SUCCESSION CERTIFICATE: LAW, JURISIDCTION OF COURTS & EFFECT

 

Succession certificate: LAW, Jurisidction of Courts & EFFECT

If a person dies intestate, leaving behind moveable properties such as fixed deposits, shares, debentures etc then the class 1 legal heirs shall have to obtain succession certificate from the competent courts of law in order to lay claim on such movables left over by the deceased. It is also imperative that such class I legal heirs also obtain Surviving Members certificate (SMC) from the appropriate SDM office before preferring claim for succession in appropriate courts of jurisdiction. The same shall be necessary, in as much as, before hand if the SMC is available processing of succession case before courts are facilitated. The succession certificate shall also be needed, in case, the nominee is named in any such deposits. It is so, because, nominee gets the deposit only as a trustee of legal heirs and the bank or such agency is discharged, once, the money is transmitted to the nominee of deceased. However, the claim of legal heirs of deceased could emanate after issuance of succession certificate. The necessary enactment, in this context is Indian Succession Act 1925.

The succession certificate shall be necessary for class 1 legal heirs of deceased, irrespective of declaring nominee. Another dimension to it is, where and in what forum, the case for seeking succession certificate could be filed and yet again, a deceased may have accounts and deposits in several locations or states, thus, what should be the appropriate forum and location, where such petition could be preferred?

Before going further, Section 371 of Indian Succession Act may be reproduced as under:

“371. Courts having jurisdiction to grant certificate:- The District judge within whose jurisdiction the deceased ordinarily resided at the time of his death, or, if at that time he had no fixed place of residence. The District Judge, within whose jurisdiction any part of the property of the deceased may be found, may grant a certificate under this Part.”

In this context, a recent judgment of Delhi High Court captioned as PJ Pothen & Anr Vs Sanghmitra (CGHS) Society and Ors FAO 351/2014 shall be of relevance. The Delhi High Court has held that the petition for seeking succession certificate shall have to be filed in a District Court of appropriate jurisdiction and the appropriate jurisdiction of District Court shall be such District Court within whose territorial jurisdiction, the deceased ordinarily resided at the time of his death. However, there may be a situation that the deceased may not have a fixed place of abode at the time of his death and in that event if any part of property of deceased is found may also have jurisdiction for entertaining a petition for seeking succession certificate. The Delhi High Court has held that the second part shall come into play, only, if first part is not satisfied i.e if the deceased had no fixed place of residence at the time of his death. It is also clearly held that the aforesaid two situations shall be relevant. The place of death of the deceased is not relevant. In PJ Pothen (Supra) the deceased was ordinary resident of New Delhi, but died in a hospital at Cochin (Kerala) and thus it was held that for the purpose of Section 371 of the Act, the deceased shall be treated as ordinary resident of New Delhi only.

Prior to the dicta of Delhi High Court as referred to above, in a matter captioned as Rameshwari Devi Vs Raj Bali Shah & Anr 1987 (13) ALR 705, Allahabad High Court has also held accordingly. Similar ratio was laid down in Shiv Kumar Vs Bhanu Prakash Singh MANU/MP/0408/1961. It is relevant to point out that in Shiv Kumar (Supra) the deceased was ordinary resident within the territorial limit of District Court , Rajgarh, however, she expired in Bombay, where she went for treatment and it was held that Rajgarh Court shall be the appropriate court for seeking succession certificate and not the courts of Bombay.

Yet another aspect of it could be perused in Madhuribai Mohan Walke Vs Anr Vs Annapurnabai Keshao Walke & Anr MANU/MH/0417/2003, the deceased was ordinary resident of “Wedshi” (Yavatrmal), however, he was posted at “Gadchiroli” and on account of his employment he was residing at “Gadchiroli” and therefore his ordinary place of residence was treated as “Gadchiroli” for the purpose of Section 371 of Indian Succession Act 1925. What is significant to note in the aforesaid context is that even permanent place of residence is of no relevance for the aforesaid purpose and under Indian Succession Act.

Thus, it clearly emerges that place of death of deceased shall be of no relevance for the purpose of preferring petition for seeking succession certificate. The place of ordinary residence of the deceased at the time of his death shall be relevant.

