[Cancellation Of Written Instruments] Action Instituted U/s 31 Specific Relief Act Is Arbitrable As It Is Not An Action In Rem: SC

 The Supreme Court has held that an action instituted under section 31 of the Specific Relief Act, 1963 is not an action in rem, but an action in personam, and therefore arbitrable.

In this case, a suit was filed by Deccan Paper Mills Co. Ltd. against Regency Mahavir Property and others, One of the prayers was to set aside some agreements as well. The Court had allowed the application filed by Regency to refer the matter to Arbitration. The High Court also dismissed the writ petition filed by Deccan in this regard. Thus, before the Apex Court in appeal, Deccan contended that since the prayer in the suit is for cancellation of three "written instruments", the proceeding under section 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. The contention was made referring to section 31 of the Specific Relief Act, 1963 and a Division Bench 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) in which it was held that the action under Section 31 is an action in rem and therefore non-arbitrable.

Referring to Muppudathi Pillai v. Krishnaswami Pillai, AIR 1960 Mad 1, the Apex Court bench comprising of Justices RF Nariman, Indira Banerjee and Navin Sinha observed that the expression "any person" in Section 31 does not include a third party, but is restricted to a party to the written instrument or any person who can bind such party. It said:

"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. "

Disagreeing with the interpretation made by the Division Bench in Aliens Developers, the court observed that 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.

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.

Overruling Alien Developers, the bench dismissed the appeals and further observed:

"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"

"..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."

Case details
Case no.: CIVIL APPEAL NO. 5147 OF 2016
Case name: DECCAN PAPER MILLS CO. LTD. vs. REGENCY MAHAVIR PROPERTIES & ORS.
Coram: Justices RF Nariman, Indira Banerjee and Navin Sinha
Counsel: Adv Meena Doshi and Sr. Adv Vinay Navre

Source: https://livelaw.in/top-stories/section-31-specific-relief-act-not-action-in-rem-arbitrable-161746

 

More than one Units/Flats/Apartments_Consumer_NCDRC

Case No. Complainant Respondent CC/975/2017 RAJEEV KUMAR SINGH JAI PRAKASH ASSOCIATES LTD. & ANR.   NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

NEW DELHI

 

CONSUMER CASE NO. 976 OF 2017

 

1. RAJEEV KUMAR SINGH S/o. Shri. K.P. Singh, R/o. D-63, Sector -40, Noida- 201301 U.P.	...........Complainant(s)
Versus
1. JAI PRAKASH ASSOCIATES LTD. & ANR. Sector - 128, Noida Uttar Pradesh - 201 304 2. Jaypee Infratech Limited., Sector - 128, Noida - 201 304 U.P.	...........Opp.Party(s)

 

15. So far as the question of Complainant being or not being a consumer is concerned, this Commission has already taken a view in a number of cases that if the complainant is not in the business of purchase/sale of the plots/flats, he will be treated as a consumer.  This Commission in Aashish Oberai  Vs. Emaar MGF Land Limited, Consumer Case No. 70 of 2015, decided on 14.09.2016, has held as follows:-

“In the case of the purchase of the houses which a builder undertakes to construct for the buyer, the purchase can be said to be for a commercial purpose where it is shown, by producing evidence, that the buyer is engaged in the business of a buying and selling of houses and or plots as a trading activity, with a view to make profits by sale of such houses or plots.  A person cannot be said to have purchased a house for a commercial purpose only by proving that he owns or had purchased more than one houses or plots.  In a given case, separate houses may be purchased by a person for the individual use of his family members.  A person owning a house in a city A may also purchase a house in city B for the purpose of staying in that house during short visits to that city.  A person may buy two or three houses if the requirement of his family cannot be met in one house.  Therefore, it would not be correct to say that in every case where a person owns more than one house, the acquisition of the house is for a commercial purpose”.

It was also observed that:-

“It would be pertinent to note that there is no evidence of the complainant having purchased and then sold any residential property.  Therefore, it would be difficult to say that he was engaged in the business of the buying and selling of the property or that villa in question was booked by him for speculative purposes”.

