[Advocate's Diary] Essentials of a Civil Suit: Exclusive jurisdiction, court fee and pre-institution mediation

Advocate's Diary is a project aimed at addressing the dearth of literature on court practice and litigation advocacy. To this end, we aim to create a repository of columns on the essentials of court practice – ranging from civil suits to criminal trials, from ADR procedures to enforcement of decrees and judgments, and more.

The guest columns in the series aim to develop a conversation channel with seasoned practitioners, senior advocates, arbitrators and judges.

In the previous column of Advocate’s Diary, we covered the element of jurisdiction and why courts exercising civil jurisdiction across the country segregate cases on the basis of territory, subject matter and the pecuniary value of the suit. We also looked at the concepts of cause of action and res judicata, and delved into the equity-based principles governing the summary dismissal of parallel proceedings and mirror suits filed on the same cause of action under Sections 10 and 11 of the Code of Civil Procedure (CPC).

In the present column, we shall deal with the interplay between the contours of jurisdiction under the CPC and exclusive jurisdiction clauses which can be frequently found in civil and commercial contractual agreements.

We shall then look at payment of court fees and the requirements of providing party details under Order VI Rule 14A of the CPC. While these requirements are strictly procedural in nature, they still form an integral part of initiating a civil suit and can pose unwanted hurdles in the adjudication of the suit in cases of non-compliance.

Finally, we will look at the recently introduced concept of pre-institution mediation in commercial suits as per the Commercial Courts Act 2015, which has recently been held to be a mandatory requirement by the Supreme Court in Patil Automation v Rakheja Engineers.

Exclusive jurisdiction clauses and interplay with CPC

An exclusive jurisdiction clause is essentially a clause delineating the parties’ mutual agreement to choose to have their dispute adjudicated by the courts of a particular jurisdiction. These clauses are often termed as ‘ouster clauses’, since the choice of one particular jurisdiction by the parties is effectively an ouster of all other courts to adjudicate disputes.

Ouster clauses, however, face a common objection on the grounds of public policy. In other words, should such clauses allow parties to choose a court of law that would never have had jurisdiction as per Sections 9 and 15-20 of the CPC? Or will courts of law hold such an agreement to be in restraint of legal proceedings under section 28 of the Indian Contract Act, 1872?

The law on this point was well settled by the Supreme Court in Hakam Singh v Gammon (India) Ltd. In Hakam Singh, the Supreme Court was dealing with a situation where a contract between two parties contained an exclusive jurisdiction clause, stating that only courts in Mumbai will have jurisdiction to adjudicate the dispute. While the respondent company was based out of Mumbai, the cause of action for the dispute arose in Varanasi. The trial court held that since the cause of action had arisen in Varanasi, the parties could not by agreement confer jurisdiction on courts in Mumbai.

The Supreme Court disagreed with the trial court’s interpretation. It held that parties were indeed restrained from conferring jurisdiction on a court which would, otherwise, not have jurisdiction. However, where two courts had concurrent jurisdiction as per the provisions of the CPC, an agreement between the parties to confer exclusive jurisdiction to one (and oust the jurisdiction of the other) would not be a violation of Sections 23 (violation of public policy) and 28 of the Contract Act.

Whether an exclusive jurisdiction clause necessarily means the ouster of all other courts having jurisdiction as per the provisions of the CPC was first decided by the Supreme Court in ABC Laminart v. AP Agencies, Salem. In ABC Laminart, the Court held that the mere presence of an exclusive jurisdiction clause will not imply an intention that the parties wanted to oust the jurisdiction of all other courts. While such intention may be inferred where the clauses use words such as ‘alone’, ‘only’ or ‘exclusive’, in other situations, such intention will depend on the facts and circumstances of the particular case.

This position was clarified by the Supreme Court in Swastik Gases Pvt Ltd v. Indian Oil Corp Ltd, where the Court stated that exclusive jurisdiction clauses need not be interpreted using the principles of statutory interpretation, but in a manner that best helps the court understand the intention of the parties. The Court observed that the presence of an exclusive jurisdiction clause implies that the parties did not want their disputes adjudicated by other courts, and therefore, inference of an ouster would be a permissible inference in such cases.

While the above cases discuss the express exclusion of the jurisdiction of some courts, there are a number of statutes which provide that for any challenge to actions taken in pursuance of the provisions of the statute, the remedy would lie before a specified tribunal/forum and a civil suit will expressly not lie [For example, see section 79 of the Real Estate (Regulation and Development) Act 2016]. The legal tenability of such provisions, and their intersection with the jurisdiction of civil courts under the CPC, was laid down by the Supreme Court’s Constitution Bench in Dhulabhai v. State of Madhya Pradesh. In Dhulabhai, the Supreme Court held that where a statute establishes a special tribunal/forum to adjudicate any challenges or disputes arising out of the statute, and provides finality to the decisions of such a tribunal/forum, the jurisdiction of civil courts in such situations must be excluded. ­­However, if the very provision has been challenged and declared unconstitutional, then a civil suit in respect of such matters shall continue to lie.

