LAW ON GRANTING OF PRE-AWARD INTEREST BY ARBITRATOR

 

LAW ON granting OF PRE-AWARD interest by arbitrator

 

The arbitrator is a creature of the agreement and the power of the arbitrator in a dispute emanates from the terms of the agreement and what is prohibited in the agreement, generally speaking cannot be provided by the Arbitrator. However, if there has not been specific prohibition, how the issues should be dealt with is a moot point and therefore law courts have dealt with the matter and the issue is now well settled. The present write up in the aforesaid canvas is relating to grant of interest. Whether Arbitrator can grant interest, if not specified in the agreement and if so, whether pre-award or post award interest can be granted by the Arbitrator?  

To reiterate the power of the Arbitrator to award pre-reference and pendente lite interest is not restricted when the agreement is silent, on whether interest can be awarded7 or does not contain a specific term that prohibits the same. The section 31(7) of the Arbitration & Conciliation Act 1996 deals with grant of interest. The relevant provision is extracted hereunder for ready reference.

 

“31. Form and contents of arbitral award.—

(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.

(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.

Explanation.—The expression “current rate of interest” shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978).”

 

 

1940 Act and 1996 Act: Comparison

 

 

The wording of Section 31(7) (a) marks a departure from Arbitration Act, 1940 in two ways: first, it does not make an explicit distinction between pre-reference and pendente lite interest, as both of them are provided for under this subsection;

second, it sanctifies party autonomy and restricts the power to grant pre-reference and pendente lite interest, the moment, the agreement bars payment of interest, even if it is not a specific bar against the Arbitrator.(Ref: Sayeed Ahmed and Company v. State of Uttar Pradesh, (2009) 12 SCC 26).

The power of the Arbitrator to grant pre-reference interest, pendente lite interest, and post-award interest, under Section 31(7) of the Act is fairly well-settled. The judicial determinations also highlight the difference in the position of law under the Arbitration Act, 1940. The following propositions can be summarized from a survey of these cases:

 

(i)   Under the Arbitration Act, 1940, there was no specific provision that empowered an Arbitrator to grant interest. However, through judicial pronouncements, this Court has affirmed the power of the Arbitrator to grant pre-reference, pendente lite, and post-award interest on the rationale that a person who has been deprived of the use of money to which he is legitimately entitled has a right to be compensated for the same.

 

(ii) When the agreement does not prohibit the grant of interest and a party claims interest, it is presumed that interest is an implied term of the agreement, and therefore, the Arbitrator has the power to decide the same.

(iii)      The Supreme Court has consistently  taken  strict view under the 1940 Act, whereby strict construction of contractual clauses that prohibit the grant of interest were held to be the norm and it is construed that that the Arbitrator has the power to award interest, unless, there is an express, specific provision that excludes the jurisdiction of the Arbitrator from awarding interest for the dispute in question (ref: Board of Trustees for the Port of Calcutta v. Engineers-de-Space-Age, (1996) 1 SCC 516 . State of U.P. v. Harish Chandra and Co., (1999) 1 SCC 63

 

Under the 1996 Act, the power of the Arbitrator to grant interest is governed by the statutory provision in Section 31(7). This provision has two parts. Under sub-section (a), the Arbitrator can award interest for the period between the dates of cause of action to the date of the award, unless otherwise agreed by the parties. Sub-section (b) provides that unless the award directs otherwise, the sum directed to be paid by an arbitral award shall carry interest at the rate of 2% higher than the current rate of interest, from the date of the award to the date of payment.

The power of the Arbitrator to award pre-reference and pendente lite interest is not restricted, when, the agreement is silent on whether interest can be awarded Jaiprakash Associates Limited v. Tehri Hydro Development Corporation India Limited, (2019) 17 SCC 786, para 13.2.

In Central Bank of India v. Ravindra (2002) 1 SCC 367, para 39 it is held that While pendente lite interest is a matter of procedural law, pre reference interest is governed by substantive law. Therefore, the grant of pre-reference interest cannot be sourced solely in Section 31(7)(a) (which is a procedural law), but must be based on an agreement between the parties (express or implied), statutory provision (such as Section 3 of the Interest Act, 1978), or proof of mercantile usage.

