2017 (5) TMI 1841 - HC - Indian Laws

Objection to pecuniary jurisdiction must be taken earliest under s.21(2) CPC; lack is voidable and curable by transfer or amendment

HC held that objection to a court's pecuniary competence must be taken at the earliest opportunity under s.21(2) CPC; lack of pecuniary jurisdiction ... Refusal to return the plaint of SCC Suit - pecuniary jurisdiction to hear the matter - HELD THAT:- Section 21 (2) of the Code of Civil Procedure, as inserted by Act No. 104 of 1976, provides that objection to the competence of a Court with reference to the pecuniary limits of its jurisdiction has to be taken at the first instance and no such objection is to be entertained by any appellate or revisional court unless such objection was taken in the court of first instance at the earliest possible opportunity, and, in all cases where issues are settled, at or before such settlement, and unless there has been a consequent failure of justice. Further by insertion of section 21-A in the Code and by amendment in sub-section (2) of section 24 and by insertion of sub-section (5) in section 24 of the Code, the legislative intent is clear that on ground of lack of pecuniary jurisdiction the proceeding before a court would not be a nullity and the proceeding could be transferred from a court which has no jurisdiction to a court which has jurisdiction and upon such transfer, the proceeding may be tried from the point at which it was transferred or withdrawn, subject to special directions in the case of an order of transfer. In Subhash Mahadevasa Habib v. Nemasa Ambasa Dharmadas, [2007 (3) TMI 756 - SUPREME COURT], the apex court had examined in some detail the effect of the amendments brought about by Act No. 104 of 1976. In that case it was observed that the Code of Civil Procedure has made a distinction between lack of inherent jurisdiction and objection to territorial jurisdiction and pecuniary jurisdiction. It was held that an inherent lack of jurisdiction may make a decree passed by that court void in law, but a decree passed by a court lacking territorial jurisdiction or pecuniary jurisdiction does not automatically become void. It was held that at best it is voidable in the sense that it could be challenged in appeal therefrom provided the conditions of Section 21 of the Code of Civil Procedure are satisfied. It is thus now well settled that no decree can be claimed to be void ab initio merely because the Court that passed the decree did not have pecuniary jurisdiction to deal with the suit though the appellate court or revisional court can set aside the decree on ground of lack of jurisdiction provided the conditions of Section 21(2) of the Code are satisfied. In the instant case, the Court of Judge Small Causes had proceeded with the suit and had recorded the evidence of both parties and, thereafter, had decided the matter. Although the decree passed by the Court of Judge Small Causes was set aside on ground of lack of jurisdiction but the revisional court while setting aside the decree did not record any satisfaction that there had been a consequent failure of justice or that the defendant had refused to participate in the proceeding on the ground that the court lacked jurisdiction. In the instant case, before file could be returned, by amendment, the pecuniary jurisdiction came to be vested in the Court of Judge Small Causes and therefore the proceeding, which was so far irregular, stood regularised, except the final judgment and decree which had already been set aside by then. Under the circumstances, the Court below was legally justified in refusing to return the plaint and was also justified in fixing a date for arguments. Petition dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether proceedings before a court lacking pecuniary jurisdiction (under pre-amendment regime) are void ab initio or merely irregular under the amended Code of Civil Procedure, and what the legal consequences are for continuing or concluding such proceedings. 2. Whether, after a revisional court sets aside a decree on the ground of lack of pecuniary jurisdiction, the trial court is obliged to return the plaint under Order VII Rule 10 CPC where, subsequently, the trial court's pecuniary jurisdiction is enhanced by statute before the plaint is returned. 3. Whether, where a plaint is returned for presentation in a competent court, the subsequent trial must be conducted de novo, and conversely whether a transferee or regularized court may proceed from the point at which the matter stands. 4. Whether the conditions in Section 21(2) and Section 21-A (as inserted by the 1976 amendments) and amended provisions of Section 24 govern the power of appellate/revisional courts to set aside decrees for want of pecuniary jurisdiction and the consequences thereof (including transfer and continuance of proceedings). 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Nature of proceedings before a court lacking pecuniary jurisdiction after statutory amendments Legal framework: The Code, as amended by the 1976 Act, distinguishes lack of inherent jurisdiction from lack of territorial or pecuniary jurisdiction, and prescribes that objections to pecuniary competence must be taken at the earliest opportunity; Section 21(2) limits appellate/revisional interference except on specified conditions; Section 21-A bars certain suits based on place of suing; amended Section 24 permits transfer from a court lacking jurisdiction and empowers the transferee court to either retry or proceed from the transferred point. Precedent treatment: Earlier decisions holding that institution in a court without jurisdiction renders the suit void were rendered under the pre-amendment Code and are treated as not fully applicable post-amendment. Later apex court rulings have interpreted the amendments to make decrees of courts lacking pecuniary jurisdiction, at best, voidable rather than void ab initio. Interpretation and reasoning: The Court interprets the legislative scheme as converting defects of pecuniary jurisdiction into irregularities curable subject to statutory conditions. The amendments manifest intent that proceedings before a court lacking pecuniary jurisdiction need not be treated as nullities; instead