue of
the provision under Section 31(2) of the Specific Relief
Act, only a competent Court is empowered to send the
cancellation decree, to the officer concerned, to effect
such cancellation and note in his books to that effect.
When such Statutory power is conferred on Courts,
such power cannot be exercised by the Arbitrator, in
spite of the fact that there is an arbitration clause in the
agreement entered between the parties…”
8. It is now for us to examine whether a further exception can be
carved out based upon Booz Allen (supra) on the footing of the
High Court’s judgment in Aliens Developers (supra). In order to
examine the correctness of Aliens Developers (supra), it is
necessary to set out certain sections of the Specific Relief Act. The
relevant sections are set out hereinbelow:
“4. Specific relief to be granted only for enforcing
individual civil rights and not for enforcing penal
laws.—Specific relief can be granted only for the
purpose of enforcing individual civil rights and not for
the mere purpose of enforcing a penal law.”
xxx xxx xxx
“26. When instrument may be rectified.—(1) When,
through fraud or a mutual mistake of the parties, a
contract or other instrument in writing [not being the
articles of association of a company to which the
Companies Act, 1956 (1 of 1956), applies] does not
express their real intention, then
(a) either party or his representative in interest
may institute a suit to have the instrument
rectified; or
(b) the plaintiff may, in any suit in which any
right arising under the instrument is in issue,
claim in his pleading that the instrument be
rectified; or
(c) a defendant in any such suit as is referred
to in clause (b), may, in addition to any other
defence open to him, ask for rectification of
the instrument.
(2) If, in any suit in which a contract or other instrument
is sought to be rectified under sub-section (1), the
court finds that the instrument, through fraud or
mistake, does not express the real intention of the
parties, the court may, in its discretion, direct
rectification of the instrument so as to express that
intention, so far as this can be done without prejudice
to rights acquired by third persons in good faith and for
value.
(3) A contract in writing may first be rectified, and then
if the party claiming rectification has so prayed in his
pleading and the court thinks fit, may be specifically
enforced.
(4) No relief for the rectification of an instrument shall
be granted to any party under this section unless it has
been specifically claimed: Provided that where a party
has not claimed any such relief in his pleading, the
court shall, at any stage of the proceeding, allow him
to amend the pleading on such terms as may be just
for including such claim.
27. When rescission may be adjudged or refused.
—(1) Any person interested in a contract may sue to
have it rescinded, and such rescission may be
adjudged by the court in any of the following cases,
namely:
(a) where the contract is voidable or
terminable by the plaintiff;
(b) where the contract is unlawful for causes
not apparent on its face and the defendant is
more to blame than the plaintiff.
(2) Notwithstanding anything contained in subsection
(1), the court may refuse to rescind the
contract
(a) where the plaintiff has expressly or
impliedly ratified the contract; or
(b) where, owing to the change of
circumstances which has taken place since
the making of the contract (not being due to
any act of the defendant himself), the parties
cannot be substantially restored to the
position in which they stood when the contract
was made; or
(c) where third parties have, during the
subsistence of the contract, acquired rights in
good faith without notice and for value; or
(d) where only a part of the contract is sought
to be rescinded and such part is not severable
from the rest of the contract.
19
Explanation.—In this section “contract” in relation to
the territories to which the Transfer of Property Act,
1882 (4 of 1882), does not extend, means a contract in
writing.”
xxx xxx xxx
“29. Alternative prayer for rescission in suit for
specific performance.—A plaintiff instituting a suit for
the specific performance of a contract in writing may
pray in the alternative that, if the contract cannot be
specifically enforced, it may be rescinded and
delivered up to be cancelled; and the court, if it refuses
to enforce the contract specifically, may direct it to be
rescinded and delivered up accordingly.
30. Court may require parties rescinding to do
equity.—On adjudging the rescission of a contract, the
court may require the party to whom such relief is
granted to restore, so far as may be, any benefit which
he may have received from the other party and to
make any compensation to him which justice may
require.”
xxx xxx xxx
“32. What instruments may be partially cancelled.
—Where an instrument is evidence of different rights
or different obligations, the court may, in a proper case,
cancel it in part and allow it to stand for the residue.
