Harshad Chiman Lal Modi vs. DLF Universal and Anr.

Harshad Chiman Lal Modi vs. DLF Universal and Anr.[1]

Supreme Court

(Section 16 of CPC vis-à-vis Section 20 of CPC)

Facts

In this case the appellant, Harshad Chiman entered into a ‘plot buyer agreement’ with DLF for purchase of a residential plot in Gurgaon, Haryana. According to the appellant, the agreement was made in Delhi. Appellant entered into an agreement The head office of DLF was also situated in Gurgaon. Later on, despite regular payment of installments by Harshad Chiman, the contract was unilaterally cancelled by DLF. A suit was then filed in Delhi High Court which was later on transferred to District Court of Delhi.

Issue

The key issue in this case was whether Civil court of Delhi had jurisdiction to try and entertain the suit. In other words, the pertinent question was in which court a suit for specific performance of agreement relating to immovable property would lie. District Court decided the question in negative and directed the appellant to be file the case is appropriate court. Petition filed against this order of Delhi Civil Court was dismissed by the Delhi High Court. The matter then reached to the Supreme Court.

Contentions

Appellant: Before the Supreme Court, the appellant contented that the defendants were having their head Office at Delhi, the agreement had been entered into at Delhi, payment was to be made and in fact made at Delhi, breach of agreement took place at Delhi and hence Delhi Court had jurisdiction to entertain the suit and the plaintiff could have instituted the suit in Delhi Court. It was also submitted that the parties had agreed that the Delhi Court alone had jurisdiction in all matters arising out of the transaction. It further contended that as Clause 28 of the agreement specifically provided that the transaction would be subject to the jurisdiction of Delhi Court, institution of suit in Delhi Court by the plaintiff could not have been objected to and no order could have been passed by the trial court holding that it had no jurisdiction.

Respondent: On the other hand, counsel for DLF argued that the suit relates to specific performance of agreement relating to immovable property and in accordance with the provisions of Section 16 of the Civil Procedure Code, such suit can be instituted where the immovable property is situate. He further contended that if the court had no jurisdiction, parties by consent cannot confer jurisdiction on it. Such a case is different from a case in which two or more courts have jurisdiction and parties have agreed to jurisdiction of one court. According to him, Section 20 of the Code would apply where two courts have jurisdiction and the parties agree as to jurisdiction of one such courts by restricting their right to that forum instead of the other. When Delhi Court had no jurisdiction whatsoever, no reliance could be placed either on Section 20 of the Code or on Clause 28 of the agreement.

Supreme Court

The Apex Court held that as per Section 16 of CPC, a suit can be instituted where the property is situated. It observed:

“Section 16 enacts that the suits for recovery of immovable property, or for partition of immovable property, or for foreclosure, sale or redemption of mortgage property, or for determination of any other right or interest in immovable property, or for compensation for wrong to immovable property shall be instituted in the court within the local limits of whose jurisdiction the property is situate. Proviso to Section 16 declares that where the relief sought can be obtained through the personal obedience of the defendant, the suit can be instituted either in the court within whose jurisdiction the property is situate or in the court where the defendant actually or voluntarily resides, or carries on business, or personally works for gain.”[2]

“Section 16 thus recognizes a well established principle that actions against res or property should be brought in the forum where such res is situate. A court within whose territorial jurisdiction the property is not situate has no power to deal with and decide the rights or interests in such property. In other words, a court has no jurisdiction over a dispute in which it cannot give an effective judgment. Proviso to Section 16, no doubt, states that though the court cannot, in case of immovable property situate beyond jurisdiction, grant a relief in rem still it can entertain a suit where relief sought can be obtained through the personal obedience of the defendant. The proviso is based on well known maxim “equity acts in personam, recognized by Chancery Courts in England. Equity Courts had jurisdiction to entertain certain suits respecting immovable properties situated abroad through personal obedience of the defendant. The principle on which the maxim was based was that courts could grant relief in suits respecting immovable property situate abroad by enforcing their judgments by process in personam, i.e. by arrest of defendant or by attachment of his property.”[3]

“The proviso is thus an exception to the main part of the section which in our considered opinion, cannot be interpreted or construed to enlarge the scope of the principal provision. It would apply only if the suit falls within one of the categories specified in the main part of the section and the relief sought could entirely be obtained by personal obedience of the defendant.”[4]