Extension of certificate: (S. 376)

As per section 376 of Indian Succession Act, 1925, application for seeking succession certificate could be moved by the class 1 legal heirs of deceased before a District Judge. A succession certificate could be issued and certificate could be extended to any debt or security that may not have been not originally specified therein. A bond or further bond or other security for the purpose mentioned in section 375 may also be required, in the same manner. It may be worthwhile to reproduce Section 375 herein for ready reference:

Requisition of security from grantee of certificate(S 375)

(1) The District Judge shall in any case in which he proposes to proceed under sub-section (1) or sub-section (4) of section 373, and may, in other case, require, as a condition precedent to the granting of a certificate, that the person to whom he proposes to make the grant shall give to the judge a bond with one more surety or sureties, or other sufficient security, for rendering an account of debts and securities received by him and for indemnity of person who may be entitled to the whole or any part of those debts and securities.

(2) The judge may, on application made by petition and on cause shown to his satisfaction, and upon such terms as to security, or providing that the money received be paid into Court, or otherwise, as he thinks fit, assign the bond or other security to some proper person, and that person shall thereupon be entitled to sue thereon in his own name as if it had been originally given to him instead of to the Judge of the Court, and to recover, as trustee for all person interested, such amount as may be recoverable thereunder.

Validity of Succession Certificate:

Section 381 of the Indian Succession Act, 1925, stipulates the effect of the certificate issued by a District judge, in respect to debts and securities shall be conclusive against those who owe debts or may have a liability towards such security.

A succession certificate has validity throughout India.

Revocation of the Succession Certificate (S.383):

There has also been stipulations as regards revocation of Succession Certificate so issued may be revoked by a District judge, on the following ground or grounds.

(a)            If process to obtain the certificates were defective in substance;

(b)          If certificate is obtained by fraud, manipulation or concealments of material facts;

(c)           If certificate is obtained by means of untrue allegation of facts essential in point of law to justify the grant thereof, though such allegation may have been made inadvertently or ignorantly;

(d)        If the certificate is rendered useless and inoperative through circumstances;

(e)         If a decree or order made by a competent Court in suit or other proceedings with respect to effects comprising debts or securities specified in the certificate renders it proper that the certificate should be revoked.

APPEAL

Section 384 of the Indian Succession Act 1925 provides for the appeal before High Court from an order of District Court, whether granting succession certificate or not granting it or revoking the certificate. Subject to the order of High Court whether in appeal or under any other proceedings, the order passed by the District Judge shall be final.

In order to prefer a petition for seeking succession certificate before a District Court, it may be worthwhile for legal heirs claiming succession to obtain Surviving Members Certificate (SMC) as surviving legal heirs of deceased, so as to facilitate the hearing, before the District Court. The diagnostic features of SMC and Succession Certificate are illustrated as under:

SMC	Succession Certificate
1.     It identifies the rightful successor, who then may raise claim on the assets/properties of the deceased person.	1.     It is a document giving authority to the person to represent the deceased for the purposes of collecting the debts and securities due to him or payable in his name
2.     May be used for the purpose of transferring utilities such as Electricity connection, Telephone connection, House Tax, Bank Account etc.	3.     It is required for movable property such as shares, debentures, bank deposits, loans, or other securities
4.     SMC could be issued by a Revenue Officer / Tehsildar of a concerned district	4.     The District Judge grants certificate, provided the deceased had been an ordinary resident at the time of his death, within the territorial limit of jurisdiction of such district judge, or, if the deceased did not have a permanent place of residence at the time of his or her death, then succession certificate could also be issued by a District judge in the jurisdiction where any part of the deceased’s property falls.
5.     The application can be made only by spouse, children, parents, or siblings of the deceased.	5.     The application of succession certificate can only be made by class I legal heirs or class 2 legal heirs , if class 1 legal heirs are not there.
6.     Generally time consumed could 15 to 20 days for this purpose.	6.     A detailed process is entailed for objections and after disposal of objections and citations in newspaper and after the hearing , the certificate is issued.
7.     It is issued only with a view to identify heirs of deceased person.	7.     It is issued to establish validity and legality of the heirs and also to accord them authority in respect of assets and securities of the deceased persons.
8.     The documents to be furnished in this regard shall be (i) Death certificate (ii) Identity Card, (iii) Ration Card with names of family members and relationship along with affidavit executed on stamp paper	8.     Death certificate shall be required apart from the specifics such time and place of death, the name of all legal heirs and relation with the deceased and place of ordinary abode of deceased. 2-3% stamp paper towards the value of assets in respect whereof succession certificate are sought shall have to be deposited.
9.     It serve as a prima facie certificate and not conclusive in itself.	9.     It is conclusive, unless revoked and it is an evidence of representative status.