33. Power to require benefit to be restored or
compensation to be made when instrument is
cancelled or is successfully resisted as being void
or voidable.—
(1) On adjudging the cancellation of an instrument, the
court may require the party to whom such relief is
granted, to restore, so far as may be any benefit which
he may have received from the other party and to
make any compensation to him which justice may
require.
(2) Where a defendant successfully resists any suit on
the ground—
(a) that the instrument sought to be enforced
against him in the suit is voidable, the court
20
may if the defendant has received any benefit
under the instrument from the other party,
require him to restore, so far as may be, such
benefit to that party or to make compensation
for it;
(b) that the agreement sought to be enforced
against him in the suit is void by reason of his
not having been competent to contract under
section 11 of the Indian Contract Act, 1872 (9
of 1872), the court may, if the defendant has
received any benefit under the agreement
from the other party, require him to restore, so
far as may be, such benefit to that party, to the
extent to which he or his estate has benefited
thereby.
34. Discretion of court as to declaration of status
or right.—Any person entitled to any legal character,
or to any right as to any property, may institute a suit
against any person denying, or interested to deny, his
title to such character or right, and the court may in its
discretion make therein a declaration that he is so
entitled, and the plaintiff need not in such suit ask for
any further relief:
Provided that no court shall make any such
declaration where the plaintiff, being able to seek
further relief than a mere declaration of title, omits to
do so.
Explanation.—A trustee of property is a “person
interested to deny” a title adverse to the title of
someone who is not inexistence, and for whom, if in
existence, he would be a trustee.
35. Effect of declaration.—A declaration made under
this Chapter is binding only on the parties to the suit,
persons claiming through them respectively, and,
where any of the parties are trustees, on the persons
for whom, if in existence at the date of the declaration,
such parties would be trustees.”
21
The very sheet anchor of Smt. Doshi’s case, namely, the judgment
in Booz Allen (supra), refers to the judgment of this Court in
Olympus Superstructures v. Meena Vijay Khetan, (1999) 5 SCC
651 [hereinafter referred to as “Olympus”], in which it was held
that an arbitrator has the power and jurisdiction to grant specific
performance of contracts relating to immovable property (see
paragraphs 43 and 44).
9. A perusal of the judgment in Olympus (supra) would show that this
Court was faced with differing views taken by the High Courts as to
whether specific performance of a contract relating to immovable
property is at all arbitrable. The Delhi High Court in Sulochana
Uppal v. Surinder Sheel Bhakri, AIR 1991 Del 138 [hereinafter
referred to as “Sulochana Uppal”] had held that specific
performance of an agreement could not be granted by an arbitrator
for the reason that:
“15. An agreement to refer a dispute to arbitration, the
effect of which would be to have an award directing
specific performance of an agreement to sell, would
have for its object to defeat the provisions of the
Specific Relief Act, especially sections 10 and 20
thereof. It is clearly intended by the aforesaid
provisions that it is only courts, and courts alone who
would have jurisdiction to grant or refuse specific
performance.”
22
The learned Single Judge thus disagreed with the contrary view of
the Bombay High Court and the Punjab High Court.1
10. It is important to note that this Court referred to all the aforesaid
three judgments, including a judgment of the Calcutta High Court.
In arriving at the conclusion that the Punjab, Bombay, and Calcutta
High Courts’ view is the correct one and that the Delhi High Court’s
view, being incorrect, is overruled, this Court referred to an
important passage in Halsbury’s Laws of England as follows :
“35. It is stated in Halsbury’s Laws of England, 4th
Edn., (Arbitration, Vol. 2, para 503) as follows:
“503. Nature of the dispute or difference.—
The dispute or difference which the parties to
an arbitration agreement agree to refer must
consist of a justiciable issue triable civilly. A
fair test of this is whether the difference can
be compromised lawfully by way of accord
and satisfaction (Cf. Bac Abr Arbitrament and
Award A).”
