Specific Relief Act | Action To Cancel Instrument Under Section 31 Is Not Action In Rem : Supreme Court

The Supreme Court reiterated that an action instituted under Section 31 of the Specific Relief Act, 1963 for cancellation of an instrument is not an action in rem. It means that the cancellation of instrument as per this section will bind only the parties to the proceedings and will not operate universally against everyone.

A bench comprising Justices Abhay S Oka and Rajesh Bindal made this observation while deciding an appeal in which the issue was whether the arbitration clause in a development agreement could have been invoked in a suit which has been filed seeking cancellation of the very same agreement. While the trial court referred the parties to arbitration, the High Court interfered in revision.

The High Court interfered was on the ground that adjudication pursuant to invocation of Section 31 of the Specific Relief Act is an adjudication in rem.  However, the Supreme Court pointed out that this view was erroneous, as held in Deccan Paper Mills Company Limited v. Regency Mahavir Properties and Ors 

"However, in the case of Deccan Paper Mills Company Limited, this Court has categorically held that it is impossible to hold that an action instituted under Section 31 of the Specific Relief for cancellation of an instrument is an action in rem", the bench noted.

The bench held that the dispute, whether the Development Agreement stands cancelled or whether the agreement can be lawfully cancelled, is a dispute arising out of or in connection with the Development Agreement. Therefore, as per the arbitration clause, if the issue concerning cancellation is not mutually resolved, the same must be referred to arbitration.

Case Title : M/s Asian Avenues Pvt Ltd vs Sri Syed Shoukat Hussain

Citation : 2023 LiveLaw (SC) 369

Specific Relief Act 1963 - Section 31- action instituted under Section 31 of the Specific Relief for cancellation of an instrument is not an action in rem- Followed Deccan Paper Mills Company Limited v. Regency Mahavir Properties and Ors

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