 

 In view of what are illustrated above , it is explicit that the law of succession stipulates and prescribes rules relating to devolution of properties of a deceased, who dies intestate i.e., without making a will. By virtue of obtaining a succession certificate, a grantee of a certificate under the Indian Succession Act, 1925 shall have authority to represent the deceased for the purposes of collecting the debts and securities due to him or payable in his name. It is also to ensure that banks or such other agency who holds money of deceased, can pay the Legal Heirs in terms of succession certificate, without any further hassles. It is also to be borne in mind that the Certificate does not establish the title of the grantee as the heir of the deceased, but only furnishes him with an authority to collect the debts and allows the debtors to make payment to the grantee without incurring any risk and in case nominees are not named by the deceased. In other words, the succession certificate shall be an authentic document guaranteeing legal heirs who obtains succession certificate as the only legal heir/heirs of the deceased property.

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                                  Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

 

 

EXECUTION PROCEEDINGS: ORDER 21 OF CPC AND LIABILITY OF DIRECTORS

 

Execution proceedings: ORDER 21 of CPC and liability of Directors

 

It may sound ironical, but Supreme Court has observed in so many cases that once a plaintiff succeeds in a suit and obtains decree, the ordeal of decree holder in real sense begins at that point in time. It is not as if the process of obtaining decree in civil courts are any easier, still, even after being successful, the decree holder has to sustain the travail and trauma, since the judgment debtor adopts several tricks with a view to frustrate judgment and decree, the malaise is palpable. The power of executing court is limited in a sense that it cannot go beyond the terms of decree, however, several objections are raised, nevertheless, with a view to frustrate the very process of execution so as to prevent a decree holder from reaping the fruits of its efforts. It is worth-mentioning that if objections are raised under Order XXI Rule 58 of CPC, the objection shall itself be treated as a suit and fresh adjudication in that event shall be necessary. Even otherwise, it is a common knowledge that in execution petition, a decree holder has to brace for myriad of issues and objections. Let us come to another aspect i.e if judgment debtor is a company and if the decree is passed against a company, then, the decree holder has to undergo further toil, since the decree holder has to deal with the objection against the personal liability of Directors. The company is a separate juristic entity and Directors have limited liability. Whether the Directors were made party to the suit or could have been made a party is another dimension that fills the dockets of courts in objections before the executing courts. The net result is tyranny and continuous tyranny of a decree holder. It is in the above perspective that judgments in Bhandari Engineers and Builders Pvt Ltd. Vs Maharia Raj Joint Venture and Ors., 227 (2016) DLT 302. The aforesaid judgment had necessitated the judgment debtor to file comprehensive affidavit of assets before the executing court. The decision in Bhandari Engineers (Supra) however is watered down.

 The above situation has to be analysed in this backdrop and it is to be seen as to whether a window is open to a decree holder. In this context, recent judgment of Delhi High Court captioned as GS Sandhu & Anr Vs Geeta Aggarwal CM (M) 1399/2019 decided on 14.01.2022 shall be of relevance.

 

 The High Court in the aforesaid judgment has also dealt with Bhandari Engineers and Builders Pvt. Ltd. Vs. Maharia Raj Joint Venture and Ors., 227 (2016) DLT 302 relating to mandating a judgment debtor to file affidavits of assets in execution of a decree.

 

The Delhi High court had dealt with several judgments while adjudicating the GS Sandhu Case (Supra). The judgments are as under:

(i)              Anirban Roy and Ors. Vs. Ram Kishan Gupta and Ors, 2017 SCC OnLine Del 12867;

(ii)            Gurmeet Satwant Singh and Ors. Vs. Meera Gupta and Ors., 2019 SCC OnLine Del 9505;

(iii)          Delhi Chemical and Pharmaceutical Works Pvt. Ltd. and Ors. Vs. Himgiri Realtors Pvt. Ltd. and Ors., 2021 SCC OnLine Del 3603.

