Case Study: Harshad Chiman Lal Modi v. D.L.F. Universal Ltd

By Mohd. Sahil Khan 9 Minutes Read

“The Supreme Court has underscored the importance of territorial jurisdiction over contractual stipulations by reaffirming the primacy of territorial jurisdiction. The ruling also categorically rejects the notion that exclusive jurisdiction clauses can override the fundamental principle of territorial jurisdiction.”

Citation: (2005) 7 SCC 791

Date of Judgment: 26th September, 2005

Court: Supreme Court of India

Bench: Arijit Pasayat (J), C.K. Thakker (J)

Facts

• Harshad Chiman, the appellant, entered into a Standard Form Contract with D.L.F., the respondent, to purchase a residential plot situated in Gurgaon, Haryana.
• The contract was executed in Delhi, where D.L.F. was also headquartered. All payments were to be made in Delhi. Notably, clause 28 of the agreement explicitly granted exclusive jurisdiction to the Delhi High Court for any disputes arising from the contract.
• Under the agreement, the appellant made the payments in instalments to the respondent. However, the respondent unilaterally cancelled the agreement because the appellant had not paid the dues to construct his modular house.
• The appellant, aggrieved by the respondent’s actions, approached the Delhi High Court seeking a declaration, specific performance of the contract, possession of the property, and a permanent injunction.
• D.L.F. contested the Delhi Court’s jurisdiction to hear the case by amending the written statement under Order VI Rule 17, Code of Civil Procedure (hereinafter referred to as C.P.C.). The respondent contended that as per Section 16 C.P.C., the Delhi High Court lacks the jurisdiction to hear the case as the immovable property is situated in Gurgaon, Haryana.

Judgment of the Trial Court

The trial court ruled in the defendant’s favour, citing the lack of jurisdiction in the Delhi court to try the suit. Therefore, the amendment made to the written statement by the defendant pursuant to Order VI, Rule 17 C.P.C. was allowed. Furthermore, the plaint was returned, and the plaintiff was ordered to present it before the proper court.

Judgment of the High Court

The High Court dismissed the revision petition filed by the appellant owing to the lack of jurisdiction to hear the case.

Judgment of the Supreme Court

The Supreme Court held that the Delhi Court lacked jurisdiction to hear the case involving the specific performance of an agreement for immovable property situated in Haryana. The court relied on Section 16 of the C.P.C., which mandates that such suits be filed in the court where the property is located. The court also dismissed the argument based on the exclusive jurisdiction clause in the agreement, finding it inapplicable as the Delhi Court had no inherent jurisdiction to begin with. The court emphasized that neither consent, waiver, nor acquiescence can confer jurisdiction on an otherwise incompetent court. Accordingly, the appeal was dismissed.

Key legal issues discussed

1. Did the Delhi Court have the jurisdiction to hear the case?

No

The apex court held that Section 16 of the C.P.C. recognizes that action pertaining to immovable property should be brought before the court within whose jurisdiction the property is situated. In the 16th para of the judgment, the court remarked, “A court within whose territorial jurisdiction the property is not situated has no power to deal with and decide the rights or interests in such property.”

The court firmly dismissed the appellant’s claims that the defendants’ Head Office, the agreement’s execution, payment, and breach all occurred in Delhi, arguing that this gave the Delhi Court jurisdiction to hear the case. Furthermore, the court held that the present case does not attract the proviso of Section 16. The proviso states that while a court cannot grant in rem relief for immovable property outside its jurisdiction, it can still hear a case if the relief sought can be achieved through the defendant’s obedience.

The court ruled that the proviso serves as an exception to the main part of the section. Relying upon Ewing v. Ewing[1], the court held that the proviso finds no application in this case. The case involves the specific performance of the agreement of immovable property; therefore, it will be covered by the main part of Section 16. Thus, the court ruled, “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.”

2. Whether the exclusive jurisdiction clause mentioned in the agreement was valid?

No

The court observed that the exclusive jurisdiction clause (under clause 28 of the agreement) was not void for being in restraint of legal proceedings as per Section 28 of the Indian Contract Act, 1872. The court found that such a clause is legal, valid, and not opposed to public policy. However, such a clause is applicable wherein two or more courts have the jurisdiction, and the parties have agreed to submit their suit before any one of them. 

In the present case, such an exclusive jurisdiction clause was void as the Delhi Court did not have the jurisdiction to hear and try the case as per Section 16 C.P.C. since the immovable property is situated in Haryana. The Supreme Court, in this matter, cited the landmark case of Hakam Singh v. Gammon (India) Limited[2]. The court concluded that an agreement cannot grant jurisdiction to a court that lacks the legal authority to hear and decide a case.

The defendant based their arguments on  Section 20 C.P.C., which is a residuary clause and provides that the suit can be instituted where the defendant actually and voluntarily resides or personally works for gain. The court rejected this contention, stating that “the suit relates to specific performance of an agreement of immovable property and for possession of the plot. It is, therefore, covered by the main part of Section 16. Neither proviso to Section 16 would get attracted, nor Section 20 (residuary provision) would apply, and hence Delhi Court lacks inherent jurisdiction to entertain, deal with and decide the cause.”

Concerning the amendment made in the written statement regarding the jurisdiction, the appellant contended that Section 21 of C.P.C. provides that the party must establish objections pertaining to jurisdiction at the earliest possible opportunity. In the present case, the defendant objected nearly ten years after the institution of the suit. The court answered the issue in para 32 of the judgment, citing Bahrein Petroleum Co. v. Pappu[3]: “Neither consent nor waiver nor acquiescence can confer jurisdiction upon a court, otherwise incompetent to try the suit. It is well-settled and needs no authority, and ‘where a court takes upon itself to exercise a jurisdiction it does not possess, its decision amounts to nothing.’ A decree passed by a court having no jurisdiction is non-est, and its validity can be set up whenever it is soughtto be enforced as a foundation for a right, even at the stage of execution or in collateral proceedings. A decree passed by a court without jurisdiction is a coram nonjudice.”

Therefore, the apex court affirmed the views of the Trial court and the High Court, and the appeal was dismissed accordingly.

[1] 1883) 9 AC 34 : 53 LJ Ch 435.

[2] (1971) 1 SCC 286.

[3] AIR 1966 SC 634.

Mohd. Sahil Khan