COMMERCIAL SUIt: The jurisdiction in execution petition
Whether
Delhi High Court can execute a decree for lesser value rather than to transfer it
to District Court?
The
Delhi High Court has recently settled a very significant aspect related to
execution proceedings. In a matter captioned as OZONE SPA PVT LTD Vs CO-INCEPT HOSPITALITY PVT LTD & ORS
EX.P. 56/2022, EX.APPL.(OS) 3172/2022,
EX.APPL.(OS) 1200/2024, EX.APPL.(OS) 1958/2024 (CNR No. DLHC010260792022 ). The
point to be pondered over in the case is as to which court shall have jurisdiction
-the High Court, where the original suit was filed or as the decree was passed
based on settlement for lesser amount i.e the District Court shall have jurisdiction,
since the decree is passed below the threshold of jurisdictional limit of Delhi
High Court. Whether , merely because, the decree that was ultimately passed,
was for lesser amount than Rs 2 Crore, shall disentitle the high court to hear the
plea of execution of its decree? Whether the Delhi High Court shall loose jurisdiction
merely on account of change in pecuniary jurisdiction due to decree passed for
lesser value i.e below the jurisdictional threshold of Delhi High Court? The
answer will have to be found from the provisions of CPC and its explanations,
particularly, explanation to Section 37 of CPC which clearly provides that even
if the Court of first instance losses its jurisdiction due to change in area
under which the subject matter of the decree is situated, however, the same
does not bar such Court from executing the decree which has been passed by it
irrespective of the territorial jurisdiction.
FACTUAL MATRIX
The
Execution Petition was filed on behalf of the Decree Holder seeking execution
of the decree dated 19.07.2018 for an amount of Rs. 1,19,43,000/- passed by the
Delhi High Court in Suit bearing CS (COMM) 870 OF 2018. The issue raised
revolved around the fact as to whether the execution for recovery of less than
Rs 2,00,00,000/- ( Rs Two Crores only) could be adjudicated by the Delhi High
Court, in the backdrop of original suit filed before the Delhi High Court for a
value of more than Rs 2 Crore, however, the judgment and decree was pronounced
for lesser amount as aforesaid. Therefore, it was contended that execution
petition should therefore be transferred to the concerned district court.
To
set out the facts in clear term, the suit was filed for recovery of Rs.
2,53,66,750/- and permanent injunction. In the interregnum, the parties
entered into a Settlement Deed on 05.07.2018 and an Application under Order
XXIII Rule 3 CPC was filed in the aforementioned Suit whereby this Court vide
Order dated 19.07.2018 decreed the Suit in terms of the said Settlement
Deed which forms the part of the Decree dated 19.07.2018. According to the
decree holder, the Judgment debtors (JDs) committed a material breach of the
Settlement Deed dated 05.07.2018 as the JDs have failed to issue post-dated
cheques on 01.02.2020, and also failed to pay royalty fees of Rs. 75,000/-
w.e.f. 01.04.2020 till the filing of the execution Petition. It is further
stated that the JDs had terminated the Settlement Agreement dated 05.07.2018 by
closing the outlet without even issuing notice to the DH. It is the contention
of the DH that such conduct of JDs amounts to breach of the Settlement Agreement
dated 05.07.2018 as well as the Decree dated 19.07.2018.. It is stated by the
DH that the JDs are liable to pay Rs. 1,19,43,000/- in terms of the Decree
dated 19.07.2018 which was passed on the basis of the Settlement Agreement
dated 05.07.2018.
MAINTAINABILITY
The
judgment debtor had raised an issue of maintainability of the execution petition
on the ground that the amount sought to be recovered by way of the execution petition
is less than Rs. 2 Crores which is the pecuniary jurisdiction of Delhi High Court,
and therefore, this Court did not have the jurisdiction to entertain the execution
Petition.
