Introduction
The Supreme Court of India held that if a statutory notice under Section 80 CPC is not provided before a suit is filed against the state or its instruments in India, any decree obtained pursuant to that suit would be considered a nullity. The present case arose out of a dispute regarding the Odisha State Financial Corporation (OSFC). The Supreme Court also clarified the duty of executing courts to scrutinize the jurisdictional issue in the form of a decree to be executed under Section 47 CPC, at any point when execution was sought, even in the execution stage.
Background
It arose out of a supply transaction in 1985 where Respondent No. 1 (a partnership firm) claimed recovery of payments due from Respondent No. 2 (a private company). OSFC is a statutory corporation and “State” entity under article 12, which took possession of the defaulter unit in order to recover dues owed to it. In 1993, OSFC was added as a defendant; which claimed it has no contractual relationship; invoked limitation; and critical for this appeal, it claimed that Section 80 notice was required and not provided by them. Despite the objection of OSFC, the trial court decreed in favor of the respondents in 2001, and the Court awarded interest in terms of the Interest on Delayed Payments to Small Scale and Ancillary Industries Act, 1993. The OSFC, as a result of execution proceedings paid more than Rs.2.92 crores in aggregate; however, the Corporation sought to challenge the payment after having initiated various rounds of litigation.
Key points
Jurisdictional Nullity: The Supreme Court unequivocally reiterated that a decree by a court without jurisdiction is a nullity, and its invalidity can be pleaded to, and set up whenever the decree is sought to be enforced—at the time of execution and even in any collateral proceedings. The principle, originating in Kiran Singh v. Chaman Paswan, places emphasis on the importance of jurisdiction as a jurisdictional requirement for every judicial decree.
Mandatory Section 80 CPC Notice: A suit by a person against the State, part of the State, its instrumentalities or public officers cannot be instituted without giving prior notice of intention to sue under Section 80 CPC. The requirement is “mandatory and must be strictly complied with”. If such notice is not given the suit shall be dismissed ab initio and is a bar to the jurisdiction of the trial court.
Duties of the executing Court: The Supreme Court made clear that the executing court is required to consider any challenge that a decree is a nullity for want of jurisdiction, including failure to comply with Section 80 CPC under section 47 CPC. Executing courts do not have jurisdiction to go behind the decree except where there happens to be a jurisdictional defect, in which case they should determine such challenges on the merits.
Limited Liability of Statutory Corporations: OSFC’s liability was limited to what was provided for in Section 29 of the State Financial Corporations Act, 1951, and did not possess privity of contract with Respondent No. 1. OSFC could not be subjected to the larger liability stemming from transactions it was not a part of.
Application of Interest on Delayed Payments Act: The Court held that the provisions of the 1993 Act could not be applied to the present case because the supply in question occurred in 1985—before the Act came into effect.
Recent Developments
The Supreme Court set aside the decrees and orders of the subordinate courts and ordered that OSFC must be fully refunded, without any interest, the amount of Rs.2,92,57,559/- within three months. If Respondent No. 1 does not refund the amount to OSFC, OSFC will have the right to pursue recovery of the amount along with simple interest at the rate of 6% per annum. The Court emphasized the need for public bodies that handle public money to not be exposed to liabilities that they cannot control or pay, by ignoring the statutory procedural protections.
Conclusion
This decision serves as a significant reaffirmation of the jurisdictional and procedural discipline in civil actions involving the State and statutory authorities. The decision of the Supreme Court reminds us the caution we should be taking in ignoring mandatory pre-requisites, such as the Section 80 CPC notice, and strengthens the power of executing courts to maintain jurisdictional integrity. The judgment is also notable to practitioners and the parties: there is a limit on whether a decree can be enforced, even at the execution or collateral stage, if the decision was made in the absence of jurisdiction (the Section 80 CPC notice), and enforcement may be permanently denied and challenged subsequently. Put simply, it is a significant precedent as it upholds procedural safeguards and protects public assets from the risks inherent in the judicial process.
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WRITTEN BY __ Kondala Phani Priya
