Pannalal vs State Of Bombay And Ors on 11 February, 1963

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 207-209 of 1961

Decision Date: 11 February, 1963

Coram: K.C. Das Gupta, P.B. Gajendragadkar, K.N. Wanchoo, M. Hidayatullah, J.C. Shah

In the matter titled Pannalal versus State of Bombay and others, the Supreme Court of India delivered its judgment on 11 February 1963. The opinion was authored by Justice K C Das Gupta and the bench was composed of Justices K C Das Gupta, P B Gajendragadkar, K N Wanchoo, M Hidayatullah and J C Shah. The petitioner in the case was Pannalal, while the respondents were the State of Bombay together with several other parties. The decision was reported in the law reports at 1963 AIR 1516, 1964 SCR (1) 980 and is also cited in R 1988 SC 54 (12). The operative statutory provision concerned the Code of Civil Procedure, 1908, Order 41, rules 22 and 33, which deal with a respondent’s ability to seek relief against a co‑respondent by way of a cross‑objection.

The factual backdrop involved the appellant filing three separate suits, each seeking full payment with interest for a hospital he had constructed under three distinct contracts entered into with the Deputy Commissioner. At the trial stage, the judge decreed that a portion of the claim could be recovered from the State of Madhya Pradesh, but held that the remaining defendants bore no liability, and therefore dismissed the suits against those defendants. The State of Madhya Pradesh appealed this decision, and the High Court set aside the decree against the State Government, allowed the appeal and awarded costs to the appellant. Subsequently, the plaintiff petitioned the High Court for leave to file a cross‑objection and also sought decrees against the Deputy Commissioner under Order 41, rule 33 of the Code of Civil Procedure. The High Court rejected both the request for a cross‑objection and the claim for additional decrees, and dismissed all three suits.

The plaintiff contended that (1) the State Government was liable for all three contracts and (2) the High Court should have granted relief against any of the other defendants it deemed appropriate under Order 41, rule 33. The Supreme Court held that the State Government was not liable for any of the contracts. It further clarified that the wide wording of Order 41, rule 33 empowers an appellate court to make any order it thinks fit, not only in relation to the appellant and a single respondent but also between respondents themselves. The Court explained that the failure of a party to file a cross‑objection under Order 41, rule 22 does not automatically preclude the appellate court from granting relief under rule 33. While Order 41, rule 22 normally permits a respondent to raise an objection only against the appellant, it may, in exceptional circumstances, be directed against other respondents. Applying these principles to the present facts, the Court concluded that the High Court had incorrectly refused to exercise its powers under Order 41, rule 33. Consequently, the appeal was remanded to the High Court for it to determine the appropriate relief, if any, that should be granted to the plaintiff under rule 33.

The Court observed that the authorities cited by the parties included Burroda Soundree Dasee v. Nobo Gopal Mullick (1864) W.R. 294, Maharaja Tarucknath Boy v. Tuboorunissa Chowdhary (1867) 7 W.R. 39, Ganesh Pandurang Agte v. Gangadhar Ramakrishna (1869) 6 Bombay High Court Report 2244, Anwar‑Jan Bibee v. Azmut Ali (1870) 15 W.R. 26, Tirmnama v. Lakshmanan (1883) 7 Madras 215, Venkateswarulu v. Rammama (1950) I.L.R. 874 Madras, Jan Mohamed v. P. N. Razden (1944) A.I.R. 433 Lahore, and Ghandiprasad v. Jugul Kishore (1948) A.I.R. 377 Nagpur. The Court also noted that Anath Nath v. Dwarka Nath (1939) A.I.R. P. C. 86 was held not applicable to the present matter.

The matter before the Court involved civil appeals numbered 207 to 209 of 1961, which were appeals from the judgment and decree dated 23 August 1957 rendered by the Bombay High Court at Nagpur in first appeals numbered 105 to 107 of 1952 arising out of an original decree. Counsel for the appellants were designated as the representatives of the building contractor who had brought the proceedings. Counsel for the respondents comprised the legal representatives of the State and other interested parties. The judgment was delivered on 11 February 1963.

