Rectification of Instruments

Author: Ritika Sharma

RECTIFICATION OF INSTRUMENTS

Introduction

Contracts or agreements are made so as to perform certain obligations in accordance with the intention of the parties. Sometimes, an instrument does not reflect the real intention of the parties and in such cases the concept of rectification of instruments is carried out so that neither of the parties suffers any loss.

What is instrument

Legal instrument is a legal term of art that is used for any formerly executed written document that can be formally attributed to its author, records and formally expresses a legally enforceable act, process, or contractual duty, obligation, or right, and therefore evidence that act, process, or agreement.[1]

According to Section 2(14) of the Indian Stamp Act, 1899, the instrument includes every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished, or recorded.

What is Rectification of instruments

Rectification refers to the correction of the mistakes so that the real intention of the parties involved in making any instrument can be fulfilled. Section 26 of the Specific Relief Act, 1963 titled “When instruments may be rectified?” contains provisions regarding rectification of instruments. It says that when, through fraud or by mutual mistake of parties, a contract or other instrument in writing does not express their real intention, then a suit for rectification of the instrument can be instituted. However, the Articles of Association of a company to which the Companies Act, 1956 apply, is an exception to this and AOA cannot be rectified.

Requirements of Section 26

Following are the essentials after fulfilling which the claim of rectification can be made:

  • Existence of Fraud or mutual mistake- The term “fraud” is not defined under this Act and therefore it is to be understood as per the provisions of Indian Contract Act. Section 17 of the Indian Contract Act states, “Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract”.

The term “mutual mistake” means common mistake on the part of both parties to contract. A party seeking rectification has to establish that there was a prior complete agreement which was reduced to writing in accordance with the common intention of the parties and by reason of a mistake the writing did not express the real intention of the parties.[2]

  • Real Intention of the parties- To file a claim for rectification, it is an important essential that the instrument does not reflect the real intention of the parties. This is because any agreement, contract or instrument is formed with the prior meeting of minds and if the instrument is biased towards one of the parties, then it would be an unfair agreement.
  • Rectification is in good faith for the third parties- Section 26(2) clearly specifies that the rectification is in good faith for the third parties. If it is affecting the rights acquired by third parties then the court may not direct rectification of the same.

In Joseph John Peter Sanday v. Veronica Thomas Rajkumar[3], father executed two registered settlement deeds by which House no 22 was given to his son (A) and House no 23 to his daughter (B). After that his A alleged that his father wanted to transfer House no 23 to him and House 22 to B. A and B both made an agreement to give effect to the real intention of their father. But after sometime, a letter by father indicated that he wanted to transfer House no. 22 to A and he did not intend otherwise. It was observed in this case that the original transfer deed was not affected by the agreement made by A and B as the rectification is permissible only by the parties to instrument and none else. The agreement made with a view to fulfill real intention of the father could not affect the tranfers made earlier and therefore, it was held that Section 26 is not applicable to this case.

Who can institute a suit for Rectification of instruments?

Section 26 specifies the parties who can institute a suit for rectification of the instruments in case the instrument does not reflect the real intention of the parties. Following can institute a suit:

  • Either party or the representatives of the parties who have an interest may institute a suit;
  • Plaintiff can file for rectification when his/her right arising under the instrument is in issue;
  • Defendant can also ask for rectification in addition to the defences open to him/her.

Also Read, War under International Law

When court may direct the Rectification of the instrument?

According to Section 26(2), it is the discretion of the court to direct the rectification of the instrument when the following conditions are satisfied:

  • There is fraud or mutual mistake while forming the instrument;
  • The instrument is not reflecting the real intention of the parties;
  • The rectification of instruments is not in prejudice with the rights of third parties and is in good faith and for value.

For example, A wants to sell her shop and her one flat out of three to B. B fraudulently prepares a conveyance according to which A is selling all the three flats to her. Now, A executes the conveyance with the intention of selling her shop and one flat to B. After the execution, of the two flats fraudulently included, B gives one to C and let the other to D for a rent, neither C or D having any knowledge of the fraud. The conveyance may, as against B and C, be rectified so as to exclude from it the flat given to C, but it cannot be rectified so as to affect D’s lease.

Section 26 is an enabling provision

Section 26 is an enabling provision, therefore if there is no claim for rectification then also, this provision would be enforced. In Karuppa Goundan v. Perlatambi[4], it was observed that under Sections 95 and 97 of the Indian Evidence Act, a mistake can be proved without claiming any rectification. Even if the claim of rectification is not sought by the plaintiff then also it would be treated as if the claim is sought. The remedy under this section is not the only remedy and the plaintiff can avail the provisions of Sections 95 to 97 of the Indian Evidence Act.

Limitation period

Under Section 26, there are no specifications about the time period within which the claim for rectification of instruments is to be made. Therefore, only after the discovery of fraud and mutual mistake, the limitation period for rectification starts.

Conclusion

Section 26 is a provision made to rectify the errors so that the real purpose behind forming the instruments could be achieved. When a contract which does not contain real intention of the parties is enforced then it is biased for one of the parties and if the instrument is cancelled then it becomes a loss for both the parties. The only solution to protect the parties from loss is to rectify the instrument. The burden of proving fraud or mutual mistake lies on the person claiming rectification. After the rectification, the agreement is read as if it had been originally drawn in its rectified form.


[1] Mode of Rectification/ Cancellation of Instruments- When and How?; available at: https://districts.ecourts.gov.in/sites/default/files/4-Modes%20of%20Rectification%20of%20Instruments%20-%20by%20Sri%20P%20Rajasekhar.pdf (Last visited: April 7, 2020)

[2] Supra note 1

[3] AIR 2013 SC 2048

[4] ILR 30 Mad 397

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