It
was further contended that since the Suit was a commercial suit, therefore,
Sections 38 and 39 CPC are not applicable in view of Section 12 read with
Section 21 of the Commercial Court Act. The “specified value” of the present
execution petition being less than Rs. 2 Crores which is the stipulated value
for commercial disputes entertainable by the Commercial Division of the Delhi High
Court. Section 38 CPC cannot be applied
to the disputes which are governed by the Commercial Courts Act. Therefore, in
case of any discrepancy or conflict among the two legislations, Commercial
Court Act shall prevail, as the said Act is a special legislation. Sections 7
and 12 of the Commercial Courts Act, read with Section 21 of the Commercial
Courts Act, restricts the jurisdiction of the Commercial Division of Delhi High
Court to entertain only those suits, applications, and appeals which satisfy
the specified value i.e. 2 crores. It is stated that the Application for
execution in order to be maintainable before Delhi High Court, should also
satisfy the said specified value. In order to buttress their contention, the
Judgment Debtor placed reliance upon a Judgment passed by the Division Bench of
Delhi High Court in Asian Patent Attonrneys Assn. (Indian
Group) v. Registrar General Delhi High Court, 2026 SCC OnLine Del
360.
DECREE HOLDERS
ARGUMENTS
Per
contra the on behalf of the Decree Holder it was argued that the Suit was filed
for recovery of Rs. 2,53,66,750/- on account of breach of the Franchise
Agreement dated 28.12.2013. In the interregnum, the parties entered into
a Settlement Deed on 05.07.2018 and an Application under Order XXIII Rule 3 CPC
was filed in the aforementioned Suit whereby this Court vide Order dated
19.07.2018 decreed the Suit in terms of the said Settlement Deed which forms
the part of the Decree dated 19.07.2018. On combined reading of Sections 37 and
38 CPC, it can be inferred that the Court passing the decree shall have
jurisdiction to execute the said decree even if the pecuniary limit of the
Decree Court has been altered. Section 12(1)(a) of the Commercial Courts Act,
2015 applies only to any application, appeal or suit, however, the same is not
applicable on execution proceedings as the same is governed by the relevant
provisions of the CPC. Moreover, Section 16 of the Commercial Courts Act also
specifies that the CPC is to be amended to the extent Commercial Courts Act do
so and, therefore, in view of no explicit provisions governing procedure for
execution, the same shall be governed by the provisions of the CPC.
The
point for consideration before the Delhi High Court therefore revolved around as
to whether the decree under execution is maintainable or not, in view of the
fact that as the amount sought to be
recovered is less than the pecuniary jurisdiction of the Delhi High Court.
PROVISIONS AND ANALYSIS
In
order to appreciate the issue in hand , the Sections 37, 38, and 39 CPC reads
as under:
“37.
Definition of Court which passed a decree.—The
expression “Court which passed a decree,”or words to that effect, shall, in
relation to the execution of decrees, unless there is anything repugnant in the
subject or context, be deemed to include—
(a)
where the decree to be executed has been passed in the exercise of appellate
jurisdiction, the Court of first instance, and
(b)
where the Court of first instance has ceased to exist or to have jurisdiction
to execute it, the Court which, if the suit wherein the decree was passed was
instituted at the time of making the application for the execution of the
decree, would have jurisdiction to try such suit.
[Explanation.—The
Court of first instance does not cease to have jurisdiction to execute a decree
merely on the ground that after the institution of the suit wherein the decree
was passed or after the passing of the decree, any area has been transferred from
the jurisdiction of that Court to the jurisdiction of any other Court; but, in
every such case, such other Court shall also have jurisdiction to execute the
decree, if at the time of making the application for execution of the decree it
would have jurisdiction to try the said suit.
38.
Court by which decree may be executed.—
A
decree may be executed either by the Court which passed it, or by the Court to
which it is sent for execution.
39.
Transfer of decree.—
(1)
The Court which passed a decree may, on the application of the decree holder,
send it for execution to another Court [of competent jurisdiction],—
(a)
if the person against whom the decree is passed actually and voluntarily
resides or carries on business, or personally works for gain, within the local
limits of the jurisdiction of such other Court, or (b) if such person has not
property within the local limits of the jurisdiction of the Court which passed
the decree sufficient to satisfy such decree and has property within the local
limits of the jurisdiction of such other Court, or
(c)
if the decree directs the sale or delivery of immovable property situate
outside the local limits of the jurisdiction of the Court which passed it, or
(d)
if the Court which passed the decree considers for any other reason, which it
shall record in writing, that the decree should be executed by such other
Court.
(2)
The Court which passed a decree may of its own motion send it for execution to
any subordinate Court of competent jurisdiction.