The appellant was a building contractor who had undertaken the construction of three hospitals within the district of Bhandara in Madhya Pradesh: the Bai Gangabai Memorial Hospital at Gondia, the Kunwar Tilaksingh Civil Hospital also at Gondia, and the Twynam Hospital at Tumsar. Each construction project was undertaken under a separate contract concluded between the appellant and the Deputy Commissioner of Bhandara, who acted as the administrative head of the hospitals. Although the appellant received partial payments under each contract, he asserted that the full amounts due under the contracts had not been paid. Consequently, on 1 April 1948 he instituted three separate suits, which gave rise to the present appeals, seeking the recovery of the sums he claimed were owed.

The pleadings in all three suits were substantially similar. In the suit relating to the Bai Gangabai Memorial Hospital, the appellant additionally sought payment for certain furniture that he alleged he had supplied at the request of the Deputy Commissioner. The central contention of the plaintiff was that the Deputy Commissioner entered into the contracts “as representative of the Provincial Government” after obtaining the necessary prior sanction from that Government. Accordingly, the plaintiff argued that the Deputy Commissioner, acting in his official capacity, was bound to discharge the contractual liabilities and pay the amounts due. The plaint further alleged that the Gondia Municipal Committee, in the case concerning the Bai Gangabai Memorial Hospital, and the Dispensary Funds Committee, in the other two cases, were also liable to satisfy the plaintiff’s claim because they had derived benefit from the work performed under the contracts, which was not intended to be gratuitous. On the basis of these allegations, the plaintiff impleaded the Provincial Government of the Central Provinces and Berar as the first defendant and the Deputy Commissioner of Bhandara as the second defendant in each of the three suits.

The plaintiff brought three distinct actions, and in each action the first defendant originally named was the Provincial Government of the Central Provinces and Berar. After the re‑organisation of the territory, the State of Madhya Pradesh was substituted in place of that Provincial Government as the first defendant in all three suits. The second defendant in every suit was the Deputy Commissioner of Bhandara District. In the suit designated as Suit No 3‑B of 1948, which concerned the Bai Gangabai Memorial Hospital, the third defendant was the Gondia Municipal Committee. In the remaining two suits the third defendant was the Dispensary Funds Committee, and in those suits every individual member of that Committee was also expressly named as a defendant. Additionally, the Deputy Commissioner, G K Tiwari, was sued in his personal capacity across all three actions: he was identified as Defendant No 4 in Suit No 3‑B, Defendant No 9 in Suit No 2‑B, and Defendant No 14 in Suit No 1‑B.

The plaint acknowledged that the construction work could not be finished within the period specified in the contracts. Nevertheless, the plaintiff asserted that the prescribed time was not a condition essential to the performance of the contracts. The plaintiff further argued that the delay arose because the Deputy Commissioner failed to provide the required materials promptly, that adverse weather conditions contributed to the slowdown, and that the Deputy Commissioner subsequently granted an extension of time. The plaintiff also claimed higher rates than those stipulated in the contracts, contending that the Deputy Commissioner had authorized those higher rates. For the purpose of the present appeals, which concerned only a question of law, the court did not need to set out the other allegations contained in the plaint. The monetary relief sought was as follows: in Suit No 3‑B the plaintiff demanded a decree for Rs 21,281 together with costs and interest from the date of the suit against defendants 1 to 3, and alternatively against Defendant No 4, namely G K Tiwari; in Suit No 1‑B the plaintiff claimed a decree for Rs 12,000 with full costs and future interest from the filing date against defendants 1 to 3 and/or Defendant No 14, also G K Tiwari; and in Suit No 2‑B the plaintiff sought a decree for Rs 32,208 with costs and future interest against defendants 1 to 3 and/or Defendant No 9, again G K Tiwari. The State of Madhya Pradesh, defending the suits, contended that the construction agreements were not executed on behalf of the State Government and that the hospital was not a government hospital, consequently denying any liability. The Deputy Commissioner of Bhandara and G K Tiwari, in their personal capacities, raised the same defenses. All of them further maintained that, even on the merits, the plaintiff was not entitled to relief because, although time was a condition essential to the contracts, the work had not been completed within the agreed period. They also opposed the plaintiff’s claim for higher rates on the ground that the Deputy Commissioner had not obtained the necessary prior sanction for those rates.

