Supreme Court clarifies jurisdiction in property disputes: Future Sector Land Developers vs. Bagmane Developers (2023)

Introduction

Date of the Judgment: March 2, 2023

Citation: Not Available

Judges: V. Ramasubramanian, J., Pankaj Mithal, J.

When a dispute involves both contractual rights and immovable property, where should the case be filed? The Supreme Court of India recently tackled this question in a case involving a property dispute, clarifying the rules of jurisdiction under the Civil Procedure Code (CPC). This judgment provides important guidance on where such cases should be litigated. The bench comprised Justices V. Ramasubramanian and Pankaj Mithal.

Case Background

In November 2018, Future Sector Land Developers LLP (the appellants) were approached by several defendants (the owner-defendants) to purchase two sets of properties located in Bengaluru. The owner-defendants represented that Bangalore Gorakshana Shala Society (defendant No. 137) was making claims over these properties based on a transfer deed from 1941, which the owner-defendants alleged was sham. The appellants and the owner-defendants entered into an agreement on February 19, 2019, for the sale of 87 acres and 27 Gunthas of land for a consideration of Rs. 357 Crores. The appellants paid Rs. 14.12 Crores as advance.

The agreement contained a clause (13.8) stating that courts in Pune would have exclusive jurisdiction over any disputes. However, some of the owner-defendants later executed deeds of confirmation in favor of Bangalore Gorakshana Shala Society. The appellants filed a civil suit in Pune seeking declarations that these deeds were illegal, and also sought permanent injunctions to restrain the defendants from dealing with the property.

The appellants also stated that they would file a substantive suit for specific performance and possession later, after the disposal of a pending partition suit in Bengaluru.

Timeline

Course of Proceedings

The appellants filed a civil suit in the 9th Joint Civil Judge, Senior Division, Pune. Defendants 66, 67, 139, and 117 filed applications under Order VII Rule 10 of the Civil Procedure Code (CPC), seeking the return of the plaint, arguing that the properties were located in Bengaluru. Defendant No. 117 also filed an application under Order VII Rule 11 of the CPC, seeking rejection of the plaint, arguing that the Pune court lacked jurisdiction and the suit was barred by the Companies Act, 2013.

The Trial Court dismissed all applications on April 22, 2022. The High Court of Judicature at Bombay allowed the civil revision applications filed by Defendant Nos. 138 and 117 on January 23, 2023, ordering the return of the plaint for presentation in the appropriate court in Bengaluru. The appellants then appealed to the Supreme Court.

Legal Framework

The judgment primarily revolves around the interpretation of the following provisions of the Civil Procedure Code, 1908:

• Section 16 of the Civil Procedure Code, 1908: This section deals with suits related to immovable property. It states that suits for the recovery of immovable property, partition of immovable property, foreclosure or redemption of a mortgage, determination of any other right to or interest in immovable property, compensation for wrong to immovable property, and recovery of movable property actually under distraint or attachment, shall be instituted in the court within the local limits of whose jurisdiction the property is situated.
  
  The proviso to Section 16 states that a suit to obtain relief respecting or compensation for wrong to immovable property held by or on behalf of the defendant may be instituted where the defendant resides, or carries on business, or personally works for gain, if the relief sought can be obtained entirely through his personal obedience.
• Section 20(c) of the Civil Procedure Code, 1908: This section states that a suit may be instituted in a court within the local limits of whose jurisdiction the cause of action, wholly or in part, arises.
• Order VII Rule 10 of the Civil Procedure Code, 1908: This rule allows a court to return a plaint to be presented to the proper court where it should have been instituted.
• Order VII Rule 11 of the Civil Procedure Code, 1908: This rule specifies grounds for rejection of a plaint, including where it does not disclose a cause of action, where the relief claimed is undervalued, or where the suit is barred by any law.
• Order VII Rule 13 of the Civil Procedure Code, 1908: This rule states that the rejection of a plaint does not preclude the plaintiff from presenting a fresh plaint in respect of the same cause of action.
• Order II Rule 2(3) of the Civil Procedure Code, 1908: This rule allows a plaintiff to seek leave from the court to reserve the right to sue for a particular relief later.
• Order XXI Rule 32 of the Civil Procedure Code, 1908: This rule deals with the execution of decrees for specific performance of a contract or for an injunction.

