Vipul Ganda is an Independent Litigation Counsel with over 14 years of experience and a proven track record in Litigation and Dispute Resolution.

Deccan Paper Mills Co. Ltd. Versus Regency Mahavir Properties & Ors.


Court / Forum : Supreme Court of India
Citation : 2020 SCC OnLine SC 655
Coram : Justice R.F. Nariman, Justice Navin Sinha and Justice Indira Banerjee
Subject : Section 31 of the Specific Relief Act, 1963
Date of Decision : 2020-08-19

Brief Facts

  • The Appellant filed a civil suit seeking cancellation of agreements entered between the Appellant and Respondents. Thereafter, Respondent No. 1 relied on the arbitration clause contained in one of the agreements and filed an application under Section 8 of the Arbitration and Conciliation Act, 1996.
  • The appeal was preferred against the judgment of Bombay High Court where the Court also referred the parties to arbitration and held that the “fraud exception” as laid down in a plethora of judgments would not be applicable to the present case and the dispute would be arbitrable.

Issues

  1. Whether Section 31 of the Specific Relief Act, 1963 are in the nature of provisions in personam?
  2. Whether the disputes are non-arbitrable in nature since the present case involves allegations of fraud?

Decision

  • While deciding the first issue, the Hon`ble Supreme Court analysed the provisions of the Specific Relief Act 1963 and held that an action for rescission or cancellation of a contract under Section 31(1) of the Specific Relief Act 1963, is an action in personam, and not an action in rem, making it arbitrable in nature.
  • It was further held that, the proceedings under Section 31 of the Specific Relief Act, 1963 are 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". It was observed as under:-
    “The expression "any person" in Section 31 of the Specific Relief Act, 1963 does not include a third party, but is restricted to a party to the written instrument or any person who can bind such party...”
  • The Hon`ble Supreme Court overruled the judgment of Andhra Pradesh High Court in Aliens Developers Pvt. Ltd. v. M. Janardhan Reddy ((2016) 1 ALT 194 (DB)) and stated the following: -
    “…the expression "court" occurring throughout the Specific Relief Act will have to be substituted by the word "arbitrator" or "arbitral tribunal
  • While deciding the second issue, the Hon`ble Supreme Court rejected the Appellant`s contention that the dispute in the present case is non-arbitrable as it involves serious allegations of fraud.
  • It was observed that, the two-fold test laid down in Avitel Post Studioz Limited & Ors. v. HSBC PI Holding (Mauritius) Ltd. (2014 SCC OnLine Bom 929) does not stand satisfied in the present case since the Appellant has not disputed entering into the arbitration agreement and the allegations of fraud do not have any ‘public overtones`, making the disputes arbitrable in nature. Thus, the appeal was dismissed.

Vipul Ganda is a Delhi based Advocate practicing largely at the Delhi High Court. His practice focus is Dispute Resolution and Litigation and his practice areas include Arbitration, Commercial, Civil, Constitutional, Corporate and Criminal Litigation.