While Disputes U/S 31 Of Specific Relief Act Are Arbitrable, Arbitral Awards Are Not Binding On Third Parties: Calcutta HC

Brief Facts:

The present petition has been filed by Jagat Singh Manot (petitioner) to challenge the letter dated 22.04.2024 issued by Kolkata Municipal Corporation (Respondent No. 3) by which it refused to de-amalgamate premises No. 202/4, Harish Mukherjee Road, Kolkata, based on the Arbitral awards, and advised the petitioner to cancel the deed of exchange for de-amalgamation.

After the premises in question were amalgamated, the parties entered into a development agreement on 18.11.2013 with respondent Nos. 12 & 13, which was duly registered, and the respondent sanctioned the building plan.

Disputes later arose between the petitioner and his wife, and respondent Nos. 5-11 regarding the agreement. As the agreement contained an arbitration clause, the disputes were referred to the Arbitral Tribunal.

A joint petition was filed before the Sole Arbitrator under Section 33(1) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) seeking rectification of the earlier award dated 16.02.2018 by which the Deed of Exchange was cancelled. The Sole Arbitrator, exercising powers under Sections 33(5) and 30 of the Arbitration Act, passed an amended award on 05.12.2018.

Based on the awards, the petitioner and his wife filed an application on 19.02.2024 with the Municipal Corporation for de-amalgamation. However, by letter dated 22.04.2024, Respondent No. 3 informed the petitioner that de-amalgamation could not proceed as the Deed of Exchange remained valid and in force. The petitioner was advised to cancel the deed through the appropriate authority.

Against the above decision of the Municipality, the present writ petition has been filed.

Contentions:

The Petitioner submitted that dispute regarding cancellation of an instrument under the Specific Relief Act is in personam and thus arbitrable. The Sole Arbitrator validly cancelled the deed of exchange dated 26.03.2012 through the award dated 16.02.2018 and amended award dated 05.12.2018.

It was further submitted that the additional award dated 05.12.2018 is a valid document in the eyes of law as the said award was drawn up in terms of Section 33 of the Arbitration Act.

Per contra, the Respondent submitted that the arbitration clause was available only in the Development Agreement. No arbitration clause was available in the Deed of exchange. Hence arbitration can be invoked only in respect of any dispute arising out of the aforesaid development agreement dated 18.11.2013.

It was further submitted that the award as well as amended award passed by the arbitrator cancelling the deed of exchange dated 26.03.2012, which was executed prior point in time, is without jurisdiction, nullity, nonest and not binding upon the Municipal authorities.

Lastly, it was submitted that the petitioner executed a deed of exchange and applied for amalgamation. Now without cancelling the said registered deed of exchange by another registered instrument under Section 17(b) of the registration Act, he cannot pray for the separation of the said properties.

Observations:

The court at the outset noted that two or more persons can mutually transfer the ownership of an immovable property with the ownership of another immovable property by way of a registered instrument.

The court further observed that under Section 31(1) of the Specific Relief Act, an instrument can be cancelled only in two situations. If the instrument is void or voidable against the person concerned, or When both parties mutually agree to cancel the deed.In the first case, the concerned person must initiate a suit to have the instrument adjudged void or voidable, and the court may, at its discretion, declare it so and order its cancellation.

The court noted that in the present case, by a registered Deed of Exchange dated 26.03.2012 executed between the petitioner and his wife on one side, and respondent Nos. 5 to 11 on the other, both parties mutually granted, transferred, and conveyed to each other, by way of exchange, an undivided 1/20th share in each of the said premises simultaneously.

It further said that hence, by virtue of the said Deed of Exchange, the petitioner, his wife, and respondent Nos. 5 to 11 became co-owners of the premises in question. To further strengthen the transaction, the parties jointly approached the respondent Corporation for the amalgamation of their separate properties.

The court observed that the Deed of exchange is a valid legal document which creates rights in favour of the parties involved therein. The said document can be within the time frame as prescribed in the Limitation Act. cancelled only in accordance with Section 31 of the Specific Relief Act.

The court also opined that the only question before this Court is whether the award passed by the Sole Arbitrator is binding on the respondent Municipal Corporation. If it is a judgment in rem, it applies to the Corporation; if it is a judgment in personam, it binds only the parties to the dispute.

The court noted that a judgment in rem determines the status of a person or thing and binds the entire world, not just the parties involved.

The Supreme Court in State of Bihar v. Radha Krishna Singh (1983) held that judgments in probate, insolvency, matrimonial, guardianship, and similar proceedings are judgments in rem and are admissible universally. In contrast, a judgment in personam is limited to the parties or privies in a suit involving contract, tort, or crime, and is conclusive only between them.

The Supreme Court in Deccan Paper Mills Company Ltd. v. Regency Mahavir Properties & Ors. (2021), addressed whether disputes involving cancellation of written agreements are arbitrable under Section 31 of the Specific Relief Act.

The Apex Court held that proceedings under Section 31 of the Specific Relief Act are specific to the parties involved and not to the world at large. Cancellation of an instrument under this provision affects only the parties and their privies, not all persons generally. Thus, a judgment under Section 31 is not a judgment in rem and does not bind others who may claim an interest in the property.

The court held that it is the petitioner's own case that the dispute was one in personam, making it arbitrable. In view of the above discussion, it was held that the arbitral awards dated 16.02.2018 and 05.12.2018 are judgments in personam arising from a private dispute and are not binding on third parties. As the respondent Corporation is a third party to these awards, the Court found no infirmity or illegality in the stand of the corporation.

Accordingly, the present petition was dismissed.

Case Title: Jagat Singh Manot Versus The Municipal Commissioner, Kolkata Municipal Corporation And Ors.

Case Number: W.P.O. 503 OF 2024

Judgment Date: 10/04/2025

Mr. Anujit Mookherjee, Adv. Mr. Harsh Tiwari, Adv. Mr. Aurin Chakraborty, Adv. Mr. Bhupendra Gupta, Adv. Mr. Anwar Hossain- For the Petitioner

Adv. Mr. Arif Ali, Adv. Mr. Sarban Bhattacharjee, Adv.-For the Respondent nos. 6&7

Mr. Gurudas Mitra, Adv. Ms. Piyali Sengupta, Adv. Gaurang Kanth, J. 1.-For the KMC.

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