Source: Supreme Court 

Why in News? 

Recently, the Supreme Court in the matter of Rohit Kochhar v. Vipul Infrastructure Developers Ltd. & Ors.  has held that the territorial jurisdiction for a suit involving immovable property should be where the property is located, and the court must be able to grant an effective judgment.   

What was the Background of Rohit Kochhar v. Vipul Infrastructure Developers Ltd. & Ors.  Case?  

• In the present case, the dispute involves a commercial property transaction between Rohit Kochhar (the plaintiff) and Vipul Infrastructure Developers Ltd. (the defendants). 
• In September 2003, the defendant offered to sell a commercial space of approximately 10,000 square feet located on the second floor of a commercial complex in Gurgaon. 
• The defendant sent a written communication containing the offer and transaction terms for the property. 
• On 20th January 2004, the plaintiff accepted the offer and issued a cheque for Rs. 20,00,000 to the defendant.  
• A subsequent payment of Rs. 20,00,000 was made on 6th February 2004. 
• Disagreements arose between the parties regarding the terms of the "Flat Buyers Agreement".  
• The plaintiff claimed the defendants were insisting on unreasonable and arbitrary terms, apparently attempting to avoid their contractual obligations. 
• Frustrated by what he perceived as the defendant's refusal to honor the contract; the plaintiff filed a civil suit in the Delhi High Court seeking specific performance of the contract and a permanent injunction against the defendant. 
• The defendants contested the suit on two primary grounds: 
• The Delhi High Court lacked territorial jurisdiction to hear the case. 
• There was no concluded and binding contract between the parties. 
• The key point of contention was the location of the property (in Gurgaon) versus the location where the suit was filed (Delhi), which raised complex questions about legal jurisdiction. 
• The Delhi High Cort applied the principle of Section 16 of the Code of Civil Procedure, 1908(CPC) and held that the suit is maintainable. 
• While this order was reversed by the Divisional Bench of the High Court and the matter was returned to the competent court. 
• Aggrieved by the decision of the High court the appellant filed the present appeal before the Supreme Court

What were the Court’s Observations? 

• Supreme Court made the following observations: 
  • The Supreme Court agreed with the High Court's observations and reasoning. 
  • The Court emphasized that: 
    • Section 16 of CPC recognizes that actions against property should be brought where the property is situated.  
    • A court without territorial jurisdiction over the property cannot effectively decide rights or interests in that property. 
  • The registration of the sale deed would have to occur in Gurugram. 
  • The defendants would need to leave Delhi's jurisdiction to execute the sale deed. 
  • The relief cannot be obtained entirely through the personal obedience of the defendants. 
  • The Supreme Court ultimately dismissed the Special Leave Petitions, agreeing that the Delhi High Court did not have territorial jurisdiction to hear the case.

What is Specific Performance?

• Specific performance constitutes an equitable remedy granted by a court to uphold the contractual commitments among the parties. 
• Unlike a claim of damages, which involves compensation for not fulfilling the contractual stipulations, specific performance operates as a remedy that enforces the terms agreed between the parties. 
• It is governed by the Specific Relief Act, 1963 (SRA). 
• Section 10 of SRA deals with the specific performance in respect of contracts. It states that- 
  • The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of section 11, section 14 and section 16. 
• The Supreme Court in the case of Katta Sujatha Reddy v. Siddamsetty Infra Projects (P) Ltd. (2023) held that the relief of specific performance of a contract can only be granted when the party claiming such relief shows its readiness and willingness to perform its obligations under the contract. 

What is an Agreement to Sell? 

About: 

• An agreement to Sell is the transfer of property that can take place in a future date.  
• Section 54 of Transfer of Property Act, 1882 (TOPA) defines “sale”. This Section also defines “Contract for Sale”.  
• A “Contract for Sale” (Agreement to sell) is a contract that sale of immovable property shall take place on terms settled between the parties.  
  • Section 54 further provides that it does not of itself create any interest in or charge on such property. 

Difference between Sale and Agreement to Sell: 

What is Section 16 of CPC? 

Suits to be Instituted where Subject-Matter is Situated:

• Scope of the Section: 
  • This legal provision outlines the courts where various types of property-related lawsuits can be filed within India. 
• Types of Suits Covered: 
  • The section addresses suits related to: 
  • Immovable Property Suits: 
    • Recovery of immovable property (with or without rent/profits), Partition of immovable property, Mortgage-related actions 
    • Foreclosure 
    • Sale 
    • Redemption 
    • Determining rights or interests in immovable property 
    • Compensation for damages to immovable property 
  • Special Provision for Movable Property: 
    • Recovery of movable property under distraint or attachment. 

Basic Jurisdictional Rule: 

• General Principle: Suits must be filed in the court where the property is located. 

Exceptions: 

• When the suit involves immovable property held by the defendant, an additional option exists: 

Alternative Jurisdiction: 

•  The plaintiff may file the suit in either: 
• The court where the property is located, or 
• The court within the jurisdiction where the defendant: 
  • Actually, and voluntarily resides 
  • Carries on business 
  • Personally, works for gain 

Conditions for Alternative Jurisdiction: 

• The relief sought must be entirely obtainable through the defendant's personal compliance. 
• Must involve a wrong or relief related to the immovable property.

Case Laws:

• Harshad Chiman Lal Modi v. DLF Universal Ltd (2005): 
  • The Supreme Court observed that Section 16 of the CPC recognizes a well-established principle that actions against res or property should be brought in the forum where such res is situated.  
  • A court within whose territorial jurisdiction the property is not situated has no power to deal with and decide the rights or interests in such property. In other words, this Court held that a court has no jurisdiction over a dispute in which it cannot give an effective judgment.