Case: DECCAN PAPER MILLS CO. LTD Vs. REGENCY MAHAVIR PROPERTIES

is exactly the same as that which is required to be done under a contract which is rescinded and cancelled (see section 30): and it is clear that both sections 30 and 33 would apply only to contracts or instruments which are rescinded/cancelled in personam. 22.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 non- binding. 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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]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 Navres argument on section 8 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.The very sheet anchor of Smt. Doshis 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 specifice learned Single Judge thus disagreed with the contrary view of the Bombay High Court and the Punjab High Court.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 Courts view, being incorrect, is overruledThus 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.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 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.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 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).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 Courts 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 Olympus (supra) and would, therefore, not be good law. We, therefore, overrule the same.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.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 non- binding. 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.. 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.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 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.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.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 Honble 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…