16. In another case, Kavit Ahuja Vs. Shipra Estate Ltd. & Jai Krishna Estate Developers Pvt. Ltd.,  I(2016) CPJ31(NC), wherein three flats were booked by the complainant, this Commission held the complainant to be a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act, 1986 and held as follows:-

“In the case of the purchase of houses which the service provider undertakes to construct for the purchaser, the purchase can be said to be for a commercial purpose only where it is shown that the purchaser is engaged in the business of purchasing and selling houses and / or plots on a regular basis, solely with a view to make profit by sale of such houses.  If however, a house to be constructed by the service provider is purchased by him purely as an investment and he is not undertaking the trading of houses on a regular basis and in the normal course of the business profession or services in which he is engaged, it would be difficult to say that he had purchased houses for a commercial purpose.  A person having surplus funds available with him would not like to keep such funds idle and would seek to invest them in such a manner that he gets maximum returns on his investment.  He may invest such funds in a Bank Deposits, Shares, Mutual Funds and Bonds or Debentures etc.  Likewise, he may also invest his surplus funds in purchase of one or more houses, which is/are proposed to be constructed by the service provider, in the hope that he would get better return on his investment by selling the said house(s) on a future date when the market value of such house (s) is higher than the price paid or agreed to be paid by him.  That by itself would not mean that he was engaged in the commerce or business of purchasing and selling the house (s).

7.      Generating profit by way of trading, in my view is altogether different from earning capital gains on account of appreciation in the market value of the property unless it is shown that the person acquiring the property was engaged in such acquisition on a regular basis and it was by way of a business activity.

8.  As observed by the Hon’ble Supreme Court in Laxmi Engineering Works (supra) what is a ‘commercial purpose’ is a question of fact to be decided in the facts of each case and it is not the value of the goods that matters but the purpose for which the goods brought are put to. The same would be equally applicable to for hiring or availing services.

9.  In any case, it is not appropriate to classify such acquisition as a commercial activity merely on the basis of the number of houses purchased by a person, unless it is shown that he was engaged in the business of selling and purchasing of houses on a regular basis. If, for instance, a person has two-three children in his family and he purchased three houses one for each of them, it would be difficult to say that the said houses were purchased by him for a commercial purpose. His intention in such a case is not to make profit at a future date but is to provide residential accommodation to his children on account of the love and affection he has for his children. To take another example, if a person has a house say in Delhi but he has business in other places as well and therefore, purchases one or more houses at other places where he has to live presently in connection with the business carried by him, it would be difficult to say that such acquisition is for commercial purpose.  To give one more example, a person owning a house in a Metropolitan city such as Delhi, or Mumbai, may acquire a house at a hill station or a place, which is less crowded and more peaceful than a Metropolitan city, in my view, it cannot be said that such acquisition would be for commercial purpose.  In yet another case, a person may be owning a house but the accommodation may not be sufficient for him and his family, if he acquires one or more additional houses, it cannot be said that he has acquired them for commercial purpose.  Many more such examples can be given.  Therefore, it cannot be said that merely because of the complainant had agreed to purchase three flats in the same complex the said acquisition was for a commercial purpose”.

17. This Commission, in Rajesh Malhotra & Ors. Vs. Acron Developers & 2 Ors., First Appeal No. 1287 of 2014, decided on 05.11.2015 has held as follows:-

“12.     Therefore, in order to determine whether the goods are purchased for commercial purpose, the basic pre-requisite would be whether the subject goods have been purchased or the services availed of with the prime motive of trading or business activity in them, for the purpose of making profit, which, as held in Laxmi Engineering (supra) is always a question of fact to be decided in the facts and circumstances of each case”.

 

18. On the basis of the above authoritative judgements of this commission, there seems to be no iota of doubt that the Complainant in the present complaint is a consumer.  The judgment relied upon by the Opposite Party in Consumer Complaint No.159/2012 Anil Dutt vs. M/s Business Park Town Planners Ltd. (BPTP) (Supra) relates to a case where 10 units were booked by one consumer and clearly this Commission has observed that a person booking 10 plots cannot be treated as consumer as the plots were booked for commercial purpose.  In Laxmi Engineering Works Vs. P.S.G Industrial Institute (1995) 3 SCC583, Hon’ble Supreme Court has observed that the finding on issue of commercial purpose will depend on facts and circumstances in each case.  In the present case, only two flats were booked by the Complainant and therefore, facts of the two cases are different.  Thus, the judgment of this Commission in Consumer Complaint No.159/2012 Anil Dutt vs. M/s Business Park Town Planners Ltd. (BPTP) (Supra) cannot be applied in the present case.