(iv)          Delhi Development Authority Vs. Skipper Construction Co. (P) Ltd. and Ors., (2000) 10 SCC 130

 

In Delhi Chemical and Pharmaceutical Works Pvt. Ltd. and Ors. a Division Bench of Delhi High Court observed that a direction under Order XXI Rule 41(2) of the CPC can only be made upon an application filed by the decree holder in that behalf. As per the provisions of Order XXI, the decree holder has to first make efforts to determine and find out the assets of the judgment debtor and only if the decree holder is unable to find the same, the assistance of the court can be taken under Order XXI Rule 41(2) of the CPC for direction that the judgment debtor be directed to disclose its list of assets on affidavit. In case, the decree holder seeks directions from court, an application has to be filed by the decree holder under Order XXI Rule 41(2) of the CPC. It is held thus:

57. We are thus of the view that Bhandari Engineers & Builders Pvt Ltd. (supra), to the extent extends what is laid down therein to execution proceedings pertaining to all money decrees and to all courts executing a money decree, cannot said to be good law. Axiomatically, what is held in Bhandari Engineers & Builders Pvt. Ltd. supra could not have been followed in the execution proceedings from which this appeal arises.

 

 62. As per the existing provisions of Order XXI Rule 41 of the CPC, the Commercial Division, in our view erred in issuing direction to judgment debtors to file affidavits and affidavits in a form other than as prescribed in the CPC. The impugned orders do not record that the decree holder had applied therefor, verbally or in writing. A direction under Order XXI Rule 41 could not have been issued without the decree holder applying therefor. Such direction could not have been issued without, in spite of taking steps and owing to obstruction by the judgment debtor, the decree remaining unsatisfied. No reason whatsoever has been given in the impugned orders as to why the directions as issued were called for in the facts of the case or why affidavit in the form prescribed in the CPC could not have sufficed.”

 

The Supreme Court has however, in Delhi Development Authority Vs. Skipper Construction Co. (P) Ltd. and Ors., (2000) 10 SCC 130 was pleased to justify lifting of the corporate veil in view of the fraud committed by the petitioners that was discovered by the decree holder in the course of the execution proceedings

 

In Geeta Aggarwal (Supra) the Delhi high Court has held as under:

 

14.     In Bhandari Engineers and Builders Pvt. Ltd. (supra), a Single Bench of this Court directed that in cases of execution of money decrees, the judgment debtor, at the initial stage itself should be directed to file particulars of assets as on the date of the institution of the suit as well as of the current date under Order XXI Rule 41(2) of the CPC along with the statement of the bank accounts for the last three years. It was further provided that if the judgment debtor’s affidavit does not sufficiently disclose assets, a further affidavit may also be directed to be filed and the judgment debtor be also examined orally under Order XXI Rule 41(1) of the CPC. This constituted the dicta of Bhandari Engineers and Builders Pvt. Ltd. (supra). Thereafter, the Court in Bhandari Engineers and Builders Pvt. Ltd. (supra) directed, inter alia, the directors of the judgment debtor company therein to file the details of their personal assets. However, the aforesaid directions with regard to the directors filing affidavits of their personal assets was only in the facts and circumstances of the said case and was not the dicta of the said case. Therefore, the reliance placed by the Executing Court on the judgment in Bhandari Engineers and Builders Pvt. Ltd. (supra) for directing the petitioners to file their affidavit of personal assets is clearly erroneous”.

 

In Anirban Roy (Supra) the following are the excerpts based on the observation of the court:

 

(1)  A routine direction against Directors and shareholders of judgment-debtor companies turns the elementary principle of company law, a company law being a legal entity, is distinct from its shareholders and Directors, on its head;

(2)  It is settled principle of law that the Directors and shareholders of a company are not liable for the dues of the company except to the extent permitted by law;

(3) In V.K. Uppal v. Akshay International Pvt. Ltd. MANU/DE/0320/2010 it is held that :

(i) there is no provision in the CPC for execution of a money decree against a Pvt. Ltd. company, against its directors;

(ii) that though Order XXI Rule 50 of the CPC does provide for execution of a money decree against a firm, from the assets of the partners of the said firm mentioned in the said Rule but there is no provision with respect to directors of a company;

(iii) that the Executing Court cannot go behind the decree and can execute the same as per its form only;

(iv) that if the decree is against the company, the executing Court cannot execute the decree against anyone other than the judgment-debtor company or against the assets and properties of anyone other than the judgment-debtor company;

(v)            that the identity of a director or a shareholder of a company is distinct from that of the company-that is the very genesis of a company or a corporate identity or a juristic person;

