2010 Supreme(Ori) 378

2010 (II) OLR (SC) — 848
R. V. RAVEENDRAN AND R. M. LODHA, JJ.
Vinod Seth … Appellant
Versus
Devinder Bajaj & Anr. … Respondents
CIVIL APPEAL NO.4891 OF 2010
[Arising out of SLP [C] No.6736 of 2009]
Decided on 5th July, 2010.

Headnote:1. CIVIL PROCEDURE CODE, 1908 - Order 14, Rule 2 - Court to dispose of a suit by hearing any issue of law relating to jurisdiction or bar created by any law as a preliminary issue - Even if a case has to be decided on all issues, the Court has the inherent power to expedite the trial/hearing in appropriate cases, if it is of the view that either party is abusing the process of Court or that the suit is vexatious. (Para - 22)

       2. CIVIL PROCEDURE CODE, 1908 - Sec. 95 - If a suit is filed without sufficient grounds and in such a suit the plaintiff obtains an interim order of arrest, attachment or temporary injunction, the Court can grant compensation upto Rs. 50,000/- on application by the defendant - Three things are implicit from this provision - Detail stated.

       The first is, if no interim order (of arrest, attachment or injunction) is obtained by the plaintiff, the court cannot grant any compensation to defendant. The second is that the compensation awardable by the court cannot exceed Rs.50,000/. The third is that if a plaintiff does not secure an interim order of arrest, attachment or temporary injunction but merely files a suit on insufficient or false grounds the remedy of the defendant, if the defendant wants any compensation (other than costs and exemplary costs under Section 35 and 35A of the Code), he has to file a separate suit. (Para - 24)

       3. CIVIL PROCEDURE CODE, 1908 - Order 25, Rule 1 - At any stage of a suit, the Court may either on its own motion or on the application of any defendant order the plaintiff for reasons to be recorded, to give security for the payment of all costs incurred or likely to be incurred by the defendant - No where it authorizes or empowers the Court to issue a direction to a plaintiff to file an undertaking to pay damages to the defendant in the event of being unsuccessful in the suit - No provision to assess damages payable by a plaintiff to defendant, when the plaintiff's suit is still pending without any application by defendant, and without a finding of any breach or wrongful act and without an enquiry into the quantum of damages.

       There is also no contract between the parties which requires the appellant to furnish such undertaking. None of the provisions of either TP Act or Specific Relief Act or any other substantive law enables the court to issue such an interim direction to a plaintiff to furnish an undertaking to pay damages. In the absence of an enabling provision in the contract or in the Code or in any substantive laws a court trying a civil suit, has no power or jurisdiction to direct the plaintiff, to file an affidavit undertaking to pay any specified sum to the defendant, by way of damages, if the plaintiff does not succeed in the suit. In short, law does not contemplate a plaintiff indemnifying a defendant for all or any losses sustained by the defendant on account of the litigation, by giving an undertaking at the time of filing a suit or before trial, to pay damages to the defendants in the event of not succeeding in the case. (Para - 26)

       4. CIVIL PROCEDURE CODE, 1908 - Sec. 151 - The section is intended to apply where the Code does not cover any particular procedural aspect, and interests of justice require the exercise of power to cover a particular situation - It is not a provision of law conferring power to grant any kind of substantive relief - It is a procedural provision saving the inherent power of the Court to make such orders as may be necessary for the ends of justice and to prevent abuse of the process of Court.

       It cannot be invoked with reference to a matter which is covered by a specific provision in the Code. It cannot be exercised in conflict with the general scheme and intent of the Code. It cannot be used either to create or recognize rights, or to create liabilities and obligations not contemplated by any law.

       A suit or proceeding initiated in accordance with law, cannot be considered as an abuse of the process of court, only on the ground that such suit or proceeding is likely to cause hardship or is likely to be rejected ultimately. As there are specific provisions in the Code, relating to costs, security for costs and damages, the court cannot invoke Section 151 on the ground that the same is necessary for ends of justice. Therefore, we are of the view that a court trying a civil suit, cannot, in exercise of inherent power under Section 151 of the Code, make an interim order directing the plaintiff to file an undertaking that he will pay a sum directed by the court to the defendant as damages in case he fails in the suit.