36. Further, as pointed out in the Calcutta case [ Apo
498 of 1997 & Apo 449 of (401) dated 27-1-1998 (Cal)]
merely because there is need for exercise of discretion
in case of specific performance, it cannot be said that
only the civil court can exercise such a discretion. In
the above case, Ms Ruma Pal, J. observed:
“… merely because the sections of the
Specific Relief Act confer discretion on courts
to grant specific performance of a contract
does not mean that parties cannot agree that
the discretion will be exercised by a forum of
their choice. If the converse were true, then
1 This Court in Olympus Superstructures v. Meena Vijay Khetan, (1999) 5 SCC
651 wrongly refers to the Delhi High Court’s judgment as being the judgment in
“P.N.B. Finance Ltd. v. Shital Prasad Jain, AIR 1991 Del 13” (see paragraph 33).
23
whenever a relief is dependent upon the
exercise of discretion of a court by statute e.g.
the grant of interest or costs, parties could be
precluded from referring the dispute to
arbitration.”
We agree with this reasoning. We hold on Point 3 that
disputes relating to specific performance of a contract
can be referred to arbitration and Section 34(2)(b)(i) is
not attracted. We overrule the view of the Delhi High
Court. Point 3 is decided in favour of the respondents.”
11. A perusal of section 26(1) of the Specific Relief Act, 1963 would
show that when, through fraud or mutual mistake of parties, a
contract or other instrument in writing does not express the real
intent of the parties, then either party or his representative in
interest may either institute a suit to have the instrument rectified or
as defendant, may, in addition to any defence open to him, ask for
rectification of the instrument. Importantly, under section 26(3), a
party may pray in a rectification suit for specific performance – and
if the Court thinks fit, may after rectifying the contract, grant
specific performance of the contract. Thus, what is made clear by
this section is that the rectification of a contract can be the subject
matter of a suit for specific performance, which, as we have
already seen, can be the subject matter of an arbitral proceeding.
12. Under section 27(1) of the Specific Relief Act, 1963, “any party
interested” in a contract may sue to have it rescinded and such
24
rescission may be adjudged by the Court in the cases mentioned in
clauses (a) and (b) of sub-section (1). Sub-section (2) of section 27
refers to four exceptions to this rule. In Shravan Goba Mahajan v.
Kashiram Devji, ILR (1927) 51 Bom 133, a Division Bench of the
Bombay High Court, with regard to section 35 of the Specific Relief
Act, 1877 (which is the pari materia provision to section 27 of the
1963 Act) held that an heir is a person interested in the contract
which is sought to be set aside, thus, making it clear that the
expression “any person interested” would include not just a party to
the contract, but persons who may be heirs of one of the parties to
the contract. A reading of this section would also show that all such
actions in which a contract or instrument may be rectified or
rescinded, no judgment in rem follows, as what is sought to be
rectified or rescinded is by the parties to the contract or persons
who may be their heirs or legal representatives. Third parties to the
contract are not persons who can be said to be “any person
interested”, particularly when section 27(2)(c), which refers to third
parties, is seen and contrasted with the expression “any person
interested” in section 27(1) – under section 27(2)(c), third parties
come in as an exception to the rule only when they have acquired
rights in good faith, without notice and for value, during the
subsistence of the contract between the parties to that contract.
25
13. Sections 29 and 30 are also important, in that a plaintiff instituting a
suit for specific performance may pray in the alternative that if the
contract cannot be specifically enforced, it may be rescinded and
be delivered up to be cancelled. In addition, on adjudging the
rescission of the contract, the Court may require the party to whom
such relief is granted to restore, so far as may be, any benefit
which he may have received from the other party and to make any
compensation to him which justice may require. These two
sections would also show that following rescission of a contract, it
has to be delivered up to the plaintiff to be cancelled – and all of
this can be done in a suit for specific performance. Thus far,
therefore, it is clear that an action for rescission of a contract and
delivering up of that contract to be cancelled is an action in
personam which can be the subject matter of a suit for specific
performance, making such rescission and delivering up the
contract to be cancelled, the subject matter of arbitration.
14. When it comes to section 31(1), the important expression used by
the legislature is “any person against whom a written instrument is
void or voidable…”. An instructive judgment of the Full Bench of
the Madras High Court reported as Muppudathi Pillai v.