The basic law is that contract clauses in arbitral proceedings shall speak for themselves. The Arbitrator should examine the contract in totality. It is the duty of every Arbitral Tribunal and Court alike and without exception, for contract is the foundation of the legal relationship. Thus, what is prohibited in the contract cannot be awarded by the arbitrator. If the Arbitrator did not refer to the contractual provisions and publish award contrary to the provisions of contract, and, if the District Court dismissed the objections under Section 34 with a notion that the objection u/s 34 is not an appellate remedy , rather, the periphery of objection is circumscribed, the same shall be the contrary to the terms of contract and prohibition contained therein.

When the agreement does not prohibit the grant of interest and a party claims interest, it is presumed that interest is an implied term of the agreement, and therefore, the Arbitrator has the power to decide the same.

It is held in Secretary, Irrigation Department Government of Orissa Vs. G.C. Ray (1992) 1 SCC 508 that there is no prohibition in the contract for payment of interest on blocked capital. The claimant is otherwise entitled to receive payment on account of interest on blocked capital.

The power of the Arbitrator to grant pre-reference interest, pendente lite interest, and post-award interest under Section 31(7) of the Act is fairly well-settled. The judicial determinations also highlight the difference in the position of law under the Arbitration Act, 1940.

The Supreme Court in the most recent judgment captioned as PAM DEVELOPMENTS PRIVATE LIMITED Vs THE STATE OF WEST BENGAL & ANR bearing Civil Appeal Nos. 9781-9782 of 2024 @ SLP (C) Nos. 8128 -8129 of 2021 has held that the power of the Arbitrator to grant pre-reference interest, pendente lite interest, and post-award interest under Section 31(7) of the Act is fairly well-settled. The judicial determinations also highlight the difference in the position of law under the Arbitration Act, 1940. The following propositions can be summarised from a survey of these cases:

I.      Under the Arbitration Act, 1940, there was no specific provision that empowered an Arbitrator to grant interest. However, through judicial pronouncements, this Court has affirmed the power of the Arbitrator to grant pre-reference, pendente lite, and post-award interest on the rationale that a person who has been deprived of the use of money to which he is legitimately entitled has a right to be compensated for the same. Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992) 1 SCC 508, para 43(i)  When the agreement does not prohibit the grant of interest and a party claims interest, it is presumed that interest is an implied term of the agreement, and therefore, the Arbitrator has the power to decide the same.

II.     Under the 1940 Act, this Court has adopted a strict construction of contractual clauses that prohibit the grant of interest and has held that the Arbitrator has the power to award interest, unless, there is an express, specific provision that excludes the jurisdiction of the Arbitrator4 from awarding interest for the dispute in question (Ref: State of U.P. v. Harish Chandra and Co., (1999) 1 SCC 63).

III.     Under the 1996 Act, the power of the Arbitrator to grant interest is governed by the statutory provision in Section 31(7). This provision has two parts. Under sub-section (a), the Arbitrator can award interest for the period between the date of cause of action to the date of the award, unless otherwise the award directs otherwise, the sum directed to be paid by an arbitral award shall carry interest at the rate of 2% higher than the current rate of interest, from the date of the award to the date of payment.

IV.    The wording of Section 31(7)(a) marks a departure from Arbitration Act, 1940 in two ways: first, it does not make an explicit distinction between pre-reference and pendente lite interest as both of them are provided for under this subsection; second, it sanctifies party autonomy and restricts the power to grant pre-reference and pendente lite interest the moment the agreement bars payment of interest, even if it is not a specific bar against the Arbitrator.

V.      The power of the Arbitrator to award pre-reference and pendente lite interest is not restricted when the agreement is silent on whether interest can be awarded7 or does not contain a specific term that prohibits the same8.

VI.    While pendente lite interest is a matter of procedural law, pre reference interest is governed by substantive law.9 Therefore, the grant of pre-reference interest cannot be sourced solely in Section 31(7)(a) (which is a procedural law), but must be based on an agreement between the parties (express or implied), statutory provision (such as Section 3 of the Interest Act, 1978), or proof of mercantile usage10.

Thus, it is no longer ambiguous that the arbitrator shall be empowered to grant interest as per the terms of the agreement and if there is specific embargo or prohibition, then, no interest can be granted. Yet again, there may be instances, where there may not be prohibition in granting interest in the agreement, but there may not be any speci9ifc mention of that  and I such a situation, the arbitrator can grant interest and the judicial precedents discussed above are a reflection on that.

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                                  Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

 

 

 

 

 

 

 

 

 

 

 

 

MEDICAL NEGLIGENCE: STRICT PROOF NECESSARY

 

MEDICAL NEGLIGENCE: STRICT PROOF NECESSARY

 

The Medical Negligence and the complaints filed for that reasons in consumer courts are quite large in numbers and the patients, who are in the receiving ends often alleges or attributes negligence on Doctors and therefore the Supreme Court has again revisited the aspect with a view to laid down parameter of medical negligence. In a matter captioned as NEERAJ SUD AND ANR. Vs JASWINDER SINGH (MINOR) AND ANR bearing Civil Appeal No. 272 of 2012: 2024 INSC 825   the Supreme Court has analysed the issue further and the parameter of medical negligence is redefined in the judgment pronounced on 25^th October 2024.

According to Supreme Court in Niraj Sud (Supra), prima facie, when reasonable care, expected of the medical professional, is extended or rendered to the patient unless contrary is proved, it would not be a case for actionable negligence. The Supreme Court while so doing had referred to a celebrated case reported as Bolam v. Friern Hospital Management Committee (Queen’s Bench Division) English Law (1957) 1 WLR 582, wherein it was observed that a doctor is not negligent if he is acting in accordance with the acceptable norms of practice unless there is evidence of a medical body of skilled persons in the field opining that the accepted principles/procedure were not followed.

The test so laid down popularly came to be known as Bolam’s test and stands approved by the Supreme Court in a well known judgment reported as Jacob Mathews v. State of Punjab and Another 2005(6) SCC 1. What is of worth reference is that, in India, medical negligence and issues arising thereunder was in a domain of civil cases only and only in 1986 Consumer Protection was enacted and the Consumer Protection Act and cases thereunder were further evolved in including doctors in the ambit of Consumer Protection act for deficiency in service. The Bolan case has therefore, provided the earlier guidelines and impetus in this regard. What therefore shall emerge is that if on application of the said principle, if a doctor was a competent and a skilled doctor possessing requisite qualification to perform PTOSIS surgery and to administer the requisite treatment and that he had followed the accepted mode of practice in performing the surgery then without any material to establish any overt act or omission negligence on the part of a doctor cannot be established. Therefore, without adducing evidence to prove that the doctor had not exercised sufficient care or has failed to exercise due skill in performing the surgical procedure the allegation cannot be deemed to be substantiated.

Contextually, it will be pertinent to point out that the State Commission had dismissed the complaint of complainant, however, the National Commission for Consumer Disputes (NCDRC) had partially reversed the State Commission decision  only on the basis of the re-examination of the record of the PGI which showed that the patient before operation had proper 6/9 vision in both the eyes and was suffering from a moderate PTOSIS with no history of double vision. However, post-surgery, the condition of PTOSIS deteriorated from moderate to severe and the vision of the patient also fell down from 6/9 in both eyes to 6/18. The patient also suffered from double vision post-surgery. Thus, the NCDRC held that the doctor was apparently negligent in not giving proper treatment and was also careless in not performing the repeat surgery.

However, the decision of NCDRC had not passed muster and the Supreme Court has set aside the judgment on the basis of the discussion that shall follow later. Pertinently, the Supreme Court has held in Niraj Sud (Supra) as under:

“11. Deterioration of the condition of the patient post-surgery is not necessarily indicative or suggestive of the fact that the surgery performed or the treatment given to the patient was not proper or inappropriate or that there was some negligence in administering the same. In case of surgery or such treatment it is not necessary that in every case the condition of the patient would improve and the surgery is successful to the satisfaction of the patient. It is very much possible that in some rare cases complications of such nature arise but that by itself does not establish any actionable negligence on part of the medical expert.”

 

In Niraj Sud (Supra) in para 14 the Supreme Court has held as under:

“14. It is well recognized that actionable negligence in context of medical profession involves three constituents (i) duty to exercise due care; (ii) breach of duty and (iii) consequential damage. However, a simple lack of care, an error of judgment or an accident is not sufficient proof of negligence on part of the medical professional so long as the doctor follows the acceptable practice of the medical profession in discharge of his duties. He cannot be held liable for negligence merely because a better alternative treatment or course of treatment was available or that more skilled doctors were there who could have administered better treatment”.

 

            Yet again, in para no. 18 it is held as under:

“18. In other words, simply for the reason that the patient has not responded favourably to the surgery or the treatment administered by a doctor or that the surgery has failed, the doctor cannot be held liable for medical negligence straightway by applying the doctrine of Res Ipsa Loquitor unless it is established by evidence that the doctor failed to exercise the due skill possessed by him in discharging of his duties”.

 

It thus follows that a medical professional may be held liable for negligence only when he is not possessed with the requisite qualification or skill or when he fails to exercise reasonable skill which he possesses in giving the treatment. Only if the above two essential conditions for establishing negligence stand satisfied only then the aspect of negligence could be looked into.

The Supreme Court has thus laid down the law and has categorically held that merely for the reason that the patient has not responded favourably to the surgery or the treatment administered by a doctor or that the surgery has failed, the doctor cannot be held liable for medical negligence straightway by applying the doctrine of Res Ipsa Loquitor, unless, it is established by evidence that the doctor failed to exercise the due skill possessed by him in discharging of his duties. It may be noted that though, the doctrine res ipsa loquitor is recognized in law of torts, but there has to be overwhelming reason to assume that there has been negligence and the magnitude of it is so pervasive that proof shall not be necessary. Clearly, the said principle cannot be applied simplistically and in literal sense of term, in the case of medical negligence and therefore, the judgment of Supreme Court is a clear pointer to the aspect of medical negligence.

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                          Anil K Khaware

            Founder & Senior Associate

            Societylawandjustice.com

 

 

ORDER 14 (2) OF CPC AND LAW ON FRAMING PRELIMINARY ISSUES

 

Order 14 (2) OF CPC and LAW ON FRAMING PRELIMINARY ISSUES

The stage of framing preliminary issues is of vital importance in any dispute in civil cases. No doubt, whether the plaint is required to be returned or not or whether it is to be rejected or not are the other aspect which is also linked with the desirability of framing preliminary issues in apt cases. Thus, principles of Order 7 Rule 10 of Code of Civil Procedure (CPC) which contains the principles of return of plaint also need elucidation. Another aspect as stated is the issue of rejection of plaint has been illustrated in Order 7 Rule 11 (a)(b)(c) & (d) of CPC and if it conforms to the aforesaid prescription, the plaint can be rejected. The power of Courts under Order 7 Rule 10 of CPC is separate and distinct. The plaint can be returned due to lack of pecuniary jurisdiction and if otherwise it is filed in the wrong forum. The issues of disputes and claim of exclusive jurisdiction if it is based on certain facts, then, being the question of facts and law, the issues ought to be framed in that regard. Preliminary issues are framed for limitation and jurisdiction. The preliminary issues are framed for question of law. It is generally understood that if mixed question of facts and law existed, then, framing of issues are recommended and the findings are required to be returned on each issues including mixed question of law and facts. In fact, the Supreme Court has also held that rather than framing preliminary issues for jurisdiction and limitation, on all such issues including the issues of limitation and jurisdiction, findings ought to be returned after full dress trial and after leading of evidence. The law in this context is changed after amendment in the Section 14(2) of CPC in 1976.

That to analyse it further, the provisions of Order XIV Rule 2 of the Code to contend such Order XIV Rule 2 has been substituted by Central Act No. 104 of 1976, whereby the Court is mandated to pronounce judgment on all issues, even though the suit can be disposed of on a preliminary issue. Such amendment was necessitated to avoid delay in the disposal of the proceedings inasmuch as if only a preliminary issue is decided, the further appeal and revision would be preferred only against the preliminary issue and after the preliminary issue is decided in favour of the plaintiffs, the evidence has to be led on the remaining issues. Therefore, to ensure expeditious disposal of the proceedings and to avoid possibility of remand by the appellate or revisional jurisdiction, it was made mandatory for the Court to record reasons on all the issues. Such finding would obviate the possibility of remand at appellate or revisional stage, even if the finding on preliminary or other issues are to be reversed.

 

The Order XIV Rule 2 before amendment by the Act No. 104 of 1976 reads thus:

“R. 2. Where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on the issues of law only, it shall try those issues first, and for that purpose may, if it thinks fit, postpone the settlement of the issues of fact until after the issues of law have been determined.”

 

The Order XIV Rule 2 after the substitution of Rule 2 by the Act No. 104 of 1976, effective from 1.4.1977, reads thus:

 

“2. Court to pronounce judgment on all issues.—

(1) Notwithstanding that a case may be disposed of on a preliminary issue, the Court shall, subject to the provisions of sub-rule (2), pronounce judgment on all issues.

(2) Where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to—

(a) the jurisdiction of the Court, or

(b) a bar to the suit created by any law for the time being in force, and for that purpose may, if it thinks fit, postpone the settlement of the other issues until after that issue has been determined, and may deal with the suit in accordance with the decision on that issue.”

