Legal Remedy avalable under Code of Civil Procedure, Arbitration Act, Specific Relief Act, Negotiable Instrument Act

LEGAL REMEDIES Nikhil Suresh Pareek

Vaish Associates Advocates

Vaish Associates Advocates Mohandev Building Tolstoy Road, New Delhi

+91 950 144 0721

2/22/2013

This project is an attempt to understand Legal remedies available in various statutory enactments like Arbitration Act, Specific Relief Act, Negotiable Instrument Act and Code of Civil Procedure.

TABLE OF CONTENTS Legal Remedies ......................................................................................................................... 1 Table of Contents ....................................................................................................................... 2 Chapter I................................................................................................................................... 11 Legal Remedies: Introduction .................................................................................................. 11 1.1.

Legal remedies in india ................................................................................................. 11

1.2.

Types of statutes ........................................................................................................... 12

Chapter II ................................................................................................................................. 14 Code of Civil procedure: a brief introduction .......................................................................... 14 2.1. Scope: code not exhaustive ............................................................................................... 14 2.2. Scheme of the code ........................................................................................................... 14 2.3. CPC at a glance ................................................................................................................ 15 2.3.1. Important definitions .................................................................................................. 15 2.3.1.1 Decree .................................................................................................................. 15 2.3.1.2. judgment ............................................................................................................. 16 2.3.1.3. Order ................................................................................................................... 16 2.3.2. Jurisdiction of Civil Courts ........................................................................................ 16 2.3.2.1. Kinds of Jurisdiction ........................................................................................... 17 2.3.2.2. Statutory Wording ............................................................................................... 17 2.3.3. Res Sub Judice and Res Judicata ............................................................................... 18 2.3.4. Place of Suing ............................................................................................................ 19 2.3.5. Institution of Suit ....................................................................................................... 20 2.3.6. Pleadings .................................................................................................................... 20 2.3.6.1. Rules of Pleadings............................................................................................... 20 2.3.7. Discovery, Inspection and Production of Documents................................................ 21 Vaish Associates Advocates | Table of Contents 2

2.3.7.1. Interrogatories: Order 11, Rules 1-11 ................................................................. 21 2.3.7.2. Discovery of Documents: Order 11, Rules 12-14 ............................................... 22 2.3.7.3. Inspection of Documents: Order 11, Rule 15-19 ................................................ 22 2.3.8. Admissions................................................................................................................. 22 2.3.9. Interim Orders ............................................................................................................ 23 2.3.10. Hearing of a Suit: Order XVIII ................................................................................ 24 2.3.10.1. Trial in Open Court: Section 153-B .................................................................. 24 2.3.10.2. Trial in Camera ................................................................................................. 24 2.3.11. First Appeals ............................................................................................................ 25 2.3.11.1. Essentials of Appeal .......................................................................................... 25 2.3.11.2. Right of Appeal ................................................................................................. 25 2.3.11.3. Appeal is Continuation of Suit .......................................................................... 26 2.3.11.4. People entitled to Appeal .................................................................................. 26 2.3.11.5. Cross-Objections: Rule 22 ................................................................................ 27 2.3.12. Second Appeals ........................................................................................................ 27 2.3.13. Summary Suits ......................................................................................................... 27 2.3.13. Reference ................................................................................................................. 28 2.3.14. Review ..................................................................................................................... 28 2.3.15. Revision ................................................................................................................... 28 2.3.16. Execution ................................................................................................................. 29 Chapter III ................................................................................................................................ 30 Specific Relief Act, 1963: Remedies Available ...................................................................... 30 3.1.

Introduction ................................................................................................................... 30

3.2.

Recovery of possession of property .............................................................................. 31

3.2.1. Recovery of specific immovable property under Specific Relief Act ....................... 31 Vaish Associates Advocates | Table of Contents 3

3.2.1.1. Suit by person dispossessed of immovable property. ........................................ 32 3.2.2. Relevant CPC Provision ............................................................................................ 34 3.2.2.1. Decree for immovable property .......................................................................... 34 3.2.3. Recovery of specific movable property under Specific Relief Act ........................... 35 3.2.4. Relevant CPC provision............................................................................................. 36 3.2.5. Liability of a person in possession- provision under Specific Relief Act.................. 36 3.2.6. Relevant CPC provision............................................................................................. 37 3.3.

Specific Performance of Contract ................................................................................. 38

3.3.1. Doctrine of Mutuality ................................................................................................ 41 3.4.

Specific performance of Contract: As provided in CPC ............................................... 61

3.5.

Rectification of instruments .......................................................................................... 61

3.6.

Declaratory Decrees ...................................................................................................... 64

3.7.

Injunctions..................................................................................................................... 66

3.8.

Temporary injunctions: Law as provided in CPC......................................................... 66

3.8.1. Injunctions which may be granted ............................................................................. 67 3.9.

Injunctions under Specific Relief Act (Continued) ...................................................... 67

Chapter IV ................................................................................................................................ 71 The Arbitration and Conciliation Act, 1996 ............................................................................ 71 4.1.

Important definitions ..................................................................................................... 71

4.1.1 Arbitration ................................................................................................................... 71 4.1.2. International Commercial Arbitration........................................................................ 72 4.1.3. Arbitration Agreement ............................................................................................... 72 4.1.4. Arbitral Award ........................................................................................................... 73 4. 2. Relevant clauses: Legal Recourse as provided under Arbitration Act ........................... 73 4.2.1. Power of Court to refer parties to Arbitration ............................................................ 73 Vaish Associates Advocates | Table of Contents 4

4.2.2. Power of Court to pass Interim Orders ...................................................................... 74 4.2.2.1. Stay of Arbitral Proceedings ............................................................................... 75 4.2.2.1. Effect of interim Relief ....................................................................................... 76 4.2.3. When interim Relief can be granted .......................................................................... 76 4.2.3.1. Law of Injunction ................................................................................................ 76 4.2.3.2. Status Quo as to property .................................................................................... 76 4.2.3.3. Jurisdiction as to Order regarding Specific Performance ................................... 76 4.2.3.4. Appointment of Reciever .................................................................................... 77 4.2.3.5. Limitation ............................................................................................................ 77 4.2.4. Appointment of Arbitrators........................................................................................ 77 4.2.5. Termination of the mandate of Arbitrator .................................................................. 78 4.2.6. Setting aside Awards.................................................................................................. 79 4.2.6.1. Constitutional Validity of section 34 .................................................................. 81 4.2.6.2. Suo Motu Power of setting Aside ....................................................................... 82 4.2.7. Due procedure: For setting aside Award ................................................................... 82 4.2.8. Applicability of Part 1 on Foreign Seated Arbitrations ............................................. 82 4.2.8.1. BALCO v. Kaiser: Facts ..................................................................................... 83 4.2.8.2. Issues Involved.................................................................................................... 84 4.2.8.3. Judgment ............................................................................................................. 84 4.2.8.4. Comparative analysis of BALCO and Bhatia judgment ..................................... 86 4.2.8.5. Conclusion and Implications............................................................................... 90 Chapter V ................................................................................................................................. 91 Negotiable Instrument Act, 1881 ............................................................................................. 91 5.1.

Important Definitions .................................................................................................... 91

5.1.1. Promissory Note......................................................................................................... 91 Vaish Associates Advocates | Table of Contents 5

5.1.1.1.

Essentials of a promissory note ...................................................................... 92

5.1.2.

Bill of Exchange .................................................................................................... 92

5.1.3.

Cheque ................................................................................................................... 94

5.1.4.

Drawer, Drawee, Acceptor, Payee, Acceptor for honour ...................................... 94

5.2.

Penalties in case of Dishonour of Certain Cheques .................................................. 95

5.2.1.

Offences under Negotiable Instrument Act, 1881 ............................................. 95

5.2.1.1.

Postdated cheque and its dishonor ................................................................. 96

5.2.1.2.

Jurisdiction ..................................................................................................... 97

5.2.1.3.

Presumption as to Legally enforceable debt .................................................. 98

5.2.1.4.

Instructions in Bank‟s memo.......................................................................... 99

5.2.1.5.

Notice and its Requirements .......................................................................... 99

5.2.1.6.

Presumption as to consideration ................................................................... 100

5.2.1.7.

Dishonor of cheques by companies under SICA ......................................... 100

5.2.1.8.

Cheque dishnour and Directors liability: ..................................................... 100

5.2.1.9.

Compounding of offence .............................................................................. 100

Chapter VI.............................................................................................................................. 101 Conclusion ............................................................................................................................. 101

Vaish Associates Advocates | Table of Contents 6

Cases Prabhakar Adsude v. State of M.P., AIR 2004 SC 3557 ......................................................... 74 Sowrashtra Vipra Sabha v. Namakal....................................................................................... 73 Aamir Raza Husain v. Cinevistaas Ltd., (2003) 3 Raj 126( Bom) ......................................... 85 Akbar Khan v. Attar Singh, AIR 1936 PC 171 ...................................................................... 100 Anant Mills v. State of Gujarat, (1975) 2 SCC 175 ................................................................. 34 Anil Kumar Sawhney v. Gulshan Rai, (1993) 4 SCC 424 ..................................................... 105 Anjoo Sharma v. DIP Educational Charitable Trust, AIR 1999 P&H 294 ............................ 85 Archcon v. Sewda Construction Co., 2005 (1) Raj 676. .......................................................... 84 Arvind Iron & Steel Co. v. Steel Authority of India Ltd., AIR 2000 MP 247 .......................... 84 AV Murthy v. B S Nagabasavanna, 2002 Cr LJ 1449 SC...................................................... 109 B.R. Mulani v. Dr. A.B. Aswathanarayana and ors., AIR 1993 SC 2449 ............................... 61 B.S. Ruta v. S.N. Ruta, AIR 2004 SC 2546.............................................................................. 74 B.S.M. Contractors Pvt. Ltd v. Rajasthan State Bridge & Construction Corporation Ltd., AIR 1999 Del 117 ........................................................................................................................ 85 Bahadurrinisa Begum v. Vasudeva, AIR 1967 AP 123......................................................... 101 Bansi Sah v. Krishna Chandra, AIR 1951 Punj. 508 .............................................................. 56 Banwari Lal Agarwala v. Ram Swarup Agarwala, AIR 1998 Patna 88.................................. 48 Bhakta Charan v. Natavar, AIR 1991 Ori 319 ........................................................................ 30 Bharat Aluminium Company and Ors. v. Kaiser Aluminium Technical Service, Inc. and Ors., 2012 (8) SCALE 333 ........................................................................................................... 91 Bhatia International v. Bulk Trading SA, AIR 2002 SC 1432. ............................................... 91 Bhau Ram v. Bajinath, AIR 1961 SC 1327 ............................................................................ 34 Board of Trustees, Chennai Port Trust v. Hindustan Construction Co. Ltd., AIR 2003 NOC 162........................................................................................................................................ 84 Chameli Debi v. Deepak Nath, AIR 2006 Gau 118 ................................................................. 44 Chandra Kumar v. Narpat Singh, 34 IA 27............................................................................. 31 Collins v. Collins, 1858 28 LJ Ch 186 ..................................................................................... 80 Dagdu v. Bhana, (1904) 28 Bom 420 ...................................................................................... 71 Darshan Singh v. Ram Pal Singh, 1992 Supp (1) SCC 191 .................................................... 34 Dasarath Gayan v. Satyanarain Ghose, AIR 1963 Cal 325 ................................................... 50 Delta Construction Systems Ltd. v. Narmada Cement Co. Ltd., (2002) 2 Arb LR 47 (Bom) . 85 Durga Prasad v. Bhajan, 31 Cal 614 (P.C.) ............................................................................ 71 Firm Ishardas v. Prakash Chand, AIR 1969 SC 938 .............................................................. 78 Ganga Bai v. Vijay Kumar, (1974) 3 SCC 393 ....................................................................... 34 Ghanshyam Dass v. Dominion of India, (1984) 3 SCC 46...................................................... 22 Goel Industries v. Om Prokash, 1 (1993) BC 553 MP .......................................................... 101 Goparaju Venkata Bharata Rao v. Nagula Ramakotayya, AIR 2001 AP 425 ........................ 68 Gopidas v. Ramdeo, AIR 1957 Raj 360 ................................................................................ 101 Gujarat Bottling Co. Ltd. v. Coca-Cola Co., (1995) 5 SCC 545............................................. 78 Gunpat Narain Singh Re, (1876) 1 Cal 74 ............................................................................... 56 Hakim Singh v. Ram Snehi, AIR 2001 ALL 231 ..................................................................... 61 Harman Electronics (P) Ltd. and Anr. v. National Panasonic India Ltd, (2009)1 Comp LJ 29 (SC). ................................................................................................................................... 106 Her Highness Maharani Shantidevi P. Gaikwak v. Savjibhai Haribahi Patel, (2001) 5 SCC 101........................................................................................................................................ 57 Hindustan Lever Ltd. v. Colgate-Palmolive Ltd., (1998) 1 SCC 720...................................... 78 Hukum Chand v. Kamalanand, (1996) 33 Cal 927 ................................................................. 22 Vaish Associates Advocates | Table of Contents 7

Hungerford Investment v. Haridas Mundhra, (1972) 3 SCC 684 ........................................... 69 I.T.C. Ltd. v. George Joseph Fernandes, AIR 1989 SC 839 ................................................... 61 Indian Bank v. Maharashtra State Cooperation Marketing Federation, (1998) 5 SCC 69 .... 26 Jagdish Singh v. Nathu Singh, AIR 1992 SC 1604 ................................................................. 67 Jai Narayan v. Kedar Nath, AIR 1956 SC 359 ....................................................................... 69 Jainarain v. Surajmal, (1949) FLJ 216 ................................................................................... 49 Jaya Sen v. Sujit Kumar Sarkar, AIR 1998 Cal,288 ............................................................... 67 John Thomas v. Joseph Thomas, AIR 2000 Ker 408 .............................................................. 65 Jones & Co. v. Coventry, (1909) 2 KB 1029 ......................................................................... 100 K Bhaskaran v. Sankaran Vaidyaa Balan and Anr, (1999) 7 SCC 510 ................................ 106 K. Narendra v. Riviera Apartments (P) Ltd., AIR 1999 SC 2309 ........................................... 62 Karnani Industrial Bank Ltd. v. Baraboni Coal Concern Ltd. and Anr., AIR 1938 Cal 471 . 46 Kartar Singh v. Dayal Das, AIR 1939 PC 210. ....................................................................... 40 Kasturi v. Jyyamperumal, AIR 2005 SC 2813 ........................................................................ 63 Khirod Nath v. Arjuna Panda, AIR 1972 Ori 95 ................................................................... 101 Kirpal Singh v. Bachan Singh, AIR 1958 SC 199. .................................................................. 35 KN Bena v. Muniyappan & Anr., AIR 2001 SC 2895. .......................................................... 108 Kochuthressia v. Devdas, (1988) 4 Bank J 636 Ker. ............................................................. 101 Krishnappa v. Shivappa, (1909) 31 Bom 393 ......................................................................... 28 Kusum Ingots & Alloys Ltd. v. Pennar Patterson Securities Ltd. & Ors., AIR 2000 SC 954. ............................................................................................................................................ 109 L.I.C. v. Indian Automobiles, (1990) 4 SCC 286..................................................................... 27 M.C. Batra v. Lakshmi Insurance Co. Ltd., AIR 1956 All 709 ............................................... 41 M.P. Mathur v. D.T.C., AIR 2007 SC 414 .............................................................................. 74 Madan Lal v. Sundar Lal, AIR 1967 SC 1233. ....................................................................... 90 Manhar Law v. Seth Hira Lal, AIR 1962 SC 527 ................................................................... 22 Matadeen Agarwal v. Syed Abdul Razzak, AIR 1997 AP 103 ................................................ 67 Meenakshisundara v. Rathnasami, (1918) 41 Mad 959 .......................................................... 56 Merchants Trading Co. v. Banner, 1871 (12) EQ 21 .............................................................. 51 MMTC Ltd & Anr. v. M/s. Medchal Chemicals & Pharma (P) Ltd., AIR 2002 SC 182. ..... 108 Modi Cements Ltd. v. M/s V Kuchikumar Nandi, AIR SC 1998 1057 .................................. 108 Mohd. Hanif v. Mariam Begum, AIR 1986 Bom 15 ............................................................... 63 Mohri Bibi v. Dharmodas, ILR 30 Cal 539 ............................................................................. 50 Munyaraj v. Venkatapati, AIR 1955 A.P. 172 ........................................................................ 74 Naresh Shridhar Mirajkar v. State of Maharashtra, AIR 1967 SC 1 ..................................... 33 Nayar Service Society Ltd v. K.C. Alexander, AIR 1968 SC 1165 ......................................... 42 Nepa Ltd. v. Manoj Kumar, AIR 1999 MP 57 ........................................................................ 85 Niranjan Singh v. Bant Singh, AIR 2004 P & H 334 .............................................................. 73 Official Trustee v. Sachindra, AIR 1969 SC 823 .................................................................... 25 Overseas Aviation Engineering, In re, (1962) 3 All ER 12 ..................................................... 37 P.C. Verghese v. Devaki Amma, AIR 2006 SC 145 ................................................................ 67 Padam Sen v. State of U.P., AIR 1961 SC 218. ...................................................................... 22 Padmini Chandrasekharan v. R. Rajagopal Reddy, (1996) 8 SCC 632 .................................. 73 Prabhakar Adsule v. State of M.P., AIR 2004 SC 3557;......................................................... 73 Purshottam v. Purshottam, AIR 21 Bom 33............................................................................ 56 R.K. Mohammaed Abidullah v. Haji C. Abul Wahab, AIR 2001 SC 1658 ............................. 63 Radha Kishan v. Ludhiana Muncipality, AIR 1963 SC 1547 ................................................. 26 Raj Narain v. Indira Gandhi, (1972) 3 SCC 850 .................................................................... 30 Rajasthan State Road Transport Corporation v. Nand Lal Sarawat, 2005 (1) RAJ 659 ........ 82 Rajkumari v. Lachman Ram, 14 CLJ 627 ................................................................................ 65 Vaish Associates Advocates | Table of Contents 8

Ram Alam Lal v. Dukhan, AIR 1950 All 427. ......................................................................... 90 Ram Karan v. Govind Lal, AIR 1999 Raj 167 ........................................................................ 49 Ram Prasad v. Babu Kashi Prasad Tewari, 1965 B.L.J.R. 214.............................................. 69 Ram Rattan v. State of U.P. 1983 SCC 188............................................................................. 41 Ram Sewak v. Kidwai, AIR 1964 SC 1249 .............................................................................. 31 Rama Bhai v. Ajitkumar Dabhi, AIR 1965 SC 669 ................................................................. 35 Rudrappa v. Narsingh Rao, (1905) 29 Bombay 213 ............................................................... 42 S.Madasamy v. A.M. Arjuna Raja, AIR 2000 Mad 465. ......................................................... 73 Sadanandan Bhadrant v. Madhavan Sunil Kumar, AIR 1998 SC 3043. .............................. 107 Santsingh v. Madandas, AIR 1976 MP 144 .......................................................................... 101 Saroj Rani v. Sudarshan Kumar, (1984) 4 SCC 90. ................................................................ 69 Satya Narayana v. Yelloji Rao, AIR 1965 SC 1045 ................................................................ 67 Secretary, Communist Party of India v. Judhistra Patnaik, AIR 2004 Ori. 67 ....................... 52 Shivaprasad Singh v. Prayagkumari Debee, (1933) I.L.R. 61 Cal. 711 ................................. 45 Shreenath Roy v. Radhanath Mookerjee, (1882) 9 Cal 773 .................................................... 37 Shyam Singh, v. Daryao Singh, AIR 2004 SC 348 .................................................................. 60 SIL Import, M/s. USA v. M/s. Exim Aides Silk Exporters, AIR 1999 SC 1609. .................... 108 Silla Chandre Sekharan v. Ramchadra Sahu, AIR 1964 SC 1789.......................................... 54 Smt. Amar Kaur v. Hardev Singh, 1991 (2) P.L.R. 551 .......................................................... 42 SNP Shipping Service Pvt. Ltd. v. World Tanker Carrier Corp., AIR 2000 Bom 34 ............. 74 State of Orissa v. Madan Gopal, AIR 1952 SC 12 .................................................................. 75 State of Punjab v. Amar Singh, (1974) 2 SCC 70.................................................................... 35 State of U.P. v. Babu Ram, AIR 1961 SC 751......................................................................... 23 State of U.P. v. Maharaja Djarmender Prasad Singh AIR 1989 SC 997 ................................. 41 Suddha Singh v. Munshi Ram, AIR 1927 Cal 605 ................................................................... 72 Sukanya Holding P. Ltd. v. Jayesh H. Pandya, AIR 2003 SC 2252 ....................................... 82 Sukhbir Singh v. Brij Pal,(1997) 2 SCC 200 ........................................................................... 61 Sundaram Finance Ltd. v. NEPC India Ltd., AIR 1999 SC 565 ............................................. 83 T.T. Devasthanams v. K.M. Krishnaiah, AIR 1998 SC 1132 .................................................. 42 TPI Ltd. v. UOI, (2001) 3 RAJ 70: (2001) 2 AD (Del) 21 ...................................................... 90 Umadutt Nemani v. Chandrarao G. Kadam, AIR 1947 Bom 944 .......................................... 90 UOI v. Om Prakash, AIR 1976 SC 1745................................................................................. 90 Vidyacharan Shukla v. Khubchand, AIR 1964 SC 1099 ......................................................... 24 Vijay Prakash v. Collector of Customs, (1988) 4 SCC 402..................................................... 34 William Graham v. Krishna Chandra, AIR 1925 PC 45......................................................... 53 Winki Dilawri v. Amritsar Improvement Trust, (1996) 11 SCC 644 ....................................... 78 Yashwant Singh v. Jagdish Singh Air 1968 SC 620 ................................................................ 41