transfer and continuation provisions apply, and appellate/revisional interference is circumscribed by Section 21(2) and Section 21-A. Ratio vs. Obiter: Ratio - Proceedings before a court lacking pecuniary jurisdiction are not automatically void; they are voidable or irregular and governed by the amended statutory regime. Obiter - historical authority under the pre-amendment Code asserting absolute nullity is distinguishable and not followed. Conclusion: The proceeding in a court lacking pecuniary jurisdiction is not a nullity post-amendments; annulment requires satisfaction of Section 21(2) conditions or appropriate order under Section 24. Issue 2: Obligation to return the plaint after revisional setting aside where trial court later acquires pecuniary jurisdiction Legal framework: Order VII Rule 10 CPC provides for return of plaints; Section 24(1), (2) and inserted sub-section (5) permit transfer from a court lacking jurisdiction and enable the transferee to either retry or proceed from the point of transfer; Section 21(2) conditions appellate/revisional interference for pecuniary objections. Precedent treatment: Authorities cited by petitioner that require return of plaint or treat institution in wrong forum as non-institutional are older decisions under pre-1976 law and are distinguished. Post-amendment precedents recognize transfer/continuation and require demonstration of consequent failure of justice to invalidate proceedings. Interpretation and reasoning: The Court reasons that where the decree was set aside for lack of pecuniary jurisdiction but the revisional order did not record consequent failure of justice or direct return of the plaint, and before a return order could be made statutory amendment enhanced the trial court's pecuniary jurisdiction, the proceeding became regularized by the amendment. Given the statutory power of transfer and the absence of a specific remand direction to return the plaint, the trial court was not obliged to return the plaint once it acquired jurisdiction. Ratio vs. Obiter: Ratio - Where a revisional court sets aside a decree for lack of pecuniary jurisdiction without recording consequent failure of justice or directing return of plaint, and the trial court acquires pecuniary jurisdiction before return, the trial court may legitimately refuse to return the plaint and proceed (subject to statutory safeguards). Obiter - discussion distinguishing pre-amendment authority and application of transfer provisions. Conclusion: There was no mandatory obligation to return the plaint in the circumstances; the trial court lawfully refused to return the plaint after its pecuniary jurisdiction was enhanced. Issue 3: Requirement of de novo trial where plaint is returned, and applicability where proceedings are regularized/continued Legal framework: When a plaint is returned for presentation to a competent court, relevant authorities hold that the returned plaint is treated as fresh and trial is to be conducted de novo; amended Section 24, however, allows the transferee court discretion to retry or proceed from the transferred point. Precedent treatment: Decisions establishing de novo trial after return of plaint are recognized; however, the amended Code and later jurisprudence permit continuation from the point of transfer in cases of statutory transfer, subject to special directions. Interpretation and reasoning: The Court distinguishes the scenario where a plaint is actually returned (entitling de novo trial) from the present situation where the plaint was not returned before statutory enhancement regularized the forum. Because the file remained with the trial court and the jurisdictional defect was cured by amendment, there is no automatic requirement for de novo trial; the court may proceed to conclude the matter without restarting if no failure of justice is shown and statutory conditions are satisfied. Ratio vs. Obiter: Ratio - Actual return of plaint mandates de novo institution; but where jurisdictional defect is remedied while file remains and no return has been ordered, de novo trial is not obligatory. Obiter - elaboration on transfer discretion under amended Section 24 and consequences of return. Conclusion: De novo trial is mandated only when the plaint has been returned for presentation; where jurisdiction is subsequently conferred and no return occurred, the court may proceed without de novo trial unless conditions in Section 21(2)/Section 24 require otherwise. Issue 4: Applicability of Section 21(2) and Section 21-A conditions to set aside decrees and the requirement to demonstrate consequent failure of justice Legal framework: Section 21(2) conditions the allowance of pecuniary jurisdiction objections on their being taken at earliest opportunity and on demonstration of consequent failure of justice; Section 21-A restricts institution of certain suits based on place of suing. Precedent treatment: Subsequent apex court rulings interpret these provisions as converting many jurisdictional defects into curable irregularities; decrees by courts lacking pecuniary jurisdiction require challenge in accordance with statutory conditions. Interpretation and reasoning: The Court applies the statutory test: because the revisional order did not record failure of justice or show that the defendant refused to participate on jurisdictional grounds, the statutory conditions for treating the earlier decree as vitiated were not satisfied in a manner that would preclude continuation after regularization. The defendant's prior participation and evidence before the trial court militate against a finding of consequent failure of justice. Ratio vs. Obiter: Ratio - To set aside a decree for want of pecuniary jurisdiction under the amended Code, the objecting party must satisfy Section 21(2) (earliest objection and consequent failure of justice); absent such satisfaction, the decree/ proceedings may be treated as irregular and amenable to transfer/continuation. Obiter - commentary on interplay of Sections 21, 21-A and 24. Conclusion: The conditions in Section 21(2) and Section 21-A were not satisfied here; no consequent failure of justice was recorded, and therefore continuation by the trial court after acquisition of jurisdiction was permissible.