The defendants argued that the plaintiff’s request for increased rates should be denied because the earlier sanction by the Deputy Commissioner had not been obtained. They also asserted, in every suit, that the plaintiff’s claim was barred by the limitation period. Additional defendants raised other objections to the suits, but the Court considered it unnecessary to detail those grounds for the purpose of the present appeals. The trial judge examined the matter and concluded that the agreements in question had been executed for and on behalf of the State, and that the constructions undeniably benefited the State; consequently, the State was held liable. The judge dismissed the various objections raised by the defendants on the merits, except that he partially disallowed the plaintiff’s claim and awarded a decree for only part of the plaintiff’s claimed amount against the State of Madhya Pradesh in each of the three suits. He further held that none of the other defendants bore any liability and therefore dismissed the suits against them. Dissatisfied with the trial court’s judgment, the State of Madhya Pradesh appealed to the High Court of Judicature at Nagpur. While those appeals were pending, the State of Madhya Pradesh was replaced by the State of Bombay. In all three appeals, the plaintiff, Pannalal, was impleaded as the first respondent, and all other defendants were also impleaded as respondents. The High Court, disagreeing with the trial judge, held that the contract entered into by the Deputy Commissioner was not binding on the State Government because the Deputy Commissioner had signed the contract of his own discretion and the contracts had not been executed in the form prescribed by section 175(3) of the Government of India Act, 1935; therefore, they were not enforceable against the State. The High Court further ruled that the Government could not be said to have ratified the actions of the contracts entered into by the Deputy Commissioner. It also rejected the argument that the Government, having received the benefit of the works, was required to pay for them, finding that the hospitals were not government hospitals and that the Government “can in no sense be regarded as having benefited by anything done with respect to them.” On these findings, the High Court set aside the decree that had been passed by the trial court against the State Government, allowed the appeals, and awarded costs. The plaintiff‑respondent also made a prayer that the High Court should pass decrees against the Deputy Commissioner, Bhandara, under Order 41, Rule 33 of the Code of Civil Procedure. The High Court rejected this prayer, stating: “Shri Phadke then prayed that under Order 41 rule 33 of the Code of Civil Procedure we should pass decrees against the Deputy Commissioner, Bhandara, who was indubitably a party to the contracts. Though the provisions of Order 41, rule 33 are wide enough to permit this we do not see any reason why we should exercise our … to prefer a cross‑objection.”

In this matter the Court observed that the High Court had rejected the applicant’s request to overturn the dismissal of his suits against the named defendants and also against several additional defendants. The High Court likewise refused the counsel’s application for permission to file a cross‑objection at that stage of the proceedings. Consequently, the High Court dismissed all three suits in their entirety. Nevertheless, the High Court issued a certificate under Article 133(1)(c) of the Constitution, and on the basis of that certificate the plaintiff filed three appeals. The appellant relied on two grounds in support of those appeals. The first ground contended that the High Court had erred in its finding that the State Government was not liable. The second ground argued that, irrespective of the first issue, the High Court should have granted relief to the plaintiff against such of the other defendants as it deemed appropriate under Order 41, rule 33 of the Code of Civil Procedure.

