REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5147 OF 2016

DECCAN PAPER MILLS CO. LTD. …APPELLANT

VERSUS

REGENCY MAHAVIR PROPERTIES & ORS. …RESPONDENTS

J U D G M E N T

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.

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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

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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

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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

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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

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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.

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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

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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.

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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

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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

10

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

11

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

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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

13

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,

14

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 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,

15

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

16

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

17

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.

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(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 sub-

section (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.

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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 (3

rd

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 subject-

matter 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

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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.

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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)

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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

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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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