Statutes Code of Civil Procedure........................................................................................................... 21 Code of Criminal Procedure .................................................................................................... 21 Indian Arbitration and Conciliation Act .................................................................................. 21 Indian Evidence Act ................................................................................................................. 21 Industrial Disputes Act ............................................................................................................ 21 Limitation Act .......................................................................................................................... 21 Negotiable Instrument Act ....................................................................................................... 21 Vaish Associates Advocates | Table of Contents 9

Specific Relief Act ................................................................................................................... 21 The Arbitration Act, 1940. ....................................................................................................... 86 The Indian Contract Act........................................................................................................... 21 The Indian Penal Code ............................................................................................................. 21 The Sick Industrial Companies Act, 1985 ............................................................................. 109 Transfer of Property Act .......................................................................................................... 21

Other Authorities C.K. Thakker, Civil Procedure, 5th Edn., ................................................................................ 21 Chamber‟s 21st Century Dictionary, (1997) ............................................................................ 33 G S Rao, Critical Study of Dishonour of Cheques Under Negotiable Instruments Act,1881 104 Halsbury‟s Laws of England, 4t Ed.,Vol. 2 ............................................................................. 79 Halsbury‟s Laws of England, 4th Ed., Vol. 24, ........................................................................ 75 Halsbury‟s Laws of England, 4th Edn., Vol. 37 ....................................................................... 20 Justice Bachawat‟s Law of Arbitration and Conciliation, 4th Ed., Vol. 1 ............................... 82 Legal information Institute ...................................................................................................... 19 O P Malhotra, The Law and Practice of Arbitration and Conciliation, First Ed., 2002 ......... 80 Russell on Arbitration, 19th Ed. ............................................................................................... 79 Rules RBI circular RBI/2011-12/270 RPCD.CO RCB. AML.BC.No.32/07.40.00/2011-12 ......... 105

Constitutional Provisions Article 226 ............................................................................................................................... 20 Article 32 ................................................................................................................................. 20

Vaish Associates Advocates | Table of Contents 10

CHAPTER I LEGAL REMEDIES: INTRODUCTION A legal remedy is a form of court enforcement of a legal right resulting from a successful civil lawsuit. Remedies fall into three general categories:

1. Damages - monetary compensation for the plaintiff's losses, injury, and/or pain or restitutionary measures designed to restore the plaintiff's status to what it was prior to the violation of his or her rights, 2. Coercive remedies - requiring a party to do or omit doing a specific act through injunctive relief or a court order of specific performance (a court mandates that the party fulfill contractual obligations. See Contracts). 3. Declaratory judgment - the court determines individual rights in a specific situation without awarding damages or ordering particular action.

Because of their historical origins, monetary damages are often referred to as a legal remedy while coercive and declaratory remedies are termed equitable remedies.1 Plaintiffs can also receive provisional remedies when a court uses its discretionary power to prevent harm to the plaintiff while the plaintiff's rights are still being determined.

Such remedies

include temporary injunctions, attachment, and garnishment.

1.1. LEGAL REMEDIES IN INDIA In India legal remedies can be classified into two classes of remedies: (1) Constitutional Remedies; and (2) Statutory Remedies. Constitutional remedies are derived from constitution of India and there is an express or implied mention of such remedies in the Constitution of India. Any legislative act which is in contravention of Constitution will attract constitutional remedy by way of writs and PILs.

Constitution of India grants High Court wider jurisdiction with respect to writs in comparison to Supreme Court. High Court can entertain writ where a legal right or a fundamental right of a person is infringed whereas Supreme Court can only enforce Fundamental Rights by way of 1

Legal Information Institute. Data retrieved from, http://www.law.cornell.edu/wex/remedy, on 18 February, 2013.

Vaish Associates Advocates | Legal remedies in india 11

writs. Legal rights conferred to a person can be enforced by way of constitutional remedy of writs conferred to High Courts pursuant to Article 226 of the Constitution of India. Apex court on the other hand enforces fundamental rights by virtue of Article 32 of the Constitution of India. So any remedy enforced pursuant to constitutional provisions can be termed as a Constitutional remedy.

Statutory remedies are remedies available to persons which are conferred to them pursuant to express clauses mentioned in the respective statute. Such remedies which are conferred are to be in consonance with Constitutional provisions, otherwise they can be struck down by judiciary as unconstitutional.

1.2. TYPES OF STATUTES Law enactments or statutes can be divided into two groups: (1) Substantive law, and (2) Adjective or procedural law. Whereas substantive law determines rights and liabilities of parties, adjective or procedural law prescribes the practice, procedure and machinery for the enforcement of those rights and liabilities. In Halsbury‟s Laws of England it has been stated2: “There is at the outset a vital and essential distinction between substantive law and procedural law. The function of substantive law is to define, create or confer substantive legal rights or legal status or to impose and define the nature and extent of legal duties. The function of procedural law is to provide the machinery or the manner in which the legal rights or status and legal duties may be enforced or recognized by a court of law or other recognized or properly constituted tribunal.”

Procedural law is thus an adjunct or an accessory to substantive law. The two branches are complementary to each other and independent and the interplay between them often conceals what is substantive law and what is procedural law. It is procedural law which puts life into substantive law by providing a remedy and implements the well-known maxim ubi jus ibi remedium.3

2 3

Halsbury‟s Laws of England, 4th Edn., Vol. 37, pp. 18-19, para 10. Ibid., p. 11, par 3.

Vaish Associates Advocates | Types of statutes 12

The Indian Contract Act, 1872, the Transfer of Property Act, 1882, the Industrial Disputes Act, 1947 and the Indian Penal Code are examples of substantive law, while the Indian Evidence Act, 1872, the Limitation Act,1963, the Code of Civil Procedure, 1908, (herein after referred as “CPC”), the Code of Criminal Procedure, 1973, (herein after referred as “CrPC”) are examples of procedural law.4

In this project we will attempt to understand various legal rights and remedies conferred by the Specific Relief Act, 1963 the Indian Arbitration and Conciliation Act, 1996 (herein after referred as “Arbitration Act”) and the Negotiable Instrument Act, 1881. We will also simultaneously try to study the relevant procedural law required in availing rights and remedies of the above mentioned statutes.

4

C.K. Thakker, Civil Procedure, 5th Edn., p 3.

Vaish Associates Advocates | Types of statutes 13

CHAPTER II CODE OF CIVIL PROCEDURE: A BRIEF INTRODUCTION Before we proceed to discuss substantive laws, we will in this chapter try to understand the law governing the civil procedure in India. In India the procedure in civil courts is governed by the CPC. The CPC extends to whole of India, except (a) State of Jammu and Kashmir; and (b) the state of Nagaland and the Tribal areas.

2.1. SCOPE: CODE NOT EXHAUSTIVE The CPC is exhaustive on matters specifically dealt with by it.5 However, it is not exhaustive on the points not specifically dealt with therein.6 The legislature is incapable of contemplating all the possible circumstances which may arise in future litigation and consequently provide procedure for them. With regard to those matters, the court has inherent powers to act in accordance to the principles of justice, equity and good conscience.7

The CPC is an adjective law. It neither creates nor takes away any right. It is intended to regulate the procedure to be followed by civil courts.8 The CPC specifically provides that: “Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court.”9

2.2. SCHEME OF THE CODE The CPC can be divided into two parts: (1) the body of code containing 158 sections; and (2) the (First) Schedule, containing 51 Orders and Rules. The section deals with provisions of a substantive nature, laying down the general principles of jurisdiction, while the (First) Schedule relates to the procedure and the method, manner and mode in which the jurisdiction may be exercised. The body of the CPC containing sections is fundamental and cannot be amended except by the legislature. The (First) Schedule of the CPC, containing Orders and

5

Manhar Law v. Seth Hira Lal, AIR 1962 SC 527; Padam Sen v. State of U.P., AIR 1961 SC 218. Ibid. 7 Hukum Chand v. Kamalanand, (1996) 33 Cal 927. 8 Ghanshyam Dass v. Dominion of India, (1984) 3 SCC 46. 9 CPC, Section 151. 6

Vaish Associates Advocates | 2.1. Scope: code not exhaustive 14

Rules, on the other hand, can be amended by High Courts.10 The sections and the rules must be read together and harmoniously construed, but if the rules are inconsistent with sections, the latter will prevail.11

2.3. CPC AT A GLANCE The substantive part of the CPC contains 158 sections. The first Schedule comprising of 51 Orders and Rules provides procedure. Appendices contain Model Forms of Pleadings, Processes, Decrees, Appeals, Execution proceedings, etc.

2.3.1. IMPORTANT DEFINITIONS 2.3.1.1 DECREE The adjudication of a court of law may be divided into two classes: (a) decrees, and (b) orders. CPC defines term „decree‟ in the following words12: “„decree‟ means the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final. It shall be deemed to include the rejection of a plaint and the determination of any question within section 144, but shall not include(a) any adjudication from which an appeal lies as an appeal from an order, or (b) any order of dismissal for default. Explanation-A decree is preliminary when further proceedings have to be taken before the suit can be completely disposed of. It is final when such adjudication completely disposes of the suit, it may be partly preliminary and partly final.” In order that a decision of a court may be a „decree‟, the following elements must be present: 10

CPC, Sections 121, 122 and 125-131. State of U.P. v. Babu Ram, AIR 1961 SC 751. 12 Supra note, 9 at Sec. 2(2). 11

Vaish Associates Advocates | 2.3. CPC at a glance 15

1. There must be adjudication. 2. Such adjudication must have been done in a suit. 3. It must have determined the rights of the parties with regard to all or any of the matters in controversy in a suit. 4. Such determination must be of a conclusive nature; and 5. There must be formal expression of such adjudication.

2.3.1.2. JUDGMENT „Judgment‟ means the statement given by a Judge of the grounds of a decree or order. 13 The essential element of a judgment is that there should be a statement for the grounds of a decision.14 Every judgment other than that of a Court of Small Causes should contain (1) a concise statement of the case; (2) the points of determination; (3) the decision thereon; and (4) the reason of such decision. A judgment of Small Causes may mention only points (2) and (3).

2.3.1.3. ORDER „Order‟ means formal expression of any decision of a civil court which is not a decree. 15 Thus, the adjudication of the court which is not a decree is an order. As a general rule, an order of a court of law is founded on objective considerations and as such the judicial order must contain a discussion of the question of issue and reasons which prevailed with the court which led to the passing of order.

2.3.2. JURISDICTION OF CIVIL COURTS Jurisdiction may be defined to be the power or authority of the court to hear and determine a cause, to adjudicate and exercise any judicial power in relation to it. Jurisdiction is the authority which a court has to decide matters that are litigated before it or to make cognizance

13

Ibid. at Sec 2(9). Vidyacharan Shukla v. Khubchand, AIR 1964 SC 1099. 15 Supra note, 9, at Sec. 2(14). 14

Vaish Associates Advocates | 2.3. CPC at a glance 16

of matters presented in a formal way for its decision.16 In Official Trustee v. Sachindra,17 after referring to various decisions, the Supreme Court observed: “…jurisdiction must include the power to hear and decide the question at issue, the authority to hear and decide the particular controversy that has arisen between the parties.”

2.3.2.1. KINDS OF JURISDICTION Jurisdiction of a court may be classified under the following categories:

1) Territorial or local jurisdiction: Every court has its local or territorial limits beyond which it cannot exercise its jurisdiction. These limits may be fixed by government.18 2) Pecuniary jurisdiction: The CPC provides that a court will have jurisdiction only over those suits the amount or value of the subject matter of which does not exceed the pecuniary limits of those jurisdiction.19 3) Jurisdiction as to subject matter: Different courts have been empowered to decide different types of suits. Thus, the Presidency Small Cause Court has no jurisdiction to try suits for specific performance of a contract, partition of immovable property, etc. 4) Original and appellate jurisdiction: The jurisdiction of a court may be classified as original and appellate. In the exercise of original jurisdiction, a court entertains and decides suits and in its appellate jurisdiction, it entertains and decides appeals.20

2.3.2.2. STATUTORY WORDING Under the CPC, a civil court has jurisdiction to try all suits of a civil nature unless they are barred. Section 9 of the Code reads as under: “9. Courts to try all civil suits unless barred— The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred.

16

Official Trustee v. Sachindra, AIR 1969 SC 823. Ibid. at p 828. 18 Supra note, 4 at p. 39. 19 Supra note, 9 at Sec. 6. 20 Supra note, 4 at p. 40. 17

Vaish Associates Advocates | 2.3. CPC at a glance 17

Explanation I: A suit in which the right to property or to an office is contested is a suit of a civil nature, notwithstanding that such right may depend entirely on the decision of questions as to religious rites or ceremonies. Explanation II: For the purposes of this section, it is immaterial whether or not any fees are attached to the office referred to in Explanation I or whether or not such office is attached to a particular place.” In Radha Kishan v. Ludhiana Muncipality21 legal position regarding jurisdiction was laid down: “Under Section 9 of the Code of Civil Procedure the court shall have jurisdiction to try all suits of civil nature excepting suits of which cognizance is either expressly or impliedly barred. A statute, therefore, expressly or by necessary implication can bar the jurisdiction of civil courts in respect of a particular matter.”

2.3.3. RES SUB JUDICE AND RES JUDICATA Section 10 of the CPC is based on the principle res sub judice and declares that no court should proceed with the trial of any suit in which the matter in issue is directly and substantially in issue in a previously instituted suit between the same parties and the court before which the previously instituted suit is pending is competent to grant the relief sought.22 Section 10 of the CPC reads as: “No Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in India having jurisdiction to grant the relief claimed, or in any Court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court…”

21 22

Radha Kishan v. Ludhiana Muncipality, AIR 1963 SC 1547. Indian Bank v. Maharashtra State Cooperation Marketing Federation, (1998) 5 SCC 69.

Vaish Associates Advocates | 2.3. CPC at a glance 18

Section 11 of the CPC embodies doctrine of res judicata or the rule of conclusiveness of a judgment, as to the point decided either of fact, or of law, or of fact and law, in every subsequent suit between the same parties. It enacts that once a matter is finally decided by a competent court; no party can be permitted to reopen it in a subsequent litigation.23 Section 11 of the CPC is reproduced below: “No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such court …”

2.3.4. PLACE OF SUING The jurisdiction of a court to entertain, deal and decide the suit may be restricted by variety of circumstances, and the first thing to be determined is the place of suing. Section 15 to 20 of the CPC regulates the forum for the institution of the suits. Section 15 of the CPC requires the plaintiff to file a suit in the court of the lowest grade competent to try it. Section 16 to 18 deals with suits relating to immovable property. These suits must be filed in the court within the local limits of whose jurisdiction the property is situated. Section 19 applies to suits for compensation for wrong to person or to movable property. A suit for movable property may be brought at the option of the plaintiff either at the place where the wrong is committed or where the defendant resides, carries on business or personally works for gains. Section 20 provides for all other cases not covered by any of the forgoing rules. All such suits may be filed at the plaintiff‟s option in any of the following courts, viz.:

1) Where the cause of action, wholly or partly arises; or 2) Where the defendant resides, or carries on business or personally works for gain; or 3) Where there are two or more defendants, any of them resides or carries on business or personally works for gain, provided for gain, provided that in such case (a) either the

23

L.I.C. v. Indian Automobiles, (1990) 4 SCC 286.

Vaish Associates Advocates | 2.3. CPC at a glance 19

leave of the court is obtained; or (b) the defendants who do not reside or carry on business or personally work for gain at that place acquiesce in such situation.

2.3.5. INSTITUTION OF SUIT Section 26 to 35-B and Orders I to XX of the First Schedule deal with the procedure relating to suits. Order I and II provide for parties to suits and frame of suit. There are four essentials of a suit i.e. opposing parties, subject matter in dispute, cause of action and relief.24

Order I deals with parties to a suit. It also contains provisions for addition, deletion and substitution of parties, joinder, non-joinder and misjoinder. Order II lays down rules relating to frame of suit, splitting and joinder of claims, joinder of causes of action and objection as to misjoinder.25 Section 26 and Order IV provides for the institution of suits.

2.3.6. PLEADINGS Pleading is defined as plaint or written statement.26 A plaintiff‟s pleading is his plaint, a statement of claim in which the plaintiff sets out his cause of action with all necessary particulars, and a defendant‟s pleading is his written statement, a defence in which the defendant deals with every material fact alleged by the plaintiff in plaint and also states any new facts which are in his favour, adding such legal objections as he wishes to take to the claim. The whole object of pleading is to bring parties to definite issue and to diminish expense and delay and to prevent surprise at the hearing.

2.3.6.1. RULES OF PLEADINGS Order VI Sub-rule (1) of Rule 2 lays down the fundamental principles of pleadings. It reads as under: “Every pleading shall contain, and contain only a statement in a concise form of the material facts on which the party pleading relies for his claim or defence as the case may be, but not the evidence by which they are to be proved.” 24

Krishnappa v. Shivappa, (1909) 31 Bom 393. Supra note, 9 at p. 114. 26 CPC, Order VI, Rule 1. 25

Vaish Associates Advocates | 2.3. CPC at a glance 20

The following general principles can be construed from the aforesaid:

1) Pleadings should state facts and not law; 2) The facts stated should be material facts; 3) Pleadings should not state the evidence; and 4) The facts should be stated in concise form.

2.3.7. DISCOVERY, INSPECTION AND PRODUCTION OF DOCUMENTS Discovery means to compel the opposite party to disclose what he has in his possession or power. Where information as to facts is required, the party is allowed to put a series of questions to his adversary. These questions are referred as interrogatories. The judge will go through the proposed questions and, if he considers them proper, he will compel the other side to answer them on oath before trial. This is called as discovery of facts. On the other hand, if information as to documents is required, the party may apply for an order compelling the other party to make a list of the relevant documents in his possession or power, and, in certain circumstances, for permission to inspect and take copies of those documents. This is known as discovery of documents.27

2.3.7.1. INTERROGATORIES: ORDER 11, RULES 1-11 “Interrogatory” means to ask questions or to make inquiry closely or thoroughly. Where a party to a suit requires information as to facts from the opposite party, he may administer to his adversary a series of questions. Those questions are called interrogatories. They are delivered in order to ascertain the nature of his opponent‟s case either for the purpose of proving his case or for destroying the case of the other side.

The object of interrogatories is twofold: (1) to know the nature of the case of the opponent; and (2) to support his own case, either (a) directly, by obtaining admissions; or (b) indirectly by impeaching or destructing the case of opponent.28

27 28

Supra note, 4 at 203. Bhakta Charan v. Natavar, AIR 1991 Ori 319.

