Objection To Territorial Jurisdiction Must Be Raised At The Earliest Opportunity, Cannot Be Taken Up At Subsequent Stage: Supreme Court - 2025-07-02

Territorial Jurisdiction Objections Must Be Raised Early, Supreme Court Rules in PNB Insolvency Case

New Delhi: The Supreme Court has delivered a significant ruling on procedural law, holding that an objection regarding the territorial jurisdiction of a court or tribunal must be raised at the very first opportunity. In a judgment setting aside a Calcutta High Court order, a bench comprising Chief Justice Sanjiv Khanna and Justice Sanjay Kumar underscored that such objections cannot be entertained at a later stage if not raised initially.

The Court allowed an appeal filed by Punjab National Bank (PNB), reviving insolvency proceedings against M/s. George Distributors Pvt. Ltd. before the National Company Law Tribunal (NCLT), Kolkata.

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Background of the Dispute

The case originated when Punjab National Bank filed a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, to initiate insolvency proceedings against M/s. George Distributors Pvt. Ltd. The petition was filed before the NCLT's Kolkata Bench on January 9, 2019, based on the company's registered address on record with the bank.

The NCLT, Kolkata, after serving notices, admitted PNB's petition on September 5, 2019. Subsequently, Atin Arora , a director of the debtor company, challenged the NCLT's order before the Calcutta High Court.

Arguments Before the High Court

Mr. Arora argued that the NCLT Kolkata lacked territorial jurisdiction to hear the case. He contended that the Ministry of Corporate Affairs had approved the company's application to change its registered office from Kolkata, West Bengal, to Cuttack , Odisha , on January 16, 2018, well before PNB initiated the insolvency proceedings.

The Calcutta High Court, exercising its supervisory powers under Article 227 of the Constitution, accepted this argument. On August 13, 2020, it set aside the NCLT's admission order, ruling that the case should have been filed in Cuttack .

Supreme Court's Analysis and Legal Principles

The Supreme Court, upon hearing PNB's appeal, found that the High Court had erred in its decision by overlooking crucial facts and established legal principles. The apex court's reasoning was firmly rooted in Section 21 of the Code of Civil Procedure (CPC), 1908.

The judgment highlighted that Section 21 of the CPC establishes a clear rule:

"No objection as to the place of suing shall be allowed by any Appellate or Revisional Court unless such objection was taken in the Court of first instance at the earliest possible opportunity... and unless there has been a consequent failure of justice."

The Court observed several key facts that the High Court had missed: -

No Intimation: M/s. George Distributors Pvt. Ltd. never officially informed PNB about the change in its registered address. -

Awareness of Proceedings: The company and its director were fully aware of the proceedings in Kolkata and had even requested a copy of the petition from PNB's counsel. -

Delayed Objection: The objection to jurisdiction was not raised at the "earliest possible opportunity" before the NCLT. -

Timing of NCLT Cuttack : A dedicated NCLT bench in Cuttack was only constituted on March 11, 2019, two months after PNB had already filed its petition in Kolkata.

In a pivotal excerpt, the Supreme Court stated:

"The High Court, in our opinion, remained oblivious to the limited role and jurisdiction of superintendence in exercising power under Article 227 of the Constitution as well as in not fully examining the apparent facts as well as consequences of setting aside the order of admission under the IBC."

The Court referenced its previous rulings in Harshad Chiman Lal Modi v. DLF Universal Ltd. and Subhash Mahadevasa Habib v. Nemasa Ambasa Dharmadas to reinforce the principle that a party that waives its right to object to jurisdiction at the initial stage cannot be permitted to raise it later.

Final Verdict and Implications

The Supreme Court allowed PNB's appeals and set aside the Calcutta High Court's order. It directed that the insolvency proceedings against M/s. George Distributors Pvt. Ltd. shall continue before the NCLT, Kolkata, in accordance with the law.

This judgment serves as a crucial reminder to litigants that procedural objections, particularly concerning territorial jurisdiction, are subject to the doctrine of waiver. Parties must be diligent in raising such issues at the outset of a case, failing which they may lose the right to challenge the proceedings on those grounds at a later date.