Cancellation of instrument (39-41) (PRINICPLE OF QUI TIMET)

INTRODUCTION:

In the legal arena, a written instrument, such as a contract, agreement, or deed, may be

declared void or voidable in certain circumstances. When a person against whom such an

instrument is directed has a reasonable apprehension that it may cause them serious injury

if left outstanding, they may seek to have it adjudged void or voidable.

MEANING OF CANCELLATION OF INSTRUMENT :

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.

Jurisprudentially, According to Snell the cancellation of instrument means

“to destroy the force, effectiveness or validity of an order, a decision, to bring to nothingness.”

What is an Instrument?

under the purview of section 39 of the Specific Relief Act. As per the judicial interpretation,
the word “instrument” refers to un-adjudged instruments, which have not been adjudged
upon by courts, tribunals or arbitral panels

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.

Essential conditions
Under Section 39 (1) of the new act of 1963, this remedy has expiated as follows-
“Any person against whom a written instrument is void or voidable, and who has a reasonable
apprehension that such instrument, if left outstanding may cause him serious injury, may sue
to have it adjudged void or voidable; and the court may, in its discretion, so adjudge it and
order it to be delivered up and cancelled.”
The above-mentioned provision encompasses three essential conditions on the fulfillment
of which this remedy can be granted by the court-
 1. The instrument must be void or voidable.
2. The plaintiff must have a reasonable apprehension of serious injury if the instrument is
left outstanding.
3. Under the circumstances of the case, the court exercises its discretion and orders the
instrument to be delivered up and cancelled.

1. The instrument must be void or voidable

A void contract is a contract that is not legally enforceable as far as the governing law is
concerned. MEANWHILE A voidable contract is a type of contract that can be canceled
legally by either party involved.

EXAMPLE; A THE OWNER OF ASHIP BY FRAUDULENTLY REPERESENTING HER TO BE

SEAWORTHY INDUCES B, and underwriter to ensure to her . bay obtain the cancellation of
instrument.

CHEQUE EXAMPLE ( IN CASH PAYMENT HAS NBEEN DONE ) MAY FILE A SUIT FOR THE
CANCELLATION SUCH CHEQUE SO IT MAY NOT BE USED AGAINST HIM

One of the examples of such voidable instruments is a sham transaction. If a lady enters
into a sale transaction with a price consideration much below the market price would be
considered a fraudulent transaction and hence liable to be cancelled.
2. REASONABLE APPREHENSION:

The ground for making such request is reasonable apprehension that such instrument, if
left outstanding may cause him serious injury. Hence, where there is no apprehension of
injury to the plaintiff no suit can be filed under this section. It is important to note that
reasonable apprehension is to be decided with reference to the circumstance of the case
with which the court deals with.

Cancellation under the Registration Act

If the instrument has been registered under the Registration Act, the court will send a copy
of its decree to the officer in whose office the instrument has been registered. The
registering officer must then note the fact of its cancellation on the copy of the instrument
in their books, ensuring that proper records are maintained.
PARTIAL CANCELLATION U/S 40:

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.

ILLUSTRATION: A draws a bill on B who endorses it to C, by whom it appears to be

endorsed to D who endorsed it to E. C’s endorsement is forged. C is entitled to have such

endorsement cancelled leaving the bill to stand in other respects

Section 41: Power to require party for whom instrument is cancelled to make

compensation.

The section gives the court the authority to order compensation to be made to the party

whose instrument has been cancelled by the court. The court can exercise this power while

adjudicating the cancellation of an instrument.

Purpose of Compensation:

The purpose of this provision is to ensure fairness and to prevent unjust enrichment. When

the court cancels an instrument, such as a contract, it must consider the consequences of

such cancellation on both parties involved. If one party has incurred expenses or suffered

losses in reliance on the instrument, the court may order the other party to compensate

them.

Factors Considered by the Court while granting compensation:

* The nature and value of the instrument cancelled

* The extent of the loss suffered by the party seeking compensation

* The extent to which the party seeking compensation acted in good faith or was negligent

* The financial position of both parties