Vaish Associates Advocates | 2.3. CPC at a glance 21

The power to allow interrogatories should be exercised liberally without being restricted by technicalities.29

2.3.7.2. DISCOVERY OF DOCUMENTS: ORDER 11, RULES 12-14 Discovery is of two kinds, namely (1) discovery of documents; and (2) discovery by interrogatories. A party is entitled to inspection of all documents which do not themselves constitute exclusively the other party‟s evidence of his case or title. If a party wants inspection of documents in the possession of the opposite party, he cannot inspect them unless the other party produces them. The party wanting inspection must, therefore, call upon the opposite party to produce the document. Rule 12 of the said Order enables a party without filing an affidavit to apply to the court for the purpose of compelling his opponent to disclose the documents in the possession or power, relating to any matter in question in the suit. If the court makes an order for discovery, the opposite party is bound to make an affidavit of documents and, if he fails to do so, he will be subject to the penalties specified in Rule 21.

2.3.7.3. INSPECTION OF DOCUMENTS: ORDER 11, RULE 15-19 Rule 15 to 19 deal with inspection of documents. For the purpose of inspection documents can be divided into following two classes:

1) Documents referred to in the pleadings or affidavits of parties; and 2) Other documents in the possession or power of the party but not referred to in the pleadings of the parties.

As regards the first class of documents, a party to a suit is entitled to inspection. And without intervention of the court every party can give notice in the prescribed form to the other party in whose pleadings they are referred to, to produce such documents for his inspection.30

2.3.8. ADMISSIONS Section 58 of the Evidence Act, 1872 lays down that the facts admitted need not be proved. Admissions may be made before the suit or after filing of the suit. The object of obtaining 29 30

Raj Narain v. Indira Gandhi, (1972) 3 SCC 850. CPC, Order XI, Rule 15 and 16; Ram Sewak v. Kidwai, AIR 1964 SC 1249.

Vaish Associates Advocates | 2.3. CPC at a glance 22

admissions is to do away with the necessity of proving facts that are admitted; and the judgment and decree may be passed on such admissions.31 As it has been said: “What a party himself admits to be true may reasonably be presumed to be so.”32 The adoption of the procedure laid down in Order 12 results in saving the costs of such proof and in cheapening and shortening litigation.

2.3.9. INTERIM ORDERS Interim or interlocutory orders are those orders passed by a court during the pendency of a suit or proceeding which do not determine finally the substantive rights and liabilities of the parties in respect of the subject matter of the suit or proceeding. After the suit is instituted by plaintiff and before it had been finally disposed of, the court may make interlocutory orders as may appear to the court to be just and convenient.33 These orders are made in order to assist the parties to the suit in prosecution of their case or for the purpose of protection of the subject matter of the suit. Courts are constituted for the purpose of doing justice and must be deemed to possess all such powers as may be necessary to do the right and undo the wrong in the course of administration of justice.34

Interim orders are thus necessary to deal with and protect rights of the parties in the interval between the commencement of the proceedings and final adjudication. They enable the court to grant such relief or to pass such order as may be necessary, just or equitable. They also prevent any abuse of process during the pendency of proceedings. Hence, interim or interlocutory proceedings play a crucial role in the conduct of litigation between parties.35

Following are the interim orders available in the CPC:

1) Commissions: Order XXVI 2) Arrest before Judgment: Order XXXVIII 3) Attachment before Judgment: Order XXXVIII 4) Temporary Injunctions: Order XXXIX 31

Ibid., at Order XII, Rule 6. Chandra Kumar v. Narpat Singh, 34 IA 27. 33 CPC, Section 94(e). 34 Ibid. at Section 151. 35 Supra note, 4 at p. 218. 32

Vaish Associates Advocates | 2.3. CPC at a glance 23

5) Interlocutory Orders: Order XXXIX 6) Receiver: Order XL 7) Security for Costs: Order XXV 8) Payment in Court: Order XXIV

2.3.10. HEARING OF A SUIT: ORDER XVIII 2.3.10.1. TRIAL IN OPEN COURT: SECTION 153-B As a general rule, the evidence of witnesses shall be taken orally in open court in the presence and under the personal direction and superintendence of the judge.36 It is well settled that, all the cases brought before the courts, whether civil, criminal or others, must be heard in open court. Public trial in open court is undoubtedly essential for the healthy, objective and fair administration of justice. Trial held subject to public scrutiny and gaze naturally acts as a check against judicial caprice or vagaries, and serves as a powerful instrument for creating confidence of the public in all fairness, objectivity and impartiality of the administration of justice. Public confidence in the administration of justice is of such great is of such great significance that there can be no two opinions on the broad proposition that in discharging their functions as judicial tribunals, courts must generally hear causes in the open and must permit public admission to the courtroom.

2.3.10.2. TRIAL IN CAMERA There may be situations where the requirement of the administration of justice itself may be necessary for the court to hold a trial in camera. If the primary function of the court isto do justice in cause before it, then on principle, it is difficult to accede to the proposition that there can be no exception to the rule that all causes must be tried in open court. If the principle that all trials before the courts must be tried in public was treated as inflexible and universal, and it is held that it admits of no exceptions whatever, cases may arise where, by following the principle, justice may itself be defeated.37 The overriding consideration which must determine the conduct of proceedings before a court is fair administration of justice. The administration of justice is primary object of the work done in courts; and so, if there is a

36 37

CPC, Order 18, Rule 19; Section 153-B. Naresh Shridhar Mirajkar v. State of Maharashtra, AIR 1967 SC 1.

Vaish Associates Advocates | 2.3. CPC at a glance 24

conflict between the claims of the administration of justice itself and those of public trial, public trial must yield to the administration of justice.38

2.3.11. FIRST APPEALS Since we have already covered judgment and decree in above sections, we would directly discuss Appeals. „Appeal‟ has not been defined in the CPC, but it may be defined as “the judicial examination of the decision by a higher court of the decision of an inferior court”.39 A first appeal lies against a decree passed by a court exercising original jurisdiction.

2.3.11.1. ESSENTIALS OF APPEAL Every appeal has three basic elements40:

1) A decision (usually a judgment of a court or the ruling of an administrative authority); 2) A person aggrieved (who is often, though not necessarily, a party to the original proceeding); and 3) A reviewing body ready and willing to entertain an appeal.

2.3.11.2. RIGHT OF APPEAL A right of appeal is not a natural or inherent right.41 It is well settled that an appeal is a creature of statute and there is no right to appeal unless it is given clearly and in express terms by a statute.42 The right to appeal is a substantive right and not merely a matter of procedure.43 It is a vested right and accrues to the litigant and exists as on and from the date the lis commences and although it may actually be exercised when the adverse judgments is pronounced, such right is to be governed by the law prevailing at the date of institution of suit or proceedings and not by the law that prevails at the time of decision when appeal is to be

38

Ibid. at 10. Chamber‟s 21st Century Dictionary, (1997), p. 59. 40 Supra note, 4 at 317. 41 Ganga Bai v. Vijay Kumar, (1974) 3 SCC 393. 42 Anant Mills v. State of Gujarat, (1975) 2 SCC 175. 43 Vijay Prakash v. Collector of Customs, (1988) 4 SCC 402. 39

Vaish Associates Advocates | 2.3. CPC at a glance 25

filed.44

2.3.11.3. APPEAL IS CONTINUATION OF SUIT An appeal is a continuation of suit.45 A decree passed by an appellate court would be construed to be a decree passed by the court of the first instance. An appeal is virtually rehearing the matter. The appellate court possesses the same powers and duties as the original court. Section 96 of the Code which deals with first appeal is reproduced below: (1) “Save where otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie from every decree passed by any Court exercising original jurisdiction the Court authorized to hear appeals from the decisions of such Court. (2) An appeal may lie from an original decree passed ex parte. (3) No appeal shall lie from a decree passed by the Court with the consent of parties. (4) No appeal shall lie, except on a question of law, from a decree in any suit of the nature cognisable by Courts of Small Cause, when the amount or value of the subject-matter of the original suit does not exceed three thousand rupees.”

2.3.11.4. PEOPLE ENTITLED TO APPEAL Following persons are entitled to appeal under the CPC:

1) A party to the suit who is aggrieved or adversely affected by the decree, or if such part is dead, his legal representatives.46 2) A person claiming under a party to the suit or a transferee of the interests of such party, who, so far as such interest of such party, who, so far as such interest is concerned, is bound by the decree, provided his name is entered on the record of the suit.47 3) A guardian ad litem appointed by the court in a suit by or against a minor.48

44

Bhau Ram v. Bajinath, AIR 1961 SC 1327. Darshan Singh v. Ram Pal Singh, 1992 Supp (1) SCC 191. 46 CPC, Section 146; Kirpal Singh v. Bachan Singh, AIR 1958 SC 199. 47 Ibid. 48 Ibid., at Section 147, Order 32, Rule 5. 45

Vaish Associates Advocates | 2.3. CPC at a glance 26

4) Any other person with the leave of the court, if he is adversely affected by the decree.49

2.3.11.5. CROSS-OBJECTIONS: RULE 22 Order XLI, Rule 22 is a special provision permitting the respondent who has not filed an appeal against the decree to object to the said decree by filing cross-objections in the appeal filed by opposite party. Where the suit is partly decided in favour of plaintiff and partly in favour of the defendant and the aggrieved party files an appeal, the opposite party may adopt any of the following courses:

1) He may prefer an appeal from that part of the decree which is going against him. Thus, there may be two appeals against the same decree, one by plaintiff and other by defendant. These are known as “cross-appeals” which are to be disposed of together. 2) He may not file an appeal against the part of the decree passed against him, but may prefer to take objection against the same. Such objections are called “cross-objections”. 3) Without filing a cross appeal or cross objection, he may support the decree (a) on the ground decided in his favour by the trial court; or (b) even on the grounds decided against him.50

2.3.12. SECOND APPEALS Section 100 of the CPC allows filing of second appeals in the High Court, if the High Court is satisfied that “the case involves a substantial question of law” but not on any other ground.51 Sections 100 to 103, 107-108 and Order XLII deal with second appeals. Section 100 of the CPC declares that an appeal shall lie to the High Court from every decree passed in appeal by any court subordinate to the High Court if the High Court is satisfied that the case involves a substantial question of law. 2.3.13. SUMMARY SUITS Order XXXVII provides summary procedure in suits based on negotiable instruments or where the plaintiff seeks to recover debt or liquidated amount. The essence of summary suit 49

State of Punjab v. Amar Singh, (1974) 2 SCC 70. Rama Bhai v. Ajitkumar Dabhi, AIR 1965 SC 669. 51 CPC, Section 101. 50

Vaish Associates Advocates | 2.3. CPC at a glance 27

is that the defendant is not, as in an ordinary suit, entitled as of right to defend the suit. He must apply for leave to defend within the stipulated period of 10 days. Such leave will be granted only if the affidavit filed by defendant discloses such facts as will make it incumbent upon the plaintiff to prove consideration or such other facts as the court may deem sufficient. Oder 37 Rule 1-3 of the CPC provides rules of procedure for the same.

2.3.13. REFERENCE Section 113 of the CPC empowers a subordinate court to state a case and refer the same for the opinion of the High Court. Such an opinion can be sought when the court itself feels some doubt about a question of law. The High Court make such order thereon as it thinks fit. Such opinion can be sought by a court when the court trying a suit, appeal or execution proceedings entertains reasonable doubt about a question of law.52

2.3.14. REVIEW Section 114 of the CPC gives a substantive right of review in certain circumstances and Order XLVII provided the procedure therefor. The provision relating to review constitutes an exception of the general rule that once the judgment is signed and pronounced by the court it becomes functus officio and has no jurisdiction to alter it.53 Review means to reconsider, to look again or to re-examine. In legal parlance, it is judicial re-examination of the case by the same court and by the same Judge, who has disposed of the matter reviews an order passed by him in certain circumstances.54

2.3.15. REVISION Section 115 of the CPC empowers a High Court to entertain a revision in any case decided by any subordinate court in circumstances. This jurisdiction is known as revisional jurisdiction of the High Court. Section 115 of the CPC authorizes the High Court to satisfy itself on three matters: (a) that the order of the subordinate court is within the jurisdiction (b) that the case is one on which the court ought to exercise its jurisdiction; and (c) that in exercising jurisdiction

52

Ibid., at Section 113, Order XLVI Rule 1. Ibid., at Order XX, Rule 3. 54 Supra note, 4 at p. 382. 53

Vaish Associates Advocates | 2.3. CPC at a glance 28

that the court has not acted illegally, i.e. in breach of some provision of law, or with material irregularity.

2.3.16. EXECUTION „Execution‟ means the process for enforcing or giving effect to the judgment of the Court.55 Execution is the enforcement of decrees and orders by the process of the court, so as to enable the decree holder to realize the fruit of the decree. 56 The execution is complete when the judgment-creditor or decree-holder gets money or other ting awarded to him by the judgment, decree or holder.

55 56

Overseas Aviation Engineering, In re, (1962) 3 All ER 12. Shreenath Roy v. Radhanath Mookerjee, (1882) 9 Cal 773.

Vaish Associates Advocates | 2.3. CPC at a glance 29

CHAPTER III SPECIFIC RELIEF ACT, 1963: REMEDIES AVAILABLE 3.1.

INTRODUCTION

The Specific Relief Act, 1963 (herein after referred as “Act” in this chapter) provides for specific reliefs to parties and is confined to certain species of relief, i.e. an exact or particular, a named, fixed or determined relief. The term is generally understood and providing relief of a specific kind rather than a general relief or damages or compensation. It is a remedy which is directed to provide the exact fulfillment of an obligation or specific performance of the contract as the case may be.

The Act extends to the whole of India, except the State of Jammu and Kashmir. The Specific Relief Act deals only with certain kinds of equitable reliefs and these are now: 

Recovery of possession of property



Specific Performance of contracts



Rectification of Instruments



Rescission of Contracts



Cancellation of instruments



Declaratory decrees



Injunctions

The other forms of Specific relief mentioned in the CPC and in statutes such as Transfer of Property Act, 1882, Trust Act, 1882 and Partnership Act, 1932 are different in origin and nature and are not included in this Act.

The Act explains and enunciates the various reliefs which can be granted under its provisions, provides the law with respect to them. It provides for the exact fulfillment of the obligation or the specific performance of contract. It is directed to the obtaining of the very thing which a person is deprived of and ought to be entitled to ask for. It is remedy which a person is deprived of and ought to be entitled to ask for. It is a remedy by which party to a contract is compelled do or omits the very acts which he has undertaken to do or omit. The remedies Vaish Associates Advocates | Introduction 30

which have been administered by Civil Courts of Justice against any wrong or injury fall broadly into two classes; firstly those by which the suitor obtains the very thing to which he is entitled, and secondly those by which he obtains not that very thing, but compensation for the loss of it. The former is the specific relief. Thus specific relief is a remedy which aims at the exact fulfillment of an obligation. It is remedial when the court directs the specific performance of contract and protective when the court makes a declaration or grants an injunction.

3.2.

RECOVERY OF POSSESSION OF PROPERTY

Chapter 2 of the Act covers Recovery of Possession as specific relief, and the relevant sections are Section 5-8. Here property may be immovable property or movable property, act provides for the recovery of the property. Section 5 and section 6 deal with the immovable property and Section 7 and Section 8 deals with movable property.

3.2.1. RECOVERY OF SPECIFIC IMMOVABLE PROPERTY UNDER SPECIFIC RELIEF ACT “A person entitled to the possession of specific immovable property may recover it in the manner provided by the CPC.” The section,57 provides that any person who is lawful owner of immovable property can get the possession of such property by due course of law. It means that when a person is entitled to the possession of specific immovable property he can recover the same by filling the suit as per provisions of CPC. He may file suit for ejectment on the strength of his title and can get a decree for ejectment on the basis of title within 12 years of the date of possession.

There are two types of actions which can be brought in law for the recovery of specific immovable property u/s 5: 

a suit based on title by ownership;



a suit based on possessory title; and



a suit based merely on the previous possession of the plaintiff, where he has been dispossessed without his consent, otherwise than in due course of law.

57

Section 5, Specific Relief Act, 1963.

Vaish Associates Advocates | Recovery of possession of property 31

The last remedy is provided in Section 6 of the Act. The suits of the first two types can be filed under the provisions of the CPC. The word „entitled to possession‟ means having a legal right to title to possession on the basis of ownership of which the claimant has been dispossessed.58 Plaintiff must show that he had possession before the alleged trespasser got possession.

There may be title by contract, inheritance, and prescription or even by possession and the last will prevail where no preferable title is shown.

3.2.1.1. SUIT BY PERSON DISPOSSESSED OF IMMOVABLE PROPERTY. (1) If any person is dispossessed without his consent of immovable property otherwise than in due course of law, he or any person claiming through him may, by suit, recover possession thereof, notwithstanding any other title that may be set up in such suit. (2) No suit under this section shall be brought- (a) after the expiry of six months from the date of dispossession; or (b) against the Government. (3) No appeal shall lie from any order or decree passed in any suit instituted under this section, nor shall any review of any such order or decree be allowed. (4) Nothing in this section shall bar any person from suing to establish his title to such property and to recover possession thereof.” The main object of section 659 is to discourage forcible dispossession on the principle that disputed rights are to be decided by due process of law and no one should be allowed to take law into his own hands, however good his title may be. The operation of Section is not excluded in cases between landlords and tenants where there is no question of title involved.

Section 6 provide summary and speedy remedy through the medium of Civil Court for the restoration of possession to a party dispossessed by another, within 6 months of its dispossession, leaving them to fight out the question of their respective titles in a competent Court if they are so advised.

58 59

Kartar Singh v. Dayal Das, AIR 1939 PC 210. Section 6, Specific Relief Act, 1963.

Vaish Associates Advocates | Recovery of possession of property 32

Requisites of section 6:1. Judicial possession of the plaintiff at the time of dispossession: The plaintiff must establish his judicial possession at the time of dispossession. Judicial possession is not equivalent to lawful possession. If a person has the possession of property as a fact and once he becomes settled as such, it is enough for the purpose of relief under section 6, irrespective of his being without any right to the same or mere trespasser.60 In M.C. Batra v. Lakshmi Insurance Co. Ltd. Mootham,61 C.J. observed: “This section says nothing about the nature of possession enjoyed by the person dispossessed but it has been held in some cases that such possession must be what is called judicial possession, that is to say possession founded on some right.” The possession must have been „juridical‟ i.e. possession recognized by law. It should be neither by force nor by fraud. In Nayar Service Society Ltd v. K.C. Alexander,62 the Supreme Court has also expressed the same view and said that a trespasser has not right to disturb peaceful possession of long time of any person and cannot reap benefit of his illegal act.

2. Dispossession of the plaintiff without his consent otherwise than in due course of law: For the application of this section the dispossession must be without the consent of plaintiff or against the process of and operation of law invoked by the ordinary method of Civil Court. In Rudrappa v. Narsingh Rao63 Court observed: “To read the words „due course of law‟ as merely equivalent to the word „legally‟ is, we think to deprive them of a force and significance which they carry on their face. For a thing which is practically legal may still by no means mean a thing done in due course of law.”

60

Yashwant Singh v. Jagdish Singh, Air 1968 SC 620; State of U.P. v. Maharaja Djarmender v. Prasad Singh, AIR 1989 SC 997; Ram Rattan v. State of U.P., 1983 SCC 188. 61 M.C. Batra v. Lakshmi Insurance Co. Ltd., AIR 1956 All 709. 62 Nayar Service Society Ltd v. K.C. Alexander, AIR 1968 SC 1165. 63 Rudrappa v. Narsingh Rao, (1905) 29 Bombay 213.

Vaish Associates Advocates | Recovery of possession of property 33

3. The suit must be instituted within 6 months from the date of dispossession: Section 6 of the act prescribes its own period of limitation for suits to be filed there under. In T.T. Devasthanams v. K.M. Krishnaiah,64 where the suit for possession under Section 6 was filed by plaintiff with allegation of being dispossessed from property, beyond six months of dispossession. Such suit was held to be not maintainable, moreover when title of defendant was subsisting and not extinguished. 4. Dispossession must be of „immovable property‟: The expression „immovable property‟ means only such properties of which physical possession can be given under the Act and it does not cover incorporeal rights, since the incorporeal rights are not rights of which possession can be taken and delivered to the claimant.65

5. Dispossession has not been made by the Government, but by any other person: Such dispossession which has occurred should not involve government as a party. 66

3.2.2. RELEVANT CPC PROVISION Section 5 of the Act declares that in a suit for the recovery of immovable property by person „entitled to‟ provisions Order XXI, Rules 35 and 36 of CPC would apply. Relevant provisions of CPC are reproduced below.

