Supreme Court Clarifies Territorial Jurisdiction in Specific Performance Suits: Rohit Kochhar vs. Vipul Infrastructure Developers Ltd. (26 November 2024)

Date of the Judgment: 26 November 2024
Citation: 2024 INSC 920
Judges: Justice J.B. Pardiwala and Justice R. Mahadevan

When a contract for the sale of immovable property is breached, where should the lawsuit be filed? The Supreme Court of India recently addressed this crucial question in a case concerning a commercial property in Gurgaon. The core issue was whether the Delhi High Court had the jurisdiction to hear a suit for specific performance of a contract for a property located in Gurgaon, Haryana. The Supreme Court clarified the application of Section 16 of the Code of Civil Procedure, 1908, in such cases. The judgment was delivered by a division bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan.

Case Background

In September 2003, Vipul Infrastructure Developers Ltd. (Defendant No. 2) offered to sell commercial space in their Fortune Hotel & Commercial Complex project in Gurgaon to Rohit Kochhar (the Petitioner). On 16 January 2004, a written offer for a 10,747 sq. ft. property on the second floor was made to the Petitioner. The Petitioner accepted the offer on 20 January 2004 and paid an initial amount of ₹20,00,000. An additional payment of ₹20,00,000 was made on 6 February 2004.

Following the initial agreement, disputes arose over the terms of the “Flat Buyers Agreement.” The Petitioner alleged that the Defendants were imposing unreasonable conditions to avoid their obligations under the contract dated 16/20 January 2004. Consequently, the Petitioner filed a suit for specific performance and permanent injunction in the High Court of Delhi.

Timeline

Course of Proceedings

The Defendants raised a preliminary objection regarding the Delhi High Court’s territorial jurisdiction, arguing that the property was in Gurgaon and that there was no concluded contract. The Single Judge of the Delhi High Court overruled this objection, holding that the court had jurisdiction because the suit was for specific performance and could be enforced through the personal obedience of the vendor, who resided or carried on business in Delhi. The Single Judge relied on the Supreme Court’s decision in Adcon Electronics Pvt. Ltd. v. Daulat and Another [(2001) 7 SCC 698], distinguishing between suits for specific performance simpliciter and those with a claim for delivery of possession.

The Defendants appealed this decision, and the Division Bench of the Delhi High Court allowed the appeals. The Division Bench held that since the sale deed would have to be executed and registered in Gurgaon, the relief could not be entirely obtained through the personal obedience of the defendants. The Division Bench also relied on the Supreme Court’s judgments in Babu Lal v. Hazari Lal Kishori Lal and Others [(1982) 3 SCR 94] and Harshad Chiman Lal Modi v. DLF Universal Ltd. [(2005) 7 SCC 791], stating that the location of the property determines the jurisdiction of the court.

Legal Framework

The Supreme Court considered the following legal provisions:

• Section 16 of the Code of Civil Procedure, 1908 (CPC): This section specifies that suits related to immovable property must be filed in the court within whose jurisdiction the property is located. The proviso to this section allows for suits to be filed where the defendant resides or carries on business if the relief sought can be entirely obtained through their personal obedience.
• Section 55 of the Transfer of Property Act, 1882: This section outlines the rights and liabilities of the seller and buyer of immovable property, including the seller’s obligation to hand over possession of the property to the buyer.
• Section 22 of the Specific Relief Act, 1963: This section allows a plaintiff in a suit for specific performance to also seek possession or partition of the property. However, such relief must be specifically claimed in the plaint.

Arguments

Petitioner’s (Plaintiff’s) Arguments:

• The Petitioner argued that the suit was for specific performance simpliciter, without a prayer for possession. Therefore, it could be enforced through the personal obedience of the defendants, who were based in Delhi.
• The Petitioner relied on the decision in Adcon Electronics Pvt. Ltd. v. Daulat and Another [(2001) 7 SCC 698], which held that a suit for specific performance without a claim for possession is not a “suit for land” and can be instituted where the defendant resides or carries on business.
• The petitioner contended that the proviso to Section 16 of the CPC is applicable, as the relief sought could be enforced through the personal obedience of the defendants in Delhi.

Respondents’ (Defendants’) Arguments:

• The Respondents contended that the Delhi High Court lacked territorial jurisdiction because the suit property was located in Gurgaon.
• They argued that the relief sought was not entirely obtainable through the personal obedience of the defendants, as the sale deed would have to be executed and registered in Gurgaon.
• The Respondents relied on the Supreme Court’s decisions in Babu Lal v. Hazari Lal Kishori Lal and Others [(1982) 3 SCR 94] and Harshad Chiman Lal Modi v. DLF Universal Ltd. [(2005) 7 SCC 791], which emphasized that suits concerning immovable property should be filed where the property is located.
• The defendants submitted that the plaintiff failed to show his readiness and willingness to pay the balance amount at any point in time and thus cannot seek specific performance of the contract.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the relief sought by the plaintiff in respect of the suit property could be entirely obtained through the personal obedience of the defendants, thereby attracting the proviso to Section 16 of the CPC.