The Court held that the appellant’s contention that the State Government bore liability lacked any substance. The record showed clearly that the Deputy Commissioner had not acted on behalf of the State Government when he signed the contracts, and there was no evidence that the State Government had derived any benefit from the plaintiff’s work. Accordingly, the Court affirmed that the High Court was correct in concluding that the State Government was not liable for any of the contracts and that the suits against defendant No. 1 were rightfully dismissed. This conclusion was not seriously contested before the Court.

However, the Court recognised that the appellant’s argument concerning the exercise of jurisdiction under Order 41, rule 33 of the Code of Civil Procedure possessed considerable merit. The operative portion of that rule, first introduced into the Civil Procedure Code in 1908, states: “33. The appellate court shall have power to pass any decree and make any order which ought to have been passed or made, and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection.” A proviso added by Act 9 of 1922 was noted, but the Court indicated that it was not relevant to the present considerations. The Court then set out the illustration accompanying the rule, which reads: “A claims a sum of money as due to him from X or Y, and in a suit against both obtains a decree against X. X appeals and A and Y are respondents. The appellate court decides in favour of X. It has power to pass a decree against Y.” Even a plain reading of Order 41, rule 33 thereby demonstrates the expansive authority conferred upon an appellate court to grant such further relief as the circumstances of the case may warrant.

The Court explained that the wide wording of the rule was intended to empower the appellate court to make any order it deemed appropriate, not only between the appellant and the respondent but also between one respondent and another respondent. It further clarified that the appellate court could both grant and refuse relief to the appellant by allowing or dismissing the appeal, and could also provide additional relief to any respondent as the case required. In the facts before it, the Court noted that if a legal impediment existed, the High Court could, while allowing the State’s appeal and dismissing the plaintiff’s suits against the State, still decree relief against any or all of the other defendants who were respondents to the appeal. The Court pointed out that the language of the provision made this position unmistakably clear, and the accompanying illustration reinforced the point beyond argument. It observed that the High Court seemed unconcerned about its power to grant the plaintiff relief by decreeing against one or more of the other defendants. Nevertheless, the learned judges of the High Court remarked, “we do not think it proper to do so as the plaintiff could have asked for this relief by filing a cross‑objection under Or. 41, r. 22, C. P. C., but has not done so.” The Court interpreted this remark to mean that a cross‑objection under Order 41, rule 22 could be filed only within the time prescribed, and that if a respondent who was entitled to file such a cross‑objection failed to do so, relief under Order 41, rule 33 would become ineffective. The argument rested on the assumption that the plaintiff could have challenged the trial court’s decree, insofar as it dismissed the suits against defendants other than the State, by filing a cross‑objection under Order 41, rule 22 of the Code of Civil Procedure. The Court expressed that it was not prepared to accept the proposition that a party who could have filed a cross‑objection under Order 41, rule 22, and failed to do so, could never receive relief from the appellate court under Order 41, rule 33. However, the Court found it unnecessary to examine the issue further because it considered the High Court’s assumption that the plaintiff could have filed a cross‑objection to be unfounded. The Court noted that the question of whether a respondent could obtain relief against another respondent by filing a cross‑objection under Order 41, rule 22 of the Code of Civil Procedure had been a long‑standing controversy in Indian jurisprudence. It added that the present Order 41, rule 22 replaces the former section 561 of the Code of 1882, and that similar provisions allowing a respondent to raise an objection without a separate appeal existed even in the Code of 1859 as section 348, later reproduced in more detail in the Code of 1877.

