A JUDGEMENT AND DECREE PASSED BY A COURT OR TRIBUNAL LACKING INHERENT JURISDICTION WOULD BE A NULLITY

[Mr. M. GOVINDARAJAN]

Every Court or tribunal is subject to various jurisdictions such as territorial jurisdiction, original jurisdiction, pecuniary jurisdiction, appellate jurisdiction etc., Without jurisdiction a Court or tribunal cannot any suit or petition otherwise the judgment and decree passed by the Court or the order passed by the tribunal would be a nullity.

In 'Kiran Singh V. Chaman Paswan' - AIR 1954 SC 340 the Supreme Court held that it is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of the parties.

In 'Mantoo Sarkar V.Oriental Insurance Company Ltd.' - (2009) 2 SCC 244, a distinction has been made between a jurisdiction with regard to the subject matter of the suit and that of the territorial and pecuniary jurisdiction. It was laid by the Supreme Court that a case falling within the former category would make a judgment a nullity.

In 'Tata Motors Ltd., V. Pharmaceutical Products of India Ltd.,' - (2008) 7 SCC 619, it Supreme Court held that the Sick Industries Companies (Special Provisions) Act, 1985 is a special statue and, thus, overrides other Acts likes Companies Act, 1956 stating-

            >>> SICA furthermore was enacted to secure the principles specified in Article 39 of the Constitution of India. It seeks to give effect to the larger public interest.  It should be given primary because of its higher public purpose. Section 26 of SICA bars jurisdiction of the civil courts;

            >>> What scheme should be prepared by the operating agency for revival and rehabilitation of the sick industrial company is within the domain of BIFR.  Section 26 not only covers orders passed under SICA but also any matter which BIFR is empowered to determine;

            >>> The jurisdiction of the civil court is, thus, barred in respect of any matter for which the appellate authority or the Board is empowered. The High Court may not be a civil court but its jurisdiction in a case of this nature is limited.

The Court further held that if the civil court's jurisdiction was ousted in terms of the provisions of Section 22 of SICA, any judgment rendered by it would be coram non judis. It is well settled principle of law that a judgement and decree passed by a court or tribunal lacking inherent jurisdiction would be a nullity.

The said concept has been elaborately discussed in the case law - 'Managing Director, Bhoruka Textiles Ltd., V. Kashmiri Rice Industries' - (2009) 92 CLA 1 (SC).  In this case a partnership firm known as Kashmiri Rice Industries has its place of business at Hangal.  The said firm entered into a contract for supply for paddy husk with the appellant.  Despite the supply of the agreed quantity of paddy husk, the price for the same has been failed to pay.  Therefore a suit was filed for the recovery in the Court of Civil Judge, Hangal.  The appellant, in the original suit contended that the appellant company has become a sick industry within the meaning of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and a reference has been made to the Board of Industrial and Financial Reconstruction ('BIFR' for short) in terms of the provisions of the Act, the suit was not maintainable. The Court held that it was opined that Sec. 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 ('Act' for short) provides for suspension of the proceedings and in view of the fact that no final order has been passed by the BIFR declaring the appellant was a sick industry, mere reference would not suffice. A finding of fact furthermore was arrived at the transaction in question being subsequent to the reference, Sec. 22 of the Act would have no appellation.

The appellant preferred appeal before the High Court which was dismissed.  Therefore the present appeal was filed by the appellant.

The appellant contended that-

            >>> The trial judge as also the High Court committed a serious error insofar as they entered into a wrong finding of fact that the transaction in question is subsequent to the reference;

            >>> A plain reading of Section 22 of the Act would clearly establish that the jurisdiction of the civil court is ousted thereby;

The Supreme Court noted the events of this case as follows:

            >>> Agreement for the supply of husk entered into on or about 6th September 2001;

            >>> Husk was supplied during the period 17th September, 2001 and 28th November, 2001;

            >>> Reference to BIFR in terms of Section 16 of the Act was made on 27th December, 2001 and was registered by the BIFR on 20th March, 2002;

            >>> Respondent filed the suit on 17th December, 2002.

The Supreme Court held that the trial judge committed a manifest error in opining that the transaction in question was subsequent to the reference. It is also apparent from the record that the respondent was aware of the fact that the appellant had made reference to BIFR in terms of the provisions of the Act.

          The Supreme Court analyzed the provisions of the Act as follows:

            >>> Sec. 15 provides for reference to the Board in terms whereof the Board of Directors of the company is required to make a reference within 60 days from the date of duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company. Such reference is made for determination of the measures which may be adopted with respect to the company. The proviso appended thereto, however, entitles the Board of Directors to make a reference within 60 days from the date of formation of the opinion that the company had become a sick industrial company before the audited accounts of the financial year in question are finalized;

            >>> Sec. 16 empowers the Board to make such enquiry as it may deem fit for determining whether any industrial company has become a sick industrial company, inter alia, upon receipt of a reference with respect to such company under Sec. 15.

            >>> Sec. 17 empowers the court to make suitable orders on the completion of enquiry;

            >>> Sec. 20 and 32 envisage speedy disposal of the enquiry and preferably within the time frame provided for thereafter;

            >>> Sec. 22(1) provides the suspension of legal proceedings, contracts.  It provides where in respect of an industrial company, an inquiry under Sec. 16 is pending or any scheme referred to under Sec. 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Sec. 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority.

The Supreme Court held that a plain reading of the aforementioned provision would clearly go to show that a suit is barred when an enquiry under Sec. 16 is pending. It is also not in dispute that prior to the institution of the suit, the respondent did not obtain the consent of the Board.  Sec. 22 must be interpreted giving a plain meaning to the contents. An enquiry in terms of Sec.16 by the Board is permissible upon receipt of a reference. Thus a reference having been made on 27th December, 2001 and the suit having been filed on 17th December 2002, the receipt of a reference must be held to be the starting period for proceeding with the enquiry.  For the above said reasons the Supreme Court set aside in the impugned order. It further directed the Civil Court to transfer the 50% of the decretal amount to BIFR.  It also directed the Board, if it has not finalized any scheme so far, would do as expeditiously as possible and also to take into consideration the decree passed by the trial judge in favor of the plaintiff.