Supreme Court Decides Jurisdiction in Property Dispute: Acme Papers vs. Chintaman Developers (2024)

Date of the Judgment: 22 March 2024

Citation: 2024 INSC 248

Judges: Justice Sudhanshu Dhulia and Justice Prasanna B. Varale

Can a suit for specific performance of a property agreement be filed in a court where the property is located, even if the agreement was signed elsewhere? The Supreme Court of India recently addressed this question in a dispute between Acme Papers Ltd. and Chintaman Developers Pvt. Ltd. The core issue revolved around determining the correct jurisdiction for a property-related lawsuit when the agreement was executed in a different location than where the property was situated. The bench comprised of Justice Sudhanshu Dhulia and Justice Prasanna B. Varale, who delivered a unanimous judgment.

Case Background

On 10 November 2022, M/S Acme Papers Ltd. (Acme Papers) and M/S. Chintaman Developers Pvt. Ltd. (Chintaman Developers) entered into a Memorandum of Understanding (MoU). Chintaman Developers agreed to purchase approximately 74.06 acres of land in Sehore, Madhya Pradesh, from Acme Papers for ₹20,69,92,000. The agreement was on an “as is where is” basis. Acme Papers was responsible for obtaining all necessary approvals for the transfer. The MoU also stipulated that if there were significant delays in obtaining these approvals, Acme Papers could cancel the agreement.

Acme Papers could not secure the necessary approvals. Consequently, Chintaman Developers filed a suit in Sehore for specific performance of the MoU. In response, Acme Papers filed a suit in Calcutta, seeking a declaration that the MoU was terminated and unenforceable. Both parties then filed transfer petitions in the Supreme Court, each seeking to transfer the other’s suit to their preferred location.

Timeline

Course of Proceedings

Chintaman Developers initially filed a suit for specific performance of the MoU in the Court of District Judge, Sehore, Madhya Pradesh. Acme Papers, in response, filed a suit in the City Civil Court, Calcutta, West Bengal, seeking a declaration that the MoU was terminated. Subsequently, both parties filed transfer petitions before the Supreme Court, seeking to transfer the suit filed by the other party to their respective preferred locations.

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 for the determination of any right or interest in immovable property shall be instituted in the court within whose local jurisdiction the property is situated. The relevant part of the section states:
  
  “Suits to be instituted where subject-matter situate.—Subject to the pecuniary or other limitations prescribed by any law, suits—(a) for the recovery of immovable property with or without rent or profits, (b) for the partition of immovable property, (c) for foreclosure, sale or redemption in the case of a mortgage of or charge upon immovable property, (d) for the determination of any other right to or interest in immovable property, (e) for compensation for wrong to immovable property, (f) for the 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 situate.”
• Section 20 of the CPC: This is a residuary provision that allows suits to be initiated where the defendant resides or where the cause of action arises. The court clarified that this section applies only to cases not covered by Sections 15 to 19 of the CPC. The relevant part of the section states:
  
  “Other suits to be instituted where defendants reside or cause of action arises.—Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction—(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or (c) the cause of action, wholly or in part, arises.”
• Section 10 of the CPC: This section mandates that no court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously filed suit between the same parties. The relevant part of the section states:
  
  “Stay of suit.—No Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in India having jurisdiction to grant the relief claimed.”

Arguments

Arguments by Acme Papers:

• Acme Papers argued that the MoU was executed in Calcutta. Therefore, the cause of action arose in Calcutta.
• They contended that their suit in Calcutta, which challenges the validity and enforceability of the MoU, should be decided first.
• They argued that the suit for specific performance in Sehore would only be relevant if the MoU was deemed valid.

Arguments by Chintaman Developers:

• Chintaman Developers argued that the location of the MoU’s execution is irrelevant to the choice of jurisdiction.
• They contended that the suit for specific performance is directly related to the suit property, which is located in Sehore, Madhya Pradesh.
• They pointed out that Acme Papers had filed other suits in Sehore and was also involved in a matter before the Debt Recovery Tribunal in Jabalpur, Madhya Pradesh, related to the same property.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue addressed was:

• Which court has the appropriate jurisdiction to hear the case? Should it be the court where the agreement was signed or the court where the property is located?

The sub-issue that the court dealt with was:

• Whether the suit filed earlier should be given precedence?