Accordingly, the Apex court dismissed the appeal and concluded that:

“In the instant case, the proviso has no application. The relief sought by the plaintiff is for specific performance of agreement respecting immovable property by directing the defendant No. 1 to execute sale-deed in favour of the plaintiff and to deliver possession to him. The trial court was, therefore, right in holding that the suit was covered by Clause (d) of Section 16 of the Code and the proviso had no application.”[5]

“In our opinion, the submission of the learned counsel for the appellant that the parties had agreed that Delhi Court alone had jurisdiction in the matters arising out of the transaction has also no force. Such a provision, in our opinion, would apply to those cases where two or more courts have jurisdiction to entertain a suit and the parties have agreed to submit to the jurisdiction of one court.”[6]

“Plain reading of Section 20 of the Code leaves no room of doubt that it is a residuary provision and covers those cases not falling within the limitations of Sections 15 to 19.”[7]

Supreme Court in this case also cited Halsbury’s Laws of England[8], to state that:

“Where, by reason of any limitation imposed by statute, charter or commission, a court is without jurisdiction to entertain any particular claim or matter, neither the acquiescence nor the express consent of the parties can confer jurisdiction upon the court, nor can consent give a court jurisdiction if a condition which goes to the jurisdiction has not been performed or fulfilled. Where the court has jurisdiction over the particular subject matter of the claim or the particular parties and the only objection is whether, in the circumstances of the case, the court ought to exercise jurisdiction, the parties may agree to give jurisdiction in their particular case; or a defendant by entering an appearance without protest, or by taking steps in the proceedings, may waive his right to object to the court taking cognizance of the proceedings. No appearance or answer, however, can give jurisdiction to a limited court, nor can a private individual impose on a judge the jurisdiction or duty to adjudicate on a matter. A statute limiting the jurisdiction of a court may contain provisions enabling the parties to extend the jurisdiction by consent.”

Before more than thirty years, such question came up for consideration before this Court in Hakam Singh v. Gamon (India) Ltd.[9] It was the first leading decision of the Supreme Court on this issue. In this case, a contract was entered into by the parties for construction of work. The agreement provided that notwithstanding where the work was to be executed, the contract ‘shall be deemed to have been entered into at Bombay’ and Bombay Court ‘alone shall have jurisdiction to adjudicate’ the dispute between the parties. The key issue question before the Court was whether the court at Bombay alone had jurisdiction to resolve such dispute.

Considering the provisions of the CPC as also of the Contract Act, the Apex Court held:

“By Clause 13 of the agreement it was expressly stipulated between the parties that the contract shall be deemed to have been entered into by the parties concerned in the city of Bombay. In any event the respondents have their principal office in Bombay and they were liable in respect of a cause of action arising under the terms of the tender to be sued in the courts of Bombay. It is not open to the parties by agreement to confer by their agreement jurisdiction on a court which it does not possess under the Code. But where two courts or more have under the Code of Civil Procedure jurisdiction to try a suit or proceeding on agreement between the parties that the dispute between them shall be tried in one of such courts is not contrary to public policy. Such an agreement does not contravene Section 28 of the Contract Act.”

The principle laid down in Hakam Singh[10] was followed and time and again reiterated in several cases thereafter.[11]

Author: Vivek Verma, Associate at Majmudar & Partners

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[1] AIR2005SC4446

[2] Ibid. para 13

[3] Ibid. Para 14

[4] Ibid. para 16

[5] Ibid. Para 17

[6] Ibid. Para 18

[7] Ibid. para 19

[8] (4th edn.), Reissue, Vol. 10; para 317

[9] [1971]3SCR314

[10] Ibid.

[11] See Globe Transport Corporation v. Triveni Engineering Works and Anr., (1983)4SCC707 , A.B.C. Laminart (P) Ltd. and Anr. v. A.P. Agency, Salem, MANU/SC/0406/1989, Patel Roadways Ltd., Bombay v. Prasad Trading Co., [1991]3SCR391 , R.S.D.V. Finance Co. (P) Ltd. v. Shree Vallabh Glass Works Ltd., AIR1993SC2094 , Angile Insulations v. Devy Ashmore India Ltd. and Anr., [1995]3SCR443 , Shriram City Union Finance Corporation Ltd. v. Rama Mishra, (2002)9SCC613 , New Moga Transport Co. v. United India Insurance Co. Ltd. and Ors., AIR2004SC2154 .