The provision that later became Order 41, rule 22 of the Code of Civil Procedure was originally enacted in the Code of 1877 as section 561 and was subsequently reproduced in the Code of 1882, also as section 561, with minor amendments. The language of the provision in the 1882 Code read as follows: “Any respondent though he may not have appealed against any part of the decree, may upon the hearing not only support the decree on any of the grounds decided against him in the court below, but take any objection to the decree which he could have taken by the way of appeal, provided he has filed a notice of such objection not less than seven days before the date fixed for the hearing of the appeal. Such objection shall be in the form of a memorandum, and the provisions of section 541, so far as they relate to the form and contents of the memorandum of appeal, shall apply thereto. Unless the respondent files with the objection a written acknowledgement from the appellant or his pleader of having received a copy thereof, the appellate court shall cause such a copy to be served, as soon as may be after the filing of the objection, on the appellant or his pleader, at the expense of the respondent.” The issue of whether a respondent could, by way of a cross‑objection, obtain relief against another respondent under this provision was first raised before the courts nearly a century ago. Both the Calcutta and the Bombay High Courts, in a series of decisions, held that, as a general rule, a respondent could not seek relief against a co‑respondent by means of an objection, although they acknowledged that exceptional circumstances might permit such a remedy. The decisions cited in support of this view were rendered under the Code of 1859, which contained section 348 providing that “Upon hearing of the appeal, the respondent may take any objection to the decision of the lower court which he might have taken if he had preferred a separate appeal from such decision.” When section 348 was replaced by section 561 in the Codes of 1877 and 1882, the same question arose repeatedly before the courts, and the rulings remained consistent.

The Patna and Allahabad High Courts also expressed the view that, as a general principle, the right of a respondent to raise cross‑objections should be limited to obtaining relief against the appellant only, and that only when the appeal raised questions that could not be properly resolved without addressing the relations among the parties could a respondent seek relief against another respondent through an objection. In contrast, the Madras High Court, in the case of Timmayya v. Lakshmanan, adopted a broader interpretation, holding that the wording of the section was sufficiently wide to encompass any objection to any part of the decree and that a respondent could therefore seek relief even against another respondent. This expansive view was reaffirmed by the same court after the Code of 1908 introduced the term “cross‑objection” in place of “objection”. Ultimately, in 1950, a Full Bench of the Madras High Court in Venkateshwarlu v. Rammama reevaluated the question and, overturning its earlier decisions, concluded that a proper construction of the language of Order 41, rule 22 confers only a limited right on the respondent to raise an objection to the decree without filing a separate appeal. Accordingly, such an objection should, as a general rule, be directed principally against the appellant, although in exceptional cases it may incidentally be directed against other respondents.

In earlier decisions the courts had allowed a respondent to obtain relief under the relevant provision even when that relief was directed against another respondent. That approach was reaffirmed by the court despite the amendment introduced by the Code of 1908, which replaced the word “objection” with the term “cross‑objection”. However, in 1950 the Full Bench of the Madras High Court, hearing Venkateshwarlu v. Rammama, revisited the issue and expressly overruled all preceding judgments. The bench held that a proper construction of Order 41, rule 22 shows that the rule confers only a limited right on a respondent to raise an objection to a decree without the necessity of filing a separate appeal. According to that judgment, such an objection, as a general principle, must be made principally against the appellant; only in rare, exceptional circumstances may the objection incidentally extend to other respondents. The Lahore High Court, which had previously adhered to the earlier Madras position, later decided in Jan Mohamed v. P. N. Razden to follow the contrary view endorsed by the High Courts of Allahabad, Bombay, Calcutta and Patna. The Nagpur High Court likewise accepted that same position, as noted in Chandiprasad v. Jugul Kishore.

The Court expressed the view that the contemporary consensus of all the High Courts is that Order 41, rule 22, as a rule, permits a respondent to raise an objection solely against the appellant. An objection against other respondents is permissible only in exceptional cases where the relief sought against the appellant is inseparably mixed with the relief granted to the other respondents, so that the relief against the appellant cannot be granted without reopening the dispute between the objecting respondent and those other respondents. The Court observed that, irrespective of the earlier position under section 561, the introduction of the term “cross‑objection” in Order 41, rule 22 unmistakably conveys the legislature’s intention that the objection be directed against the appellant. Quoting Rajammannar C. J. in Venkataswarlu v. Ramamma, the Court noted that the legislature, by describing the permissible objection of a respondent as a “cross‑objection”, deliberately aligned with the view of the other High Courts, and that an objection by a respondent in which the appellant has no interest cannot be characterised as a cross‑objection. The Court concluded that these observations clearly and correctly set out the matter, and that the legislature also intended to give effect to the view held by the various High Courts that, in the exceptional situations described, a respondent may indeed prefer an objection against a