Krishnaswami Pillai, AIR 1960 Mad 1 involved the determination
26
of the scope of section 41 of the Specific Relief Act, 1877 (section
33(1) of the 1963 Act is the pari materia provision). This judgment,
after referring to section 41, then referred to section 39 of the
Specific Relief Act, 1877 (which is the pari materia provision to
section 31 of the 1963 Act). The Court then went on to notice the
distinction between section 35 (which is the pari materia provision
to section 27 of the 1963 Act) and section 39 of the Specific Relief
Act, 1877 as follows:
“11. ... It may be noticed that the above section applies
not merely to the case of an instrument which is
voidable but also one that is void. S. 35 provides for
the case of rescission of voidable contracts. It is
evident that S. 39 covers not only a case contemplated
under S. 35, but also a wider field, that is, a case of a
void document, which under the law need not be set
aside.”
15. In an extremely important paragraph, the Full Bench then set out
the principle behind section 39(1) of the Specific Relief Act, 1877
as follows:
“12. The principle is that such document though not
necessary to be set aside may, if left outstanding, be a
source of potential mischief. The jurisdiction under S.
39 is, therefore, a protective or a preventive one. It is
not confined to a case of fraud, mistake, undue
influence etc. and as it has been stated it was to
prevent a document to remain as a menace and
danger to the party against whom under different
circumstances it might have operated. A party against
whom a claim under a document might be made is not
bound to wait till the document is used against him. If
27
that were so he might be in a disadvantageous
position if the impugned document is sought to be
used after the evidence attending its execution has
disappeared. Section 39 embodies the principle by
which he is allowed to anticipate the danger and
institute a suit to cancel the document and to deliver it
up to him. The principle of the relief is the same as in
quia timet actions.”
(emphasis added)
The Court then continued its discussion as follows:
“13. ... The provisions of Section 39 make it clear that
three conditions are requisite for the exercise of the
jurisdiction to cancel an instrument : (1) the instrument
is void or voidable against the plaintiff; (2) plaintiff may
reasonably apprehend serious injury by the instrument
being left outstanding; (3) in the circumstances of the
case the court considers it proper to grant this relief of
preventive justice. On the third aspect of the question
the English and American authorities hold that where
the document is void on its face the court would not
exercise its jurisdiction while it would if it were not so
apparent. In India it is a matter entirely for the
discretion of the court.
14. The question that has to be considered depends
on the first and second conditions set out above. As
the principle is one of potential mischief, by the
document remaining outstanding, it stands to reason
the executant of the document should be either the
plaintiff or a person who can in certain circumstances
bind him. It is only then it could be said that the
instrument is voidable by or void against him. The
second aspect of the matter emphasises that principle.
For there can be no apprehension if a mere third party
asserting a hostile title creates a document. Thus relief
under S. 39 would be granted only in respect of an
instrument likely to affect the title of the plaintiff and not
of an instrument executed by a stranger to that title.
15. Let us take an example of a trespasser purporting
to convey the property in his own right and not in the
right of the owner. In such a case a mere cancellation
28
of the document would not remove the cloud
occasioned by the assertion of a hostile title, as such a
document even if cancelled would not remove the
assertion of the hostile title. In that case it would be the
title that has got to be judicially adjudicated and
declared, and a mere cancellation of an instrument
would not achieve the object. S. 42 of the Specific
Relief Act would apply to such a case. The remedy
under S. 39 is to remove a cloud upon the title, by
removing a potential danger but it does not envisage
an adjudication between competing titles.
That can relate only to instruments executed or
purported to be executed by a party or by any person
who can bind him in certain circumstances. It is only in
such cases that it can be said there is a cloud on his
title and an apprehension that if the instrument is left
outstanding it may be a source of danger. Such cases
may arise in the following circumstances: A party
executing the document, or a principal in respect of a
document executed by his agent, or a minor in respect
of a document executed by his guardian de jure or de
facto, a reversioner in respect of a document executed
by the holder of the anterior limited estate, a real
owner in respect of a document executed by the
benamidar, etc. This right has also been recognised in
respect of forged instruments which could be cancelled
by a party on whose behalf it is purported to be
executed. In all these cases there is no question of a
document by a stranger to the title. The title is the
same. But in the case of a person asserting hostile
title, the source or claim of title is different. It cannot be
said to be void against the plaintiff as the term void or
voidable implies that but for the vitiating factor it would
be binding on him, that is, he was a party to the
contract.