(vi)               The classic exposition of law in this regard is contained in Solomon v. Solomon & Co. Ltd. 1897 AC 22 where the House of Lords held that in law, a company is a person all together different from its shareholders and directors and the shareholders and Directors of the company are not liable for the debts of the company except to the extent permissible;

(vii)                That though a Single Judge of this Court in Jawahar Lal Nehru Hockey Tournament v. Radiant Sports Management MANU/DE/1756/2008 : 149(2008) DLT 749 observed that there could be a case where the Court even in a execution proceeding lifts the veil of a closely held company, particularly a Pvt. Ltd. company and in order to satisfy a decree, proceed against the personal assets of its directors and shareholders

(viii)                 that though Section 53 of the Transfer of the Property Act, 1882 allows the creditors to have a transfer of property made with an intent to defeat the creditors set aside but a case has to be pleaded;

(ix)                    The Courts have watered down the principle in Solomon supra to cover the cases of a fraud, improper conduct, etc. as laid down in Singer India Ltd. v. Chander Mohan Chadha MANU/SC/0626/2004 : (2004) SCC 1 but a case about it has to be made out;.

 

It is apt to point out that the sub-Rule (2) of Order XXI Rule 41 CPC however permits is a direction for disclosure of the particulars of the assets of the judgment-debtor and not assets of any other person. Though Order XXI Rule 41(1) also permits the Court to examine "any other person" but the words "any other person" are absent from sub-Rule (2) of Rule 41 which permits a direction only against the judgment-debtor where the judgment-debtor is a corporation against any officer thereof and disclosure as aforesaid, of assets of the judgment debtor only and not of personal assets of such officer. Moreover, there may be a situation where the director of the company had agreed to be personally liable to satisfy the decree and for this reason holding him liable and that case the liability of Directors may be taken as inbuilt.

The discussion shall be incomplete if a recent enunciation in this regard is not set forth as regards the power of courts to lift corporate veil. In Delhi Airport Metro Express Pvt Ltd Vs Delhi Metro Rail Corporation Ltd OMP (ENF) (Comm) 145/2021, the Delhi High Court has held as under:

 

“89.   On a review of the legal position as it prevails today across various jurisdictions, it is manifest that the doctrine of lifting of the corporate veil is no longer recognized to be applicable only in the context of the facade and sham tests that have held the field for centuries. The said principle may also in an appropriate case be liable to be resorted to where equity and the ends of justice may sanction such a recourse, where legal obligations are sought to be avoided as also in a setting where public policy or public interest so demand and require. A decree or judgment of a competent court must necessarily be enforced. Courts of justice would be failing in their duty if a decree were left to be a mere dead letter. If decrees and judgments of courts were to be rendered inexecutable and courts were to simply be forced to stand on the sideline, it would clearly shake the confidence of the people in the legal system and its very efficacy. An obligation which flows from a decree or an award must not only be duly recognized but also enforced in accordance with law. Taking any other view would render the entire adjudicatory process meaningless and an exercise in futility”.

 

 

Thus, once corporate veil of a company is lifted, then, of course, no impediments subsist as regards seeking personal assets of Directors who were not a party in a suit filed against a company. What therefore follows is that it cannot be laid as a general proposition that whenever the decree is against a company, its Directors/shareholders would also be liable, if it is to be held like that it would be contrary to the very concept of limited liability. The liability of partnership firm and liability of directors are in different footings. However, in case, there are averments and substantive proof about fraud and improper conduct of directors, then even in execution proceedings the corporate veils could be lifted and the personal affidavits of Directors may be called for as also is held in Singer India (Supra) and several judgments enunciated thereafter such as Delhi Airport Metro (Supra).

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                                        Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com                                       

 

SCOPE OF APPEALS UNDER SECTION 13 (1A) OF COMMERCIAL COURTS ACT APPEAL

 

