DECCAN PAPER MILLS CO. LTD. versus REGENCY MAHAVIR PROPERTIES & ORS.

Citation: [2020] 13 S.C.R. 427 · Decided: 19-08-2020 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Dismissed

Cited by 4 judgment(s) · cites 8 · see the full citation network in Lexace

Judgment (excerpt)

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   [2020] 13 S.C.R. 427
DECCAN PAPER MILLS CO. LTD.
v.
REGENCY MAHAVIR PROPERTIES & ORS.
(Civil Appeal No. 5147 of 2016)
AUGUST 19, 2020
[R. F. NARIMAN, NAVIN SINHA AND
INDIRA BANERJEE, JJ.]
Arbitration & Conciliation Act, 1996 – s.8 – Cancellation of
written instrument u/s.31, 1963 Act – Arbitrability of – Agreement
between appellant and respondent no.2 to develop a portion of the
land owned by appellant – Respondent no.2 assigned the execution
thereof to respondent no.1 vide another agreement containing
arbitration clause – This was followed by a deed of confirmation –
Appellant filed suit, alleging fraud by respondent no.3 (representing
himself to be authorized partner of respondent no.1), inter alia for
declaring the aforesaid agreements to be null and void – Relying
on the arbitration clause, respondent no.1 filed application u/s.8
for referring the parties to arbitration – Allowed – Writ petition
filed by appellant – Dismissed – On appeal, held: Post amendment,
judicial authority before which an action is brought shall, if the
other conditions of s.8 are met, refer the parties to arbitration unless
it finds that prima facie, no valid arbitration agreement exists – In
the present case, a valid arbitration agreement exists as the
agreements that are sought to be cancelled are not stated not to
have ever been entered into – Also, the suit is inter parties with no
“public overtones”, thus the “fraud exception” would not apply in
the present case – Further, action u/s.31(1) is strictly an action inter
parties or by persons who obtained derivative title from the parties,
and is thus in personam – Judgments of the District Court and the
High Court need no interference – Specific Relief Act, 1963 –
ss.26(1), (3), 27(1), (2)(c), 29, 30, 31(1), (2), 32-35 – Arbitration
and Conciliation (Amendment) Act, 2015 – Contract Act, 1872 –
s.17 – Arbitration Act, 1940 – s.20.
Specific Relief Act, 1963 – s.31 – Proceedings under, in rem
or in personam – Discussed – Arbitration & Conciliation Act, 1996.
427
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SUPREME COURT REPORTS
[2020] 13 S.C.R.
Dismissing the appeal, the Court
HELD: 1.1 If the subject matter of an agreement between
parties falls within section 17 of the Indian Contract Act, 1872,
or involves fraud in the performance of the contract which would
amount to deceit, being a civil wrong, the subject matter of such
agreement would certainly be arbitrable. Merely because a
particular transaction may have criminal overtones as well, does
not mean that its subject matter becomes non-arbitrable. There
is no averment that the agreement dated 20.05.2006 and the deed
of confirmation dated 13.07.2006 were not entered into at all, as
a result of which the arbitration clause would be non-existent.
Further, it is equally clear that the suit is one that is inter parties
with no “public overtones”, as a result of which this exception
would clearly not apply to the facts of this case. There is a sea
change between section 8 of the 1996 Act and section 20 of the
Arbitration Act, 1940. Post amendment, it is clear that the judicial
authority before which an action is brought shall, if the other
conditions of section 8 are met, refer the parties to arbitration
unless it finds that prima facie, no valid arbitration agreement
exists. In the present case, the finding that is returned is correct
– a valid arbitration agreement certainly exists as the agreements
that are sought to be cancelled are not stated not to have ever
been entered into. [Paras 4, 6][443-G-H; 444-A-B; G-H; 445-A]
Avitel Post Studioz Limited & Ors. v. HSBC PI Holding
(Mauritius) Ltd., Civil Appeal No. 5145 of 2016 – relied
on.
1.2 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
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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

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