16. There is one other reason for this conclusion.
Section 39 empowers the court after adjudicating the
instrument to be void to order the instrument to be
delivered up and cancelled. If the sale deed is or
purported to have been executed by a party, the
instrument on cancellation could be directed to be
delivered over to the plaintiff. If on the other hand such
29
an instrument is executed by a trespasser or a person
claiming adversely to the plaintiff it is not possible to
conceive the instrument being delivered over not to the
executant but his rival, the plaintiff.”
The Court then concluded:
“18. In our opinion, Sec. 39 will not apply to a case like
the present where the sale was executed by a person
claiming title adverse to that of Vinayagam Pillai, and
therefore, the court would have no jurisdiction under S.
41 to direct payment of compensation by the plaintiff to
the appellant before obtaining relief as to possession.
To hold otherwise would mean that a mere volunteer
who paid the debt of the plaintiff would be able to
recover the same.”2
16. A reading of the aforesaid judgment of the Full Bench would make
the position in law crystal clear. The expression “any person” does
not include a third party, but is restricted to a party to the written
instrument or any person who can bind such party. Importantly,
relief under section 39 of the Specific Relief Act, 1877 would be
granted only in respect of an instrument likely to affect the title of
2 A Full Bench of the Andhra Pradesh High Court in Yanala Malleshwari v.
Ananthula Sayamma, AIR 2007 AP 57 followed this judgment and then stated the
law thus:
“33. The law, therefore, may be taken as well settled that in all cases of
void or voidable transactions, a suit for cancellation of a deed is not
maintainable. In a case where immovable property is transferred by a
person without authority to a third person, it is no answer to say that
the true owner who has authority and entitlement to transfer can file a
suit under Section 31 of the Specific Relief Act for the simple reason
that such a suit is not maintainable. Further, in case of an instrument,
which is void or voidable against executant, a suit would be
maintainable for cancellation of such instrument and can be decreed
only when it is adjudicated by the competent Court that such
instrument is void or voidable and that if such instrument is left to exist,
it would cause serious injury to the true owner.”
30
the plaintiff, and not of an instrument executed by a stranger to that
title. The expression “any person” in this section has been held by
this Court to include a person seeking derivative title from his seller
(see Mohd. Noorul Hoda v. Bibi Raifunnisa (1996) 7 SCC 767,
at p. 771). The principle behind the section is to protect a party or a
person having a derivative title to property from such party from a
prospective misuse of an instrument against him. A reading of
section 31(1) then shows that when a written instrument is
adjudged void or voidable, the Court may then order it to be
delivered up to the plaintiff and cancelled – in exactly the same
way as a suit for rescission of a contract under section 29. Thus
far, it is clear that the action under section 31(1) is strictly an action
inter parties or by persons who obtained derivative title from the
parties, and is thus in personam.
17. Let us see whether section 31(2) makes any difference to this
position in law. According to the judgment in Aliens Developers
(supra), the moment a registered instrument is cancelled, the effect
being to remove it from a public register, the adjudicatory effect of
the Court would make it a judgment in rem. Further, only a
competent court is empowered to send the cancellation decree to
the officer concerned, to effect such cancellation and “note on the
31
copy of the instrument contained in his books the fact of its
cancellation”. Both reasons are incorrect. An action that is started
under section 31(1) cannot be said to be in personam when an
unregistered instrument is cancelled and in rem when a registered
instrument is cancelled. The suit that is filed for cancellation cannot
be in personam only for unregistered instruments by virtue of the
fact that the decree for cancellation does not involve its being sent
to the registration office – a ministerial action which is subsequent
to the decree being passed. In fact, in Gopal Das v. Sri Thakurji,
AIR 1943 PC 83, a certified copy of a registered instrument, being
a receipt dated 29.03.1881 signed by the owner, was held not to be
a public record of a private document under section 74(2) of the
Indian Evidence Act, 1872 for the reason that the original has to be
returned to the party under section 61(2) of the Registration Act,
1908 (see p. 87). This judgment has been followed in Rekha v.
Ratnashree, (2006) 1 MP LJ 103 by a Division Bench of the
Madhya Pradesh High Court, in which it was held:
“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
32
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 by 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 Strangman
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
33
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.”