Scope of APPEALS UNDER Section 13 (1A)  OF COMMERCIAL COURTS ACT  APPEAL

The Commercial Courts Act (CCA) 2015 is enacted with a view to accord expediency in cases related to commercial transactions. The need of a separate and comprehensive Act was felt in view of delay in disposal of ordinary suits and hence, in the Commercial Act, the tiers related to appeals impugning judgments on adjudication on interlocutory application are dispensed with. The commercial courts are constituted at the District level for a specified sum and Commercial Divisions are also constituted in High Courts. The High Court also has appellate Commercial Division qua the appeals that could be filed against the judgment/decree of a single bench of high Court. Similarly, the judgment/decree passed by District Judge could be challenged before the High Court under the said Act. It is worthwhile in the context to refer that Section 115 of Code of Civil Procedure relating to revisionary jurisdiction appears to have been completely dispensed with in the Commercial Courts Act and thereby a substantive rights of parties to the lis is absent as per the CCA. For instance, in cases which is not of commercial nature under the CCA, once, application under Order VII Rule 11 (a) (b) (c) or (d) of Code of Civil Procedure are dismissed by a District Court, the revisionary jurisdiction of High Court could be invoked u/s 115 of Code of Civil Procedure. Similarly, if application under Order 12 Rule 6 of Code of Civil Procedure is dismissed by a District Court, , in a general suit, the revisionary jurisdiction of High Court shall continue to exist. However, if such orders are passed by a District Court under CCA, then, revisionary jurisdiction of high court cannot be invoked. Gracefully, though, it is now settled that one can, nevertheless, approach high court under Article 226 under the supervisory jurisdiction of the high court and therefore, those who wished to challenge such orders passed by Commercial District Courts are not rendered remediless, irrespective of fetter of Order XLIII of CPC. However, what is not understood is the fact that if a High Court has Commercial Division and Commercial Appellate Division, then, why the orders rejecting the application under Order 7 Rule 11 of CPC or order for refusing to return the plaint under  Order VII Rule 10 of CPC or decisions Order XXXVII when leave to defend was allowed conditionally or unconditionally, and/or other such interlocutory application by a single judge bench of high court cannot be impugned before the appellate division of high court? If commercial appellate division of high court can adjudicate in appeal from orders passed by a single judge bench of high court which finds mention under Order XLIII of CPC, then, why no substantive orders such as above should be heard by the appellate division of a high court. The object of expediency cannot be allowed to circumvent the basic rights of parties. The Section 13 (1A) of CCA no doubt, clearly carved out details as regards appeals against orders could be impugned before commercial division or commercial appellate division of high court as the case may be , provided, the appeals are provided for under Order 43 of Code of Civil Procedure and in no other cases. The additions however are made as regards the appeals that could be filed under Section 37 of Arbitration & Conciliation Act 1996 ( as amended and up to date).

SECTION 13 & SECTION 13 (1A) of CCA

In the light of above, it is therefore, endeavored herein to discuss Chapter IV and provisions for appeal under Section of CCA Section 13 (1A) of CCA and while so doing judicial precedents shall also be analysed. Before doing so, the provision of Section 13 (1A) may be reproduced:

13. Appeals from decrees of Commercial Courts and Commercial Divisions—

(1) [Any person aggrieved by the judgment or order of a Commercial Court below the level of a District Judge may appeal to the Commercial Appellate Court within a period of sixty days from the date of judgment or order.

(1A) Any person aggrieved by the judgment or order of a Commercial Court at the level of District Judge exercising original civil jurisdiction or, as the case may be, Commercial Division of a High Court may appeal to the Commercial Appellate Division of that High Court within a period of sixty days from the date of the judgment or order:

Provided that an appeal shall lie from such orders passed by a Commercial Division or a Commercial Court that are specifically enumerated under Order XLIII of the Code of Civil Procedure, 1908 (5 of 1908) as amended by this Act and section 37 of the Arbitration and Conciliation Act, 1996

(2) Notwithstanding anything contained in any other law for the time being in force or Letters Patent of a High Court, no appeal shall lie from any order or decree of a Commercial Division or Commercial Court otherwise than in accordance with the provisions of this Act.

The perusal of above recitations makes it clear that no appeals are contemplated under CCA from any interlocutory or intermediate orders, before high court, unless, stipulated under Order XLIII of Code of Civil Procedure. However, the difficulty is removed in a great deal since, it is now settled that under CCA, through, revisionary power under Section 115 of CPC is no longer available to high court, but, still, aggrieved party may approach high court under article 226 of Constitution of India. However, if orders are passed by a high court on applications in respect whereof appeals are not provided for under Order 43 of CPC and unless, the appeal is preferred under section 37 of Arbitration & Conciliation Act. It is therefore not understood as to, if appellate division is provided for even in the high court against the orders of single judge, then why should that be circumvented by putting fetter that appeals against order could be filed only as per Order XLIII or not otherwise?

