Report No. 54
Section 20(c) and proposed Explanation 3
1D.61. Under section 20(c), a suit can be filed where the cause of action arises wholly or in part. As a general rule, it is well settled that in the case of a suit on contract the cause of action arises in part where the contract is to be performed. The place of performance of a contract depends on the terms of the contract. The contract Act has only one provision1 as to place of performance which, however, does not solve the problem of forum.
1. Section 49, Indian Contract Act, 1872.
1D.62. Now, in respect of payment of debts, a controversy as to the place where the debt is to be repaid has arisen. So far as the Code of Civil Procedure is concerned, this controversy has assumed this form, namely,-how far is the English rule that the debtor must find the creditor, to be invoked for the purpose of giving competence to a court having jurisdiction at the place where the creditor resides or carries on business?
1D.63. The Calcutta1 view is, that the English rule on the subject (referred to above) applies to determine the forum. The Bombay view2 also is that the English rule applies.
1. (a) State of Punjab v. A.N. Raha, AIR 1964 Cal 418.
(b) S.P.C. Engineering Co. v. Union of India, AIR 1966 SC 259 (264), para. 9.
2. Bharumal v. Sakhawatmal, AIR 1956 Born 111 (112), para. 3, (Chagla C.J. and Dixit J.).
1D.64. The Punjab view1 is that it does not.
1. Hiralal Girdharilal v. Baijnath, AIR 1960 P unj 450 (FB).
1D.65. The Madras High Court1 has held that the English maxim has to be applied with the modifications pointed out judicially in several cases.
1. G. Venkatesha v. Kamlapat, AIR 1957 Mad 201 (205).
1D.66. In this state of case-law, it would be desirable to make a clarification to the effect that, in the absence of a term in the contract to the contrary, in a suit for recovery of money the cause of action should be deemed to arise in part at the place where the person to whom the money is due resides.
1D.67. Accordingly, we recommend that the following Explanation should be added as Explanation 3 to section 20-
"Explanation 3-In a suit for recovery of money, based on contract, the cause of action shall, in the absence of a term in the contract to the contrary, be deemed to arise in part at the place where the person to whom the money is due ordinarily resides, carries on business or personally works for gain."
Section 21 and execution
1D.68. At present, section 21, which saves irregularities as to local jurisdiction, deals only with objections as to the place of suing. The section does not apply to execution proceedings, that is to say, where an attack is sought to be made on the validity of the execution proceedings themselves on the ground that they had been held in the wrong court.
1D.69. Now, the principle on which section 21 is based, namely, that no objection as to the local jurisdiction of a court can be raised except as provided in the section, has been held to apply to execution proceedings in a number of decisions. Thus, as has been noted in the earlier Report,1 it has been held that the defect of jurisdiction arising by reason of the transfer of an area pending execution proceedings, does not vitiate those proceedings. It has also been held, that after sale, an application to set aside the sale on the ground that the court had lost territorial jurisdiction, could not be made, and that such objection, if not taken at the earliest opportunity, cannot be raised subsequently.
1. 27th Report, Not on section 21 and execution.
1D.70. The Commission, in its Report on the Code, also noted that the only case taking an apparently contrary view was a Madras one. The Commission, however, did not recommend any amendment on the point, as it considered that no express provision was necessary and that in most cases, courts would apply the principle of section 21 to execution also.