       (Paras - 28 & 33)

       5. JUDICIAL JURISPRUDENCE - Every person has a right to approach a Court of law if he has a grievance for which law provides a remedy - Certain safeguards are built into the Code to prevent and discourage frivolous speculative and vexatious suits - An order punishing a litigant for approaching the Court, on the ground that the Court is not able to decide the case expeditiously, is unwarranted, unauthorised and beyond the power and jurisdiction of the Court in a civil suit governed by the Code - Such orders are likely to be branded as judicial high-handedness, or worse, judicial vigilantism.

       We appreciate the anxiety shown by the High Court to discourage land-grabbers, speculators, false claimants and adventurers in real estate from pressurizing hapless and innocent property owners to part with their property against their will, by filing suits which are vexatious, false or frivolous. But we cannot approve the method adopted by the High Court which is wholly outside law. In a suit governed by the Code, no court can, merely because it considers it just and equitable, issue directions which are contrary to or not authorized by law.

        (Paras - 34 & 35)

       6. TRANSFER OF PROPERTY ACT, 1882 - Sec. 52 - It incorporates the well-known principle of lis pendens - The doctrine of lis pendens does not annul the conveyance by a party to the suit, but only renders it subservient to the rights of the other parties to the litigation - Detail stated.

       Section 52 will not therefore render a transaction relating to the suit property during the pendency of the suit void but render the transfer inoperative insofar as the other parties to the suit. Transfer of any right, title or interest in the suit property or the consequential acquisition of any right, title or interest, during the pendency of the suit will be subject to the decision in the suit.

       The principle underlying Section 52 of TP Act is based on justice and equity. The operation of the bar under Section 52 is however subject to the power of the court to exempt the suit property from the operation of Section 52 subject to such conditions it may impose. That means that the court in which the suit is pending, has the power, in appropriate cases, to permit a party to transfer the property which is the subject-matter of the suit without being subjected to the rights of any part to the suit, by imposing such terms as it deems fit. Having regard to the facts and circumstances, we are of the view that this is a fit case where the suit property should be exempted from the operation of Section 52 of the TP Act, subject to a condition relating to reasonable security, so that the defendants will have the liberty to deal with the property in any manner they may deem fit, inspite of the pendency of the suit.

       (Paras - 42 & 43)

       7. CIVIL PROCEDURE CODE, 1908 - Secs. 35, 35-A and 35-B - Costs - Section 35 vests the discretion to award costs in the Courts - It provides that normally the costs should follow the event and Court shall have full power to determine by whom or out of what property, and to what extent costs are to be paid - Detail stated.

       As Section 35 of the Code does not impose any ceiling the desired object can be achieved by the following :

       (i)courts levying costs, following the result, in all cases (non-levy of costs should be supported by reasons); and

       (ii)appropriate amendment to Civil Rules of Practice relating to taxation of costs, to make it more realistic in commercial litigation.

       The provision relating to compensatory costs (Section 35A of the Code) in respect of false or vexatious claims or defences has become virtually infructuous and ineffective, on account of inflation. Under the said section, award of compensatory costs in false and vexatious litigation, is subject to a ceiling of Rs.3,000/-. This requires a realistic revision keeping in view, the observations in Salem Advocates Bar Association (supra). Section 35B providing for costs for causing delay is seldom invoked. It should be regularly employed, to reduce delay.

       The lack of appropriate provisions relating to costs has resulted in a steady increase in malicious, vexatious, false, frivolous and speculative suits, apart from rendering Section 89 of the Code ineffective. Any attempt to reduce the pendency or encourage alternative dispute resolution processes or to streamline the civil justice system will fail in the absence of appropriate provisions relating to costs. There is therefore an urgent need for the legislature and the Law Commission of India to re-visit the provisions relating to costs and compensatory costs contained in Section 35 and 35A of the Code. (Paras - 49 to 53)