In this case the Court observed that the term “correspondent” is identified by replacing the word “appellant” in the third paragraph with the phrase “the party who may be affected by such objection.” Applying that interpretation to the present facts, the Court concluded that the plaintiff‑appellant before the High Court was not entitled to file any cross‑objection against the other defendants who were correspondents. Consequently, the High Court erred when it declined to consider what relief, if any, could be granted to the plaintiff under Order 41, Rule 33 of the Civil Procedure Code.

Counsel appearing for the Gondia Municipality in Civil Appeal No. 209 of 1961 relied on the Privy Council decision in Anath Nath v. Dwarka Nath, arguing that Rule 33 could not be properly invoked in the present matter. In that precedent the plaintiff contested a revenue sale on the ground that it was wholly void for lack of jurisdiction and for irregularities, and also alleged that the respondent had committed fraud or improper conduct to the prejudice of co‑owners of the estate. The Trial Court dismissed the plaintiff’s claim that the sale was void for jurisdictional or irregular reasons, but it accepted the allegation of fraud and accordingly entered a decree in favour of the plaintiff.

On appeal, the High Court held that no fraud or improper conduct by Respondent No. 1 toward the co‑owners in connection with the revenue sale had been proved. The High Court also refused to grant any relief on the jurisdictional or irregularity ground, reasoning that the plaintiff had not filed any cross‑objections to the Trial Court’s decree and therefore could no longer maintain a claim that the revenue sale should be set aside for lack of jurisdiction or irregularity. The Privy Council, agreeing with the High Court’s view, observed that the case fell clearly within the condition imposed by the concluding words of sub‑rule (1) of Rule 22, namely that an objection must be filed in the appellate court. Although it was suggested that the language of Rule 33 might be broad enough to cover the case, the Privy Council affirmed that, even if the High Court possessed some authority to entertain the appeal on that ground, Rule 33 could not be used to override the essential requirement that an independent appeal must be brought only after notice of the grounds of appeal has been given to the parties who succeeded in the lower courts.

The Court noted that the Privy Council decision did not assist the respondents in the present matter. The specific issue before this Court—whether a respondent may seek relief against a co‑respondent by way of a cross‑objection—was not addressed by the Privy Council, and therefore its reasoning could not be applied to resolve the question at hand.

The Court observed that the Privy Council had decided that a respondent before the High Court could file a cross‑objection under Order 41, rule 22 against the appellant, and that the Privy Council therefore did not need to consider the question presently before this Court. The Court further explained that the Privy Council’s decision in Anath Nath’s case (A.I.R. 1939 P.C. 86) should not be taken as authority for the proposition that a failure to lodge a cross‑objection, when the law permits such an objection, automatically precludes the application of Order 41, rule 33. In that earlier case the Privy Council had assumed, without reaching a definite conclusion, that the High Court was not entirely without power to entertain another ground of appeal; however, because of the special facts, the Privy Council felt it would not be appropriate to grant relief to the appellant under Rule 33.

Since the High Court had refused to exercise its powers under Order 41, rule 33 of the Code of Civil Procedure on what the Court deemed an erroneous interpretation of the law, the matter was required to be remitted to the High Court. Consequently, the Court upheld the High Court’s order to the extent that it dismissed the suits against the State of Bombay, but it set aside the part of the order that dismissed the suits against the other defendants. The case was therefore sent back to the High Court so that, after a full examination of the merits, it could determine whether the plaintiff should be granted relief under the provisions of Order 41, rule 33 of the Civil Procedure Code. The Court ordered that costs incurred in this Court would be subject to the final outcome of the appeals before the Bombay High Court. The appeals were allowed in part and the case was remanded for further determination.