Arguments

Appellants’ Arguments:

• The appellants argued that the suit was primarily for the enforcement of contractual rights against the defendants. They contended that the agreement between the parties contained a clause conferring exclusive jurisdiction on the civil courts in Pune.
• The appellants further argued that they had been granted leave by the Trial Court under Order II Rule 2(3) of the Civil Procedure Code, 1908, to seek larger reliefs in respect of the suit properties at a later point of time.
• The appellants submitted that the reliefs sought were in personam, meaning they could be enforced through the personal obedience of the defendants, and thus, the suit was maintainable in Pune, as per the proviso to Section 16 of the Civil Procedure Code, 1908.

Respondents’ Arguments:

• The respondents argued that the suit schedule properties were located in Bengaluru, and the reliefs sought were substantially in respect of these immovable properties.
• They contended that the appellants were attempting to circumvent the jurisdiction of the Bengaluru courts by cleverly drafting the reliefs to appear as though they related to enforcement of rights in personam.
• The respondents submitted that the suit fell under Section 16(d) of the Civil Procedure Code, 1908, which stipulates that suits for determination of any right to or interest in immovable property must be instituted where the property is situated.

[TABLE] of Submissions

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the suit filed by the appellants was maintainable in Pune, given that the suit properties were located in Bengaluru, and whether the reliefs sought were substantially related to immovable property.

The sub-issue that the court dealt with was:

1. Whether the High Court was correct in allowing the application under Order VII Rule 11 of the Civil Procedure Code, 1908.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following legal provisions:

• Section 16 of the Civil Procedure Code, 1908: This section specifies the jurisdiction for suits related to immovable property.
• Section 20(c) of the Civil Procedure Code, 1908: This section allows suits to be instituted where the cause of action arises.
• Order VII Rule 10 of the Civil Procedure Code, 1908: This rule allows for the return of a plaint to the proper court.
• Order VII Rule 11 of the Civil Procedure Code, 1908: This rule specifies grounds for rejection of a plaint.
• Order VII Rule 13 of the Civil Procedure Code, 1908: This rule states that the rejection of a plaint does not preclude the plaintiff from presenting a fresh plaint in respect of the same cause of action.
• Order II Rule 2(3) of the Civil Procedure Code, 1908: This rule allows a plaintiff to seek leave from the court to reserve the right to sue for a particular relief later.
• Order XXI Rule 32 of the Civil Procedure Code, 1908: This rule deals with the execution of decrees for specific performance of a contract or for an injunction.

[TABLE] of Authorities and their Treatment

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Section 16, Civil Procedure Code, 1908: The court held that the suit fell under Section 16(d) as it concerned the determination of rights in immovable property.
• Section 20(c), Civil Procedure Code, 1908: The court held that the suit could not be maintained on the basis of cause of action arising in Pune as the suit was related to immovable property.
• Order VII Rule 10, Civil Procedure Code, 1908: The court upheld the High Court’s decision to allow the return of the plaint under this rule.
• Order VII Rule 11, Civil Procedure Code, 1908: The court set aside the High Court’s decision to allow the application under this rule.
• Order VII Rule 13, Civil Procedure Code, 1908: The court noted that the rejection of plaint under Order VII Rule 11 does not preclude the plaintiff from presenting a fresh plaint in respect of the same cause of action.
• Order II Rule 2(3), Civil Procedure Code, 1908: The court held that the leave granted to the appellants to file a substantive suit later does not curtail the right of the defendants to seek the return of the plaint.
• Order XXI Rule 32, Civil Procedure Code, 1908: The court noted that the decree in the present suit may have to be executed under this rule but it will not enable the appellants to recover possession of the suit properties.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the suit, despite being framed as one for contractual rights, substantially involved the determination of rights and interests in immovable property. The Court noted that the appellants were seeking to restrain the defendants from dealing with the property, which directly related to the immovable property located in Bengaluru. The court also highlighted the fact that one of the reliefs sought was to restrain the defendants from handing over possession of the suit properties, which was a relief directly related to the immovable property.

