Cancellation of instruments

 

Cancellation of instruments

Introduction

The legal system in India provides for certain duties and obligations which are to be performed by each party to a contract. A party found in breach of any such duty or obligation is punishable under law. Along with these duties, the laws also provide for certain reliefs to the parties to a contract, in cases where a contract can be held questionable under law. One such relief is the Cancellation of Instruments, which has been mentioned under the Specific Relief Act, 1963. This article would help the reader understand the different issues associated with the Cancellation of Instruments under the Specific Relief Act, 1963.

Cancellation of instruments

In simple language, cancellation of instruments means the nullification of a written document which is proof of a transaction between the parties that are part of the transaction. An instrument being every document by which any right or liability is, or purports to be created, transferred, limited, extended or extinguished as per the Indian Stamps Act, 1899. 

Cancellation of documents is dealt with under Sections 31, 32 & 33 of the Specific Relief Act, 1963. If there is an instrument, which is void or voidable due to some reason and a party to such an instrument has enough reasons to believe that the said instrument has the potential to act against him and may even cause serious injury to him, then such a person can file a suit with regards to the cancellation of such an Instrument. This is a discretionary relief and the reason behind such is defined in the later stages of this article.

Cancellation of Instruments can be done in two ways, as follows:

·         Complete cancellation where the court decides to cancel the whole instrument.

·         Partial cancellation where only a part of the instrument is cancelled out. These types of cancellations are mentioned under Section 32 in the Specific Relief Act and have been further explained later in this article.

Main requirements for cancellation

The cancellation of an instrument can be done by the Civil Courts on request of a party to a transaction only after considering certain requirements. A suit for cancellation of an instrument filed by a party, shall be entertained only if any of the following requirements are met:

·         If the instrument against which the cancellation suit is filed by the party is void.

·         If the instrument against which a cancellation suit is filed by the party is voidable.

·         If the instrument against which a cancellation suit is filed has the potential to cause injury/harm to the party filing the suit.

·         If the party who has filed a suit for cancellation of an instrument is under reasonable apprehension of an injury being caused to him/her due to the performance of the instrument.

·         When the instrument whose cancellation is requested by the party has already caused enough damage/injury to the requesting party.

·         In the view of all the circumstances of the case, the Court must be satisfied that such cancellation of an instrument is reasonable and would serve justice to the parties coming to the courts for such claims.

If any of the above conditions/requirements are satisfied, then a person may successfully proceed with a suit for the cancellation of an instrument.

When cancellation is ordered

The Specific Relief Act, 1963 under Section 31 tells us about when the cancellation of an instrument may be ordered by a court. To begin with, this Section under its first clause tells us that any person who is aggrieved by the performance of a particular instrument and feels that such an instrument has become void or voidable, or believes that the instrument has the potential of causing injury/harm to him if such a transaction is continued may file a suit at a Civil Court to have such an instrument declared to be void. Once such a suit is filed it is upon the Court to decide whether such an instrument should be declared void or not. The Court has complete discretion in such matters. Thus, the Court can order for the cancellation of such an instrument if the above-mentioned requisites are fulfilled.

The second clause of Section 31 tells us that if an instrument which has been put up in front of the Court for cancellation is a document which has been registered under the Indian Registrations Act, 1908, then a copy of such a decree containing details about the cancellation of the instrument is required to be sent to the officer under whom the instrument/document had been registered. Such a decree is sent for the convenience of the officer and to keep his register updated. Upon receiving the instructions/decree from the court, the officer is required to mark the copy of the documents as “cancelled” in his register.

Partial cancellation of instruments

The process of partial cancellation of instruments is mentioned under Section 32 in The Specific Relief Act, 1963. 

This section says, that when a particular part of an instrument is up for a question of cancellation in front of the court or when such an instrument has several rights and obligations required under it, the court upon its discretion may cancel only a part of that instrument and let the rest of it stay as it is. Partial cancellation basically means that a part of the instrument which is inconsistent, void or voidable shall be cancelled by the court and such cancellation shall not have any effect upon the performance of the other rights and obligations associated with the instrument.

Power to require benefit or compensation

The provisions with regards to the power of the Court, to require restoration of benefits received and fair compensation which are supposed to be made when an instrument is cancelled are provided under Section 33 in the Specific Relief Act, 1963. The primary aim of this section lies in serving justice to the participants of a particular instrument/contract in case such is cancelled by the court.

This Section firstly tells us that when the court decides to cancel an instrument either completely or partially, then the party towards whom such relief is granted is required to either restore/claim any benefits which he/she may have received from the other party or to make the required amount of compensation for it. Such conditions are put forth by the act with an intention to deliver justice to the parties, as a court is a place that is responsible for delivering justice to the people who approach it.