(emphasis in original)
Thus, the factum of registration of what is otherwise a private
document inter parties does not clothe the document with any
higher legal status by virtue of its registration.
18. Also, it must be remembered that the Delhi High Court’s reasoning
in Sulochana Uppal (supra) that it is the Court alone that can,
under the Specific Relief Act, enforce specific performance of an
agreement, is contra to the reasoning in Olympus (supra) which
overruled it, stating that “the dispute or difference which parties to
an arbitration agreement agree to refer must consist of justiciable
issues triable civilly”. Since specific performance is a justiciable
issue triable civilly, obviously, the expression “court” occurring
throughout the Specific Relief Act will have to be substituted by
“arbitrator” or “arbitral tribunal”. This part of the reasoning in Aliens
Developers (supra), in following the same reasoning as an
overruled Delhi High Court judgment, would fly in the face of
34
Olympus (supra) and would, therefore, not be good law. We,
therefore, overrule the same.
19. P. Ramanatha Aiyar’s Advanced Law Lexicon (3rd Edn., Wadhwa
Nagpur) describes an in rem proceeding as follows:
“In rem. adj. [Latin “against a thing”] Involving or
determining the status of a thing, and therefore the
rights of persons generally with respect to that thing.-
Also termed (archaically) impersonal. (Black 7th Edn.,
1999)
“An action in rem is one in which the judgment of
the Court determines the title to property and the rights
of the parties, not merely as between themselves, but
also as against all persons at any time dealing with
them or with the property upon which the Court had
adjudicated.” R.H. GRAVESON, Conflict of Laws 98
(7th ed. 1974).
Against the king; against the property, not against
a person.
This term is derived from the Roman law, but is
not used in English law in precisely the same sense as
in that law. Indeed, Bracton, limits proceedings in rem
to actions to obtain possession of res by which he
understood real actions; (Bigelow on Estoppel 42, 43.)
A proceeding in rem is a proceeding instituted
against a thing, and not against a person.
A proceeding in rem, in a strict sense, is one taken
directly against property, and has for its object the
disposition of the property, without reference to the title
of individual claimants but in a larger and more
general sense the term 'proceeding in rem' is applied
to actions between parties where the direct object is to
35
reach and dispose of property owned by them, or of
some interest therein.
A judgement in rem is generally said to be a
judgment declaratory of the status of some subject
matter, whether this be a person, or a thing. Thus the
probate of a will fixes the status of the document as a
will; so a decree establishing or dissolving a marriage
is a judgment in rem, because it fixes the status of the
person. A judgment or forfeiture against specified
articles of goods for violation of the revenue laws is a
judgment in rem. In such case the judgment is
conclusive against all the world, and, if the expression
‘strictly in rem’ may be applied to any class of cases, it
should be confined to such as these. Chief Justice
Marshall says: ‘I have always understood that where a
process is to be served on the thing itself, and where
the mere possession of the thing itself, by the service
of a process and making proclamation, authorizes the
Court to decide upon it without notice to any individual
whatever, it is a proceeding in rem, to which all the
world are parties. The claimant if a party, whether he
speaks or is silent, whether he asserts his claim or
abandons it. But usage has distinguished as
proceedings in rem a class of cases in which, while
the seizure of the thing will be in aid of jurisdiction, yet
it is essential that some form of notice be given to the
particular person or persons. The proceeding thus
assumes a phase of actions in personam, and a
judgment will not be binding upon any one who was
not before the Court.
An act or proceeding is in rem when it is done or
directed with reference to no specific person and
consequently against or with reference to all whom it
might concern, or ‘all the world’.
Lawsuits brought against property as compared
with those against a person; the Court's jurisdiction
does not depend on notice to the property owner.”