3.2.2.1. DECREE FOR IMMOVABLE PROPERTY Rule 35 of Order XXI, of CPC provides for decree for immovable property. (1) “Where a decree is for the delivery of any immovable property, possession thereof shall be delivered to the party to whom it has been adjudged, or to such person as he may appoint to receive delivery on his behalf, and, if necessary, by removing any person bound by the decree who refuses to vacate the property.

64

T.T. Devasthanams v. K.M. Krishnaiah, AIR 1998 SC 1132; Smt. Amar Kaur v. Hardev Singh, 1991 (2) P.L.R. 551. 65 Data retrieved from, www.lawyersclubindia.com/articles/Specific-Relief-Act-1963-1757.asp#.UQ0H6r_qlVo, last accessed on 10 February, 2013. 66 Ibid.

Vaish Associates Advocates | Recovery of possession of property 34

(2) Where a decree is for the joint possession of immovable property, such possession shall be delivered by affixing a copy of the warrant in some conspicuous place on the property and proclaiming the beat of drum, or other customary mode, at some convenient place, the substance of the decree. (3) Where possession of any building on enclosure is to be delivered and the person in possession, being bound by the decree, does not afford free access, the Court, through its officers, may, after giving reasonable warning and facility to any woman not appearing in public according to the customs of the country to withdraw, remove or open any lock or bolt or break open any door or do any other act necessary for putting the decree-holder in possession.”

Decree for delivery of immovable property when in occupancy of tenant is provided under Rule 36 of Order XXI, of the Code. “Where a decree is for the delivery of any immovable property in the occupancy of a tenant or other person entitled to occupy the same and not bound by the decree to relinquish such occupancy, the Court shall order delivery to be made by affixing a copy of the warrant in some conspicuous place on the property, and proclaiming to the occupant by beat of drum or other customary mode, at some convenient place, the substance of the decree in regard to the property.”

If the decree holder is dispossessed by the defendant after getting possession of land in suit for declaration of title, remedy for him would be to press into service for second execution with police force for restoration of possession.67

3.2.3. RECOVERY OF SPECIFIC MOVABLE PROPERTY UNDER SPECIFIC RELIEF ACT “A person entitled to the possession of specific movable property may recover it in the manner provided by the Code of Civil Procedure, 1908 (5 of 1908).

Explanation 1.-A trustee may sue under this section for the possession of movable property to the beneficial interest in which the person for whom he is trustee is

67

Chameli Debi v. Deepak Nath, AIR 2006 Gau 118.

Vaish Associates Advocates | Recovery of possession of property 35

entitled. Explanation 2.-A special or temporary right to the present possession of movable property is sufficient to support a suit under this section.”

Section 7 lays down provision for the recovery of movable property in specie i.e. the things itself. The things to be recovered must be specific in the sense they are ascertained and capable of identification. The nature of things must continue without alteration.68 This section entitles a person to bring a regular suit for the recovery of possession of movable property if he has right to the same at the time of action for detenue.

3.2.4. RELEVANT CPC PROVISION Suit can be filed under Order XX, Rule 10 of CPC and the form of the plaints are laid down in Schedule I and Appendix A of CPC. Where the Court decrees delivery of such property, the decree shall also state the amount of money to be paid in alternative, if delivery cannot be had. “Decree for delivery of movable property

Where the suit is for movable property, and the decree is for the delivery of such property, the decree shall also state the amount of money to be paid as an alternative if delivery cannot be had.”

A person who is entitled to delivery of specific movables may sue for such delivery or for their value or for damages. The court need not invariably decree the articles claimed and not their value only.69

3.2.5. LIABILITY OF A PERSON IN POSSESSION- PROVISION UNDER SPECIFIC RELIEF ACT “Liability of person in possession, not as owner, to deliver to persons entitled to immediate possession

68 69

Supra note, 65. Shivaprasad Singh v. Prayagkumari Debee, (1933) I.L.R. 61 Cal. 711.

Vaish Associates Advocates | Recovery of possession of property 36

Any person having the possession or control of a particular article of movable property, of which he is not the owner, may be compelled specifically to deliver it to the person entitled to its immediate possession, in any of the following cases:-

a) when the thing claimed is held by the defendant as the agent or trustee of the plaintiff; b) when compensation in money would not afford the plaintiff adequate relief for the loss of the thing claimed; c) when it would be extremely difficult to ascertain the actual damage caused by its loss; d) when the possession of the thing claimed has been wrongfully transferred from the plaintiff.

Explanation.- Unless and until the contrary is proved, the court shall, in respect of any article of movable property claimed under clause (b) or clause (c) of this section, presume- (a) that compensation in money would not afford the plaintiff adequate relief for the loss of the thing claimed, or, as the case may be; (b) that it would be extremely difficult to ascertain the actual damage caused by its loss.”

Section 8 of the Specific Relief Act which is analogous to the equitable relief of English law in an action of detenue entitles a person to recover the specific movable property itself from the defendant who is not the owner thereof in cases where the property has a peculiar value or association and cannot be adequately compensated in terms of money.70

The relief under this section can only be granted against a person having the possession control of the particular article claimed by the plaintiff. The object of this section is to provide special remedy so that persons having the possession or control of particular articles of movable property, although not their owners, may be compelled specifically to deliver them to the persons entitled to their immediate possession.

3.2.6. RELEVANT CPC PROVISION A decree for delivery of specific movable property which can be enforced by the stringent method prescribed by Order XXI Rule 31, can be passed only in a suit where the plaintiff

70

Supra note, 9.

Vaish Associates Advocates | Recovery of possession of property 37

alleges and proves facts which give him a right under the provision of Section 11 of the act.71 Here we should note that section 11 referred above was the corresponding provision of section 8 of the current act in Specific Relief Act, 1877.

Rule 31 of Order XXI, of the Code deals with decree in case of specific movable property: “Decree for specific movable property

(1) Where the decree is for any specific movable, or for any share in a specific movable, it may be executed by the seizure, if practicable, of the movable or share, and by the delivery thereof to the party to whom it has been adjudged, or to such person as he appoints to receive delivery on his behalf, or by the detention in the civil prison of the judgment-debtor, or by the attachment of his property, or by both. (2) Where any attachment under sub-rule (1) has remained in force for 1[three months] if the judgment-debtor has not obeyed the decree and the decree-holder has applied to have the attached property sold, such property may be sold, and out of the proceeds the Court may award to the decree-holder, in cases where any amount has been fixed by the decree to be paid as an alternative to delivery of movable property, such amount, and, in other cases, such compensation as it thinks fit, and shall pay the balance (if any) to the judgment-debtor on his application. (3) Where the judgment-debtor has obeyed the decree and paid all costs of executing the same which he is bound to pay, or where, at the end of 1[three months] from the date of attachment, no application to have the property sold has been made, or, if made, has been refused, the attachment shall cease.”

3.3.

SPECIFIC PERFORMANCE OF CONTRACT

The jurisdiction of the English Court of Chancery to decree specific performance of contracts was founded on the want of an adequate remedy at law. However in India, this concept has been not left to judicial discretion as it has been enacted in the form of statute. 71

ILR 39 Mad 1 (FB); Karnani Industrial Bank Ltd. v. Baraboni Coal Concern Ltd. and Anr., AIR 1938 Cal 471.

Vaish Associates Advocates | Specific Performance of Contract 38

Section 9 of the Act declares that defendant may raise any ground available in law to him while resisting suit for specific performance. All those pleas as recognized under law of contract like incapacity of parties, the absence of concluded contract, the uncertainty of the contract, coercion, fraud, misrepresentation, mistake, illegality or want of authority, to enter into contract, etc., are available to defendant in a suit for specific performance. “9. Defences respecting suits for relief based on contract.

Except as otherwise provided herein, where any relief is claimed under this Chapter in respect of a contract, the person against whom the relief is claimed may plead by way of defence any ground which is available to him under any law relating to contracts.”

The remedy of specific performance being an equitable remedy is at the discretion of the Court.72 But in the exercise of this discretion, the Court is governed by certain principles. The circumstances in which specific performance may be granted are enumerated in Section 10 of the very Act. “10. Cases in which specific performance of contract enforceable

Except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the court, be enforced(a) when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; or (b) when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief. Explanation.-Unless and until the contrary is proved, the court shall presume(i) that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money; and (ii) that the breach of a contract to transfer movable property can be so relieved except in the following cases:-

72

Supra note, 65.

Vaish Associates Advocates | Specific Performance of Contract 39

Where the property is not an ordinary article of commerce, or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market; (b) Where the property is held by the defendant as the agent or trustee of the plaintiff.”

Section 10 providers for specific performance of contract in those cases where there is no standard for ascertaining damages or where the money cannot form adequate relief for the nonperformance.

Further enforcement of the specific performance is at discretion of the court and no one claim it as a matter of right. In Banwari Lal Agarwala v. Ram Swarup Agarwala,73it was held that the plaintiff tenant was entitled to a decree of specific performance contract under Section 10 of Specific Relief Act. Where from some special or practical features or incidents of the contract either in its subject-matter, or in its terms or in the relations of the parties, it is impossible to arrive at a legal measure of damages at all, or at least with any sufficient degree of certainty so that not real compensation can be obtained by means of action at law, the contract will be enforced in specie.

The specific performance will also be granted when compensation in money is not adequate relief in facts and circumstances of case. Damages may be considered to be an inadequate remedy if it is difficult to quantify them. In Jainarain v. Surajmal,74it was held that where shares are limited in number and are not ordinarily available in the market, it is quite proper to grant decree for specific performance of contract of sale of such shares. In Ram Karan v. Govind Lal75there was an agreement for the sale of agricultural land. The buyer had paid full sale consideration to the seller, but the seller even then avoided executing the sale deed as per the agreement. The buyer brought an action for the specific performance of the contract. It was held that the case is covered under Section 10(b) of the act.

Explanation to Section 10 carries presumption in favour of plaintiff and declares that it should be presumed that compensation does not afford adequate relief in following cases:

73

Banwari Lal Agarwala v. Ram Swarup Agarwala, AIR 1998 Patna 88. Jainarain v. Surajmal, (1949) FLJ 216. 75 Ram Karan v. Govind Lal, AIR 1999 Raj 167. 74

Vaish Associates Advocates | Specific Performance of Contract 40

1) In all cases where the contract is for the transfer of immovable property. 2) In case of movable property where the property is not an ordinary article but an article of special value or of special interest to plaintiff, or the article is not easily obtainable in the market or if the property is held by the defendant as an agent or trustee of the plaintiff.

However these presumptions can be rebutted by the defendant by proving the contrary.

3.3.1. DOCTRINE OF MUTUALITY No person can sue for specific performance if he cannot be sued for it, whether because he is minor or for any other reason. The contract to be specifically enforced must be mutual. The doctrine of mutuality means the contract must be mutually enforceable by each party against the other. It does not however mean that for every right there must be corresponding clause. A contract may contain series of clauses and covenants which form the total bargain between the parties and each of them is the consideration for the other. Mutuality in this context does not mean equality and exact arithmetical correspondence. It means each party to the contract must have the freedom to enforce his right under the contract against each other.76

The doctrine of mutuality though a technical on is founded on common sense and amounts to this that the party to the contract should not be bound to that contract ,when he could not enforce it against the other. In India the contract by a minor himself is absolutely void. 77 “11. Cases in which specific performance of contracts connected with trusts enforceable.-

(1) Except as otherwise provided in this Act, specific performance of a contract may, in the discretion of the court, be enforced when the act agreed to be done is in the performance wholly or partly of a trust. (2) A contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced.”

76 77

Dasarath Gayan v. Satyanarain Ghose, AIR 1963 Cal 325. Mohri Bibi v. Dharmodas, ILR 30 Cal 539.

Vaish Associates Advocates | Specific Performance of Contract 41

According to Section 11(1) when the act agreed to be done is in the performance, wholly or partly, of a trust, specific performance of the same may be granted at the discretion of the court. “12. Specific performance of part of contract.-

Except as otherwise hereinafter provided in this section, the court shall not direct the specific performance of a part of a contract. (1) Where a party to a contract is unable to perform the whole of his part of it, but the part which must be left unperformed bears only a small proportion to the whole in value and admits of compensation in money, the court may, at the suit of either party, direct the specific performance of so much of the contract as can be performed, and award compensation in money for the deficiency. (2) Where a party to a contract is unable to perform the whole of his part of it, and the part which must be left unperformed either- (a) forms a considerable part of the whole, though admiting of compensation in money; or (b) does not admit of compensation in money; he is not entitled to obtain a decree for specific performance; but the court may, at the suit of the other party, direct the party in default to perform specifically so much of his part of the contract as he can perform, if the other party(i) in a case falling under clause (a), pays or has paid the agreed consideration for the whole of the contract reduced by the consideration for the part which must be left unperformed and in a case falling under clause (b),1*[pays or has paid] the consideration for the whole of the contract without any abatement; and (ii) in either case, relinquishes all claims to the performance of the remaining part of the contract and all right to compensation, either for the deficiency or for the loss or damage sustained by him through the default of the defendant. (3) When a part of a contract which, taken by itself, can and ought to be specifically performed, stands on a separate and independent footing from another part of the same contract which cannot or ought not to be specifically performed, the court may direct specific performance of the former part. Vaish Associates Advocates | Specific Performance of Contract 42

Explanation.-For the purposes of this section, a party to a contract shall be deemed to be unable to perform the whole of his part of it if a portion of its subject-matter existing at the date of the contract has ceased to exist at the time of its performance.”

The general rule of equity is that the court will not compel specific performance of a contract unless it can enforce the whole contract. In Merchants Trading Co. v. Banner78 Lord Romilly observed that: “this court cannot specifically perform the contract piecemeal, but it must be performed in it‟s entirely if performed at all.” A court of equity is not concerned to make the new contract for the parties. The rule laid in above case is contained in Section 12(1) of the Specific Relief Act which lays court shall not direct the specific performance of a part of contract, except in cases coming under on or other of the three proceeding sections.

To this general rules there are certain exceptions which proceed upon the principle of that „equity looks to the substance of contract and requires substantial compliance with its conditions rather than its literal fulfillment‟ and these are embodied in Section 12 (2), (3) and (4).

Section 12(2) becomes applicable when the part of contract which cannot be performed is the conveyance of an item which is only a small portion of the whole in value and admits of compensation in money. The inability to perform the contract may be by reason of deficiency in quantity of the subject-matter, variance in quality, defect in title or of some other legal prohibition or lapse of time. For the applicability of these provisions of this sub-section two conditions must co-exist, i.e., the part which must be left unperformed bears only a small proportion to the whole value and the part which must be left unperformed admits of compensation in money.

Section 12(3) lays down the second exception the general rule under Section 12(1). The equitable principle underlying this section is that specific performance of contract will not be enforced for the benefit of the purchaser and cannot operate to his detriment. Following are the important points in this sub-section:

78

Merchants Trading Co. v. Banner, 1871 (12) EQ 21.

Vaish Associates Advocates | Specific Performance of Contract 43

a. The part unperformed must be a considerable portion of the whole; or b. It does not admit of compensation in money; c. Not either of the parties, but party who is not in default may sue for part performance. d. Provided the plaintiff relinquishes, (i) claims to further performance and also, (ii) all rights to compensation on account of default of the defendant.

Section 12(3) of the specific relief Act can be invoked only where terms of contract permit segregation of rights and interest of parties in the property. The provision cannot be availed of when the terms of the contract specifically even an intention contrary to segregating interest of the vendor having the interest and spes successionis of revesioners. Neither law nor equity is in favour of the vendee to grant specific performance of the contract.79

Section 12(4) is the third exception to the general law provided in sub-section 12(1). The ordinary presumption is that a contract is intended to be dealt with as a whole and not piecemeal. But this section permits the Court in certain cases where this presumption is rebutted to afford relief by way of partial performance. The basic principle of Section 12(4) is that when a contract consists of several parts which are separate from and independent of on another, and some of which cannot or ought not to be performed, such part or parts as can and ought to be performed may alone be specifically enforced. The court must not make a new contract for the parties, nor proceed merely on surmises that the requirements of the section would be satisfied, if further enquiry were allowed.80 “13. Rights of purchaser or lessee against person with no title or imperfect title.

(1) Where a person contracts to sell or let certain immovable property having no title or only an imperfect title, the purchaser or lessee (subject to the other provisions of this Chapter), has the following rights, namely:(a) if the vendor or lessor has subsequently to the contract acquired any interest in the property, the purchaser or lessee may compel him to make good the contract out of such interest;

79 80

Secretary, Communist Party of India v. Judhistra Patnaik, AIR 2004 Ori. 67. William Graham v. Krishna Chandra, AIR 1925 PC 45.

Vaish Associates Advocates | Specific Performance of Contract 44

(b) where the concurrence of other persons is necessary for validating the title, and they are bound to concur at the request of the vendor or lessor, the purchaser or lessee may compel him to procure such concurrence, and when a conveyance by other persons is necessary to validate the title and they are bound to convey at the request of the vendor or lessor, the purchaser or lessee may compel him to procure such conveyance; (c) where the vendor professes to sell unencumbered property, but the property is mortgaged for an amount not exceeding the purchase money and the vendor has in fact only a right to redeem it, the purchaser may compel him to redeem the mortgage and to obtain a valid discharge, and, where necessary, also a conveyance from the mortgagee; (d) where the vendor or lessor sues for specific performance of the contract and the suit is dismissed on the ground of his want of title or imperfect title, the defendant has a right to a return of his deposit, if any, with interest thereon, to his costs of the suit, and to a lien for such deposit, interest and costs on the interest, if any, of the vendor or lessor in the property which is the subject-matter of the contract. (2) The provisions of sub-section (1) shall also apply, as far as may be, to contracts for the sale or hire of movable property.”

This section is based on the extended principle what is known in English Law the doctrine of feeding the grant by estoppels. This doctrine found acceptance in India, in the form of Section 43 of Transfer of property Act. It is has been extended in the present Section 13 of the Act. The right of the person of purchaser or lessee against the person with no title or imperfect title has been enumerated in Section 13 of the Act. A contract may be specifically enforced even though the promisor had no title or imperfect title at the time of the contract. The promisor is bound to comply with the terms of the contract if he subsequently acquires the power of performing the contract. The promisee can compel the promisor to make good the contract out of the interest which the latter acquired subsequent to the contract.81 “14. Contracts not specifically enforceable.-

81

Silla Chandre Sekharan v. Ramchadra Sahu, AIR 1964 SC 1789.

Vaish Associates Advocates | Specific Performance of Contract 45

(1) The following contracts cannot be specifically enforced, namely:-(a) a contract for the non-performance of which compensation in money is an adequate relief; (b) a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms; (c) a contract which is in its nature determinable; (d) a contract the performance of which involves the performance of a continuous duty which he court cannot supervise. (2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such a contract (other than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit. (3) Notwithstanding anything contained in clause (a) or clause (c) or clause (d) of sub-section (1), the court may enforce specific performance in the following cases:(a) where the suit is for the enforcement of a contract,(i) to execute a mortgage or furnish any other security for security for securing the repayment of any loan which the borrower is not willing to repay at once: Provided that where only a part of the loan has been advanced the lender is willing to advance the remaining part of the loan in terms of the contract; or (ii) to take up and pay for any debentures of a company; (b) where the suit is for,(i) the execution of a formal deed of partnership, the parties having commenced to carry on the business of the partnership; or (ii) the purchase of a share of a partner in a firm, (c) where the suit is for the enforcement of a contract for the construction of any building or the execution of any other work on land: Provided that the following conditions are fulfilled, namely:Vaish Associates Advocates | Specific Performance of Contract 46

(i) the building or other work is described in the contract in terms sufficiently precise to enable the court to determine the exact nature of the building or work; (ii) the plaintiff has a substantial interest in the performance of the contract and the interest is of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and (iii)the defendant has, in pursuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.”

The effect of the provisions in Section 14 can be stated in terms of certain propositions, namely, that in the case of following contracts the relief of Specific performance cannot be allowed:

1. Where Compensation is Adequate

Courts will not order specific performance of a contract where the aggrieved party can be adequately compensated in terms of money. An ordinary contract to lend or borrow money whether with or without security is an example of a contract which cannot be specifically enforced, though where a loan has been already advanced on the understanding that a security would be provided against it, this can be specifically enforced.82

2. Contracts involving personal skill

It is not possible for the court to supervise the performance of a contract which runs into minute and numerous details or is dependent upon the personal qualifications of the promisor or is otherwise of volitional nature. Contracts of employment, contracts of personal service, contracts involving performance of artistic skill, like contract to sing, to paint, to act, contract of authorship are ordinary examples of things requiring personal skill and therefore beyond

82

Meenakshisundara v. Rathnasami, (1918) 41 Mad 959.