[(3) For the purposes of this section, a Court
shall be deemed to be a Court of competent jurisdiction if, at the time of
making the application for the transfer of decree to it, such Court would have
jurisdiction to try the suit in which such decree was passed.]
[(4)
Nothing in this section shall be deemed to authorise the Court which passed a
decree to execute such decree against any person or property outside the local
limits of its jurisdiction.]”
LAW/PRECEDENTS
The
Division Bench of Delhi High Court in Gulab Chand Sharma v. Saraswati Devi,1974
SCC OnLine Del 202 has explained the purport of Section 37, 38 and 39 CPC.
The relevant paragraphs of the above judgments are as under:
“In
support of the first contention it was submitted that the decree passed by the
Division Bench must be taken to be the decree which the Court of first instance
should have passed if it had decided the case correctly. The application (I.A.
No. 469 of 1973) was required to be moved in the trial Court regardless of the
fact that at the time the said application was made a change had occurred in
its pecuniary jurisdiction because a Court does not cease to exist by the
pecuniary limits of its jurisdiction being altered. Strenuously contending that
when a decree for redemption is passed by an appellant Court, execution
application is required to be made not to that Court but to the court of first
instance and urging that the more reasonable view would be that the proceedings
in the appellate Court stood terminated with its decree and any further order
which the parties required in order to give effect to their rights as settled
by the decree, should be obtained from the Court of first instance on which
would devolve the duty of making such an order if a correct decree had been
passed in the first instance. Strong reliance was placed on Sheonarain v. Chuni
Lal, 23 ILR Allahabad 88 (1), Venkata Krishna Ayyar v. Thiagaraya Chitti, 23
ILR Madras 521 (9) and Ram Dhani Sahu v. Lalit Singh, 31 ILR 328 (3). It was
contended that the Court of first instance taking note of the change in its
pecuniary jurisdiction would have forwarded the application to this Court for
execution in compliance with the provisions of section 39 of the Code. The said
procedure having not been adopted, the proceedings taken in this Court, goes
the argument, stood vitiated and the final decree passed was of no consequence
to base a follow-up action on it. With a view to appreciating the contention of
the appellant, it would be appropriate to note the provisions of sections 37,
38 and 39 of the Code. Section 37 defines the “Court which passed a decree”.
It
envisages that the said expression or words to that effect, shall, in relation
to the execution of decrees, unless there is anything repugnant in the subject
or context, be deemed to include— (a) where the decree to be executed has been
passed in the exercise of appellate jurisdiction the court of first instance,
and
(b)
where the Court of first instance has ceased to exist or to have jurisdiction
to execute it, the court which, if the suit wherein the decree was passed was
instituted at the time of making the application for the execution of the
decree, would have jurisdiction to try such suit. Section 38 provides that a
decree may be executed by the court which passed it, or by the Court to which
it is sent for execution. Section 39 provides for transfer of decree and is as
follows:—
“39(1). The Court which passed a decree
may, on the application of the decree holder, sent it for execution to another
Court—
(a)
if the person against whom the decree is passed actually and voluntary resides
or carries on business, or personally works for gain, within the local limits
of the jurisdiction of such other court, or
(b)
if such person has not property within the local limits of the jurisdiction of
the court which passed the decree to satisfy such decree and has property
within the local limits of the jurisdiction of such other property, or
(c)
if the decree directs the sale or delivery of immovable property situate
outside the local limits of the jurisdiction of the court which passed it, or
(d)
if the court which passed the decree considers for any other reason, which it
shall record in writing, that the decree should be executed by such other
court.
(2)
The Court which passed a decree may of its own motion send it for execution to
any subordinate court of competent jurisdiction.