The court also took note of the fact that there were already two suits and a first appeal pending in the courts in Bengaluru, including a partition suit, which further strengthened the need for the case to be heard in Bengaluru. The court also noted that the appellants were trying to use one court for temporary reliefs and another court for permanent reliefs, which was not considered appropriate.

[TABLE] of Sentiment Analysis of Reasons

Fact:Law Ratio

Logical Reasoning:

The court considered the argument that the suit was for enforcement of contractual rights and therefore maintainable in Pune. However, the court rejected this argument, holding that the suit was substantially related to immovable property, and therefore Section 16(d) of the Civil Procedure Code, 1908, applied. The court also considered the argument that the reliefs were in personam but held that at least one of the reliefs, relating to possession, did not fall under the proviso to Section 16.

The Supreme Court concluded that the High Court was correct in ordering the return of the plaint under Order VII Rule 10 of the Civil Procedure Code, 1908. However, the court found that the High Court had erred in also allowing the application under Order VII Rule 11, as it was contradictory to the order of return of plaint.

The court stated:

“…the High Court has overlooked the obvious and allowed both the applications under Order VII Rule 10 and Order VII Rule 11 at one stroke.”

“Therefore, that portion of the impugned order which states that both the civil revision applications stand allowed, requires modification.”

“Therefore, the High Court, in our considered opinion was right in holding that the suit falls under the category of one , for the determination of any right to or interest in immovable property covered by Section 16(d).”

The court set aside that portion of the High Court’s order that allowed the application under Order VII Rule 11, and upheld the order allowing the application under Order VII Rule 10.

Key Takeaways

• Suits involving immovable property should be filed in the court within whose jurisdiction the property is located, as per Section 16 of the Civil Procedure Code, 1908.
• Even if a contract specifies a different jurisdiction, Section 16 of the Civil Procedure Code, 1908, will override such clauses when the suit substantially involves immovable property.
• Plaintiffs cannot circumvent the jurisdiction of the court where the property is located by cleverly drafting reliefs to appear as though they are in personam, especially if the relief of possession is involved.
• Courts should not allow litigants to use one court for temporary reliefs and another for permanent reliefs.
• The rejection of a plaint under Order VII Rule 11 of the Civil Procedure Code, 1908, does not preclude the plaintiff from filing a fresh plaint in the appropriate court.

Directions

The Supreme Court directed the appellants to present the plaint before the jurisdictional court at Bengaluru within a period of four weeks.

Development of Law

The ratio decidendi of this case is that suits involving immovable property should be filed in the court within whose jurisdiction the property is located, as per Section 16 of the Civil Procedure Code, 1908, and this provision overrides contractual jurisdiction clauses. The court also clarified that a suit cannot be maintained in a court where the cause of action arises if the suit is substantially related to immovable property. There is no change in the previous position of law, but the court has clarified the application of Section 16 of the Civil Procedure Code, 1908, in cases where contractual rights are also involved.

Conclusion

The Supreme Court partly allowed the appeals, setting aside that portion of the High Court’s order which allowed the application under Order VII Rule 11 of the Civil Procedure Code, 1908, and upheld the order allowing the application under Order VII Rule 10 of the Civil Procedure Code, 1908. The court clarified that suits substantially involving immovable property must be filed in the jurisdiction where the property is located, irrespective of contractual jurisdiction clauses. The appellants were directed to present the plaint before the jurisdictional court at Bengaluru within four weeks.