This Section also provides/states/lays the conditions under which, a defendant to a suit for the performance of an instrument/contract may claim for the cancellation of such an instrument/contract. The conditions mentioned in Section 33 are as follows:

·         When a plaintiff files a suit to enforce a contract against a defendant and the defendant tries to resist the contract by claiming such a contract to be voidable. In such a case if the court is also of the opinion that the contract/instrument under consideration is voidable, then the court may order for the cancellation of such an instrument/contract.

·         When a plaintiff files a suit to enforce a contract against a defendant and the defendant tries to resist the contract by claiming such contract to be void because of the defendant not being competent to participate in a contract under Indian Laws. Competence to enter into a contract is defined under Section 11 in the Indian Contracts Act, 1872. Competence to enter into a contract can be judged by conditions such as age, soundness of mind, etc. In such a case the instrument/contract shall be cancelled by the court.

With regards to the above-mentioned conditions if an order of cancellation is passed by the court with regards to an instrument, then the defendant shall have to restore the benefits he/she has received from the other party while the performance of such contract/instrument and the defendant shall also be asked to compensate the other party i.e. the plaintiff accordingly, to satisfy the purpose of the court in serving justice.

Case laws for cancellation 

These provisions with regards to the cancellation of an instrument under the Specific Relief Act 1963 can be better understood by the decisions given with regards to the cancellation of an instrument by the Indian Courts. A few interpretations of the judgements given by the Indian Courts are given below.

·         Vellayya Konar and another v. Ramaswami Konar and another 

This case is relevant to our topic as in its Judgement, his lordship Wordsworth.J. has distinguished between the cancellation of an instrument and a declaration that the instrument is not binding on the plaintiff.

This judgement tells us that a suit for cancellation of an instrument can only be filed by parties who are a part of such a transaction and such a suit can be held for cancellation at the discretion of the court. If a third party who shares concerns regarding a transaction/instrument i.e. if such third party feels that he/she is unfairly treated because of the performance of the obligations of such an instrument by the parties to it, then such third party cannot file a suit for the cancellation of the instrument. The court said that in such a case the concerned third party would have to sue for declaration decree and not cancellation of an instrument. 

·         Jeka Dula v. Bai Jivi (1937) 

This case helps us to understand the importance of Court intervention with regards to the cancellation of an instrument as well as the logic used by the courts for such cancellations. The judgement talks about the importance of justice to be served by the court. Justice to be served by the court is hence linked with the aspect of cancellation of an instrument. 

If an instrument is being used unfairly by any of the parties to a transaction, which is causing harm or is intended to cause harm to the aggrieved party who has approached the court, then such an instrument should be cancelled at the discretion of the court for the purpose of serving justice.

The cancellation of an instrument is a protective measure under the Specific Relief Act, 1963 for the protection of such parties who are at a fear of being harmed by the other party through the performance of an instrument of which they are a part of.

·         Ram Karan v. Bhagwan Das

The Hon’ble Court, in this case, interpreted the consequences of misrepresentation or fraud on the cancellation of a document. The Hon’ble Justice considered misrepresentations in a particular document/instrument to obtain certain benefits to be an act which makes the performance of the obligations of the document/instrument/contract voidable and not void. The court, in this case, has said that since the obligations of the contract were voidable. The defendants to the case should have sought relief under the provisions with regards to Cancellation of an Instrument under the Specific Relief Act, 1963 and such a claim shall be instituted within the period of Limitation for such claims as mentioned under the Limitation Act, 1963.

·         Prem Singh & Ors v. Birbal & Ors. (2008)

The Hon’ble Supreme Court, in this case, has talked about Section 31 in the Specific Relief Act, 1963. The Hon’ble Court was of the opinion that cancellation of an instrument can be entrusted upon when either the document is a void document or a voidable document.

The Hon’ble Court held that as far as void documents are considered the aggrieved party may not be required to file a suit for cancellation of an instrument/document under Section 31 in the Specific Relief Act, 1963. Though when a similar concern is raised with regards to a voidable document/instrument then a suit for such shall be required to be filed under Section 31 in the Specific Relief Act, 1963 for the purpose of cancellation of the instrument.

Conclusion

The purpose of cancellation of instruments by the courts in India under the Specific Relief Act of 1963 has always been with an intent to serve justice to the parties who are in a fear of being harmed or are actually being harmed by the other party due to the performance of such instrument/contract. The court serves justice in such situations by way of cancellation of the instrument/contract. Thus it can be said that provisions with regards to the cancellation of instruments under the Specific Relief Act, 1963 is commendable and falls in line with the purpose of Courts to serve justice.

 

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