The
clause (a) of section 37 of the Code poses no difficulty, however, it was also deliberated as to what is
meant by the expression “where the court of first instance has ceased to exist”
contemplated by clause (b) of the said section. The said expression, without
doubt, envisages the “abolition or total extinguishment” of the court which
passed the decree. In other words, what is required to attract the first part
of clause (b) of section 37 is the complete abolition of the court and not the
mere alteration in its pecuniary or territorial jurisdiction. The expression
“where the Court of first instance has ceased to have jurisdiction to execute
the decree envisaged by the second part of clause (b) of section 37, obviously
refers to such a decree where the Court loses jurisdiction to execute the
decree according to its tenor. In other words where the court has lost
jurisdiction to execute the decree in the manner prayed for, such as if the
decree is sought to be executed against a person who actually and voluntarily
resides or carries on business or personally works for gain within the local
limits of the jurisdiction of another court, or the person against whom the
decree is sought to be executed has not property within the local limits of the
jurisdiction of the Court which passed the decree to satisfy such decree but
has property within the local limits of the jurisdiction of another court or in
a case where the decree directs the sale or delivery of immovable property
situate outside the local limits of the jurisdiction of the court which passed
the decree. In such cases provision is made in section 39 of the Code
empowering the court which passed the decree to send it for execution to
another court.
INFERENCE
A
combined reading of sections 37 and 38 of the Code makes it clear that a decree
may be executed by the court which passed it or by the court to which it is
sent for execution. That being the position in law, the court which actually
passes the decree does not lose its jurisdiction to entertain execution
petition by reason of the subject-matter thereof being transferred subsequently
to the jurisdiction of another court in which event normally resort has to be
made to the procedure contemplated by section 39 of the Code. However, with a
view to safeguarding the rights acquired under the decree passed by a court
which ceases to have jurisdiction to execute it according to its tenor
provision has been made in clause (b) of section 37 of the Code enabling the
decree-holder to make an application for execution either to that court or to
the court which, if the suit wherein the decree was passed was instituted at
the time of making application to execute it, would have jurisdiction to try
the suit. There are authorities in support of the proposition that the court
which actually passed the decree does not lose its jurisdiction to entertain
the execution petition notwithstanding the fact that its pecuniary jurisdiction
had been altered.
The
court does not cease to exist merely because of the change in its pecuniary
jurisdiction (See Abdus Sattar v. Mohini Mohan Dass, AIR 1933 Cal 684 (5);
Suryanarayan Aggarwal v. Maheshwar Keot, AIR 1950 Assam 115 (4); Chaudhri
Raghunandan Singh v. Narain Dass Balkishan Dass, AIR 1960 All 730 (6); and
Masrab Khan v. Debnath Mali Abdur Mali, AIR 1942 Cal 321 (7).”
The
Co-ordinate Bench of Delhi High Court in Pearey Lal and Sons (Pvt.) Ltd vs
M/s Jamuna Properties (P) Ltd. and Ors.,2004 SCC OnLine Del 11 has
held as under:-
“7.
Coming to the question of transfer of Execution
application on revision of pecuniary jurisdiction or the Court ceasing to have
jurisdiction, reference is invited to a decision of Division Bench of this
Court in Gulab Chand Sharma v. Saraswati Devi reported at ILR (1975) 1 Delhi
345 : (AIR 1975 Del 210). The Division Bench considered the provisions of
Sections 37, 38 and 39 of the Code of Civil Procedure.
The
Court considering the effect of Section 37(a), CPC, held that the expression
“where the Court of first instance has ceased to exist” without doubt envisages
“the abolition or total extinguishment of the Court which passed the decree”.
Further, to attract first part of Clause (b) of Section 37, what is required is
the complete abolition of the Court which passed the decree and not mere
alteration in its pecuniary or territorial jurisdiction.
The
expression “where the Court of first Instance has ceased to have jurisdiction
to execute the decree” as envisaged by second part of Clause (b) of Section 37,
obviously refers to such a decree where the Court loses jurisdiction to execute
the decree according to its tenor. Mr. Valmiki Mehta, learned senior counsel
for decree holder submits that in view of the above dictum of the Division
Bench, there can be no doubt that the Court which passed the decree, in this
case being the High Court, does not lose the jurisdiction to execute the same
because of the increase in pecuniary jurisdiction.
In
view of the judgment in the case of Gulab Chand Sharma, AIR 1975 Del 210
(supra) it cannot be said that the Delhi High Court has lost its pecuniary
jurisdiction to execute the decree and all pending executions are automatically
liable to be transferred to the District Courts. The first question is
accordingly answered in the negative.”
