Delhi High Court Says It Can Execute Decrees Below Pecuniary Threshold If Original Suit Exceeded It

The Delhi High Court has recently held that it can execute a decree of less than ₹2 crore if the original suit was valued at more than ₹2 crore, which is the court's pecuniary threshold.

The court, relying on Sections 37 and 38 of the Code of Civil Procedure, held that the court that passed a decree retains the power to execute it, and a reduction in the decretal amount following settlement does not extinguish its jurisdiction.

"There is no quarrel with the said provision. Section 16 of the Commercial Courts Act states that in a trial of a commercial dispute of a specified value, the provisions of CPC as amended by the Commercial Courts Act shall apply. Sections 37 and 38 CPC, therefore, apply to the decrees passed under the Commercial Courts Act. This Court has the jurisdiction to entertain Suits which are above Rs.2 crores and only this Court can execute a decree in a Suit which was filed in this Court for a value more than Rs.2 crores but the decretal amount is less than Rs.2 crores.", Justice Subramonium Prasad observed. 

The Court dismissed a maintainability challenge raised by a judgment debtor in execution proceedings initiated by Ozone Spa Private Limited against Co-Incept Hospitality Private Limited and others over the recovery of dues arising from a franchise agreement to operate a gym, spa and salon under the Ozone brand.

The dispute arose from a franchise agreement dated December 28, 2013 under which the judgment debtors were permitted to operate a gym, spa and salon using the Ozone brand. Following disputes over the agreement, Ozone Spa filed a commercial suit in 2018 seeking recovery of ₹2,53,66,750.

The parties subsequently entered into a settlement agreement on July 5, 2018 and the Court passed a decree on July 19, 2018, for ₹1,19,43,000. Ozone Spa later initiated execution proceedings, alleging breach of the settlement terms.

The Court explained that Section 37 of CPC defines the expression “Court which passed the decree” to include the court of first instance and certain appellate situations, including where the original court has ceased to exist or lost jurisdiction to execute the decree under the statutory conditions.

It clarified that a court does not cease to exist merely because its territorial or pecuniary jurisdiction changes. A change in the monetary limits of its jurisdiction does not by itself, extinguish its authority to execute a decree it has passed.

"It can be said that the expression “Court which passed the decree” assumes in itself a decree which is passed by the Court of first instance, however, the same has ceased to exist in entirety which is possible only after extinguishment of the claims decided in the decree under execution. It can be said that the extinguishment of the claims shall render the Court of first instance as non- existent and not the alteration of the territorial or pecuniary jurisdiction of the Court of first instance."

Section 38 CPC provides that a decree may be executed either by the court that passed it or by the court to which it is transferred for execution.

Applying this provision, the Court held that the High Court retained jurisdiction because the original suit exceeded ₹2 crore, even though the settlement decree was for a lesser amount.

Rejecting the argument that the Commercial Courts Act displaced the CPC provisions, the Court held that Sections 37 and 38 CPC also apply to decrees passed in commercial suits.

Accordingly, the High Court held that it alone could execute the decree in the present case, as the original suit fell within its pecuniary jurisdiction and dismissed the challenge to the maintainability of the present petition. 

For Petitioner: Advocate Rajesh Mahindru

For Respondents: Advocates Sanjela Gupta, Dr. Amit George, Kunal Kher, Rupam Jha, Manju Gautam