 

The Supreme Court, recently, in a matter captioned as Sathyanath & Anr. Vs Sarojmani, bearing Civil Appeal No. 3680 of 2022 has deliberated in detail on the above aspect. Before adverting to the findings of Supreme Court, the facts of the case may be reproduced in nutshell.

                                                  FACTS

1.   The plaintiffs-appellants had preferred original suit against the Defendant/ respondent for seeking a declaration that the appellants was absolute owners of the suit property and for permanent injunction restraining the defendant and their agents in disturbing the peaceful possession and enjoyment of the suit property by the appellants in any manner. Initially, the defendant filed an application under Order VII Rule 11 of the Code of Civil Procedure, 19081 for rejection of the plaint but the same was dismissed by the trial court. It is thereafter, the defendant filed an application to frame issues under Order XIV Rule 2(2) of the Code to treat the following as the preliminary issues:

 

1.  Whether the suit is not hit by res judicata and estoppel as claimed by the defendant in the written statement?

2. Whether the suit is not hit by res judicata and estoppel as claimed by the defendant in the written statement?   

3. Whether the suit is not barred by limitation as contented by the defendant in the written statement?

4. Whether the Plaintiffs have deliberately and wantonly abused the process of the court, as contented by the defendant in the written statement?

5. Whether the suit is not valued properly and court fee paid is deficient as claimed by the defendant in P the Written statement.?

 

2.   That the learned trial court dismissed the application of the defendant and the order of the learned trial court was challenged in revision petition under Article 227 of the Constitution of India wherein the High Court ordered the framing of issue of res judicata as preliminary issue.

 

LAW

The law in this regard could be traced back to 1964 when, Supreme Court had the occasion to consider the above provision in a judgment reported as Major S. S. Khanna v. Brig. F. J. Dillon AIR 1964 SC 497. It was held that under Order XIV Rule 2 of the Code where issues both of law and of fact arise in the same suit and the Court is of opinion that the case or any part thereof may be disposed of on the issues of law only, it shall try those issues first, and postpone the settlement of the issues of fact until other issues of law have been determined. It was held as under:

“18. ……. Under Order 14 Rule 2 Code of Civil Procedure, where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on the issues of law only, it shall try those issues first, and for that purpose may, if it thinks fit, postpone the settlement of the issues of fact until after the issues of law have been determined. The jurisdiction to try issues of law apart from the issues of fact may be exercised only where in the opinion of the Court the whole suit may be disposed of on the issues of law alone, but the Code confers no jurisdiction upon the Court to try a suit on mixed issues of law and fact as preliminary issues. Normally all the issues in a suit should be tried by the Court: not to do so, especially when the decision on issues even of law depend upon the decision of issues of fact, would result in a lopsided trial of the suit.”

                             

How, the various high courts over the years have dealt with the aspect arising out of Order 14 (2) of Code of Civil Procedure is worth consideration.

 

Allahabad High Court

 

The amended provision of Order XIV came up for consideration before the Full Bench of Allahabad High Court in a judgment reported as Sunni Central Waqf Board and Ors. v. Gopal Singh Vishrad and Ors AIR 1991 ALL 89.  It was held that material changes had been brought about in CPC by substituting Order XIV Rule 2 of the Code. The word ‘shall’ in the un-amended provision has been replaced by the word ‘may’ in the substituted provision, therefore, it is now discretionary for the Court to decide the issue of law as a preliminary issue, or to decide it along with the other issues. It was further held that even all issues of law cannot be decided as preliminary issues and only those issues of law falling within the ambit of clause (a) and (b) of sub-rule (2) of Rule 2 could be decided. The High Court held as under:

 

“22. Under the above provision once the court came to the conclusion that the case or any part thereof could be disposed of on the issues of law only it was obliged to try those issues first and the other issues could be taken up only thereafter, if necessity survived. The court had no discretion in the matter. This flows from the use of the word “it shall try those issues first”. Material change has been brought about in legal position by amended O. 14, R. 2 which reads as follows:—

 

24. The word “shall” used in old O. 14, R. 2 has been replaced in the present Rule by the word “may”. Thus now it is discretionary for the Court to decide the issue of law as a preliminary issue or to decide it along with the other issues. It is no longer obligatory for the Court to decide an issue of law as a preliminary issue.

