“The expression ‘any person’ in this section has been held by this Court to include a person seeking derivative title from his seller”
The Supreme Court recently faced the question of application of Section 31 of the Specific Relief Act, 1963 with relation to the arbitrable nature of the concerned dispute. The Bombay High Court had dismissed the Writ Petition in which the present Appellant had challenged the judgment of the Additional Judge, Small Causes Court, through which he had referred the parties for Arbitration.
Facts:
Through an agreement between the Appellant and Respondent No. 2, it was decided that the Appellant’s portion of land (in Pune) will be used for development. The said agreement also contained a clause which allowed the developer to delegate or assign rights under this agreement to any other person without violating the terms and conditions. This agreement did not contain an arbitration clause. By means of another agreement that was entered into by Respondent No. 2, the development task was delegated to Respondent No. 3. This agreement did contain an arbitration clause. Thereafter, the Appellant claimed that a fraud had been played by Respondent No. 3 which had active involvement from the rest of the respondents. A suit was instituted by the Appellant against all the Respondents before Civil Judge for cancellation of the said agreements in reply to which, an application was filed by Respondent No. 1 invoking the clause of arbitration in the second agreement.
Decision of the Additional Judge:
The application to refer the parties for arbitration was allowed and the plaintiff was directed to resolve the dispute through arbitration.
Decision of the High Court:
Aggrieved by the decision of the Additional Judge to refer the parties to arbitration despite the original agreement not having any arbitration clause, the Appellant filed a Writ Petition against the same which was disposed of as the parties stood referred to arbitration. The High Court was of the view that the “fraud exception” in the case could not be relied upon.
Aggrieved by the same, the Appellant filed an appeal in the Supreme Court.
Supreme Court’s Observations:
The Supreme Court took a systematic approach to explain the interpretation and subsequent applicability of Section 31. Section 31 of the Specific Relief Act, 1963 is ‘pari materia’ to Section 39 of the Specific Relief Act, 1877 and with the help of the principles laid out by the full bench in the case of ‘Muppudathi Pillai v. Krishnaswami Pillai, AIR 1960 Mad 1’, the extent of Section 39(31 in the present Act) was enunciated. Important extracts from the case law are as follows:
- 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.
- 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 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.
It was observed by the Supreme Court that 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 the plaintiff, and not of an instrument executed by a stranger to that title. 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. It was made crystal 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.
It is also seen 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 the court found that 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.
While concluding the judgement, the court further strengthened the rules derived at regarding the applicability of Section 31 by enunciating some anomalies, which are:
- 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.
Supreme Court held:
The bench disposed of the appeal and came to the conclusion that the decisions of the District Court & High Court need no interference. Hence, the parties still stood referred to arbitration.
Bench: Justice R. F. Nariman, Justice Navin Sinha, Justice Indira Banerjee
Case Title: Deccan Paper Mills Co. Ltd. v. Regency Mahavir Properties & Ors.
Case Details: Civil Appeal No. 5147 of 2016
Read the Judgement:
