The Calcutta High Court has clarified an important legal point regarding the scope of arbitration under the Specific Relief Act, 1963. Justice Gaurang Kanth, while deciding a writ petition, ruled that although disputes related to the cancellation of written agreements under Section 31 of the Specific Relief Act are arbitrable, any arbitral award passed in such cases is binding only on the parties directly involved and not on third parties who were not part of the arbitration process.
The ruling came in the case of Jagat Singh Manot Versus The Municipal Commissioner, Kolkata Municipal Corporation And Others [W.P.O. 503 OF 2024]. The judgment was delivered on April 10, 2025.
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The case arose when the petitioner, Jagat Singh Manot, approached the court challenging a letter dated April 22, 2024, issued by the Kolkata Municipal Corporation (KMC). Through this letter, the corporation refused to allow the de-amalgamation of property located at 202/4, Harish Mukherjee Road, Kolkata. The refusal was based on the existence of arbitral awards, and the KMC advised the petitioner to first cancel the registered deed of exchange before seeking de-amalgamation.
The background of the dispute reveals that after amalgamating the premises, the parties signed a development agreement on November 18, 2013, with two other parties, which was properly registered. The Municipal Corporation later approved the building plan based on this agreement.
However, disputes emerged involving the petitioner, his wife, and other respondents (Nos. 5-11) regarding the development agreement. Since the agreement contained an arbitration clause, the matter was referred to arbitration.
A joint petition was later filed before the Sole Arbitrator under Section 33(1) of the Arbitration and Conciliation Act, 1996, requesting rectification of an earlier arbitral award dated February 16, 2018. The original award had cancelled the deed of exchange. The arbitrator, exercising powers under Sections 33(5) and 30 of the Arbitration Act, issued an amended award on December 5, 2018.
Following these awards, the petitioner and his wife filed a formal request for de-amalgamation with the Municipal Corporation on February 19, 2024. However, the Municipal Corporation rejected the request, stating through its letter dated April 22, 2024, that the deed of exchange remained valid unless legally cancelled, and advised the petitioner to take appropriate steps to cancel the registered deed.
The petitioner approached the High Court, arguing that disputes about cancellation of an agreement under Section 31 of the Specific Relief Act are personal (in personam) and thus suitable for arbitration. The petitioner also contended that the amended award dated December 5, 2018, was legally valid under Section 33 of the Arbitration Act.
On the other hand, the respondents argued that the arbitration clause was included only in the development agreement, not in the deed of exchange, meaning the arbitrator lacked jurisdiction to cancel the deed. They claimed the awards were non-binding on third parties, including the Municipal Corporation, which was not a party to the arbitration.
The respondents also highlighted that since the deed of exchange was a registered legal document, it could only be cancelled by following the correct procedure under Section 17(b) of the Registration Act, not through arbitration.
During its observation, the court stressed that under Indian law, property ownership can be transferred through a registered deed of exchange between two or more parties.
The court also referred to Section 31(1) of the Specific Relief Act, which allows for cancellation of an instrument only in two situations:
- If the instrument is void or voidable against the person seeking cancellation.
- If both parties mutually agree to cancel the deed.
The court noted:
“Where an instrument is void or voidable, a person must approach the court and file a suit seeking a declaration and cancellation.”
In this case, the deed of exchange dated March 26, 2012, was a registered and valid agreement between the petitioner, his wife, and respondents 5-11. This deed created legal ownership rights for all involved and could not be set aside casually.
