Introduction and background

  1. The law of enabling the creditor to file the suit at his place of residence is a well-recognised rule in the English common law. Principle. Where no place of payment is specified either expressly, or by implication from the nature and terms of the contract and the surrounding circumstances and the act is one which requires the presence of both parties for completion the general rule is that the promiser must seek out the promise and perform the contract wherever he may happen to be.1 This principle in England has been followed in judgments such as BallAntwerp London and Brazil Lines2, Seward v. Palmer3 and Cranley v. Hillery4.
  2. The application of this principle by Indian Courts is not uniform and this article attempts to examine how the common law principle are dealt by the Indian Courts. Though the principle of common law that 'debtor shall seek for his creditor' is not incorporated into Indian law, in several cases, the Indian courts have considered this principle to determine territorial jurisdiction in suits for recovery of money.
  3. Section 49 of the Indian Contract Act, 18725 ("ICA") provides for the place of performance of a promise where no place is fixed for performance of the contract. Under the said provision, where a promise is to be performed, for which no place is fixed, it is the onus of the promisee to apply to the promisor to appoint a reasonable place for the performance of the promise.
  4. In some cases, the courts have relied upon the common law doctrine and in some cases they have refused to apply this doctrine. A full bench of the High Court of Madras has in Employees' State Insurance Corporation v. M. Haji Md. Ismail Sahib6, while relying on a catena of English and Indian judgments observed that Section 49 of the ICA does not preclude the applicability of the common law doctrine of debtor must seek the creditor. Albeit the said observations were rendered in a reference arising out of a criminal matter, the said doctrine continues to be followed in Indian law as seen in the judgments of various High Courts. This article traces the adoption of the said doctrine into Indian law, and its applicability in various contexts.
  5. The territorial jurisdiction governing the institution of a suit is governed by Section 20 of the Code of Civil Procedure, 1908 ("CPC")7 which provides that a suit is to be instituted either where the defendant resides or works, or where the cause of action arises in whole or in part. Hence, in suits instituted at the place of business/residence of the Plaintiff, a jurisdictional objection is typically taken by the Defendant to the effect that the concerned court lacks jurisdiction, and the proper place for institution of the suit should have been where the Defendant resides or voluntarily carries on business. In this context, Courts in India have applied the principle of "debtor must seek the creditor" in certain cases, to hold that the Court situated in the territorial jurisdiction where the Plaintiff resides or carries on business, may have jurisdiction to entertain suits for recovery of money.
  6. It merits mention in this regard, that the Hon'ble Supreme Court of India has clarified in Subramanian SwamyUnion of India,8 that the common Law of England operates as law in force in India by virtue of Article 372 of the Constitution. Hence, civil action for enforcement of common law right for which there is no codified law in India, can be taken recourse to under Section 9 of the CPC, unless there is a specific statutory bar in that regard. In the present context, Section 49 of the ICA does not preclude the application of the common law principle of debtor must seek the creditor as already held by the Madras High Court in Employees' State Insurance Corporation v. M. Haji Md. Ismail Sahib9.

Divergence of opinion between various High Courts regarding applicability of the rule of "debtor must seek the creditor" to Indian law

