Source: Supreme Court 

Why in News? 

Recently, the Supreme Court in the matter of Punjab National Bank v. Atin Arora & Anr.  has held that objections to place of suing can't be allowed unless taken in court of first instance at earliest opportunity. 

What was the Background of Punjab National Bank v. Atin Arora & Anr.   Case?  

• Punjab National Bank (PNB) was the appellant against Atin Arora and another party in this matter that reached the Supreme Court. 
• M/s. George Distributors Pvt. Ltd. (Respondent No. 2) had its registered office in Kolkata, West Bengal initially. 
• On 16^th January 2018, the Ministry of Corporate Affairs, Kolkata, issued an order allowing M/s. George Distributors Pvt. Ltd. to change its registered address from Kolkata, West Bengal to Cuttack, Odisha. 
• PNB filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal (NCLT), Kolkata on 9th January 2019. 
• The company and its director were aware of these proceedings, as evidenced by their request for a copy of the petition from PNB. 
• M/s. George Distributors Pvt. Ltd. had filed an e-Form for the change of registered address. 
• NCLT Kolkata served notices on the petition through Speed Post of India. 
• The Section 7 IBC petition was admitted for hearing. 
• The NCLT Bench at Cuttack was first constituted via an office order on 11th March 2019. 
• The respondent company had not informed PNB about the change in its registered address from Kolkata to Cuttack. 
• The matter eventually reached the Calcutta High Court through a petition under Article 227 of the Constitution of India (COI) where the High Court set aside the NCLT's order rejecting the recall application. 
• Subsequently came before the Supreme Court through Special Leave Petition. 

What were the Court’s Observations? 

• The Supreme Court made the following Observations as: 
  • Found that the High Court erred in entertaining the Article 227of the COI petition. 
  • The Supreme Court specifically noted that the Calcutta High Court:  
    • Failed to consider Section 21 of Civil Procedure Code, 1908 (CPC) regarding jurisdictional objections. 
    • Overlooked that objections about place of suing must be taken at earliest opportunity. 
    • Did not fully examine the consequences of setting aside the IBC admission order. 
    • Remained oblivious to its limited role and jurisdiction under Article 227 of COI. 
  • The Supreme Court emphasized these key points:  
    • The respondent company never informed PNB about the change in registered address. 
    • Mere mention of e-Form in the petition was not sufficient to indicate knowledge of address change. 
    • The NCLT Cuttack bench was only constituted on 11th March 2019, after PNB had already filed in Kolkata. 
    • The company and its director were aware of proceedings and had even collected petition copies. 
  • The Supreme Court ultimately:  
    • Set aside the High Court's order of the High Court. 
    • Allowed the IBC proceedings to continue. 
    • Preserved the rights of Atin Arora and M/s. George Distributors Pvt. Ltd. to pursue other legal remedies.

What is Section 21 of CPC? 

About: 

• Section 21 of CPC deals with the objections to jurisdiction. 
• The purpose of this section is to safeguard honest litigants and to prevent harassment of plaintiffs who have commenced actions in good faith before a court that is later determined to lack jurisdiction. 

Section 21 of CPC: 

• Section 21 of CPC states that - 
  • No objection as to the place of suing shall be allowed by any Appellate or Revisional Court unless such objection was taken in the Court of first instance at the earliest possible opportunity and in all cases where issues are settled at or before such settlement, and unless there has been a consequent failure of justice. 
  • No objection as to the competence of a Court with reference to the pecuniary limits of its jurisdiction shall be allowed by any Appellate or Revisional Court unless such objection was taken in the Court of first instance at the earliest possible opportunity, and, in all cases where issues are settled, at or before such settlement, and unless there has been a consequent failure of justice. 
  • No objection as to the competence of the executing Court with reference to the local limits of its jurisdiction shall be allowed by any Appellate or Revisional Court unless such objection was taken in the executing Court at the earliest possible opportunity, and unless there has been a consequent failure of justice. 
• Under this Section, no objection as to the place of suing will be allowed by an appellate or revisional court unless the following three conditions are satisfied: 
  • The objection was taken in the court of first instance. 
  • It was taken at the earliest possible opportunity and in cases where issues are settled, at or before settlement of issues. 
  • There has been a consequent failure of justice. 
• The Supreme Court in the case of Pathumma v. Kuntalan kutty (1981), held that all these three conditions must co-exist. 
• The principles of this Section also apply to execution proceedings. 

Significance of Section 21 of CPC: 

• This Section serves the purpose of preserving judicial resources by preventing parties from taking inconsistent positions regarding jurisdiction. 
• By requiring timely objections, the Section helps in avoiding unnecessary delays and promotes the efficient resolution of disputes. 
• It aligns with the principles of fairness and equity in legal proceedings. 
• It ensures that parties do not take advantage of the court's jurisdiction and then later attempt to challenge it, thereby maintaining the integrity of the legal system. 
• The provision's recognition of exceptional circumstances provides the court with the flexibility which is needed to address unique situations where strict adherence to the rule may lead to injustice. 

Case Laws: 

• ONGC v. Utpal Kumar Basu (1994): 
  • The Supreme Court held that the reason behind having Section 21 in CPC is to guard the true litigants and also to protect them from any kind of harassment.
• Pathumma v. Kuntalan kutty (1981): 
  • The Supreme Court held that Section 21 of CPC does not preclude objections as to the place of suing being taken in the appellate court, it the trial court has not decided the suit on merits.