Vaish Associates Advocates | Specific Performance of Contract 47

the capacity of the judicial process to enforce their actual performance. The only choice in such cases is to be content with damages.83 In Purshottam v. Purshottam84 it was held that a contract to marry would fall under the category of such contracts fro which a court cannot enforce the specific performance.

3. Contracts of Determinable Nature.

Specific performance is not ordered of a contract which is in its nature determinable. Thus no order of specific performance is likely to be passed when the contract is revocable at the option of the opposite party. A revocable lease comes under this category.85

The court will not enforce a contract which is in its nature revocable by the defendant, for its interference in such case would be idle in as much as what it had done might be instantly undone by one of the parties. In Jawahar Sao v. Shatrughan Sonar86 it has been held that where a contract of sale is determinable at the option of the seller within a specified period on repayment of the consideration, the other party cannot get decree of specific performance of the agreement.

4. Contracts requiring Constant Supervision

Clause (d) of Section 14(1) says that the contract cannot be specifically enforced where it involves the performance of continuous duty which the court cannot supervise. Contracts requiring the performance of a continuous duty extending over period longer than three years from the date of the contract cannot be specifically enforced. As it is put by Dr. Banerji: “If the court were to make what purported to be a final order for specific performance in such case, such order would not be the end of litigation; but on the contrary, it is fruitful and continuous source.”

83

Gunpat Narain Singh Re, (1876) 1 Cal 74; Bansi Sah v. Krishna Chandra, AIR 1951 Punj. 508. Purshottam v. Purshottam, AIR 21 Bom 33. 85 Oil and Natural Gas Corpn Ltd. v. Streamline Shipping Co. P. Ltd., AIR 2002 Bom 420. 86 Jawahar Sao v. Shatrughan Sonar, AIR 1961 Pat 482. 84

Vaish Associates Advocates | Specific Performance of Contract 48

In Central Bank Yeotmal v. Vyankatish87 the respondent-defendant was required to execute a Kabuliyat every year for 25 years and it was held there was continuous duty in the sense that it had to be performed annually for 25 years and, there fore, the contract must be held to be specifically unenforceable.

5. Construction Contracts

Subject to certain exceptions, the court will not enforce specific performance to build, repair, or maintain works or building both because:-

a) Specific performance is decreed only where the party wants the thing in specie and cannot have it in any other way; and

b) Such contracts are for the most part so uncertain that the court will be unable to enforce its own decree. In Her Highness Maharani Shantidevi P. Gaikwak v. Savjibhai Haribahi Patel88 Supreme Court held that: “There is also force in the contention that the agreement is not specifically enforceable in view of clause (d) of Sub-section (1) of Section 14 of the Specific Relief Act, 1963. This provision provides that a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise is not specifically enforceable. Having regard to the nature of the scheme and the facts and the circumstances of the case it is clear that the performance of the contract involves continuous supervision which is not possible for the court. After repeal such continuous supervision cannot be directed to be undertaken by the competent authority as such an authority is now non-existent.”

6. Contract for Arbitration

Where an agreement of reference to an arbitration has been acted and determinate in an award a suit for the cancellation of the award on the ground of fraud and collusion isnot 87 88

Central Bank Yeotmal v. Vyankatish, AIR 1949 Nag 286. Her Highness Maharani Shantidevi P. Gaikwak v. Savjibhai Haribahi Patel, (2001) 5 SCC 101.

Vaish Associates Advocates | Specific Performance of Contract 49

against the tenor of Section 14(2). This section has no application except where a person having made a contract to refer a controversy to arbitration has refused to perform it and institutes a suit in respect of subject matter in defiance of the contract, where two competent tribunal are available for the determination of a controversy viz. the court the arbitrators and the plaintiff chooses the latter while he has remedy to the former, it is not open to the defendant to enforce specific performance of the agreement of reference. “15. Who may obtain specific performance.-

Except as otherwise provided by this Chapter, the specific performance of a contract may be obtained by-

a.

any party thereto;

b.

the representative in interest or the principal, of any party thereto: Provided that where the learning, skill, solvency or any personal quality of such party is a material ingredient in the contract, or where the contract provides that his interest shall not be assigned, his representative in interest of his principal shall not be entitled to specific performance of the contract, unless such party has already performed his part of the contract, or the performance thereof by his representative in interest, or his principal, has been accepted by the other party;

c.

where the contract is a settlement on marriage, or a compromise of doubtful rights between members of the same family, any person beneficially entitled thereunder;

d.

where the contract has been entered into by a tenant for life in due exercise of a power, the remainder-man;

e.

a reversioner in possession, where the agreement is a covenant entered into with his predecessor in title and the reversioner is entitled to the benefit of such covenant;

f.

a reversioner in remainder, where the agreement is such a covenant, and the reversioner is entitled to the benefit thereof and will sustain material injury by reason of its breach; Vaish Associates Advocates | Specific Performance of Contract 50

g.

when a company has entered into a contract and subsequently becomes amalgamated with another company, the new company which arises out of the amalgamation;

h.

when the promoters of a company have, before its incorporation, entered into a contract for the purposes of the company, and such contract is warranted by the terms of the incorporation, the company: Provided that the company has accepted the contract and has communicated such acceptance to the other party to the contract.”

It is a general rule that a contract cannot be got enforced except by a party to the contract. This general rule is embodied in clause (a) of Section 15. But there are certain exceptions to this general rule. These exceptions are contained in clause (b) to (h) of the section and contain list of persons who although not a party to the contract, are entitled to obtain specific performance of contract. These are:

1) A representative in interest or the principal thereto. 2) Any person beneficially entitled 3) The remainder man 4) A revesioner in possession 5) A revesioner in remainder 6) The amalgamated company 7) The company In Shyam Singh, v. Daryao Singh89 it was held that u/s 15(b) specific performance of the contract may be obtained by 'any party thereto' or their representative in interest.' This expression clearly includes the transferees and assignees from the contracting party in whose favour the right exists. Such right of seeking specific performance would, however, be not available in terms of proviso below Cl. (b) where the contract provides that the 'interest shall not be assigned.

The plaintiff in the present case also falls within the meaning of representative in interest as contemplated under Cl. (b) of S. 15 of the Act. On such assignment, the plaintiff-appellant 89

Shyam Singh, v. Daryao Singh, AIR 2004 SC 348.

Vaish Associates Advocates | Specific Performance of Contract 51

acquired a valid title to claim specific performance. In the result, we allow these appeals with costs and set aside the judgment of the High Court and restore the judgments and decrees passed by the trial court. “16. Personal bars to relief.-

i) Specific performance of a contract cannot be enforced in favour of a person(a) who would not be entitled to recover compensation for its breach; or (b) who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or (c) who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant. ii) Explanation.-For the purposes of clause (c),(i) where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the court; (ii) the plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction.” In B.R. Mulani v. Dr. A.B. Aswathanarayana and Ors.90 it has been held that where the plaintiff, pays mortgage debt created by defendant and the defendant in term agrees to sell certain property on its failure to pay off amount advanced, specific performance of such agreement cannot be ordered as it was not agreement of sale only. However, in this case Supreme Court decreed suit for repayment of money paid against mortgage with accrued interest. In Sukhbir Singh v. Brij Pal91 the fact that the party was present in the sub-registrar‟s office with necessary funds was held to be a proof of the party‟s readiness and willingness.

90 91

B.R. Mulani v. Dr. A.B. Aswathanarayana and ors., AIR 1993 SC 2449. Sukhbir Singh v. Brij Pal,(1997) 2 SCC 200; Hakim Singh v. Ram Snehi, AIR 2001 ALL 231.

Vaish Associates Advocates | Specific Performance of Contract 52

Further the person who makes himself party to an illegal contract cannot enforce his rights under this section.92 “17. Contract to sell or let property by one who has no title, not specifically enforceable.-

(1) A contract to sell or let any immovable property cannot be specifically enforced in favour of a vendor or lessor(a) who, knowing himself not to have any title to the property, has contracted to sell or let the property; (b) who, though he entered into the contract believing that he had a good title to the property, cannot at the time fixed by the parties or by the court for the completion of the sale or letting, give the purchaser or lessee a title free from reasonable doubt. (2) The provisions of sub-section (1) shall also apply, as far as may be, to contracts for the sale or hire of movable property.” “18. Non-enforcement except with variation.-

Where a plaintiff seeks specific performance of a contract in writing, to which the defendant sets up a variation, the plaintiff cannot obtain the performance sought, except with the variation so set up, in the following cases, namely:a. where by fraud, mistake of fact or mis-representation, the written contract of which performance is sought is in its terms or effect different from what the parties agreed to, or does not contain all the terms agreed to between the parties on the basis of which the defendant entered into the contract; b. where the object of the parties was to produce a certain legal result which the contract as framed is not calculated to produce; c. where the parties have, subsequently to the execution of the contract, varied its terms.”

92

I.T.C. Ltd. v. George Joseph Fernandes, AIR 1989 SC 839.

Vaish Associates Advocates | Specific Performance of Contract 53

Section 18 deals with cases in which the contract entered into is valid contract. In other words, it is one in respect of which the remedy of damages is available. Section 18 does not apply unless there is complete contract.

It sets out the cases in which contracts cannot be enforced except with a variation and there are three particular cases set out in which a contract may be enforced subject to variation, such a variation being in favour of the defendant. But the remedy of specific performance is available when the plaintiff is prepared to accept the variation pleaded by the defendant. In K. Narendra v. Riviera Apartments (P) Ltd.93 it was held that when the defendant sets up a variation then the plaintiff may have the contract specifically performed subject to the variation so set up only in cases of fraud, mistake of fact or misrepresentation or where the contract has failed to produce a certain legal result which the contract was intended to do or where the parties have subsequent to the execution of the contract varied its terms. “19. Relief against parties and persons claiming under them by subsequent title.-

Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against(a) either party thereto; (b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract; (c) any person claiming under a title which, though prior to the contract and known to the plaintiff, might have been displaced by the defendant; (d) when a company has entered into a contract and subsequently becomes amalgamated with another company, the new company which arises out of the amalgamation; (e) when the promoters of a company have, before its incorporation, entered into a contract for the purpose of the company and such contract is warranted by the terms of the incorporation, the company: Provided that

93

K. Narendra v. Riviera Apartments (P) Ltd., AIR 1999 SC 2309.

Vaish Associates Advocates | Specific Performance of Contract 54

the company has accepted the contract and communicated such acceptance to the other party to the contract.”

In a suit for specific performance the parties to the contract are the sufficient parties. A stranger to the contract is not a proper or necessary party. In Kasturi v. Jyyamperumal94 the apex Court held that third party or stranger to the contract cannot be added so as to convert a suit of one character into another character. In R.K. Mohammaed Abidullah v. Haji C. Abul Wahab95 the plaintiff who was in possession of certain property as a tenant and purchased the same property brought an action for specific performance. Subsequent purchaser contended that he was buyer in good faith and for consideration without notice and therefore he had a better title. It was found that the defendants i.e. subsequent purchasers, were aware of the fact that the plaintiff was in occupation of the property as tenant for several years. The defendants could not be said to be bonafide subsequent purchasers without notice of the suit property. Hence the plaintiff was held entitled to the relief of specific performance. In Mohd. Hanif v. Mariam Begum96 A sued B for specific performance of the contract of sale of house. He also sought possession from C who was not party to the contract. It was held that decree for possession cannot be passed against C in this suit. The scope of a suit for specific performance of an agreement for sale of land coupled with a prayer for possession cannot be enlarged and the suit cannot be turned also in a title unless it comes under Section 19(c).

The principle in fourth sub-section is that the amalgamated company is not allowed to exercise powers acquired by means of agreements with its component companies, except upon the terms of complying with those agreements provided they are such as the amalgamated company would itself have been bound by, if it had entered into them.

94

Kasturi v. Jyyamperumal, AIR 2005 SC 2813. R.K. Mohammaed Abidullah v. Haji C. Abul Wahab, AIR 2001 SC 1658. 96 Mohd. Hanif v. Mariam Begum, AIR 1986 Bom 15. 95

Vaish Associates Advocates | Specific Performance of Contract 55

It has been recognized on all hands that to decree specific performance is a matter of discretion of the court. But it does not implies that it is open to the court to do just what it pleases in an individual case without regard to authority or principle.97 “20. Discretion as to decreeing specific performance.-

(1) The jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal. (2) The following are cases in which the court may properly exercise discretion not to decree specific performance(a) where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage over the defendant; or (b) where the performance of the contract would involve some hardship on the defendant which he did not foresee, whereas its non-performance would involve no such hardship on the plaintiff; (c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable to enforce specific performance. 2) Explanation 1.-Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of clause (a) or hardship within the meaning of clause (b). 3) Explanation 2.-The question whether the performance of a contract would involve hardship on the defendant within the meaning of clause (b) shall, except in cases where the hardship has resulted from any act of the plaintiff subsequent to the contract, be determined with reference to the circumstances existing at the time of the contract.”

97

Supra note, 9.

Vaish Associates Advocates | Specific Performance of Contract 56

The section gives to the Court discretion in the matter of decreeing specific performance. This discretion is not arbitrary, but sound and reasonable, guided by the judicial principles. Under no circumstances, the court should exercise its discretion, where it would be improper. Mere on the ground that the contract is unenforceable court can‟t refuse relief to any party. The discretion of the court is to decide whether enforcement of the contract in the present circumstances is fair and if the contract is fair and reasonable character of the plaintiff has been good then the discretion of the court has no application.98

The court would grant specific performance on following general principles:

1. Specific performance will not be granted where damages are an adequate remedy. 2. To grant a specific performance of a contract is at the discretion of the court. 3. The plaintiff must prove the following: a) That there was concluded and valid contract between him and the defendant. b) That he performed or is ready and willing to perform the terms of contract on his part c) That he was ready and willing to do all matters and things on his part thereafter to be done. In John Thomas v. Joseph Thomas99 there was sale of land at a stated price. There was no record to show that the value stated on the plaint was not correct. The suit for specific performance was resisted on the ground that the value of the property was understated to avoid stamp duty and taxes. It was held that specific performance could not be refused on the above ground. “21. Power to award compensation in certain cases.-

(1) In a suit for specific performance of a contract, the plaintiff may also claim compensation for its breach, either in addition to, or in substitution of, such performance. (2) If, in any such suit, the court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been

98 99

Rajkumari v. Lachman Ram, 14 CLJ 627. John Thomas v. Joseph Thomas, AIR 2000 Ker 408.

Vaish Associates Advocates | Specific Performance of Contract 57

broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly. (3) If, in any such suit, the court decides that specific performance ought to be granted, but that is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly. (4) In determining the amount of any compensation awarded under this section, the court shall be guided by the principles specified in section 73 of the Indian Contract Act, 1872 (9 of 1872). (5) No compensation shall be awarded under this section unless the plaintiff has claimed such compensation in his plaint: Provided that where the plaintiff has not claimed any such compensation in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation. Explanation.-The circumstance that the contract has become incapable of specific performance does not preclude the court from exercising the jurisdiction conferred by this section.”

The plaintiff in a suit for specific performance of contract, under Section 21 may also ask for compensation in case of the breach of the contract, either in addition to or in substitution for such performance but if the plaintiff in a suit for specific performance omits to ask for compensatory relief and his suit for specific performance is dismissed them his subsequent suit for compensation will be barred by the provisions of Section 24. In Jagdish Singh v. Nathu Singh100 the Supreme Court has held that when the plaintiff has made specific performance impossible, Section 21 does not entitle him to seek damages. In Jaya Sen v. Sujit Kumar Sarkar101 it has been held that the parties are bound by their pleadings and they can be awarded only such relief as is claimed in the plaint. “22. Power to grant relief for possession, partition, refund of earnest money, etc.-

(1) Notwithstanding anything to the contrary contained in the Code of Civil Procedure, 1908 (5 of 1908), any person suing for the specific performance of

100 101

Jagdish Singh v. Nathu Singh, AIR 1992 SC 1604. Jaya Sen v. Sujit Kumar Sarkar, AIR 1998 Cal,288.

Vaish Associates Advocates | Specific Performance of Contract 58

a contract for the transfer of immovable property may, in an appropriate case, ask for(a) possession, or partition and separate possession, of the property, in addition to such performance; or (b) any other relief to which he may be entitled, including the refund of any earnest money or deposit paid or 1*[made by] him, in case his claim for specific performance is refused. (2) No relief under clause (a) or clause (b) of sub-section (1) shall be granted by the court unless it has been specifically claimed: Provided that where the plaintiff has not claimed any such relief in the plaint, the court shall, at any stage of the proceeding, allow for "made to". him to amend the plaint on such terms as may be just for including a claim for such relief. (3) The power of the court to grant relief under clause (b) of sub-section (1) shall be without prejudice to its powers to award compensation under section 21.” In P.C. Verghese v. Devaki Amma102 the apex court held that in view of Section 22 (1)(a) of the Specific Relief Act a decree of partition and separate possession of the property can be granted in addition to a decree for specific performance. In Satya Narayana v. Yelloji Rao103 the Supreme Court has observed that discretion referred in Section 22 of the Specific Relief Act cannot be defined as it is not possible or desirable to lay down the circumstances under which the court will exercise discretion against the plaintiff, but at the same time the said discretion shall not be arbitrary and must be in accordance with sound and reasonable judicial principles. In Goparaju Venkata Bharata Rao v. Nagula Ramakotayya104 there was agreement for sale of property in favour of the plaintiff. The plaintiff was put in possession of suit property. The execution of the agreement was to take place after entire consideration was paid by the plaintiff. The original owner died. Her legatees under will dispossessed the plaintiff and postponed execution of sale deed. The plaintiff proved that the agreement to sell was a

102

P.C. Verghese v. Devaki Amma, AIR 2006 SC 145. Satya Narayana v. Yelloji Rao, AIR 1965 SC 1045; Matadeen Agarwal v. Syed Abdul Razzak, AIR 1997 AP 103. 104 Goparaju Venkata Bharata Rao v. Nagula Ramakotayya, AIR 2001 AP 425. 103

Vaish Associates Advocates | Specific Performance of Contract 59

genuine document. It was held that the plaintiff was entitled to relief of specific performance of agreement possession of property against the legatees of the original owner property. “23. Liquidation of damages not a bar to specific performance.-

(4) A contract, otherwise proper to be specifically enforced, may be so enforced, though a sum be named in it as the amount to be paid in case of its breach and the party in default is willing to pay the same, if the court, having regard to the terms of the contract and other attending circumstances, is satisfied that the sum was named only for the purpose of securing performance of the contract and not for the purpose of giving to the party in default an option of paying money in lieu of specific performance. (5) When enforcing specific performance under this section, the court shall not also decree payment of the sum so named in the contract.” “24. Bar of suit for compensation for breach after dismissal of suit for specific performance.-

The dismissal of a suit for specific performance of a contract or part thereof shall bar the plaintiff's right to sue for compensation for the breach of such contract or part, as the case may be, but shall not bar his right to sue for any other relief to which he may be entitled, by reason of such breach.”

It is open for the party to a contract to sue for its specific performance and for compensation for its breach in addition to or in substitution for such performance by the defendant. In those cases the plaintiff does not treat the contract to be at an end and asserts that he has been all along willing to performance his part of the contract. If the court grants him the specific performance, he will discharge his obligation. But in an action for damages only for breach of the contract, that cannot be the position there, the contract is taken to be no longer subsisting to be enforced. 105

105

Ram Prasad v. Babu Kashi Prasad Tewari, 1965 B.L.J.R. 214.

Vaish Associates Advocates | Specific Performance of Contract 60

3.4.

SPECIFIC PERFORMANCE OF CONTRACT: AS PROVIDED IN CPC

A decree for specific performance of contract for sale or lease of immovable property shall specify the period within which the purchase money or other sum is to be paid by the purchaser of the lessee.106 Where a decree is for specific performance of a contract, and the party against whom it has been passed has willfully disobeyed it, the same may be executed by attachment of his property, or his detention n civil prison, or by both.107

A decree for specific performance creates mutual rights and liabilities in favour of both the parties. The defendant is as much entitled to enforce the decree as the plaintiff.108 Where the decree does not specify the time for performance of the contract, it should be performed within reasonable time.109 Even if the decree for specific performance does not provide for delivery of possession, the court can deliver possession as incidental to the execution of the sale deed.110 A party seeking to execute the decree for specific performance must fulfill the obligations imposed upon him by the decree. If he deposits considerations in the court, he is entitled to have the sale deed executed.