25. Another Change brought about by the amended provision is that not all issues of law can be decided as preliminary issues. Only those issues of law can be decided as preliminary issues which fell within the ambit of cls. (a) and (b) of sub-r. (2) of R. 2 of O. 14. Cl. (a) mentions “jurisdiction of the Court” and clause (b) deals with “bar to the suit created by any law for the time being in force.” In the present case cl. (a) is not attracted. The case is sought to be brought within the ambit of cl. (b). For bringing it under cl. (b) Limitation Act and the Muslim Waqf Act have been invoked.”

 

HIMACHAL PRADESH HIGH COURT

 

A Full Bench of Himachal Pradesh High Court in a judgment reported as Prithvi Raj Jhingta & Anr. v. Gopal Singh & Anr AIR 2007 HP 11, has held as under:

“8. The legislative mandate is very clear and unambiguous. In the light of the past experience that the old Rule 2 whereby, in the fact-situation of the trial Court deciding only preliminary issues and neither trying nor deciding other issues, whenever an appeal against the judgment was filed before the Appeal Court and the Appeal Court on finding that the decision of the trial Court on preliminary issues deserved to be reversed, the case per force had to be remanded to the trial Court for trial on other issues. This resulted in delay in the disposal of the cases. To eliminate this delay and to ensure the expeditious disposal of the suits, both at the stage of the trial as well as at the appeal stage, the legislature decided to provide for a mechanism whereby, subject to the exception created under sub-rule (2), all issues, both of law and fact were required to be decided together and the suit had to be disposed of as a whole, of course based upon the findings of the trial Court on all the issues, both of law and fact.

 

9. Based upon the aforesaid reasons therefor, and in the light of legislative background of Rule 2 and the legislative intent as well as mandate based upon such background, as well as on its plain reading, we have no doubt in our minds that except in situations perceived or warranted under sub-rule (2) where a Court in fact frames only issues of law in the first instance and postpones settlement of other issues, under sub-rule (1), clearly and explicitly in situations where the Court has framed all issues together, both of law as well as facts and has also tried all these issues together, it is not open to the Court in such a situation to adopt the principle of severability and proceed to decide issues of law first, without taking up simultaneously other issues for decision. This course of action is not available to a Court because sub-rule (1) does not permit the Court to adopt any such principle of severability and to dispose of a suit only on preliminary issues, or what can be termed as issues of law. Sub rule (1) clearly mandates that in a situation contemplated under it, where all the issues have been framed together and have also been taken up for adjudication during the course of the trial, these must be decided together and the judgment in the suit as a whole must be pronounced by the Court covering all the issues framed in the suit.”

                

PATNA HIGH COURT

The Patna High Court in a judgment reported as Dhirendranath Chandra v. Apurba Krishna Chandra and Ors AIR 1979 Pat 34 held that even if the case may be disposed of on a preliminary issue, the Court is bound to pronounce judgment on all the issues, subject to the provision in sub-rule (2) according to which if the case or any part thereof may be disposed of on issue of law only and if that issue relates to jurisdiction of the Court or a bar to the suit created by law for the time being in force, the Court may try such issue first. The High Court held as under:

“6. A plain reading of R. 2 will show that ordinarily even if the case may be disposed of on a preliminary issue, the Court is bound to pronounce judgment on all issues. This ordinary rule is subject to only one exception which has been provided in sub rule (2) according to which if the case or any part thereof may be disposed of on issue of law only and if that issue of law relates to the jurisdiction of the Court or a bar to the suit created by any law for the time being in force the court may try such issue first. It is, therefore, clear that a departure from the ordinary rule provided in sub-rule (1) of R. 2 can be made by the Court only in the circumstances mentioned in sub-rule (2) and even in these circumstances the Court has only a discretion that it may try an issue of law relating to the points mentioned in clauses (a) and (b) of sub-rule (2) as a preliminary issue before framing other issues. There is, however, nothing in sub-rule (2) which in my opinion makes it obligatory for the Court to try such an issue first in all cases. If, therefore, the Court is of opinion that in any particular case it will be more expedient to try all the issues together and therefore, if it refuses to try and decide any issue of law even on the points referred to in cls. (a) and (b) of sub rule (2) as a preliminary issue before taking up other issues”.

