Back
SUPREME COURT OF INDIA
R.F. NARIMAN, NAVIN SINHA, INDIRA BANERJEE, JJ.
Deccan Paper Mills Co. Ltd. – Appellant
Versus
Regency Mahavir Properties and Others – Respondents
Civil Appeal No. 5147 of 2016
Decided On : 19-08-2020
(A) Arbitration and Conciliation Act, 1996 – Section 8 – Contract Act, 1872 – Section 17 – Reference to arbitration – If subject matter of an agreement between parties falls within section 17 of Contract Act, 1872, or involves fraud in performance of contract which would amount to deceit, being a civil wrong, subject matter of such agreement would certainly be arbitrable – Merely because a particular transaction may have criminal overtones as well, does not mean that its subject matter becomes non-arbitrable – Judicial authority before which an action is brought shall, if other conditions of Section 8 are met, refer parties to arbitration unless it finds that prima facie, no valid arbitration agreement exists. (Paras 4 and 6)
(B) Specific Relief Act, 1963 – Sections 27(2)(c), 31 and 34 – Cancellation of instrument – Declaration of statues by Court – Expression “any person interested” would include not just a party to contract but persons who may be heirs of one of parties to contract – All such actions in which a contract or instrument may be rectified or rescinded, no judgment in rem follows – Third parties to contract are not persons who can be said to be any person interested – Action for rescission of a contract and delivering up of that contract to be cancelled is an action in personam which can be subject matter of a suit for specific performance, making such rescission and delivering up contract to be cancelled, subject matter of arbitration. (Paras 12, 13 and 16)
(C) Specific Relief Act, 1963 – Section 31 – Cancellation of instrument – When a written instrument is adjudged void or voidable, Court may then order it to be delivered up to plaintiff and cancelled in exactly same way as a suit for rescission of a contract under Section 29 – Action under Section 31(1) is strictly an action inter parties or by persons who obtained derivative title from parties, and is in personam – 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 – Suit that is filed for cancellation cannot be in personam only for unregistered instruments by virtue of fact that decree for cancellation does not involve its being sent to registration office – a ministerial action which is subsequent to decree being passed – 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. (Paras 16, 17 and 20)
Facts of the case:
Dispute emanating from development agreement between parties. Additional Judge, Small Causes Court, Pune, after hearing both sides, held that 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.
Findings of Court:
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.
Result : Appeal dismissed.
Key Points: - The judgment discusses that when there is an arbitration clause, disputes may be referred to arbitration if conditions of Section 8 are met. (!) (!) (!) - It addresses that an action under Section 31(1) is an in personam action between parties, and cancellation of a registered instrument does not automatically become in rem; the instrument’s cancellation is between the parties and their privies. (!) (!) (!) (!) - It clarifies that Section 39 provides preventive relief to cancel a document likely to affect the title, limited to instruments likely to affect the plaintiff’s title, not a stranger’s title, and is not a universal in rem remedy. (!) (!) (!)
JUDGMENT :
R.F. NARIMAN, J.
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 and 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 authoriz
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