Where a party against whom a decree for specific performance is passed is a Corporation, the decree may be enforced by attachment of the property of Corporation or, with the leave of the court, by detention in civil prison of the directors or other principal officers thereof, or by both attachment and detention.111

3.5.

RECTIFICATION OF INSTRUMENTS “26. When instrument may be rectified.-

(1) When, through fraud or a mutual mistake of the parties, a contract or other instrument in writing (not being the articles 628 of association of a company

106

CPC, Order XX, Rule 12-A. CPC, Order XXI, Rule 32(1); Saroj Rani v. Sudarshan Kumar, (1984) 4 SCC 90. 108 Hungerford Investment v. Haridas Mundhra, (1972) 3 SCC 684; Jai Narayan v. Kedar Nath, AIR 1956 SC 359. 109 Ibid, at (1972) 3 SCC 685. 110 Narendra Chandra v. 111 Supra note, 55, at Rule 32(2). 107

Vaish Associates Advocates | Specific performance of Contract: As provided in 61 CPC

to which the Companies Act, 1956 (1 of 1956), applies) does not express their real intention, then(a) either party or his representative in interest may institute a suit to have the instrument rectified; or (b) the plaintiff may, in any suit in which any right arising under the instrument is in issue, claim in his pleading that the instrument be rectified; or (c) a defendant in any such suit as is referred to in clause (b), may, in addition to any other defence open to him, ask for rectification of the instrument. (2) If, in any suit in which a contract or other instrument is sought to be rectified under sub-section (1), the court finds that the instrument, through fraud or mistake, does not express the real intention of the parties, the court may, in its discretion, direct rectification of the instrument so as to express that intention, so far as this can be done without prejudice to rights acquired by third persons in good faith and for value. (3) A contract in writing may first be rectified, and then if the party claiming rectification has so prayed in his pleading and the court thinks fit, may be specifically enforced. (4) No relief for the rectification of an instrument shall be granted to any party under this section unless it has been specifically claimed: Provided that where a party has not claimed any such relief in his pleading, the court shall, at any stage of the proceeding, allow him to amend the pleading on such terms as may be just for including such claim.”

Rectification means correction of an error in an instrument in order to give effect to the real intention of the parties. Where a contract has been reduced into writing, in pursuance of a previous engagement and the writing, owning to fraud or mutual mistake, fails to express the real intention of the parties, the court will rectify the writing instrument in accordance with their true intent.112 Here the fundamental assumption is that there exists in between the parties a complete and perfectly unobjectionable contract but the writing designed to embody it, either from fraud or mutual mistake is incorrect or imperfect and the relief sought is to rectify the writing so as to bring it into conformity with true intent. In such a case to enforce the 112

Supra note, 65.

Vaish Associates Advocates | Rectification of instruments 62

instrument as its stand must be to injure at least one party to it; to rescind it all together must be to injure both, but rectify it and then enforce it is to injure neither but to carry out the intention of both. In cases of rectification the court does not put it to the other party to submit to the variation alleged but makes the instrument confirmable to the intention of the parties without such offer or submission.113 In Dagdu v. Bhana114 it was observed: “The Court in administering equitable principles permits mistakes to be proved where they are common; that is where the expression of the contract is contrary to the concurrent intention of the parties. If such mistakes be established, them the court can give relief of rectification, but what is rectified is not the agreement, but the mistaken expression of it.” The following persons can apply for rectification of instruments115:

a. Either party or his representative in interest b. The plaintiff in any suit c. A defendant in such suit

Conditions Necessary for obtaining rectification:

1. There must have been a complete agreement reached prior to the written instrument which is sought to be rectified. There must be two distinct stages: i) an agreement, verbal or written, which clearly expresses the final intention of the parties, and ii) instrument which purports to embody that intention. 2. Both the parties must have intended, and still intending, that the exact terms of the prior contract should be reduced to writing.116 3. Clear evidence of Mistake common to both parties or of fraud.

113

Collett, pp. 260-261. Dagdu v. Bhana, (1904) 28 Bom 420. 115 Durga Prasad v. Bhajan, 31 Cal 614 (P.C.). 116 AIR 1937 Assam 49; Air 1954 Nag 328. 114

Vaish Associates Advocates | Rectification of instruments 63

The principle on which the court acts in correcting/rectifying instruments is that the parties are to be placed in the position as that in which they would have stood if no error has been committed.117

3.6.

DECLARATORY DECREES “34. Discretion of court as to declaration of status or right.

Any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right, and the court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in such suit ask for any further relief: Provided that no court shall make any such declaration where the plaintiff, being able to seek further relief than a mere declaration of title, omits to do so. Explanation.-A trustee of property is a "person interested to deny" a title adverse to the title of someone who is not in existence, and for whom, if in existence, he would be a trustee.

A declaratory decree is a mode of relief where there is no specific performance and no award of compensation. There is only a declaration of rights of the parties without any consequential relief which can be enforced by the execution of the decree. In other words, declaratory decrees are those where some right is declared in favour of the plaintiff but nothing is sought to be paid or performed by the defendant. Further, the declaration does not confer any new rights upon the plaintiff; it merely declares what he had before. The object of such decrees is that where a person‟s status or legal character has been denied or where a cloud has been cast upon his titles to rights and interests in some property, he may have the cloud removed by having his legal status or rights declared by the court. But it is not a matter of absolute right to obtain a declaratory decree. It is discretion of the Court. The object of Section 34 is to perpetuate and strengthen testimony regarding title and protect it from adverse attacks.

117

Suddha Singh v. Munshi Ram, AIR 1927 Cal 605.

Vaish Associates Advocates | Declaratory Decrees 64

The policy of legislature is not only to secure to a wronged party possession of the property taken away from him but also to see that he is allowed to enjoy that property peacefully.

Essential prerequisites for a declaratory action:

1. The plaintiff must be entitled to any legal character or to any right as to any property.118 2. The defendant should have denied or be interested in denying the character or title of the plaintiff. It is this denial which gives a cause of action for declaratory relief. 3. The plaintiff is not in a position to claim further relief than mere declaration of his title, or where he is so able to seek further relief, he seeking such relief also.119

It has been held that in a suit for declaration of title and consequential injunction, the burden is on the plaintiff to prove his right and possession over property. If the plaintiff fails to prove his clear title to he is no entitled to such declaration and consequential injunction.120 “35. Effect of declaration.

A declaration made under this Chapter is binding only on the parties to the suit, persons claiming through them respectively, and, where any of the parties are trustees, on the persons for whom, if in existence at the date of the declaration, such parties would be trustees.”

According to this section the declaratory decree is not binding on everybody in the world. It cannot bind strangers and as such a declaration will not operate as a judgment in rem121 and will be binding only between parties to the suit and their representatives. Hence, a declaratory

118

Padmini Chandrasekharan v. R. Rajagopal Reddy, (1996) 8 SCC 632; Sowrashtra Vipra Sabha v. Namakal Municipality,(1996) 11 SCC 584; Prabhakar Adsule v. State of M.P., AIR 2004 SC 3557; Niranjan Singh v. Bant Singh, AIR 2004 P & H 334. 119 S.Madasamy v. A.M. Arjuna Raja, AIR 2000 Mad 465. 120 Ibid. 121 SNP Shipping Service Pvt. Ltd. v. World Tanker Carrier Corp., AIR 2000 Bom 34.

Vaish Associates Advocates | Declaratory Decrees 65

decree is binding between the parties inter se and its effect does not bind persons who are not connected with the suit in question.122

3.7.

INJUNCTIONS “36. Preventive relief how granted.-

Preventive relief is granted at the discretion of the court by injunction, temporary or perpetual.” “37. Temporary and perpetual injunctions.-

(1) Temporary injunctions are such as are to continue until a specified time, or until the further order of the court, and they may be granted at any stage of a suit, and are regulated by the Code of Civil Procedure, 1908 (5 of 1908).

(2) A perpetual injunction can only be granted by the decree made at the hearing and upon the merits of the suit; the defendant is thereby perpetually enjoined from the assertion of a right, or from the commission of an act, which would be contrary to the rights of the plaintiff.”

3.8.

TEMPORARY INJUNCTIONS: LAW AS PROVIDED IN CPC

It is a well settled principle of law that interim relief can always be granted in the aid of and as ancillary to the main relief available to the party on final determination of his rights in a suit or any other proceeding. Therefore, court undoubtedly possesses the power to grant interim relief during the pendency of the suit.123 Temporary injunctions are thus injunctions issued during the pendency of proceedings.

An injunction is a judicial process whereby a party is required to do, or to refrain from doing, any particular act. It is a remedy in the form of an order of the court addressed to a particular 122

Munyaraj v. Venkatapati, AIR 1955 A.P. 172; Prabhakar Adsude v. State of M.P., AIR 2004 SC 3557; B.S. Ruta v. S.N. Ruta, AIR 2004 SC 2546; M.P. Mathur v. D.T.C., AIR 2007 SC 414. 123 State of Orissa v. Madan Gopal, AIR 1952 SC 12.

Vaish Associates Advocates | Injunctions 66

person that either prohibits him from doing or continuing to do a particular person that either prohibits him from doing or continuing to do a particular act (prohibitory injunction); or orders him to carry out certain act (mandatory injunction).124

Injunctions are regulated by the provisions of Order XL of the CPC and may be granted at any stage of proceedings. Rule I of Order XXXIX provides for various grounds which are to be relied upon by court while granting injunction:

a) Where any property in dispute in a suit is in danger of being wasted, damaged or alienated by any party to the suit or wrongfully sold in execution of a decree;125 or b) Where a defendant threatens, or intends to remove or dispose of his property with a view to defrauding his creditors;126 or c) Where a defendant threatens to dispossess the plaintiff or otherwise cause injury to the plaintiff in relation to any property in dispute in the suit;127 or d) Where a defendant is about to commit a breach of contract, or other injury of any kind;128 or e) Where a court is of the opinion that the interest of justice so requires.129

3.8.1. INJUNCTIONS WHICH MAY BE GRANTED In accordance of above principles, interim injunction of maintain status quo, against transfer of property, disposal of goods, making constructions, effecting recovery of dues, attachment of property, appointment of receiver or commission, against prosecution, etc., can be granted by a court.

3.9.

INJUNCTIONS UNDER SPECIFIC RELIEF ACT (CONTINUED) “38. Perpetual injunction when granted.-

124

Halsbury‟s Laws of England, 4th Ed., Vol. 24, para 901. CPC, Order XXXIX, Rule 1(a). 126 Ibid, Rule 1(b). 127 Ibid, Rule 1(c). 128 Ibid, Rule 1(d). 129 CPC, Sec. 94(c), 151. Manohar Lal v. Seth Hiralal, AIR 1962 SC 527; Cotton Corp. of India v. United Industrial Bank Ltd., (1983) 4 SCC 625. 125

Vaish Associates Advocates | Injunctions under Specific Relief Act (Continued) 67

(2) Subject to the other provisions contained in or referred to by this Chapter, a perpetual injunction may be granted to the plaintiff to prevent the breach of an obligation existing in his favour, whether expressly or by implication. (3) When any such obligation arises from contract, the court shall be guided by the rules and provisions contained in (4) When the defendant invades or threatens to invade the plaintiff's right to, or enjoyment of, property, the court may grant a perpetual injunction in the following cases, namely:- (a) where the defendant is trustee of the property for the plaintiff; (b) where there exists no standard for ascertaining the actual damage caused, or likely to be caused, by the invasion; (c) where the invasion is such that compensation in money would not afford adequate relief; (d) where the injunction is necessary to prevent a multiplicity of judicial proceedings.” “39. Mandatory injunctions.-

When, to prevent the breach of an obligation, it is necessary to compel the performance of certain acts which the court is capable of enforcing, the court may in its discretion grant an injunction to prevent the breach complained of, and also to compel performance of the requisite acts.” “40. Damages in lieu of, or in addition to, injunction.-

(1) The plaintiff in a suit for perpetual injunction under section 38, or mandatory injunction under section 39, may claim damages either in addition to, or in substitution for, such injunction and the court may, if it thinks fit, award such damages. (2) No relief for damages shall be granted under this section unless the plaintiff has claimed such relief in his plaint: Provided that where no such damages have been claimed in the plaint, the court shall, at any stage of the proceedings, allow the plaintiff to amend the plaint on such terms as may be just for including such claim.

Vaish Associates Advocates | Injunctions under Specific Relief Act (Continued) 68

(3) The dismissal of a suit to prevent the breach of an obligation existing in favour of the plaintiff shall bar his right to sue for damages for such breach.” “41. Injunction when refused.-

An injunction cannot be granted- (a) to restrain any person from prosecuting a judicial proceeding pending at the institution of the suit in which the injunction is sought, unless such restraint is necessary to prevent a multiplicity of proceedings; (b) to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought; (c) to restrain any person from applying to any legislative body; (d) to restrain any person from instituting or prosecuting any proceeding in a criminal matter; (e) to prevent the breach of a contract the performance of which would not be specifically enforced; (f) to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it will be a nuisance; (g) to prevent a continuing breach in which the plaintiff has acquiesced; (h) when equally efficacious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust; (i) when the conduct of the plaintiff or his agents has been such as to disentitle him to the assistance of the court; (j) when the plaintiff has no personal interest in the matter.” “42. Injunction to perform negative agreement.-

Notwithstanding anything contained in clause (e) of section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement: Provided that the plaintiff has not failed to perform the contract so far as it is binding on him.”

An injunction is a specific order of the court forbidding the commission of a wrong threatened or the continuance of a wrongful course of action already begun, or in some cases, when it is called mandatory injunction commanding active restitution of the former state of

Vaish Associates Advocates | Injunctions under Specific Relief Act (Continued) 69

things. An order granting or refusing to grant injunction is subject to appeal. 130 Further an order granting or refusing an injunction is a “case decides” within the purview of Section 115 of CPC and, hence, a revision lies against such an order.131

130

Gujarat Bottling Co. Ltd. v. Coca-Cola Co., (1995) 5 SCC 545; Winki Dilawri v. Amritsar Improvement Trust, (1996) 11 SCC 644. 131 Hindustan Lever Ltd. v. Colgate-Palmolive Ltd., (1998) 1 SCC 720; Firm Ishardas v. Prakash Chand, AIR 1969 SC 938.

Vaish Associates Advocates | Injunctions under Specific Relief Act (Continued) 70

CHAPTER IV THE ARBITRATION AND CONCILIATION ACT, 1996 4.1.IMPORTANT DEFINITIONS 4.1.1 ARBITRATION “An arbitration is the reference of a dispute or difference between not less than two parties for determination, after hearing both sides in a judicial manner, by a person or persons other than a court of competent jurisdiction”.132 “The essence of arbitration is that some dispute is referred by the parties for settlement to a tribunal of their own choosing instead to a court.”133 The definition of „arbitration‟ in section 2(1)(a) verbatim reproduces the text of Article 2(a) of the Model Law: “arbitration means any arbitration whether or not administered by a permanent arbitral institution‟.

Above definition as provided under statute does not explicitly gives us a definition of what arbitration is, so we have to rely on judicial precedents and interpretation. In Collins v. Collins,134 Lord Romily MR pithily stated the concept of arbitration as „a reference to the decision of one or more persons of a particular matter in difference between the parties… The process of arbitration means the determination of a matter I a dispute by the judgment of one or more persons called arbitrators…‟ Some of the salient features of Arbitral process135:

a) Reference by the parties of an existing or apprehended dispute between them for settlement to an arbitral tribunal;

132

Halsbury‟s Laws of England, 4t Ed.,Vol. 2, p. 255, Para. 501. Russell on Arbitration, 19th Ed., p. 1. 134 Collins v. Collins, 1858 28 LJ Ch 186. 135 O P Malhotra, The Law and Practice of Arbitration and Conciliation, First Ed., 2002, p. 64. 133

Vaish Associates Advocates | Important definitions 71

b) The arbitration proceeding may or may not be administered by a permanent arbitral tribunal; c) the arbitrator or arbitrators are to be appointed in accordance with the procedure provided in the Arbitration Act; d) the award made by tribunal, if any, must be final and binding, as if it were a decree of the court enforceable in accordance with law.

4.1.2. INTERNATIONAL COMMERCIAL ARBITRATION The term „international commercial arbitration‟ has been defined in section 2(f) of the Arbitration Act. The definition comprises of two parts viz, (1)international arbitration and (2) commercial arbitration.

The arbitration is international, if at least one of the parties is:

a) an individual who is a national of, or habitually resident in, any country other than India; or b) a body corporate which is incorporated in any country other than India; or c) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or d) the Government of a foreign country. „International arbitration‟ is „commercial‟ if it relates to disputes arising out of a „legal relationship, whether contractual or not, considered as commercial under the law in force in India‟.136

4.1.3. ARBITRATION AGREEMENT Section 2(b) of the Arbitration Act, defines „arbitration agreement‟ to mean „an agreement referred in section 7‟. In other words, the real definition of the expression „arbitration agreement‟ is contained in section 7. Section 7 defines „arbitration agreement‟ as an agreement by which the parties submit to arbitration all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship. The „arbitration 136

Ibid., at p 79.

Vaish Associates Advocates | Important definitions 72

agreement‟ may be in the form of an arbitration clause in a contract or in the form of separate agreement, but it shall be in writing.

4.1.4. ARBITRAL AWARD Section 2(c) of the Arbitration Act, defines and „arbitral award‟ by including in it „an interim award‟. From this definition, no denotation of the term „award‟ or „interim award‟ is discernible. Russell, in principle, describes an award as a “final determination of a particular issue or claim in the arbitration”.137 Whether the award is final or interim, it is the final determinations of the issues or claims covered by it.138

4. 2. RELEVANT CLAUSES: LEGAL RECOURSE AS PROVIDED UNDER ARBITRATION ACT 4.2.1. POWER OF COURT TO REFER PARTIES TO ARBITRATION Section 8 of the Arbitration Act is based on the principle that the right to seek arbitration is a contractual right and a contract cannot be unilaterally abrogated so as to overthrow the arbitration clause. Under this section, the judicial authority does not restrain the plaintiff from bringing an action in breach of his agreement with the defendant. On the other hand, it is only on the defendant exercising his right to go for arbitration that the judicial authority makes the parties to abide by their contract and refers them to arbitration. Section 8 has been reproduced below: “8.Power to refer parties to arbitration where there is an arbitration agreement.- (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

137 138

Supra note, 132, pp 249-50, para 6-001. Supra note, 134, p 86.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 73 under Arbitration Act

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”

Section 89 of the CPC provides for reference of disputes to arbitration, conciliation, Lok Adalat, or mediation. The section comes into play when it appears to the court that there are elements of a settlement which may be acceptable to the parties. However, Supreme Court has held that section 89 of CPC cannot be used to interpret section 8 of Arbitration Act.139

Section 8 of the Arbitration Act mandates a judicial authority before whom an action is brought in a matter which is subject of arbitration agreement to refer the parties to arbitration. As per section the party is required to apply not later than when submitting first statement on the substance of dispute. For purpose of entertaining application it is required to be accompanied by original arbitration agreement or duly certified copy thereof.140

4.2.2. POWER OF COURT TO PASS INTERIM ORDERS For purpose of and in relation to arbitration proceedings, the court has wide powers to pass interim orders for detention, preservation, interim custody and sale of any property- the subject matter of the reference for preservation or inspection of any property or thing. 141 Section 9 of the Arbitration Act, allows party to seek interim measures in select cases. “9.Interim measures etc.by Court.- A party may, before, or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court(i)

for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

(ii)

for an interim measure or protection in respect of any of the following matters, namely:(b) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

139

Sukanya Holding P. Ltd. v. Jayesh H. Pandya, AIR 2003 SC 2252, at p. 2256. Rajasthan State Road Transport Corporation v. Nand Lal Sarawat, 2005 (1) RAJ 659. 141 R S Bachawat, Justice Bachawat‟s Law of Arbitration and Conciliation, 4th Ed., Vol. 1, p 405. 140

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 74 under Arbitration Act

(c) securing the amount in dispute in the arbitration; (d) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (e) interim injunction or the appointment of a receiver; (f) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.”