                                       

                                                  BOMBAY HIGH COURT

The Bombay High Court in a judgment reported as Usha Sales Ltd. v. Malcolm Gomes and Ors AIR 1984 Bom 60  held that after the amendment, a duty is cast upon the Court that it must proceed to hear all the issues and pronounce the judgment on the same, except that the Court may try an issue relating to the jurisdiction of the Court or to the legal bar to the suit as a preliminary issue. It was held to be more in the nature of discretion rather than a duty. It was held as under:

“11. From the above it is easily seen that there is an obligation cast upon the Court that even though a case may be disposed of on a preliminary issue the Courts shall subject to the provision of sub-rule (2) pronounce judgment on all issues. In other words, the obligation to decide a question of law as a preliminary issue if that decision disposes of the case or part of the case is no longer, there. Similarly, the discretion to decide any other issue as a preliminary issue has been taken away totally from the Court. On the other hand, a duty is cast upon the Court that it must proceed to hear all the issues and pronounce judgment on the same.

 

12. There is, however, a small exception carved out to the above provision. The Court may try an issue relating to the jurisdiction of the Court or to the legal bar to the suit as a preliminary issue but this is more in the nature of a discretion rather than a duty and the Court is not bound to try any issue despite the provision contained in sub-r. (2) of R. 2 of O. 14 of the Code. The words “it may try” are clearly indicative of the fact that discretion is given to the Court and no duty is cast upon the Court to decide any issue as a preliminary issue.”

 

 

 

PUNJAB & HARYANA HIGH COURT

The Punjab and Haryana High Court in a judgment reported as Hardwari Lal v. Pohkar Mal and Ors AIR 1978 P&H 230 had the occasion to compare the provision of Order XIV Rule 2 prior to and after the amendment and held as under:

“5. A comparative reading of the said provision as it existed earlier to the amendment and the one after amendment would clearly indicate that the consideration of an issue and its disposal as preliminary issue has now been made permissible only in limited cases. In the unamended Code, the categorization was only between issues of law and of fact and it was mandatory for the Court to try the issues of law in the first instance and to postpone the settlement of the issues of fact until after the issues of law had been determined. On the other hand, in the amended provision there is a mandate to the Court that notwithstanding that a case may be disposed of on a preliminary issue, the Court has to pronounce judgment on all the issues. The only exception to this is contained in sub-rule (2). This sub rule relaxes the mandate to a limited extent by conferring a discretion upon the Court that if it is of opinion that the case or any part thereof may be disposed of “on an issue of law only,” it may try that issue first. The exercise of this discretion is further limited to the contingency that the issue to be so tried must relate to the jurisdiction of the Court or a bar to the suit created by a law in force.”

 

JAMMU & KASHMIR HIGH COURT

The Jammu and Kashmir High Court in a judgment reported as Smt. Aruna Kumari v. Ajay Kumar AIR 1991 J&K 1 held as under:

 

“4. …..Admittedly both the parties have to lead evidence regarding both the issues. In case issue No. 2 is allowed to be treated as preliminary the parties will certainly lead evidence in the case and instead of disposing of the case expeditiously it will prolong the matter and frustrate the very basis of law contained in Order XIV, Rule 2, Civil Procedure Code. The evidence to be led by both the parties will almost cover both the issues and it cannot, therefore, be said that by allowing issue No. 2 to be treated as preliminary the trial of the case would be expedited. When we review the whole law on the point it becomes clear that where issue of jurisdiction is a mixed question of law and fact requiring evidence to be recorded by both the sides same cannot be treated as a preliminary issue.”

                             

                                             SUPREME COURT

In furtherance to the earlier judgment of Supreme Court as reported in Major S. S. Khanna (Supra)  The Supreme Court in a judgment reported as Ramesh B. Desai and Ors. v. Bipin Vadilal Mehta and Ors. (2006) 5 SCC 638, wherein it was held as under:

 

“13. Sub-rule (2) of Order 14 Rule 2 CPC lays down that where issues both of law and of fact arise in the same suit, and the court is of the opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to (a) the jurisdiction of the court, or (b) a bar to the suit created by any law for the time being in force. The provisions of this Rule came up for consideration before this Court in Major S.S. Khanna v. Brig. F.J. Dillon [(1964) 4 SCR 409 : AIR 1964 SC 497] and it was held as under: (SCR p. 421)

Though there has been a slight amendment in the language of Order 14 Rule 2 CPC by the amending Act, 1976 but the principle enunciated in the above quoted decision still holds good and there can be no departure from the principle that the Code confers no jurisdiction upon the court to try a suit on mixed issues of law and fact as a preliminary issue and where the decision on issue of law depends upon decision of fact, it cannot be tried as a preliminary issue.”