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issues:

Authorities

The Supreme 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 in Harshad Chiman Lal Modi v. DLF Universal Ltd., (2005) 7 SCC 791* was used to clarify that Section 20 of the CPC is a residuary provision and does not apply when a specific provision like Section 16 applies.
• The Supreme Court in Gupte Cardiac Care Centre and Hospital v. Olympic Pharma Care (P) Ltd., (2004) 6 SCC 756* was used to emphasize the importance of considering Section 10 of the CPC when dealing with transfer petitions.
• The Court relied on Section 16 of the CPC to determine that suits related to immovable property should be filed where the property is located.
• The Court clarified that Section 20 of the CPC is a residuary provision and does not apply when Section 16 is applicable.
• The Court relied on Section 10 of the CPC to determine that the suit filed earlier should be given precedence.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the statutory provisions of the Code of Civil Procedure, 1908, particularly Sections 16 and 10. The Court emphasized that suits related to immovable property should be filed where the property is situated, as mandated by Section 16. Additionally, the Court gave precedence to the suit filed earlier in time, as per Section 10 of the CPC. The Court also considered the practical aspects of the case, such as the location of property records and witnesses, which were primarily in Sehore. The court’s reasoning was rooted in established legal principles and procedural norms.

Fact:Law Ratio:

Logical Reasoning:

The Court rejected Acme Papers’ argument that the cause of action arose in Calcutta, where the MoU was executed. The Court stated that “the petitioner’s reliance on the cause of action arising in Calcutta due to the MoU being executed at Calcutta is completely erroneous in view of Section 20, CPC”. The Court emphasized that Section 20 of the CPC is a residuary provision, and Section 16 takes precedence in cases involving immovable property. The Court also noted that “the suit filed at Sehore, Madhya Pradesh was earlier in time”, and therefore, Section 10 of the CPC applied, which states that “no Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue between the parties…where such suit is pending in the same or any other Court in India having jurisdiction to grant the relief claimed.” The Court also considered the practical aspects of the case, stating that “since the suit property is located in Sehore, all property records and government documents would be present in the vicinity, including most witnesses.”

The Court did not consider any alternative interpretations and concluded that the suit in Sehore should proceed, while the suit in Calcutta should be transferred.

The court held that the suit filed by Chintaman Developers in Sehore should proceed. The court dismissed the transfer petition filed by Acme Papers and allowed the transfer petition filed by Chintaman Developers. The suit filed by Acme Papers in Calcutta was transferred to Sehore. The court gave liberty to Acme Papers to withdraw the suit that has been transferred and file a counter claim in the suit filed by Chintaman Developers in Sehore.

Key Takeaways

• Suits related to immovable property should be filed in the court where the property is located, as per Section 16 of the CPC.
• Section 20 of the CPC is a residuary provision and does not apply when a specific provision like Section 16 is applicable.
• When multiple suits are filed between the same parties on the same issue, the suit filed earlier should be given precedence, as per Section 10 of the CPC.
• Courts will also consider practical aspects such as the location of property records and witnesses when deciding on jurisdiction.

Directions

The Supreme Court directed that:

• Transfer Petition No.2664 of 2023 filed by M/S Acme Papers Ltd. was dismissed.
• Transfer Petition (Civil) No. 499 of 2024 filed by M/S. Chintaman Developers Pvt. Ltd. was allowed.
• TS No.1346 of 2023 pending before the City Civil Court at Calcutta, West Bengal was transferred to the Court of Principle Judge, Sehore, Madhya Pradesh.
• The petitioners (in T.P.(c) No.2664/2023) are at liberty to withdraw the suit that has been transferred and file a counter claim in RCS No.128/A/2023 before the Court of Principle Judge, Sehore, Madhya Pradesh in accordance with law.
• The transferee Court shall give fresh notice to all the parties by fixing a date and the aforesaid matter shall proceed at the transferee Court from the stage it was left at the City Civil Court, Calcutta, West Bengal.
• The records of the case be transferred to the transferee Court forthwith.

Development of Law

The ratio decidendi of this case is that when a suit involves immovable property, the jurisdiction lies with the court where the property is situated, as mandated by Section 16 of the Code of Civil Procedure, 1908. Section 20 of the CPC, being a residuary provision, does not apply in such cases. Additionally, the suit filed earlier in time should be given precedence, as per Section 10 of the CPC. This case reaffirms the established principles of jurisdiction and precedence in civil procedure, without introducing any new doctrines or principles.

Conclusion

The Supreme Court’s decision in the case of M/S Acme Papers Ltd. vs. M/S. Chintaman Developers Pvt. Ltd. & Ors. clarifies the jurisdictional issues in property disputes. The Court held that the suit for specific performance should be heard in Sehore, Madhya Pradesh, where the property is located, and not in Calcutta, where the MoU was executed. This decision reinforces the importance of Section 16 of the CPC, which mandates that suits related to immovable property should be filed where the property is situated. The Court also emphasized the significance of Section 10 of the CPC, which prioritizes the suit filed earlier in time, thereby avoiding multiplicity of proceedings. The judgment provides clarity on the applicable legal provisions and ensures that property-related disputes are adjudicated in the appropriate jurisdiction.