36
20. In R. Viswanathan v. Rukn-ul-Mulk Syed Abdul Wajid, (1963) 3
SCR 22, this Court set out the Roman law concept of jus in rem as
follows:
“Roman lawyers recognised a right either as a jus in
rem or a jus in personam. According to its literal
meaning “jus in rem” is a right in respect of a thing, a
“jus in personam” is a right against or in respect of a
person. In modern legal terminology a right in rem,
postulates a duty to recognise the right imposed upon
all persons generally, a right in personam postulates a
duty imposed upon a determinate person or class of
persons. A right in rem is therefore protected against
the world at large; a right in personam against
determinate individuals or persons. An action to
enforce a jus in personam was originally regarded as
an action in personam and an action to enforce a jus
in rem was regarded as an action in rem. But in course
of time, actions in rem and actions in personam
acquired different content. When in an action the rights
and interest of the parties themselves in the subjectmatter
are sought to be determined, the action is in
personam. The effect of such an action is therefore
merely to bind the parties thereto. Where the
intervention of the Court is sought for the adjudication
of a right or title to property, not merely as between the
parties but against all persons generally, the action is
in rem. Such an action is one brought in the Admiralty
Division of the High Court possessing Admiralty
jurisdiction by service of process against a ship or
cargo within jurisdiction. There is another sense in
which an action in rem is understood. A proceeding in
relation to personal status is also treated as a
proceeding in rem, for the judgment of the proper court
within the jurisdiction of which the parties are
37
domiciled is by comity of nations admitted to
recognition by other courts. As observed by Cheshire
in his “Private International Law”, Sixth Edition at page
109, “In Roman law an action in rem was one brought
in order to vindicate a jus in rem, i.e., a right such as
ownership available against all persons, but the only
action in rem known to English law is that which lies in
an Admiralty court against a particular res, namely, a
ship or some other res, such as cargo, associated with
the ship.” Dealing with judgments in rem and
judgments in personam. Cheshire observed at page
653, “It (judgment in rem) has been defined as a
judgment of a court of competent jurisdiction
determining the status of a person or thing (as distinct
from the particular interest in it of a party to the
litigation); and such a judgment is conclusive evidence
for and against all persons whether parties, privies or
strangers of the matter actually decided. …… A
judgment in rem settles the destiny of the res itself
‘and binds all persons claiming an interest in the
property inconsistent with the judgment even though
pronounced in their absence’; a judgment in
personam, although it may concern a res, merely
determines the rights of the litigants inter se to the
res.”
(at pp. 43-44)
Also, a judgment in rem has been described in Satrucharla Vijaya
Rama Raju v. Nimmaka Jaya Raju, (2006) 1 SCC 212 as follows:
“10. ... A judgment in rem is defined in English law as
“an adjudication pronounced (as its name indeed
denotes) by the status, some particular subject-matter
by a tribunal having competent authority for that
purpose”. Spencer Bower on Res Judicata defines the
term as one which “declares, defines or otherwise
determines the status of a person or of a thing, that is
38
to say, the jural relation of the person or thing to the
world generally”...”
Judged by these authorities, it is clear that the proceeding under
section 31 is with reference to specific persons and not with
reference to all who may be concerned with the property
underlying the instrument, or “all the world”. Clearly, the
cancellation of the instrument under section 31 is as between the
parties to the action and their privies and not against all persons
generally, as the instrument that is cancelled is to be delivered to
the plaintiff in the cancellation suit. A judgment delivered under
section 31 does not bind all persons claiming an interest in the
property inconsistent with the judgment, even though pronounced
in their absence.
21. A reading of sections 32 and 33 of the Specific Relief Act, 1963
would also show that the reasoning of the High Court in Aliens
Developers (supra) is flawed. Where, for example, under section
32, an instrument is cancelled in part, the instrument which is
otherwise only an instrument inter parties, cannot be said to be an
instrument which remains inter parties, the cancelled portion being
a cancellation to the world at large, i.e., in rem. Equally, under
section 33, when compensation is required to be paid or
restoration of benefit which has been received from the other party
is required to be made, it is exactly the same as that which is
required to be done under a contract which is rescinded and
cancelled (see section 30): and it is clear that both sections 30 and
33 would apply only to contracts or instruments which are
rescinded/cancelled in personam.
22. When sections 34 and 35 are seen, the position becomes even
clearer. Unlike section 31, under section 34, any person entitled to
any legal character may institute a suit for a declaration that he is
so entitled. Considering that it is possible to argue on a reading of
this provision that the legal character so declared may be against
the entire world, section 35 follows, making it clear that such
declaration is binding only on the parties to the suit and persons
claiming through them, respectively. This is for the reason that
under section 4 of the Specific Relief Act, specific relief is granted
only for the purpose of enforcing individual civil rights. The principle
contained in section 4 permeates the entire Act, and it would be
most incongruous to say that every other provision of the Specific
Relief Act refers to in personam actions, section 31 alone being out
of step, i.e., referring to in rem actions.