LAW

Earlier, there were conflicting views in this regard from Delhi High Court , but now, it appears to have been settled to the effect that no appeal by the commercial court or commercial appellate division could be heard, unless, it is provided for under Order XLIII of CPC or under Section 37 of Arbitration & Conciliation act. The mandate emanates from Section 13 (1A) of CCA.

                          DELHI HIGH COURT        

(Division Bench)

(1)  D & H INDIA LTD Vs Superon Schweisstechnik India Ltd FA (OS) (COMM) 237/2019 reported as AIR Online 2020 Del 463

Para 21 of the above judgment is reproduced as:

21: On a plain reading, the proviso to section 13 (1A) of the Commercial Courts Act is an enabling, rather than a disabling, provision. There is nothing, in the said proviso, which would seem to indicate that it dilutes the effect  of sub-section 13(1A) of section 13. If we were to read the said proviso as excluding, from the jurisdiction of the appellate court, all orders , passed by a Commercial Court, save and except those which finds specific enumeration in Order XLIII of the Code of Civil Procedure,1908, as amended by this Act under section 37 of the Arbitration & Conciliation act 1996. “ we are not convinced that the province of our jurisdiction, in the present case, allows us to legislate. To our mind, therefore, sub- section (1A) of section 13 of the Commercial Courts Act allows appeals to be preferred against all judgments and orders of Commercial Division of the High Court, to the Commercial Appellate Division thereof, and the proviso, to the said sub-section merely clarifies that, in the case of orders specifically enumerated in Order XLIII of CPC, such appeals shall lie.”

(2)  Arindam Chaudhuri Vs Zest Systems Pvt Ltd & Anr AIR ONLINE 2021 DEL1677

Para 8 of the above judgment reads as:

“8. We had doubts about the correctness of the view taken in D & H India Ltd (Supra). We felt that the said view went against the very purpose for which the Commercial Courts Act was enacted i.e to provide for speedy disposal of high value commercial disputes, as is evident from the statement of objects and reasons for the said Act. The effect of judgment ion D & H India Ltd (Supra) was that all orders passed by the Commercial Courts or the Commercial Divisions of the High Court, would be appealable when, before the enactment of the Commercial Courts Act, only such orders were appealable, which were either specifically made appealable, such as, under section 104, or within XLIII of CPC, or qualified as “judgments” within the meaning of that expression, as explained by the Supreme Court in Shah Babulal Khimji Vs jayaben D.Kania & Anr AIR 1981 SC1786.. Thus, right to prefer an appeal-if D& H India Ltd (Supra) were to be accepted as the correct view, stood expanded by the Section 13 of the Commercial Courts Act, when compared to the rights of appeal available prior to its enactment. We were of the prima facie view that this would go contrary to the purpose and object of the Commercial Courts Act, as creation of rights and appeal against all and sundry orders passed in original commercial cases would impede the progress of the causes. Every appeal at the interlocutory stage of the proceedings acts as a speed breaker in the progress of the cause. Moreover, if the proviso to Section 13 (1A) were to be read as not limiting or qualifying the rights of appeal contained in section 13 (1) and the first part of section 13 (1A), then, there was no need to enact the proviso.The view taken in D&H India Ltd (Supra) rendered the proviso to section 13 (1A) a surplusage-which is not to be presumed in respect of any part of a legislation. Thirdly, the view taken by the division bench in D & H India ltd (Supra) neither took into account Section 13 (2), nor the interpretation adopted by the division bench could be reconciled with the clear plain meaning of Section 13 (2). A party aggrieved by an order passed at an interlocutory stage of the proceedings is not entirely remediless, in as much as section 105 CPC entitles the party aggrieved by any such interlocutory order, to assail the same which appealing against the decree by raising a ground in Memorandum of Appeal. Moreover, the option to assail the interlocutory order before the Supreme Court, by preferring a Special Leave Petition, is also available. Since, we were finding it difficult to persuade ourselves to accept the view expressed in D & H India Ltd (Supra), we decided to hear the submissions of learned counsels, and directed them to place on record copies of the judgments that they wished to rely upon”.      