In Sundaram Finance Ltd. v. NEPC India Ltd.142Supreme Court held that court has jurisdiction under section 9 to pass interim orders even before the commencement of arbitration proceedings and appointment of arbitrator. All that is necessary is that there must be satisfaction on the part of the court that the applicant will take effective steps for commencing arbitral proceedings.

4.2.2.1. STAY OF ARBITRAL PROCEEDINGS The provision of section 9 cannot be invoked by the court to stay arbitral proceedings. The party was seeking relief of interim injunction for restraining proceedings before the Arbitral Tribunal in order to bring about compliance of the recommendations of the Dispute Redressal Board. The court said that such relief could have been obtained from the Tribunal itself and not the court.143

142 143

Sundaram Finance Ltd. v. NEPC India Ltd., AIR 1999 SC 565. Board of Trustees, Chennai Port Trust v. Hindustan Construction Co. Ltd., AIR 2003 NOC 162.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 75 under Arbitration Act

4.2.2.1. EFFECT OF INTERIM RELIEF An interim relief does not put to rest the rights of the parties. Their rights will come up for final adjudication when reference is made. The court has the power to pass interim orders for protection and preservation of the rights of the parties during the period of arbitration. An interim award may become negatived after the award or may become merged with it.144

4.2.3. WHEN INTERIM RELIEF CAN BE GRANTED We will now go through few cases where court of law has mooted upon granting interim relief pursuant to section 9 of the Arbitration Act.

4.2.3.1. LAW OF INJUNCTION In granting injunction u/s 9, the three golden principles under Law of Injunction are prescribed by judicial precedents, i.e., (1) prima facie case; (2) Balance of convenience; and (3) Irreparable loss and injury.145

4.2.3.2. STATUS QUO AS TO PROPERTY Where in a pending suit an order had already been passed directing the parties not to make any alteration in the dimensions of the plot, it was held that no further directions for maintenance of status quo were necessary.146

4.2.3.3. JURISDICTION AS TO ORDER REGARDING SPECIFIC PERFORMANCE The machinery u/s 9 of the Arbitration Act cannot be used for securing an order of specific performance of a contract. That facility can be only exercised by filing of a regular suit under the Specific Relief Act, 1963. It was held by court in B.S.M. Contractors Pvt. Ltd v. Rajasthan State Bridge & Construction Corporation Ltd.147:

144

Arvind Iron & Steel Co. v. Steel Authority of India Ltd., AIR 2000 MP 247. Archcon v. Sewda Construction Co., 2005 (1) Raj 676. 146 Anjoo Sharma v. DIP Educational Charitable Trust, AIR 1999 P&H 294. 147 B.S.M. Contractors Pvt. Ltd v. Rajasthan State Bridge & Construction Corporation Ltd., AIR 1999 Del 117. 145

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 76 under Arbitration Act

“…if the injunction sought by the petitioner was granted it would have the effect of practically granting the relief for specific performance of contract which relief cannot be granted under section 9 of the Act.”

The court has the power to grant a relief of interim nature only. The provisions of the Specific Relief Act, 1963 cannot be used for providing interim orders under section 9 of the Arbitration Act.148

4.2.3.4. APPOINTMENT OF RECIEVER A receiver can be appointed pursuant to section 9(ii)(d) of the Arbitration Act in all cases in which it would appear to the court to be just and convenient to do so. A receiver may be appointed prior to the commencement of legal proceedings and also prior to the commencement of arbitral proceedings.149

4.2.3.5. LIMITATION The right to apply u/s 9 of the Arbitration Act remains available to the extent till the awards becomes enforceable. After the award becomes enforceable, the provisions of Order XXI, CPC becomes applicable. The award becomes a decree and can be executed as such.150

4.2.4. APPOINTMENT OF ARBITRATORS One of the changes introduced by the Arbitration Act, over the previous statute151 enforced is that now instead of court; the parties have to approach the Chief Justice who in turn may designate any person or institution for the purpose. The parties would then have to approach the designated person or institution.152

148

Nepa Ltd. v. Manoj Kumar, AIR 1999 MP 57. Aamir Raza Husain v. Cinevistaas Ltd., (2003) 3 Raj 126( Bom). 150 Delta Construction Systems Ltd. v. Narmada Cement Co. Ltd., (2002) 2 Arb LR 47 (Bom). 151 The Arbitration Act, 1940. 152 Supra note, 140, p 489. 149

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 77 under Arbitration Act

In Denel (Proprietary Limited) v. Govt. of India, Ministry of Defence153 in a Government contract disputes arose as DGOF appointed one 'A' as an arbitrator as per arbitration clause 19(F. Petitioner raised objections due to apprehension of bias. Yet, arbitration proceedings continued and therefore application filed before Principal District Court, whereupon, mandate of the Arbitrator terminated after observing that he failed to act fairly. In accordance with Section 15(2), Court directed DGOF to act as an arbitrator or to appoint a Government servant as an arbitrator. Admittedly, DGOF neither acted as an arbitrator, nor appointed any government servant within 30 days from the date of order. Subsequently petitioner filed a petition on 2.3.2011 for appointment of arbitrator which led respondent to appoint 'S' as arbitrator on 16.3.2011. The issue before the court was whether DGOF, having failed to appoint an arbitrator within 30 days from the date of order, respondent forfeited its right to appoint an arbitrator to which court decided in affirmative and by then respondent had lost its right to appoint an arbitrator. In Dakshin Shelters P. Ltd. v. Geeta S. Johari154 appointment of arbitrator was in question as respondent sent a notice to the petitioner on 10-12-2010, invoking arbitration clause in the agreement for appointment of arbitrator. To which Petitioner replied on 10-1-2011 stating that “the question of appointment of Arbitration does not raise either from your side or from our side as there is no arbitral dispute to be decided by the arbitrator”. Court observed that it was clear that the petitioner declined to appoint its arbitrator in accordance to agreement. Court further held that the stance of the petitioner amounted to failure on its part to appoint its arbitrator on receipt of the request to do so from the respondent and the Designate Judge committed no error in nominating an arbitrator on behalf of petitioner.

4.2.5. TERMINATION OF THE MANDATE OF ARBITRATOR The court could on the application of any party to a reference u/s 11(1) of the Arbitration Act, 1940 remove an arbitrator or umpire who failed to use all reasonable dispatch in entering and proceeding with the reference, including where reference to the umpire was necessary by giving notice of that fact to the parties and the umpire and making the award.

153 154

Denel (Proprietary Limited) v. Govt. of India, Ministry of Defence, ILC 2012 SC ARB. Dakshin Shelters P. Ltd. v. Geeta S. Johari, ILC-2012 SC ARB.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 78 under Arbitration Act

The Arbitration Act approaches the matter differently. Section 14 of the said act provides for the circumstances in which the mandate of the arbitrator is to terminate. It says that the mandate of an arbitrator will end when it becomes impossible for him to perform his functions de facto or de jure or for some other reasons he fails to act without undue delay or withdrawn from office or the parties agree to terminate his mandate. If any dispute arises as to his inability de facto or de jure to act or about the failure to act without undue delay, the parties may decide the dispute by their agreement or through a court decision.155

The said section is reproduced below: “14.Failure or impossibility to act.- (1) The mandate of an arbitrator shall terminate if--a. he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and b. he withdraws from his office or the parties agree to the termination of his mandate. 2. If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. 3. If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.”

4.2.6. SETTING ASIDE AWARDS The grounds and procedure for setting aside an award are to be found in section 34 of the Arbitration Act. The said section is as follows: “34.Application for setting aside arbitral award.-

155

Supra note, 140, p 639.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 79 under Arbitration Act

(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if--- (a) the party making the application furnishes proof that (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii)the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matter beyond the scope of the submission to arbitration: 2) Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (i) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Past; or (b) the Court finds that (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. 3) Explanation.---Without prejudice to the generality of sub-clause (ii), it is hereby declared , for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced of affected by fraud or corruption or was in violation of section 75 or section 81.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 80 under Arbitration Act

(1) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award, or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: 4) Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months if may entertain the application within a further period of thirty days, but not thereafter. (1) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.”

Section 30 of the Arbitration Act, 1940 contained the grounds of setting aside awards. It carried only here grounds as against the present most complex section 34 of the Arbitration Act. The reason for complexity is that the power of the court to order remission of award has been brought into the same section which deals with setting aside. In addition some of the grounds which were available under the preceding act for challenging the arbitrator and its procedure have also been enacted as a part of the grounds for setting aside. Apart from this, the procedure for recourse against the award has also been stated.156

4.2.6.1. CONSTITUTIONAL VALIDITY OF SECTION 34 The constitutional validity of section 34 of the said act was challenged because of the absence of appeal against an award. The High Court of Delhi refused the plea. The court said157: “There is no compulsion and or imposition by any statute which compels the parties to resort to arbitration in case of dispute between them. The constitutionality of provision of section 34 is to be examined keeping in view this important and relevant 156 157

Supra note, 140, pp 936-37. TPI Ltd. v. UOI, (2001) 3 RAJ 70: (2001) 2 AD (Del) 21.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 81 under Arbitration Act

aspect in mind. When the parties have chosen the forum of arbitration and the arbitrator of their choice, it is necessary to make a provision for appeal against the award rendered by the arbitrator. The legislature has the power to specify the grounds on which awards can be challenged and it would be permissible for the party to challenge the award only on those grounds and no others.”

4.2.6.2. SUO MOTU POWER OF SETTING ASIDE An award cannot be set aside by the court suo motu on any of the specified grounds if the objection is taken in an objection petition filed after the expiry of the prescribed period of limitation.158 All forms of invalidity of award including invalidity of the reference159 or invalidity on the grounds that the award is bogus160 were covered by the words “otherwise invalid” occurring in section 30(c) of the Arbitration Act, 1940.161

4.2.7. DUE PROCEDURE: FOR SETTING ASIDE AWARD The provisions of Order I Rule 8 of the CPC apply to proceedings to set aside the award. The applicant is entitled to make use of the rule when the respondents are numerous and are in the same interest. The court has held that a clause as to exclusive jurisdiction of a particular court would come into play only after the validity of agreement is established.162

4.2.8. APPLICABILITY OF PART 1 ON FOREIGN SEATED ARBITRATIONS Applicability of part 1 on foreign seated arbitration was an incessant mooting point among legal jurists, and the subsidiary issues involved were governing law, tacit law, etc., but all these were put on hold by Supreme Court judgment in Bhatia International v. Bulk Trading SA,163 which held in affirmative that part 1 which initially thought to be applicable only on domestic arbitration was even applicable on foreign seated arbitrations. However, recent

158

Madan Lal v. Sundar Lal, AIR 1967 SC 1233. UOI v. Om Prakash, AIR 1976 SC 1745. 160 Umadutt Nemani v. Chandrarao G. Kadam, AIR 1947 Bom 944. 161 Supra note, 158. 162 Ram Alam Lal v. Dukhan, AIR 1950 All 427. 163 Bhatia International v. Bulk Trading SA, AIR 2002 SC 1432. 159

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 82 under Arbitration Act

judgment rendered by Supreme Court has prospectively overruled the same.164 It is pertinent for us to go through its facts and rationale behind the judgment. We will also try to differentiate it from the Bhatia International case.

4.2.8.1. BALCO V. KAISER: FACTS 

An agreement dated 22 April, 1993 (“Agreement”) was executed between BALCO and Kaiser, under which Kaiser was to supply and install a computer based system at BALCO‟s premises.



As per the arbitration clause in the Agreement, any dispute under the Agreement would be settled in accordance with the English Arbitration Law and the venue of the proceedings would be London. The Agreement further stated that the governing law with respect to the Agreement was Indian law; however, arbitration proceedings were to be governed and conducted in accordance with English Law.



Disputes arose and were duly referred to arbitration in England. The arbitral tribunal passed two awards in England which were sought to be challenged in India u/s. 34 of the Act in the district court at Bilaspur. Successive orders of the district court and the High Court of Chhattisgarh rejected the appeals. Therefore, BALCO appealed to the Supreme Court (“Court”).



Another significant issue to be adjudged, in the case of Bharti Shipyard Ltd. v/s Ferrostaal AG & Anr. (clubbed together with the above petition for hearing), was applicability of section 9 (interim measures) of the Act. The parties had initially agreed to get their disputes settled through arbitral process under the Rules of Arbitration of the International Chamber of Commerce, at Paris, subsequently, mutually agreed on 29 November, 2010 to arbitration under the Rules of London Maritime Arbitrators Association, in London.



During the pendency of arbitration proceedings in London, an injunction application was made by appellants, Bharti Shipyard Ltd., before the District Judge at Mangalore, against the encashment of refund bank guarantees issued under the contract (u/s 9 of the Act). The applications were allowed and were consequently challenged in High Court of Bangalore. The Bangalore High Court set aside the application so allowed on

164

Bharat Aluminium Company and Ors. v. Kaiser Aluminium Technical Service, Inc. and Ors., 2012 (8) SCALE 333.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 83 under Arbitration Act

the grounds that the appellants had an alternative remedy (u/s 44 of the Act, being interim reliefs for international arbitration) in the courts of London and further since the substantive law governing the contract, as well as the arbitration agreement, is English law, the English courts should be approached. This was also challenged in this petition to the Supreme Court. 

The appeal filed by Bharat Aluminum Co. before the Division Bench of the Supreme Court was placed for hearing before a three Judge Bench, as one of the judges in the Division Bench found that judgment in Bhatia International and Venture Global was unsound and the other judge disagreed with that observation.

4.2.8.2. ISSUES INVOLVED Section 2(2) of the Arbitration and Conciliation Act, 1996 (the “Act”), contained in Part I of the Act, states that “This Part shall apply where the place of arbitration is in India.” In comparison, Article 1(2) of the UNCITRAL Model Law provides: “The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the place of arbitration is in the territory of this State." The central issue therefore that was before the two judge Bench of the Supreme Court in Bhatia and before the Constitutional Bench in BALCO, was whether the exclusion of the word “only” from the Indian Statute gave rise to the implication that Part I of the Act would apply even in some situations where the arbitration was conducted outside India.

If Part I did apply to arbitrations conducted abroad, the most significant consequences would have been that Indian Courts would be competent to : 

Set aside foreign awards pursuant to Section 34 of the Act.



Grant interim relief pursuant to Section 9 of the Act.



Appoint an arbitrator pursuant to Section 11 of the Act.

4.2.8.3. JUDGMENT The judgment in detail analyses, the provisions of various sections in the Act and applicability of Part I of the Act to international commercial arbitrations. Some significant issues dealt with in the judgment are as follows: Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 84 under Arbitration Act

It was observed that the object of section 2(7) of the Act is to distinguish the domestic award (Part I of the Act) from the „foreign award‟ (Part II of the Act); and not to distinguish the „domestic award‟ from an „international award‟ rendered in India. The term „domestic award‟ means an award made in India whether in a purely domestic context, (i.e., domestically rendered award in a domestic arbitration or in the international arbitration which awards are liable to be challenged u/s 34 and are enforceable u/s 36 of the Act). It was held that there is a clear distinction between Part I and Part II as being applicable in completely different fields and with no overlapping provisions. The Court has also drawn a distinction between a „seat‟ and „venue‟ which would be quite crucial in the event, the arbitration agreement designates a foreign country as the „seat‟/ „place‟ of the arbitration and also select the Act as the curial law/ law governing the arbitration proceedings. The Court further clarified that the choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings. It would, therefore, follow that if the arbitration agreement is found or held to provide for a seat / place of arbitration outside India, then even if the contract specifies that the Act shall govern the arbitration proceedings, Part I of the Act would not be applicable or shall not enable Indian courts to exercise supervisory jurisdiction over the arbitration or the award. It would only mean that the parties have contractually imported from the Act, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the English procedural law or curial law. Therefore, it can be inferred that Part I applies only to arbitrations having their seat / place in India.

The Court dissented with the observations made in Bhatia International case and further observed on a logical construction of the Act, that the Indian Courts do not have the power to grant interim measures when the seat of arbitration is outside India. A bare perusal of Section 9 of the Act would clearly show that it relates to interim measures before or during arbitral proceedings or at any time after the making of the arbitral award, but before it is enforced in accordance with Section 36 (enforcement of domestic awards). Therefore, the arbitral proceedings prior to the award contemplated u/s 36 can only relate to arbitrations which take place in India.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 85 under Arbitration Act

The Court further held that in foreign related international commercial arbitration, no application for interim relief will be maintainable in India, either by arbitration or by filing a suit. This judgment has overruled the Bhatia Judgment.

4.2.8.4. COMPARATIVE ANALYSIS OF BALCO AND BHATIA JUDGMENT Bhatia Argument

1

BALCO Argument

The word “only” was omitted from Relying on the discussions at the time of section 2(2) and such omission was drafting Article 1(2) of the Model Law, not unintentional. Such an omission the Supreme Court held that the use of would be rendered redundant if the “only” was to ensure that the exceptions to word “only” was to be read in to the Article 1(2) alone, i.e. Articles 8, 9, 35 & Section.

36, had extra territorial operation. Since Section 2(2) of the Act, did not make any reference to these exceptions, there was no requirement to use the term “only”. Similar provisions exist in Switzerland and UK, and in the Statutes of these countries as well the word “only” has been deleted.

2

Section 1(2) states: “It extends to the The proviso is necessary to update the whole of India: Provided that Parts I, Jammu and Kashmir Act, 1945, which III and IV shall extend to the State of does not contain any provision relating to Jammu and Kashmir only in so far as International Commercial Arbitration. The they

relate

to

international Proviso

to

Section

1(2)

commercial arbitration or, as the case incorporates those provisions

therefore of the

may be, international commercial Arbitration and Conciliation Act, 1996 conciliation.”

which relate to international commercial arbitrations into the Jammu and Kashmir

The anomalous situation that would legislation.

Owing

to

Jammu

and

arise if it was held that Part I only Kashmir‟s special constitutional status, all Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 86 under Arbitration Act

applies if the arbitration is held in other aspects of arbitration in that State are India is that Part I would apply to covered by a special statute (originally the Jammu and Kashmir with respect to 1945 Act and now by the Jammu & all

international

commercial Kashmir Arbitration and Conciliation Act,

arbitrations but Part I would not apply 1997). to the rest of India if the arbitration takes place out of India.

3

Sections 2(4) and 2(5) state: “(4) This Section 2(2) does not conflict with section Part except sub-section (1) of section 2(4) or with section 2(5). Section 2(5) only 40, sections 41 and 43 shall apply to means that the Act applies to all every arbitration under any other arbitrations where it would be otherwise enactment for the time being in force, applicable. Section 2(5) does not indicate as if the arbitration were pursuant to that it would apply to arbitrations which an arbitration agreement and as if that are not held in India. other enactment were an arbitration agreement, except in so far as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder. (5) Subject to the provisions of sub -section (4), and save in so far as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arb –itrations and to all proceedings relating thereto.”

The reasoning in Bhatia was that if Part I does not apply to foreign arbitrations,

there

is

a

conflict

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 87 under Arbitration Act

between Section 2(2) and Section 2(5), which is made subject to Section 2(4) alone and not Section 2(2). Consequently, Section 2(2) would have to be interpreted in such a manner that it did not contradict Section 2(5).

4

If Part I does not apply, an award of The Parliament has intentionally not Tribunal in a country that is party to provided a mechanism for enforcement of neither the New York nor the Geneva a non-Convention award by not including Convention will be unenforceable in such an award within the definition of a India because it is neither a domestic “foreign award” in Sections 44 and 53. or a foreign award, and this “lacuna” That being so, Courts cannot provide an could not have been intended by enforcement mechanism for such awards Parliament.

by deeming them to be domestic awards. There is therefore no lacuna that needs to be filled.