 

The Supreme Court has therefore reiterated the principles enunciated in Major S. S. Khanna (Supra) and it is further held that the Code confers no jurisdiction upon the Court to try a suit on mixed issues of law and fact as a preliminary issue and where the decision on issue depends upon the question of fact, it cannot be tried as a preliminary issue. The said finding arises from the provision of Order XIV Rule 2 clause (a) and (b).

After the amendment, discretion has been given to the Court by the expression ‘may’ used in sub-rule (2) to try the issue relating to the jurisdiction of the Court i.e. territorial and pecuniary jurisdiction, or a bar to the suit created by any law for the time being in force i.e., the bar to file a suit before the Civil Court. Hence, if Order XIV Rule 2 is read along with Order XII Rule 5, the Court is expected to decide all the issues together unless the bar of jurisdiction of the Court or bar to the suit in terms of sub-rule (2) clause (a) and (b) arises. The intention to substitute Rule 2 is the speedy disposal of the lis on a question which oust either the jurisdiction of the Court or bars the plaintiff to sue before the Civil Court.

Thus, if the issue is a mixed issue of law and fact, or issue of law depends upon the decision of fact, such issue cannot be tried as a preliminary issue. In other words, preliminary issues can be those where no evidence is required and on the basis of reading of the plaint or the applicable law, if the jurisdiction of the Court or the bar to the suit is made out, the Court may decide such issues with the sole objective for the expeditious decision. Thus, if the Court lacks jurisdiction or there is a statutory bar, such issue is required to be decided in the first instance so that the process of civil court is not abused by the litigants, who may approach the civil court to delay the proceedings on false pretext.

The Supreme Court in A. Shanmugam v. Ariya Kshatriya Rajakula Vamsathu Madalaya Nandhavana Paripalanai Sangam & Ors (2012) 6 SCC 430 has held as under:

“39. Our courts are usually short of time because of huge pendency of cases and at times the courts arrive at an erroneous conclusion because of false pleas, claims, defences and irrelevant facts. A litigant could deviate from the facts which are liable for all the conclusions. In the journey of discovering the truth, at times, this Court, at a later stage, but once discovered, it is the duty of the court to take appropriate remedial and preventive steps so that no one should derive benefits or advantages by abusing the process of law. The court must effectively discourage fraudulent and dishonest litigants.”

 

The aforesaid judgments if put together in a broad canvas, it may appear that the judgments are in consonance with the principles laid down by the Supreme Court  in Ramesh B. Desai (Supra) that not all issues of law can be decided as preliminary issues. Only those issues of law can be decided as preliminary issues which fell within the ambit of clause (a) relating to the “jurisdiction of the Court” and (b) which deal with the “bar to the suit created by any law for the time being in force.” The reason to substitute Rule 2 is to avoid piecemeal trial, protracted litigation and possibility of remand of the case, where the appellate court differs with the decision of the trial court on the preliminary issues upon which the trial court had decided.

 

In SATHYANATH (Supra) thus Supreme Court has summarized in para 33:

 

33. Keeping in view the object of substitution of sub-Rule (2) to avoid the possibility of remanding back the matter after the decision on the preliminary issues, it is mandated for the trial court under Order XIV Rule 2 and Order XX Rule 5, and for the first appellate court in terms of Order XLI Rules 24 and 25 to record findings on all the issues.

Therefore, it was held that the order of the High Court remanding the matter to the learned trial court to frame preliminary issues runs counter to the mandate of Order XIV Rule 2 of the Code and thus, not sustainable in law. The learned trial court should record findings on all the issues so that the first appellate court has the advantage of the findings so recorded and to obviate the possibility of remand if the suit is decided only on the preliminary issue. The amendment in 1976 in the Order 14(2) of Code of Civil Procedure appears to have been necessitated due to the fact that framing of preliminary issues and appeal/revision against such framing or not framing could consume long period of time and hence, it was felt necessary that the preliminary issues should only be framed when it is only on legal issues as narrated therein and on pure question of law and not otherwise. The discretion is therefore accorded to the Courts, whether to frame preliminary issues after the amendment with the object of expediency. The underlying object is to conclude the trial on all plausible issues, rather than to deliberate on preliminary issues and remain prone to appeals or revisions, thereby in effect halting the process of effective adjudication. What therefore follows is that unless in bare reading of plaint and documents, if the bar of jurisdiction or if the plaint is otherwise explicitly barred by law that preliminary issues could be framed and not otherwise. The aforesaid discussions are in sync with the judgments/precedents are a pointer to that.

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                                            Anil K Khaware

Founder & Senior Associate

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