(3)   Delhi Chemical and Pharmaceutical Works Pvt Ltd Vs Himgiri Realtors Pvt Ltd & Anr 2021 SCC Online Del 3603

Para 25:

“Though, we, with due deference to the members of the Division bench in D & H India Ltd (Supra) entertain doubts as to the correctness of the view taken in D & H India Ltd, but do not in the facts of the present case, feel the need to make a reference of the question to a larger bench; the reason is that Bhandari Engineers & Builders Pvt Ltd (supra) on which the impugned orders are based, while laying down law therein, also directs all Courts to abide thereby, resulting in plethora of similar challenges as made herein and it is deemed expedient to settle the law in that regard and which would remain pending if the question of maintainability of the appeal were to be referred to a larger bench”. 

 

BOMBAY HIGH COURT

(Division Bench)

(1). Bank of India Vs M/s Maruti Civil Works & Ors (Appeal from Order no. 362 of 2021 in Commercial Suit No. 6 of 2019

The Bombay High Court has observed in para no. 15 as under:

“15. If we compare the unamended provision with the amended provision of section 13 of the act of 2015, what we find is that earlier an appeal was provided against a “decision” of a Commercial Courts or Commercial Divisions of a High Court to Commercial division of that high court, whereas after the amendment the expression “decision” has been substituted by the expression “:judgment or order”. It is also noticeable that the proviso appended to sub-section 1 of section 13 which earlier existed has been retained in the amended provision as well. To determine as to whether the instant appeal is maintainable, we may also refer to sub section (2) of section 13 of the Commercial Courts Act which begins with a non obstante clause and provides that notwithstanding anything contained in any other law for the tine being in force or Letters Patent of a High Court, no appeal shall lie from any order or decree under section 13 otherwise than in accordance with the provisions of the said Act.”

In the aforesaid case, the hon’ble Division Bench of Bombay High Court had dismissed the appeal that was preferred against the order passed by District Commercial Judge under Order VII Rule 10 and Rule 11 (d) of CPC, since that was not enumerated under Order XLIII of CPC.

The Bombay High Court has also held that in Delhi Chemical and Pharmaceutical Works Pvt Ltd Vs Himgiiri Realtors Pvt Ltd & Anr 2021 SCC Online Del 3603, that the division bench of Delhi High Court had itself  expressed doubts about correctness of the decision of D& H India Ltd(Supra).

(2)      Skil Himachal Infrastructure & Toursim Ltd & Ors Vs FS Financial Services Ltd 2022 SCC Online Bom3152

(3)   Shailendra Bhaduria Vs matrix partners India Investment Holdings LIC 2018 SCC Online Bom 13804

“44.Now the Commercial Courts (Amendment) Act 2018 amends the Act 4 of 2016 and deletes the word “decision” from section 13…..After the judgment of hon’ble Supreme Court delivered in the in the case of Fuerest day Lawson Limited Vs Jindal Exports Limited (2011) 8 SCC 33 and authoritative and binding pronouncements in the case of Kandla Export Corporation Vs OCI Corporation (2018) 14 SCC 715, the statute has to confer a right of appeal, that has to be conferred in clear words. We cannot as suggested by Mr Andhyaarjuna, by an interpretative process carve out a right of appeal, when the law is not creating it.

In para 27 of Bank of India (Supra) it is held by Bombay High Court that:

27. referring to the order which was under appeal in Skil Himachal (Supra), the Division bench in this case held that an order under Order XXXVII of CPC is not enumerated in Order XLIII and that it is only and order and not decree and therefore in view of law laid down in kandla Export (Supra) and Shailendra bhaudaria 9Supra), such an order is not appealable under the Act of 2015.”

The above discussion based on judicial precedents therefore makes it amply clear that the appeal in the Commercial Courts of High Court or Appellate Division of High Court shall not lie against such orders which are not featured under Order XLIII of CPC. Resultantly, any appeal against orders not rejecting plaint under Order VII Rule 11 of CPC or order of not returning of plaint under Order VII Rule 10 of CPC or, order passed under Order XXXVII of CPC thereby granting leave to defend either conditionally or unconditionally or order rejecting application under Order XII Rule 6 of CPC for instance shall not be appealable. In commercial division, clearly there is no provision for revision either. However, the order passed by the District Commercial Court can be entertained by high Court under Article 227 of Constitution of India under supervisory jurisdiction, but no corresponding remedy shall be available, if such orders are passed by the single bench of commercial division of High Court. Therefore, the only remedy, if a party is aggrieved by such orders passed by a single bench of commercial division of high court shall be to prefer Special leave Petition before the Supreme Court.

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                                        Anil K Khaware

Founder & Senior Associate

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