5

A party is entirely remediless if Part I The parties will have a remedy before the does

not

apply

to

arbitrations Courts at the seat of arbitration. Merely,

conducted outside India as the party because this remedy may be onerous does would not be able to apply for interim not mean that the party is left remediless. relief in India even though the Since the parties voluntarily chose the properties and assets are in India. seat, they are deemed to have voluntarily Thus a party may not be able to get chosen the consequences of such a any interim relief at all.

selection. In arguendo that the parties are left remediless, that needs to be addressed by the Legislature and not the Courts.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 88 under Arbitration Act

6

If Part I did not apply, there was no The Supreme Court, while addressing this need to have used the words “where argument held: “The section merely shows the place of arbitration is in India” in that the legislature has segregated the Section 28(1) because if Part I does domestic and international arbitration. not apply when the seat is abroad, Therefore, to suit India, conflict of law neither will section 28.

rules have been suitably modified, where the arbitration is in India. This will not apply where the seat is outside India. In that event, the conflict of laws rules of the country in which the arbitration takes place would have to be applied. Therefore, in our opinion, the emphasis placed on the expression “where the place of arbitration is situated in India”, by the learned senior counsel for the appellants, is not indicative of the fact that the intention of Parliament was to give an extra-territorial operation to Part I of the Arbitration Act, 1996.”

7

Use of the phrase “notwithstanding The Supreme Court held: “It appears that anything contained in Part I, or in the the Parliament in order to avoid any Code of Civil Procedure, 1908”, in confusion

has

used

the

expression

Section 45, which is contained in Part “notwithstanding anything contained in II of the Act indicates that Part I and Part I” out of abundant caution, i.e., ex ab Part II can apply concurrently in undanti cautela.” certain situations and since Part II only applies where the place of arbitration is abroad, it would mean that Part I could apply in certain situations

where

the

place

of

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 89 under Arbitration Act

arbitration is foreign.

4.2.8.5. CONCLUSION AND IMPLICATIONS 

This judgment shall be applicable prospectively (i.e. to all the arbitration agreements executed after September 6, 2012).



As a result of this judgment, the seat of arbitration has now gained paramount importance for determining the applicability of Part I of the Act.



The judgment also draws a distinction between the seat of arbitration and the place of arbitration. It therefore contemplates a situation where even though the parties have provided for a particular place for arbitration, that some of the proceedings themselves may be conducted in other territories as may be convenient to all.



This judgment also ensures that foreign award (i.e. an award passed outside India) can no longer be challenged by an Indian entity u/s 34 of the Act and that the party which seeks to resist the enforcement of the award has to prove one or more grounds set out in section 48 of the Act.



No interim relief u/s 9 of the Act or order XXXIX of the CPC (both pertaining to injunction) would be available where the seat of arbitration is outside India. As interim orders from foreign courts and arbitration tribunals are not enforceable in India such a situation would leave foreign parties remediless.

Vaish Associates Advocates | 4. 2. Relevant clauses: Legal Recourse as provided 90 under Arbitration Act

CHAPTER V NEGOTIABLE INSTRUMENT ACT, 1881 „Negotiable instrument‟ means a written or signed unconditional promise or order to pay a specified sum of money on demand or at a definite time payable to order or bearer.165 A negotiable instrument is one which embodies the characteristic of negotiability. To be a negotiable instrument a document should contain substantially an order or a promise to pay a definite sum of money and no more.166 A document which is a receipt but contains no such promise is not a negotiable instrument.167

5.1.

IMPORTANT DEFINITIONS

5.1.1. PROMISSORY NOTE Promissory note has been defined along with illustration in section 4 of the Negotiable Instrument Act, 1881 as follows: “4. Promissory note

A "promissory note" is an instrument in writing (not being a bank-note or a currencynote) containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

Illustrations

A signs instruments in the following terms: a. "I promise to Pay B or order Rs.500". b. "I acknowledge myself to be indebted to B in Rs.1,000, to be paid on demand, for value received." c. "Mr B I.O.U Rs.1,000." d. "I promise to pay B Rs. 500 and all other sums which shall be due to him." 165

S.P. Sen Gupta, Sengupta on Negotiable Instrument Act, 1881, 3rd Ed., 2008, p 13. 166 Akbar Khan v. Attar Singh, AIR 1936 PC 171. 167 Ibid.; Jones & Co. v. Coventry, (1909) 2 KB 1029.

Vaish Associates Advocates | Important Definitions 91

e. "I promise to pay B Rs. 500 first deducting there out any money which he may owe me." f. I promise to pay B Rs. 500 seven days after my marriage with C. g. I promise to pay B Rs. 500 on D's death, provided D leaves me enough to pay that sum. h. I promise to pay B Rs. 500 and to deliver to him my black horse on lst January next. The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (f), (g) and (h) are not promissory notes.”

5.1.1.1.ESSENTIALS OF A PROMISSORY NOTE The promissory note168:

a) Must be in writing; b) Must be signed by the maker; c) Must contain an undertaking to pay; d) Must be a promise to pay unconditionally on demand or at a fixed or determinable future time; e) Payee must be certain; f) Maker must be certain; g) Sum payable must be certain h) Must contain a promise to pay money and money only; i) Must be payable to or to the order of a certain person or to the bearer.

5.1.2. BILL OF EXCHANGE Section 5 of the Negotiable Instrument Act, 1881 defines bill of exchange. The said section is reproduced below:

168

Khirod Nath v. Arjuna Panda, AIR 1972 Ori 95; Santsingh v. Madandas, AIR 1976 MP 144; Bahadurrinisa Begum v. Vasudeva, AIR 1967 AP 123; Gopidas v. Ramdeo, AIR 1957 Raj 360; Goel Industries v. Om Prokash, 1 (1993) BC 553 MP; Kochuthressia v. Devdas, (1988) 4 Bank J 636 Ker.

Vaish Associates Advocates | Important Definitions 92

“5. Bill of exchange: A “bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

A promise or order to pay is not "conditional" within the meaning of this section and section 4, by reason of the time for payment of the amount or any installment thereof being expressed to be on the lapse of a certain period after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain

The sum payable may be "certain", within the meaning of this section and section 4, although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an installment, the balance unpaid shall become due.

The person to whom it is clear that the direction is given or that payment is to be made may be "certain person", within the meaning of this section and section 4, although he is misnamed or designated by description only.”

First part of the above mentioned section defines bill of exchange and also lays down its essential requisites. Certain laws relating to promissory notes apply mutatis mutandis to bill of exchange.169

Bills of exchange, which are also called drafts, are instruments by means of which a series of debts may be discharged without the use of the cash, or payment postponed by the granting of credit; they are used for both domestic transactions and international trade.170

169 170

Supra note, 164, p 103. Ibid.

Vaish Associates Advocates | Important Definitions 93

5.1.3. CHEQUE “„6. “Cheque”.-A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form. Explanation I.—For the purposes of this section, the expression— (a) “a cheque in the electronic form” means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system; (b) “a truncated cheque” means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing. Explanation II.—For the purposes of this section, the expression “clearing house” means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India.‟.” „Cheque‟ as defined in above section is an inclusive definition but at the same time it is exhaustive as is evident from absence of the word “means”. Not only the traditional paper cheque but also a cheque in the electronic form and the electronic image of a truncated cheque come within the definition of cheque.171 5.1.4. DRAWER, DRAWEE, ACCEPTOR, PAYEE, ACCEPTOR FOR HONOUR Section 7 of the said act covers the above mentioned terms as follows: “7. "Drawer", "drawee"

The maker of a bill of exchange or cheque is called the "drawer"; the person thereby directed to pay is called the "drawee".

171

Ibid., at p 146.

Vaish Associates Advocates | Important Definitions 94

"Drawee in case of need": When the bill or in any endorsement thereon the name of any person is given in addition to the drawee to be resorted to in case of need, such person is called a "drawee in case of need".

"Acceptor": After the drawee of a bill has signed his assent upon the bill, or, if there are more parts thereof than one, upon one of such parts, and delivered the same, or given notice of such signing to the holder or to some person on his behalf, he is called the "acceptor".

"Acceptor for honor": 8When a bill of exchange has been noted or protested for nonacceptance or for better security, and any person accepts it supra protest for honor of the drawer or of any one of the endorser, such person is called an "acceptor for honor".

"Payee" : The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the "payee".”

5.2. PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES Section 138 to 142 are incorporated in Negotiable Instruments Act,1881 with a view to encourage the culture of use of cheques and enhancing the credibility of the instrument. The Negotiable Instrument Act makes the drawer of cheque liable for penalties in case of dishonour of cheques due to insufficiency of funds or for the reason that it exceeds the arrangements made by the drawer.172 The said Act also contains sufficient safe guards to protect the drawer of cheques by giving him an opportunity to make good the payment of dishonoured cheque when a demand is made by the payee.

5.2.1. OFFENCES UNDER NEGOTIABLE INSTRUMENT ACT, 1881 Offence under Section 138 of the said Act shall be deemed to have been committed, if the following conditions are satisfied:

172

G S Rao, Critical Study of Dishonour of Cheques Under Negotiable Instruments Act,1881, 1 July, 2011. Data retrieved from, www.caclubindia.com/articles/critical-study-of-dishonour-of-cheques-under-negotiableinstruments-act-1881-10283.asp#.USYKSKWLBVp, on 21st February, 2012.

Vaish Associates Advocates | Important Definitions 95

a) Cheque must have been drawn by a person(the drawer) in favour of a payee on his bank account for making payment b) Such payment must be either in whole or partial discharge of a legally enforceable debt c) Cheque must have been returned by the Banker to the payee or holder in due course due to insufficient balance in the account of the drawer or it exceeds the arrangement he had with the bank, Proviso requires fulfillment following additional conditions: a) Cheque must be presented within a period of 6 months from the date of cheque or its validity period whichever is earlier.173 b) The payee or holder in due course must demand payment of the cheque amount by written notice within 15 days of receipt of notice c) Such notice must be issued within 30 days from the date of receipt of intimation of dishonour from bank and d) The drawer of cheque fails to pay demanded sum within 15 days from the date of receipt of the notice

The punishment provided for the offence u/s 138 is imprisonment for a term which may extend to a maximum period of 2 years or with a fine which may extend to a maximum of twice the amount of the cheque or with both.

5.2.1.1. POSTDATED CHEQUE AND ITS DISHONOR Every cheque shall be presumed to be drawn on the date mentioned on the face of the cheque. A postdated cheque is a bill of exchange when it is written or drawn and it is not payable on demand until the date shown on the cheque. If postdated cheque is dishonored because of its presentation before it became payable on demand, no offence u/s 138 can be alleged. The controversy is settled by the decision of the supreme court in Anil Kumar Sawhney v. Gulshan Rai.174 In this case Supreme Court held that a postdated cheque is a bill of exchange and it becomes a cheque under the said act only on the date which is written on the said cheque and period of six months has to be reckoned from the date of the cheque. 173

Here it is pertinent to note RBI circular RBI/2011-12/270 RPCD.CO RCB. AML.BC.No.32/07.40.00/201112, which explicitly provides for presentation of cheques/draft/pay orders/bankers cheque within 3 months. The said circular can be retrieved from, http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=6832. 174 Anil Kumar Sawhney v. Gulshan Rai, (1993) 4 SCC 424.

Vaish Associates Advocates | Important Definitions 96

5.2.1.2.JURISDICTION There is ambiguity about the place where criminal compliant can be filed under the said act, as the act is silent on this matter. Since the Criminal courts are approached, the issue needs to be examined from the point of view of the Criminal Procedure Code. 175 Section 177 of CrPC provides that every offence shall ordinarily be inquired into and tried by a Court within whose local jurisdiction it was committed. Section 178 provides that offence may be tried at by a court having jurisdiction over any of the local areas where offence is committed. It is possible that an offence may be committed in several local areas or partly in one area and partly in another area. It is also possible that some times offence may consist of several acts done in different areas In all the above situations, the court having jurisdiction over any of such local areas may try the offence. The judgment of supreme court in K Bhaskaran v. Sankaran Vaidyaa Balan and Anr,176 dealt with this issue elaborately. The Hon‟ble Supreme court opined that offence can be completed only with concatenation of a number of acts, namely, drawing of cheque, presentation of cheque, returning of the cheque by the bank, notice by payee and failure of drawer of cheque within 15 days of receipt of notice. Any one of the courts under whose jurisdiction the above acts have taken place can try the offence. In other words complainant can file compliant in any one of the courts where the cause of arises or acts have been committed. In Harman Electronics (P) Ltd. and Anr. v. National Panasonic India Ltd,177 the Hon‟ble supreme court had the occasion to examine the issue of jurisdiction again. In this case the appellant is a resident of Chandigarh issued a cheque which was dishonored. The cheque was issued at Chandigarh where the complainant had a branch and was presented at Chandigarh. Notice demanding payment however was issued by the complainant from its Head office at Delhi to the accused‟s office at Chandigarh. On failure to respond to the notice, a complaint was filed in Delhi. Both lower court and High court have placed reliance on K Bhaskaran v. Sankaran Vaidyaa Balan and Anr.178 case and held that Delhi court also has jurisdiction. The Appellant/Respondent in appeal contended that Chandigarh court had jurisdiction to try the offence but his appeal was dismissed. But in appeal, the Supreme Court held that a court 175

Supra note, 171. K Bhaskaran v. Sankaran Vaidyaa Balan and Anr, (1999) 7 SCC 510. 177 Harman Electronics (P) Ltd. and Anr. v. National Panasonic India Ltd, (2009)1 Comp LJ 29 (SC). 178 Supra note, 175. 176

Vaish Associates Advocates | Important Definitions 97

derives jurisdiction when a cause of action arises. Jurisdiction cannot be conferred for any act of omission or commission on the part of the accused. Issuance of notice would not give rise to cause of action but communication of the notice would and therefore Delhi High court would not have jurisdiction and it directed for transfer of the case pending in Delhi to Chandigarh court.

5.2.1.3. SUCCESSIVE PRESENTATION OF CHEQUE AND CAUSE OF ACTION

When a cheque is dishonored, the drawer is informed and he is advised to present the cheque again as in the meantime so that he must have arranged for funds or some credits have come into his accounts just after dishonour or made arrangement with his bankers. In Sadanandan Bhadrant v. Madhavan Sunil Kumar,179 Supreme Court ruled that a cheque can be presented any number of times during its validity period by the payee. However on each presentation of the cheque and its dishonour, a fresh right accrues in his favour and not cause of action to file complaint. Once he chooses to give a notice u/s138(b) and the drawer fails to pay within the stipulated time, the cause of action for filing the complaint will arise immediately on the following day of expiry of 15 days‟ notice period and remains alive till 30 days. Complaint has to be filed before expiry of 30 days from the date of expiry of notice period.

If a complaint is filed before expiry of 15 days‟ notice period, it becomes a premature complaint and it will be dismissed. If complaint is filed after expiry of 30 days complaint will be dismissed on the ground of limitation. So one has to be clear about cause of action and filing of complaint before the limitation period runs out

5.2.1.3. PRESUMPTION AS TO LEGALLY ENFORCEABLE DEBT Section 139 says that it shall be presumed, unless the contrary is proved, that the holder of a cheque, received the cheque for discharge, in whole or in part, or any debt or other liability. Supreme court reiterated the contents of section 139 in the case of KN Bena v. Muniyappan

179

Sadanandan Bhadrant v. Madhavan Sunil Kumar, AIR 1998 SC 3043.

Vaish Associates Advocates | Important Definitions 98

& Anr.,180 that the onus is on the accused to prove by cogent evidence that there was no debt or liability. 5.2.1.4. INSTRUCTIONS IN BANK’S MEMO The payee bank while returning the cheque has to give reason for dishonour. Generally it mentions reasons such as “exceeds the arrangement” or “refer to drawer”. These reasons of dishonour will lead to a presumption of dishonour of cheque. The supreme court in the case of Modi Cements Ltd. v. M/s V Kuchikumar Nandi181 ruled that once the cheque is issued by the drawer, a presumption under S. 139 in favour of holder must follow and merely because the drawer issues a notice to the drawee or to the Bank for stoppage of the payment, it will not preclude an action under Section 138 by the drawee or the holder of a cheque in due course. This judgment overruled it previous Judgment in MMTC Ltd & Anr. v. Ms. Medchal Chemicals & Pharma (P) Ltd..182

5.2.1.5. NOTICE AND ITS REQUIREMENTS The Negotiable Instrument Act is silent about the manner of service of notice. However, sending by notice by registered post is desirable as it will be easier to prove service of notice.183 In SIL Import, M/s. USA v. M/s. Exim Aides Silk Exporters,184 the Supreme court ruled that if notice envisaged in cl. (b) of the proviso to S. 138 was transmitted by Fax, it would be a compliance with the legal requirement therefore notice demanding payment can be sent by Fax is also equally acceptable. If notice is sent by the payee at the correct address of the drawer, it would be deemed to be a proper service of notice.

180

KN Bena v. Muniyappan & Anr., AIR 2001 SC 2895. Modi Cements Ltd. v. M/s V Kuchikumar Nandi, AIR SC 1998 1057. 182 MMTC Ltd & Anr. v. M/s. Medchal Chemicals & Pharma (P) Ltd., AIR 2002 SC 182. 183 Supra note, 171. 184 SIL Import, M/s. USA v. M/s. Exim Aides Silk Exporters, AIR 1999 SC 1609. 181

Vaish Associates Advocates | Important Definitions 99

5.2.1.6. PRESUMPTION AS TO CONSIDERATION In the case of AV Murthy v. B S Nagabasavanna,185 held that dismissal of a complaint at the threshold on the ground that the debt is time barred is erroneous and not proper as consideration is presumed u/s 118 of Negotiable Instrument Act.

5.2.1.7.DISHONOR OF CHEQUES BY COMPANIES UNDER SICA Supreme Court in the case of Kusum Ingots & alloys Ltd. v. Pennar Patterson Securities Ltd. & Ors.186 held that criminal prosecution for dishonour cheques is neither a proceeding for recovery of money nor for enforcement of a security. Prosecution against the Directors of Sick companies would not be suspended merely on the ground that proceedings against sick companies are suspended u/s 22 of The Sick Industrial Companies Act, 1985.

5.2.1.8.CHEQUE DISHNOUR AND DIRECTORS LIABILITY: If a complaint is filed against a company and its directors, presumption will be drawn as per section 141 of the said act against them unless they rebut this presumption. Normally it is the Managing Director who looks after the day to day affairs is supposed to be in the knowledge of the affairs of the company on day to day basis. Once a notice is served on all directors, the burden is on them to show that they are not liable to be convicted or it will be a good defense, if they can show that at the relevant time they were not in-charge of the affairs of the company. Same is the case with the partnership firm.187 Keeping in view the risk, Nominee Directors of Central or State government or a Financial Corporation owned or controlled by the Central Government or the State Government, as the case may be, are exempted from prosecution under the said act.188

5.2.1.9.COMPOUNDING OF OFFENCE Section 147 provides that notwithstanding anything contained in the CrPC every offence punishable under Negotiable Instrument Act shall be compoundable.

185

AV Murthy v. B S Nagabasavanna, 2002 Cr LJ 1449 SC. Kusum Ingots & Alloys Ltd. v. Pennar Patterson Securities Ltd. & Ors., AIR 2000 SC 954. 187 Supra note, 171. 188 Ibid. 186

Vaish Associates Advocates | Important Definitions 100

CHAPTER VI CONCLUSION Legal Remedies is a very vast topic and to cover it in a span of 21 days would be injustice to such a topic, hence the topic was restricted to four statutory enactments, i.e., Code of Civil Procedure, 1908, Negotiable Instrument Act, 1881, Specific Relief Act, 1963 and The Arbitration and Conciliation Act, 1996.

These enactments provide for legal recourse to persons which can be exercised by respective persons in case of any infringement as specified under the relevant statute. As CPC is an adjective law, it does not itself confer any rights on persons, but it facilitates in implementing those rights by providing way to achieve justice.

Arbitration is a front runner in Alternate Dispute Resolution mechanism, and as Indian economy is booming in addition to already over-burdened judiciary, industries would unquestionably start resorting to arbitration with even more enthusiasm. Further with the recent BALCO judgment (discussed above), hopefully industries won‟t anymore shy away from venturing into modern dispute resolution. International Commercial Arbitration would soon pick up the pace, and with few legislative reforms we might be able to replicate the success of states like Singapore which have developed themselves into impartial Arbitration venues. Specific Relief Act is a source book for legal remedies. The said act is a code itself and provides various situations in which specific relief can be sought from court of law. Negotiable Instrument Act on the other hand provides remedies as to transaction involving negotiable instruments like cheque, bill payable, etc. we have dealt with the remedies available to the innocent parties in case of any such happening. Relevant provision of CrPC has also been elaborated in the fifth Chapter.

Despite restricting topic to four statutes, this topic was too wide to cover in a single project, hence an outline is drawn in the project. This project will give you basic idea as to recourse available to person on various occasions.

Vaish Associates Advocates | Important Definitions 101