Treatment of the Issue by the Court

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

Authorities

The Court considered the following authorities:

Judgment

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

How each authority was viewed by the Court?

• The Supreme Court distinguished Adcon Electronics Pvt. Ltd. v. Daulat and Another [(2001) 7 SCC 698], stating that it did not consider the impact of Sections 22 and 28 of the Specific Relief Act, 1963, and that the decision was rendered in the context of the expression “suit for land”.
• The Supreme Court relied on Babu Lal v. Hazari Lal Kishori Lal and Others [(1982) 3 SCR 94], emphasizing that the relief of possession is inherent in a suit for specific performance, and on Harshad Chiman Lal Modi v. DLF Universal Ltd. [(2005) 7 SCC 791], which held that actions against property should be brought where the property is situated.
• The Court also relied on Babasaheb Dhondiba Kute v. Radhu Vithoba Barde [2024 INSC 122], which clarified that conveyance takes place upon registration of the sale deed.

What weighed in the mind of the Court?

The Supreme Court emphasized the following points in its reasoning:

• The primary concern was the territorial jurisdiction of the court. The Court reiterated that suits related to immovable property should generally be filed in the court within whose jurisdiction the property is located, as per Section 16 of the CPC.
• The Court highlighted that the proviso to Section 16 of the CPC is applicable only when the relief sought can be entirely obtained through the personal obedience of the defendant, without the need for the defendant to go outside the jurisdiction of the court.
• The Court noted that the sale deed for the property would have to be executed and registered in Gurgaon, which meant the defendants would have to go outside the jurisdiction of the Delhi court. Therefore, the proviso to Section 16 of the CPC was not applicable.
• The Court also emphasized that Section 55 of the Transfer of Property Act implies that the seller is obligated to hand over possession of the property to the buyer upon execution of the sale deed.
• The Court clarified that even if the suit for specific performance is decreed without a specific decree for transfer of possession, the same can be enforced only when the trial court directs the defendants to convey the suit property to the plaintiff by getting a sale deed registered with respect to the suit property.

Fact:Law Ratio

Logical Reasoning:

The Court rejected the argument that a suit for specific performance without a prayer for possession is an action in personam. Instead, the court reasoned that since the sale deed must be registered in Gurgaon, the defendants would have to go outside the jurisdiction of the Delhi court to comply with the decree. This meant that the relief could not be entirely obtained through their personal obedience. The court also highlighted that the transfer of possession is implicit in the contract for sale and is an obligation of the seller under Section 55 of the Transfer of Property Act, 1882.

The Court also considered the interplay between Sections 22 and 28 of the Specific Relief Act and Section 55 of the Transfer of Property Act, concluding that the handing over of possession is only incidental to the decree of specific performance. The Court rejected the interpretation that would allow a plaintiff to file a suit for specific performance simpliciter in one jurisdiction and then seek transfer of the execution proceedings to another jurisdiction to include a prayer for possession.

The Supreme Court’s decision was unanimous.

Key Takeaways

• Suits for specific performance of contracts involving immovable property should generally be filed in the court within whose jurisdiction the property is located.
• The proviso to Section 16 of the CPC applies only when the relief sought can be entirely obtained through the personal obedience of the defendant, without the need for the defendant to go outside the jurisdiction of the court.
• The obligation to hand over possession is implicit in a contract for the sale of immovable property.
• Even if the suit for specific performance is decreed without a specific decree for transfer of possession, the same can be enforced only when the trial court directs the defendants to convey the suit property to the plaintiff by getting a sale deed registered with respect to the suit property.

Directions

The Supreme Court directed the plaintiff to present the plaint before the court of competent jurisdiction to get the suit adjudicated on merits in accordance with law.

Development of Law

The Supreme Court clarified the interpretation of Section 16 of the CPC, emphasizing that the location of the immovable property is the primary determinant of territorial jurisdiction in suits for specific performance. This judgment reaffirms the principles laid down in Babu Lal v. Hazari Lal Kishori Lal and Others [(1982) 3 SCR 94] and Harshad Chiman Lal Modi v. DLF Universal Ltd. [(2005) 7 SCC 791] and clarifies the scope of the proviso to Section 16 of the CPC. The Court distinguished its earlier judgment in Adcon Electronics Pvt. Ltd. v. Daulat and Another [(2001) 7 SCC 698], stating that it did not consider the amended provisions of the Specific Relief Act.

Conclusion

The Supreme Court dismissed the Special Leave Petitions, upholding the Division Bench of the Delhi High Court’s decision. The Court clarified that suits for specific performance of contracts involving immovable property must generally be filed in the court within whose jurisdiction the property is located. The Court emphasized that the proviso to Section 16 of the CPC is applicable only when the relief sought can be entirely obtained through the personal obedience of the defendant, without the need for the defendant to go outside the jurisdiction of the court. This judgment provides clarity on the issue of territorial jurisdiction in specific performance suits and ensures that such suits are filed in the appropriate court.