  • Punjab & Haryana High Court
  1. A full bench of the High Court of Punjab in Firm Hira Lal Girdhari Lal & Ors v. Baij Nath Hardial Khatri10 held that the above said rule cannot be imported into the ICA or the CPC, as it was not found in either statute but was merely a rule of Indian common law. The High Court of Punjab held that English rule, as a matter of law is not applicable to determine the forum for institution of the suit by the creditor.
  2. The facts of the said case pertained to the institution of a suit for recovery of monies for goods supplied, where the Plaintiff was carrying on business in Amritsar, and had supplied goods to the Defendant, who was carrying on business in Assam. The suit had been filed by the Plaintiff before the trial court at Amritsar on the basis that the creditor i.e. Plaintiff being based out of Amritsar, would have jurisdiction to entertain the suit. The Defendant had objected to the jurisdiction of the Trial Court, and the Trial Court had found it fit to return the plaint seeking for the same to be filed before the Court of proper jurisdiction. As against the said order, an appeal had been filed whereby the District Judge had remanded the case back to the Trial Court, relying upon the principle that the debtor must seek the creditor was a universal rule of application across the country and accordingly framed a preliminary issue as to whether the goods were supplied on credit. As against the said order, the Defendant had preferred a second appeal, before a Single Judge of the Punjab & Haryana High Court. The Learned Single Judge had referred the matter for consideration before the Division Bench which in turn had referred the matter before the Full Bench to answer the reference as to whether the common law rule of debtor must seek the creditor could be applied to Indian law. Answering the said reference, the full bench had held that the said rule was not a rule of law and could not be imported into the ICA or the CPC. The full bench had taken the view that whether the money was agreed to be paid at a particular place was a question of fact which had to be determined in the facts and circumstances, and it was upon determination of the same that the issue of jurisdiction to entertain the suit would be decided. The Court opined that while deciding the jurisdiction to entertain a suit, several factors were to be considered such as the ordinary residence of the creditor, the nature of the transaction itself, the circumstances in which it was made. After considering the above, if the Court could determine as a fact that the payment was to be made at a particular place, then, a suit for its recovery would lie there, but not otherwise.
  • View of the Calcutta High Court
  1. In Jagadish Chandra Sikdar v. Smt. Santimoyee Choudhuri11, the High Court of Calcutta considered the issue at length and declined to apply the common law principle.
  2. However, the High Court of Calcutta had considered this issue in K Raha (Engineers) Limited v. State of Punjab12 which arose out of a suit filed in Calcutta by a contractor seeking payment for works carried out arising out of a tender. The suit had been filed in Calcutta where the Plaintiff had its place of business, after seeking leave of the Court under the Letters Patent, and the Defendant had defended the suit on the grounds of jurisdiction citing the fact that the contract was performed outside Calcutta and that running bills had been paid outside Calcutta. It was contended that merely because the intimation of acceptance of the tender by the Defendant had taken place in Calcutta, that alone would not suffice for cause of action to have arisen in Calcutta. The Learned Single Judge had noted the fact that the tender did not specify any place for the payments to be made and hence the common law principle of debtor must seek the creditor would apply to the facts and circumstances. It was also held on facts that the Defendant was aware that the Plaintiff had an office in Calcutta. Hence, applying the rule of debtor must seek the creditor, the Learned Single Judge had held that a part of cause of action had arisen in Calcutta and hence the Court had jurisdiction to entertain the suit. The decision of the Learned Single Judge was subsequently upheld by the Division Bench in State of Punjab v. A.K. Raha (Engineers) Ltd.13, upholding the general principle that the debtor must seek the creditor where no place of payment was specified either expressly or impliedly in the contract. It was further held that the obligation to pay the debt involves the obligation to find the creditor and pay it where they are, when the money is payable.
  3. Subsequently in S.P. Consolidated Engineering Co. (P) Ltd. v. Union of India14, the High Court of Calcutta had relied upon the judgment of the Single Judge and the Division Bench in K Raha (supra) and assertively held that the rule of debtor must follow the creditor is a rule based on justice and equity and is therefore universal in its application. The same is not merely a technical rule of English law, which has been made applicable to Indian law. On this basis, the Calcutta High Court disagreed with the reasoning of the Full Bench of the High Court of Punjab in Firm Hiralal Girdhari Lal v. Baijnath Hardia Khatri15, to the extent that it held that the rule was not applicable in India while also holding that the rule will apply only in circumstances where no place of payment is expressly stated in the contract or indicated by necessary implication based on the relevant evidence on record.
  4. Further, in Bharumlal v. Sakhawatmal16, the division bench of the High Court of Calcutta paved the way for the application of the doctrine in cases where there is no agreement regarding the place of performance of the contract. It was pointed out that the common law rule is a "reasonable rule" and it is in conformity with justice and equity because it recognises the obligation of the debtor to pay his debt and that obligation can be discharged by the debtor going to his creditor and repaying the amount. Relying on this judgment, in Maria Munisa Begum v. Noore Mohammad Saheb17, the High Court of Andhra Pradesh, opined that the doctrine of the debtor finding the creditor applies to the Indian cases. The High Court of Andhra Pradesh observed that the doctrine is a well-known proposition of the commons law rule in England which is equally applicable in India too. The Courts have further observed that although there is no support for such a principle, it may not be totally inconsistent with the established principles regarding jurisdiction.18
  • Kerala High Court
  1. The divergence of opinion between the High Court of Punjab and the High Court of Calcutta in the above decisions was taken note of by a division bench of the High Court of Kerala in Ramasubramoniam v. Ranganathan19 wherein the division bench was deciding upon an appeal arising out of a decision by the trial court returning a plaint for proper presentation on the grounds that the Defendant was based outside its jurisdiction. The suit was filed by the plaintiff residing at Palghat, against the Defendant residing at Madras, for recovery of money due under a promissory note executed by the Defendant in favour of the Plaintiff. The plaintiff had relied upon the doctrine of debtor must seek the creditor, in support of its plaint, and upon return of the plaint, had challenged the same. The Division Bench therefore took upon itself the onus of answering two questions:
    1. Whether the principle of debtor must follow the creditor is a principle of law capable of universal application and
    2. whether the said principle will apply in the case of instruments under the Negotiable Instruments Act 1881 ("NI Act").
  1. In answering the first question, the Division Bench considered the view expressed by the Punjab High Court Full bench to the effect that the principle of debtor must seek the creditor being a common law principle cannot be imported into the ICA and CPC, as well as the contrary view expressed by the Calcutta High Court that the same is not merely a technical rule of English law, but a universal principle of justice and equity applicable to Indian law as well. The Division Bench of the Kerala High Court substantially upheld the interpretation of law as held by the Punjab High Court Full Bench, differing only to the extent that it completely negated the applicability of the principle to India. The Kerala High Court Division Bench expressed its inability to agree with the rationale of the High Court of Calcutta in K Raha (supra) and S.P Consolidated Engineering (supra) holding the principle of debtor must seek the creditor to be a universal rule, holding the same to be an "extreme view".
  2. Instead, the High Court of Kerala held that the principle of debtor shall follow the creditor must be treated not as a rule of law, but as a rule of evidence, which is to be applied in fit cases where the overall facts and circumstances of the case indicate that the place of payment is to be made within the jurisdiction where the creditor resides. The division bench further opined that the applicability of the principle is to be restricted to cases where Section 49 of the ICA does not apply.
  3. On the second question, the Explanation to Section 64 of the NI Act20 was relied upon to hold that the abovesaid principle would apply as a rule of evidence only in the cases of on demand promissory notes, which do not require presentation at any specific place, and where no place of payment is specified.
  • Delhi High Court
  1. The Delhi High Court considered the divergence of views between the Punjab, Calcutta and Kerala High Courts regarding the stated principle in National Building Const. Corpn. Ltd. v. Vyasa Bank Ltd.21 The judgment arose out of a summary suit filed by the plaintiff (based out of Delhi) as against the Defendant (based out of Bangalore) for of a guarantee extended by the Defendant to a sub-contractor of the Plaintiff for works to be carried on in Delhi. The main issue for consideration before the Court was whether a suit could be maintained at Delhi. The Defendant relied upon the full bench of the High Court of Punjab in Firm Hira Lal case to contend that the stated principle cannot be applied in India, as it is a common law rule not to be found in the ICA and CPC, and hence, the suit ought to have been instituted at Bangalore, where the Defendant was situated.
  2. After considering the relevant judgments, the learned Single Judge drew strength from the observations of the Supreme Court in Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co.22, to hold that the principles of common law could be relied upon in the absence of any statutory provisions to the contrary, where the existing statutory provisions were silent upon a particular situation. On this basis, the Learned Single Judge disagreed with the view taken by the Punjab High Court Full Bench and held that where there was no specific provision regarding place of performance, the principle of debtor must seek the creditor could be applied. Hence, the point on jurisdiction was held in favour of the Plaintiff.
  3. Similarly, in N. Gupta v. Tara Mani23, the High Court of Delhi once again considered the stated principle, in a revision petition dismissing an objection to the jurisdiction of the Court with respect to a suit arising out of a promissory note made and delivered at Bangalore, in favour of the plaintiff, a resident of Delhi. The promissory note expressly stated that the same was payable at "Bangalore or any part of India". The Defendant contested the jurisdiction of the Delhi High Court to entertain the suit was contested on the grounds that they were based out of Bangalore. The Plaintiff contended that considering the promissory note was an on-demand promissory note, which did not provide for any specific place of payment, by the principle of debtor must seek the creditor, the Plaintiff was entitled to maintain its suit in Delhi where she resided. The District Judge had decided this issue as a preliminary issue in favour of the Plaintiff. Upholding the decision of the District Judge, the High Court of Delhi had dismissed the revision petition. In its judgment, the learned Single Judge placing reliance upon the previous judgment of the High Court of Delhi in National Building Const. Corporation Ltd. v. Vyasa Bank Ltd, as well as the judgments of the Bombay and Gujarat High Courts in Bharumal v. Sekhawatmal24 and Shobasingh and Sonsv. Saurashtra Iron Foundary and Steel Works,25 upheld S.P Consolidated Engineering judgment to be the correct position of law. Accordingly, it was held that the common law principle of debtor must seek the creditor is a principle of law that can be applied in India in fit cases.
  4. The Court also employed similar reasoning as the Kerala High Court in Ramasubramoniam v. Ranganathan (supra) to hold that the said principle is applicable in the case of promissory notes payable on demand where no place of payment is expressly provided for as the same are covered under the Explanation to Section 64 of the NI Act.
  5. The above judgment of the High Court of Delhi in L.N Gupta v. Tara Mani (supra) upholding the law laid down by the in K Raha (supra) has been consistently followed by the Delhi High Court thereafter in a catena of judgments such as Shradha Wassan v. Anil Goel26, Puneet Kumar Agrawal v. Imaginations Agri Exports27, Satyapal v. Slick Auto Accessories Private Limited28 and Maya Jain v. Yash Chhabra29.
  6. Ultimately, the division bench of the Delhi High Court in Union Bank of India v. Milkfood Limited30 has held the principle of debtor shall seek to be the creditor unless there is an arrangement to the contrary, to be a settled principle of law which has been subsequently followed in TKW Management Solutions Private Limited v. Sherif Cargo & Ors.31
  7. The above are some of the judgments in which the courts have considered the applicability of the common law doctrine of debtor seeking the creditor. From the above judgments, we can understand that there are courts that have held that the common law doctrine, 'the debtor shall seek the creditor' cannot be applied and the plaintiff cannot file a suit at the place of his residence or place of business unless there is an agreement regarding the place of payment. The other dominant opinion is that the common law principle is applicable in India to Indian transactions and therefore in all cases it shall be presumed that it is the duty of the debtor to find the creditor and a suit can be filed at the place where the creditor is entitled to receive the payment.

