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Case Reviews, The Law

Deccan Paper Mills Co. Ltd. V/S Regency Mahavir Property and others 2020 SCC Online SC 655

In this case, the Supreme Court held that specific relief is granted only for the purpose of enforcing individual civil rights in light of S.4 of the Act and hence all actions under the Specific Relief Act, 1963 are actions in personam.

By: Pooja Mujumdar, ILS Law College, Pune.

Facts of the case:

  1. Suit was filed by Deccan paper mills against Regency Mahavir Property and others for declaration of agreement dated 22.07.2004 and 20.05.2006 and the deed of confirmation dated 13.07.2006 were illegal, null ab-initio, not binding upon the plaintiff as that was obtained by fraud. Further, cancellation of the said agreement was sought. 
  2. At the same time, Regency Mahavir Properties filed an application u/s.8 of Arbitration and Conciliation Act, 1996. The application was allowed and the matter was referred to arbitration. 
  3. Deccan Paper Mills approached High Court of Bombay via a writ petition against the same which was later dismissed. 
  4. In an appeal before hon’ble Supreme Court, Deccan stated that their prayer was to cancel all the agreements and proceedings u/s.31 of specific relief Act, 1963 is a proceeding in rem and thus comes within the exceptions within the Booz Allen Case

Issues:

  • Arbitrability of a dispute in case of allegations of fraud. 
  • To determine whether the proceedings under S.31 of the Specific Relief Act, 1963 is one in rem or in personam.

Judgment:

The Hon’ble Supreme Court observed that the expression any person in S.31of the Specific Relief Act, 1963 does not include a third party, but the same is restricted to the party to the written instrument or any to who can bind such a party. A reading of S.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 S.29.

Thus far, it is clear that the action Under S.31 (1) is strictly an action inter-parties or by persons who obtained derivative title from the parties, and is thus in persona.

Apex court carried out in depth scrutiny of various provisions of the Specific Relief Act, 1963 and different expressions used therein. The Apex Court further examined as to whether S.31 (2) makes any difference to the aforesaid determination in law. The SC disapproved the reasons given by the Hon’ble Delhi High Court.

SC held whether or not the written instrument is registered, does not make any difference in order to hold that the proceeding in relation thereto will be proceeding in rem or in personam.

Lastly the SC held that it would be wholly incorrect to hold that cancellation of very same deed, if done under S.31 would be an action in rem, however, if done under S.34 of Specific Relief Act, 1963 would be an action in personam. On the basis of above discussion, the SC held that an action instituted under S.31 Specific Relief Act, 1963 is an action in personam and not an action in rem.      

Analysis & Conclusion:

The case primarily discussed the question of arbitrability of disputes involving allegation of fraud written in the execution of an agreement. By virtue of this judgment, the Apex Court has put to rest most of the controversies surrounding arbitrability of the disputes seeking specific performance of contract.

It has been clearly brought out that specific relief is granted only for the purpose of enforcing individual civil rights in light of S.4 of the Act and hence all actions under the Specific Relief Act, 1963 are actions in personam.

This determination of the apex court is in line with principle highlighted in Halsbury’s Laws of England to the effect that justiciable issues triable civilly are arbitrable and a fair test of this is whether difference can be compromised lawfully by way of accord and satisfaction. Accordingly, no exception was required to be carved out to the categories of non-arbitrable cases as mentioned in the case of Booz Allen. Relying on Avitel Post Studioz Limited VS HSBC the Court held that merely because a particular transaction may have criminal overtones as well, does not mean that its subject matter becomes non-arbitrable.

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