23. As a matter of fact, this Court in Razia Begum v. Sahebzadi
Anwar Begum, 1959 SCR 1111 clarified that the predecessor to
section 35 of the 1963 Act, namely, section 43 of the Specific Relief
Act, 1877, made it clear that both sections 42 and 43 of the
Specific Relief Act, 1877 go together and refer only to an action
that is in personam. This was felicitously stated by this Court as
follows:
“ ... Sections 42 and 43, as indicated above, go
together, and are meant to be coextensive in their
operation. That being so, a declaratory judgment in
respect of a disputed status, will be binding not only
upon the parties actually before the court, but also
upon persons claiming through them respectively. The
use of the word “only” in Section 43, as rightly
contended on behalf of the appellant, was meant to
emphasize that a declaration in Chapter VI of the
Specific Relief Act, is not a judgment in rem. But even
though such a declaration operates only in personam,
the section proceeds further to provide that it binds not
only the parties to the suit, but also persons claiming
through them, respectively. The word “respectively”
has been used with a view to showing that the parties
arrayed on either side, are really claiming adversely to
one another, so far as the declaration is concerned.
This is another indication of the sound rule that the
court, in a particular case where it has reasons to
believe that there is no real conflict, may, in exercise of
a judicial discretion, refuse to grant the declaration
asked for oblique reasons.”
(at p. 1131)
24. Also, in an instructive judgment of this Court in Suhrid Singh v.
Randhir Singh, (2010) 12 SCC 112, in the context of the Court
Fees Act, 1870 this Court held:
“7. Where the executant of a deed wants it to be
annulled, he has to seek cancellation of the deed. But
if a non-executant seeks annulment of a deed, he has
to seek a declaration that the deed is invalid, or non
est, or illegal or that it is not binding on him. The
difference between a prayer for cancellation and
declaration in regard to a deed of transfer/conveyance,
can be brought out by the following illustration relating
to A and B, two brothers. A executes a sale deed in
favour of C. Subsequently A wants to avoid the sale. A
has to sue for cancellation of the deed. On the other
hand, if B, who is not the executant of the deed, wants
to avoid it, he has to sue for a declaration that the
deed executed by A is invalid/void and non est/illegal
and he is not bound by it. In essence both may be
suing to have the deed set aside or declared as nonbinding.
But the form is different and court fee is also
different. If A, the executant of the deed, seeks
cancellation of the deed, he has to pay ad valorem
court fee on the consideration stated in the sale deed.
If B, who is a non-executant, is in possession and sues
for a declaration that the deed is null or void and does
not bind him or his share, he has to merely pay a fixed
court fee of Rs. 19.50 under Article 17(iii) of the
Second Schedule of the Act. But if B, a non-executant,
is not in possession, and he seeks not only a
declaration that the sale deed is invalid, but also the
consequential relief of possession, he has to pay an ad
valorem court fee as provided under Section 7(iv)(c) of
the Act.”
25. The reasoning in the aforesaid judgment would again expose the
incongruous result of section 31 of the Specific Relief Act being
held to be an in rem provision. When it comes to cancellation of a deed by an executant to the document, such person can approach the Court under section 31, but when it comes to cancellation of a deed by a non-executant, the non-executant must approach the
Court under section 34 of the Specific Relief Act, 1963.
Cancellation of the very same deed, therefore, by a non-executant would be an action in personam since a suit has to be filed under section 34. However, cancellation of the same deed by an
executant of the deed, being under section 31, would somehow
convert the suit into a suit being in rem. All these anomalies only
highlight the impossibility of holding that an action instituted under
section 31 of the Specific Relief Act, 1963 is an action in rem.
26. Given this finding of law, it is clear that the judgments of the District
Court and the High Court in this case need no interference. This
appeal, therefore, stands dismissed.
……………..………………J.
(R. F. Nariman)
………..……………………J.
(Navin Sinha)
………..……………………J.
(Indira Banerjee)
New Delhi
August 19, 2020.
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