SC: An action u/s 31(1) of the Specific Relief Act is strictly in personam

The Hon’ble Supreme Court, on 19th August 2020, in the matter of Deccan Paper Mills Co. Ltd. v.Regency Mahavir Properties & Ors. pronounced that an action under section 31(1) of the Specific Relief Act, 1963 is strictly an action in personam. 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.

The Hon’ble Supreme Court observed that:

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, can be the subject matter of an arbitral proceeding. (Para 11)

Under section 27(1) of the Specific Relief Act, 1963, “any party interested” in a contract may sue to have it rescinded and such rescission may be adjudged by the Court in the cases mentioned in clauses (a) and (b) of sub-section (1).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. (Para 12)

A reading of section 27 of the Specific Relief Act, 1963 would also show that all such actions in which a contract or instrument may be rectified or rescinded, no judgment in rem follows, as what is sought to be rectified or rescinded is by the parties to the contract or persons who may be their heirs or legal representatives.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. (Para 12)

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. (Para 13)

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. (Para 16)

An action that is started under section 31(1) of the Specific Relief Act, 1963 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. (Para 17)

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. (Para 17)

Proceeding under section 31 of the Specific Relief Act, 1963 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. (Para 20)

Unlike section 31, under section 34 of the Specific Relief Act, 1963, 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. (Para 22)

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. (Para 25)

Copy of judgement: Judgement_19-Aug-2020

-Adv. Tushar Kaushik

Leave a Reply

Your email address will not be published. Required fields are marked *