Payment of court fee: A civil suit prerequisite­

A court fee is levied on any substantive pleading filed before a court of law to institute legal proceedings for two reasons: first, to generate revenue for the State, and second, to deter vexatious and frivolous proceedings from being initiated by litigants. While court fees in India is regulated by the provisions of the Court Fees Act, 1870, a number of states have enacted legislation to levy court fees in accordance with List II, Entry 3 of the Seventh Schedule of the Constitution.

Before looking at how the Court Fees Act, 1870, and the Karnataka Court Fee and Suit Valuation Act, 1958 regulate the levy and payment of court fee, we will first inspect the relevant provisions under the CPC.

Section 149 CPC provides the civil court with the discretion to allow a party to cure the payment of deficit court fee at any stage. Payment of deficit court fee is therefore a curable procedural defect and will not be fatal for the institution of a civil suit. However, if such a defect is not cured, it does render the suit liable to be rejected in the future.

The Supreme Court has, in Ajay Dabra v. Pyare Ram, clarified that once a party makes good the deficiency in court fee in respect of a pleading, such a defect shall be deemed to have been cured from the date on which the said pleading was first filed in court.

The provisions of the CPC also ensure that poor and indigent litigants are not denied justice due to want of financial resources, and upholds the salient principle that justice should be available and accessible to all. Order 33 Rule 1 grants any indigent person with the power to institute a civil suit, and Rule 8 provides that no court fee shall be charged from an indigent person in respect of a suit instituted by him or her. Order 44 allows for indigent persons to prefer an appeal against an adverse decision in the primary proceedings, without a payment of court fee on the Memorandum of Appeal.

Sections 3 and 4 of the Court Fees Act, 1870 provide for fees to be charged by the High Court on the original and appellate side pleadings. Section 7 provides for how fees are to be computed in respect of different suits. It is read in conjunction with Schedule I, which covers the levy of ad valorem fees (based on value of the subject matter of the suit), and Schedule II, which covers fixed fees. A refund of court fees can be claimed in certain situations, such as withdrawal of the suit, and is specifically covered under Sections 13-16. Any collection of court fees is usually collected through stamps (as is provided under Section 25 of the Act).

The Karnataka Court Fee and Suit Valuation Act 1958 lays down important guidelines for parties to keep in mind when instituting any suit or original side proceedings requiring the payment of court fee. Section 4 of the Act states that no document which is chargeable by fee under the Act shall be exhibited in court till such fee has been paid. Further, in situations where the party has claimed multiple reliefs, court fee is payable on the aggregate value of the relief in cases of the former, whereas it will be payable on the highest relief claimed when the reliefs are sought in the alternative – as per Section 6. Section 10 also states that in a suit, the plaint should contain a statement on the particulars of the subject matter of the suit, and how it has been valued (which should be in accordance with the provisions of the Act) for payment of appropriate court fee.

Requirements of Order VI Rule 14A

Order VI Rule 14A of the CPC requires that along with every pleading filed in court, a statement should be filed by the party providing the correct address of the party, which shall be called the “registered address of the party”. Sub-section (2) also allows a party to inform the court if the said address has been changed, and to provide details of the new address by filing the relevant form.

A failure to comply with these requirements, and any attempt to provide a false or incomplete address to the court, are severe. The court is empowered under Rule 14(5) to stay the suit filed (if the defect is by the plaintiff) till the correct address if furnished. If the defect is by the defendant, the Court is even empowered to strike out the defence, and place the defendant in such a position as if the defence was not put up, as was recognised by the Delhi High Court in Gagan Kakkar v. Dharampal Chhabra.

Pre-institution mediation under the Commercial Courts Act

The Commercial Courts Act, 2015 has given a tremendous boost to alternative dispute resolution methods such as mediation for resolving commercial disputes. Section 12-A of the Commercial Courts Act makes trying mediation before the institution of any commercial suit mandatory. This was recently upheld by the Supreme Court in Patil Automation. The Supreme Court also laid down that any suit which was filed without complying with the mandate under Section 12-A was liable to be rejected under Order 7 Rule 11 of the CPC.

However, Section 12-A specifically provides that such pre-institution mediation is only contemplated for suits where no urgent interim relief has been sought by the party. This has seen parties urge interim reliefs before the commercial court under false pretexts, in order to circumvent the pre-institution mediation proceedings under Section 12-A. This practice has been called out by the Supreme Court in Yamini Manohar v. TKD Keethi, where the Court held that merely making an application for interim relief will not exempt the parties from complying with the requirement for pre-institution mediation under Section 12-A. The Court held that the commercial court should assess whether the urgent interim relief has been urged on valid and bona fide grounds.

Tanvi Dubey is an independent practitioner at the Supreme Court of India, with a diverse practice ranging from civil, commercial and constitutional disputes to service matters before the Supreme Court and other fora in Delhi.

Sumit Chatterjee is a civil and commercial dispute resolution lawyer at Arista Chambers, practicing before the Karnataka High Court, trial courts and a wide array of tribunals in Bangalore.

The authors would like to thank Justice (Retd.) Abhay Manohar Sapre (former judge, Supreme Court of India) for his invaluable comments and feedback on the previous column, which helped us probe into the issue of jurisdiction further.