In
sequel upon careful examination of the afore-stated provisions and the law laid
down by Delhi High Court, it can be inferred that Section 37 CPC clearly
defines the expression “Court which passed the decree”. The said expression as
per the provision includes the decree passed by the Appellate Court in exercise
of the appellate jurisdiction, decree passed by the Court of the first
instance, and where the Court of the first instance has ceased to exist or to
have jurisdiction to execute the decree because of the circumstances mentioned
in the Explanation to Section 37 CPC. It can be said that the expression “Court
which passed the decree” assumes in itself a decree which is passed by the
Court of first instance, however, the same has ceased to exist in entirety
which is possible only after extinguishment of the claims decided in the decree
under execution. It can be said that the extinguishment of the claims shall
render the Court of first instance as non- existent and not the alteration of
the territorial or pecuniary jurisdiction of the Court of first instance.
Section 38 of the CPC grants the power to execute the decree to the Court which
has passed such decree or to the Court to which the decree has been transferred
for execution.
In
OZONE SPA PVT LTD (Supra), the facts
reveals that though the Suit was initially filed as a Commercial Suit, however,
the same was filed for recovery of Rs. 2,53,66,750/- which is above the
pecuniary threshold of Delhi High Court in original jurisdiction. However, the
dispute got settled vide a Settlement Agreement dated 05.07.2018 in
terms of which the decree under execution was passed. The decree is for Rs.
1,19,43,000/- which is less than Rs.2 crores. The Delhi High court has thus
opined that the same does not bar the High Court from executing the said decree on the
ground that the amount sought to recovered is less than the pecuniary
jurisdiction of Delhi High Court, as the Suit filed was for the amount more
than the pecuniary limit of Delhi High Court.
Section
38 of the CPC clearly stipulates that the decree can be enforced by the Court
which has passed the decree or by the Court to which the decree has been
transferred for execution. In Ozone Spa (Supra), the Court which
has passed the decree is the High Court and therefore, the same does not loose
jurisdiction merely on account of change in pecuniary jurisdiction. Further,
the said rationale derives its strength from the Explanation to Section 37
which clearly provides that even if the Court of first instance losses its
jurisdiction due to change in area under which the subject matter of the decree
is situated, however, the same does not bar such Court from executing the
decree which has been passed by it irrespective of the territorial
jurisdiction. It is categorically held that the contention that alteration in
pecuniary limit of the court which passed the decree would also take away the
power of such Court to execute the said decree cannot be accepted.
The
Delhi High Court has held that the reliance placed on a Division bench judgment
reported as Asian Patent Attonrneys (supra) is completely
misconceived as the said Judgment does not deal with the situation which has arises
in the present case i.e Ozone Spa (Supra). The said Judgment dealt with
an Administrative Order dated 17.11.2016 which directed the Registry of the
High Court to not entertain the execution petitions in which the decree passed
by the High Court is for a value less
than Rs. 2 Crores. The Division Bench in the said Judgment quashed the
Administrative Order dated 17.11.2016 and categorically observed that the
question to entertain such execution petitions which are seeking to enforce a
decree of a value less than 2 crores passed by Delhi High Court should be
decided by the Court which hears it on the judicial side. Moreover, no opinion
was rendered by the Division Bench qua the maintainability of execution
petitions which sought to enforce a decree for a value less than 2 crores
passed by Delhi High Court and the same was left open for this Court to decide
as when such petition comes for hearing on the judicial side.
CONCLUSION
What
is therefore categorically held is that there will be no difference even if the
decree was passed in a Commercial Suit. No doubt, the same can only be executed
under the provisions of the Commercial Courts Act. There is no quarrel with the
said provision. What is of pertinence is that Section 16 of the Commercial
Courts Act states that in a trial of a commercial dispute of a specified value,
the provisions of CPC as amended by the Commercial Courts Act shall apply.
Sections 37 and 38 CPC, therefore, apply to the decrees passed under the
Commercial Courts Act. The High Court has the jurisdiction to entertain Suits
which are above Rs.2 crores and only the Delhi High Court can execute a decree
in a Suit which was filed before the Delhi High Court for a value more than
Rs.2 crores but the decretal amount is less than Rs.2 crores.
It
is categorically held that the contention that alteration in pecuniary limit of
the court which passed the decree would also take away the power of such Court
to execute the said decree cannot be accepted.
The
challenge to the maintainability of the execution petition in Ozone (Supra) was
therefore dismissed.
--------
Anil K Khaware
Founder & Senior Associate
Societylawandjustice.com
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