Conclusion

  1. A careful analysis of the judgment of the Supreme Court and various High Courts in India show that there are judgments for and against the application of common law principle, the debtor must seek the creditor in India. Predominantly, courts in India have held in favour of the application of this principle. The observation of the High Court of Punjab in the Firm Hiralal Giridari Lal judgment refusing to accept the common law doctrine is purely for technical reasons that it is difficult to apply the common law doctrine in the absence of any specific legal provision in India. The Firm Hiralal Giridari Lal judgment is one of the earliest judgment on the application of the doctrine. However, subsequently several courts including the Supreme Court in Bhagwandas Goverdhandas Kedia case hold that the principles of common law could be relied upon in the absence of any statutory provisions to the contrary even when the existing statutory provisions were silent upon a particular situation. Further, the High Courts of Calcutta and Delhi categorially hold in favour of the doctrine as it is in conformity with justice and equity.

Footnotes

1. Halsbury Laws of England, Volume II, p 1956

2. (1891) 1 Q.B. 103

3. 105 E.R. 327(1815)

4. (1813) 129 E.R. 390

5. 49. Place for performance of promise, where no application to be made and no place fixed for performance.—When a promise is to be performed without application by the promisee, and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such place.

6. 1959 SCC OnLine Mad 123.

7."20. Other suits to be instituted where defendants reside or cause of action arises.—Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction—

(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or

(c) the cause of action, wholly or in part, arises.

[Explanation]— A corporation shall be deemed to carry on business at its sole or principal office in [India] or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place."

8. (2016) 7 SCC 221

9. 1959 SCC OnLine Mad 123.

10. AIR 1960 P&H 450.

11. AIR 1961 Cal 321

12. AIR 1961 Cal 166

13. 1963 SCC OnLine Cal 66

14. 1965 SCC OnLine Cal 46

15. supra

16. AIR 1956 Bom 111

17. AIR 1965 AP 231

18. National Sugar Industry, Madras v. Narala Venkiah 1994(3)ALT 276; Rajasthan State Electricity Board and others v. Dayal Wood works, AIR 1998 AP 381

19. 1978 SCC OnLine Ker 157

20. 64. Presentment for payment.—3 [(1)] Promissory notes, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder as hereinafter provided. In default of such presentment, the other parties thereto are not liable thereon to such holder. 1 [Where authorized by agreement or usage, a presentment through the post office by means of a registered letter is sufficient.] Exception.—Where a promissory note is payable on demand and is not payable at a specified place, no presentment is necessary in order to charge the maker thereof

21. 1981 SCC OnLine Del 222

22. (1966) 1 SCR 656

23. 1983 SCC OnLine Del 155.

24. AIR 1956 Bom 111

25. AIR 1968 Guj. 276

26. 2009 SCC Online Del 1285

27. 2013 SCC Online Del 701

28. AIR 2014 Del 115

29. 2015 SCC Online Del 9078

30. MANU/DE/2078/2012

31. 2023/DHC/000745

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