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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1165 OF 2009 [Arising out of SLP (Civil) No.20490 of 2008)

Koppisetty Venkat Ratnam (D) through LRs. .. Appellants

Versus

Pamarti Venkayamma .. Respondent

O R D E R

Leave granted.

This appeal is directed against  the judgment dated 3.10.2007 passed by the

High Court of Andhra Pradesh at Hyderabad in Second Appeal No.865 of 1997.

Learned  senior  counsel  appearing  for  the  appellant  raised  a  preliminary

objection that in the impugned judgment, the High Court has set-aside the concurrent

findings of facts of two courts without formulating any substantial question of law which

is  mandatory  according  to  Section  100  of  the  Code  of  Civil  Procedure  after  1976

Amendment.

There is considerable material which led to 1976 Amendment in the Code of

Civil Procedure.

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Legislative Background in the 54  th   Report of the Law Commission of India submitted in   1973:

The comprehensive 54th Report of the Law Commission of India submitted to

the Government of India in 1973 gives historical background regarding ambit and scope

of Section 100 C.P.C.  According to the said report, any rational system of administration

of civil law should recognize that litigation in civil cases should have two hearings on facts

– one by the trial court and one by the court of appeal.

In the 54th Report of the Law Commission of India, it is incorporated that it

may be permissible to point out that a search for absolute truth in the administration of

justice,  however,  laudable,  must  in  the  very  nature  of  things  be  put  under  some

reasonable restraint.  In other words, a search for truth has to be reconciled with the

doctrine of finality.   In judicial hierarchy finality is absolutely important because that

gives certainty to the law.  Even in the interest  of litigants  themselves it  may not  be

unreasonable to draw a line in respect of the two different categories of litigation where

procedure will say at a certain stage that questions of fact have been decided by the lower

courts and the matter should be allowed to rest where it lies without any further appeal.

This may be somewhat harsh to an individual litigant; but, in the larger interest of the

administration of justice, this view seems to us to be juristically sound and pragmatically

wise.  It is in the light of this basic approach that we will now proceed to consider some of

the cases which were decided more than a century ago.

The question  could perhaps be asked,  why  the  litigant  who wishes  to  have

justice from the highest Court of the State should be denied the opportunity to do so, at

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least where there is a flaw in the conclusion on facts reached by the trial court or by the

court  of  first  appeal.  The  answer is  obvious  that  even  litigants  have  to  be  protected

against  too  persistent  a  pursuit  of  their  goal  of  perfectly  satisfactory  justice.     An

unqualified right  of first appeal may be necessary for the  satisfaction of the defeated

litigant; but a wide right of second appeal is more in the nature of a luxury.   

The rational behind allowing a second appeal on a question of law is, that there

ought to be some tribunal having jurisdiction that will enable it to maintain, and, where

necessary,  re-establish, uniformity throughout the State on important legal issues, so that

within the area of the State, the law, in so far as it is not enacted law, should be laid down,

or capable of being laid down, by one court whose rulings will be binding on all courts,

tribunals and authorities within the area over which it has jurisdiction.  This is implicit in

any legal system where the higher courts have authority to make binding decisions on

questions of law.

It may be relevant to recall the statement of Douglas Payne on “Appeals on

Questions of Fact” reported in (1958) Current Legal Problem 181.   He observed that the

real justification for appeals on questions of this sort is not so much that the law laid

down by the appeal court is likely to be superior to that laid down by a lower court as

that there should be a final rule laid down which binds all future courts and so facilitates

the prediction of the law.  In such a case the individual litigants are sacrificed, with some

justification, on the altar of law-making and must find such consolation as they can in the

monument of a leading case.

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Historical Perspective:

The predecessors of the High Courts in their civil appellate jurisdiction were

the Sadar Divani Adalats.  The right of appeal to the Sadar Divani Adalat was very wide

initially, but came to be severely curtailed in the course of time.  The “Conwallis Scheme”,

for example, made provision for two appeals in every category of cases, irrespective of its

value.  By 1814, this was reduced to one appeal only.  Only in cases of Rs.5,000 or over,

there could be two appeals;  one to the Provincial Court of Appeal and second to  the

Sadar Divani Adalat.  As Lord Hastings observed, -

“The facility of appeal is founded on a most laudable principle of securing, by double and treble checks, the proper decision of all suits,  but  the utopian idea,  in its attempt  to  prevent  individual  injury  from a  wrong  decision,  has  been  productive  of general  injustice  by  withholding  redress,  and  general  inconvenience,  by  perpetuating litigation”.

Arrears:

The primary cause of the accumulation of arrears of second appeal in the High

Court is the laxity with which second appeals are admitted without serious scrutiny of the

provisions of Section 100 C.P.C.  It is the bounden duty of the High Court to entertain

second appeal within the ambit and scope of Section 100 C.P.C.

The question which is often asked is why should a litigant have the right of two

appeals even on questions of law?  The answer to this query is that in every State there

are number of  District  Courts  and  courts  in  the  District  cannot  be  final  arbiters on

questions of law.  If the law is to be uniformly interpreted and applied, questions of law

must be decided by the highest  Court in the State whose decisions are binding on all

subordinate courts.

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Rationale behind permitting second appeal on question of law:

The rationale behind allowing a second appeal on a question of law is,  that

there ought to be some tribunal having a jurisdiction that will enable it to maintain, and,

where necessary, re-establish, uniformity throughout the State on important legal issues,

so that within the area of the State, the law, in so far as it is not enacted law, should be

laid down, or capable of being laid down, by one court whose rulings will be binding on

all courts, tribunals  and authorities within the area over which it has jurisdiction.  This is

implicit  in  any legal system where the  higher courts have authority  to  make binding

decisions on question of law.

Now,  after 1976 Amendment,  the  scope  of  Section  100 has  been drastically

curtailed and narrowed down.  The High Courts would have jurisdiction of interfering

under Section 100 C.P.C. only in a case where substantial questions of law are involved

and those questions have been clearly formulated in the memorandum of appeal.  At the

time of admission of the second appeal, it is the bounden duty and obligation of the High

Court to formulate substantial questions of law and then only the High Court is permitted

to proceed with the case to decide those questions of law.   The language used in the

amended  section  specifically  incorporates  the  words  as  “substantial  question  of  law”

which is indicative of the legislative intention.   It must be clearly understood that  the

legislative intention was very clear that legislature never wanted second appeal to become

“third trial on facts” or “one more dice in the gamble”.  The effect of the amendment

mainly, according to the amended section, was:

(i) The High Court would be justified in admitting the second appeal

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only when a substantial question of law is involved;  

(ii) The substantial question of law to precisely state such question;  

(iii) A duty  has been cast on the High Court to  formulate substantial question of law before hearing the appeal;  

(iv) Another part of the Section is that the appeal shall be heard only on that question.

The fact that,  in a series of cases, this  court was compelled to interfere was

because the true legislative intendment and scope of Section 100 C.P.C. have neither been

appreciated nor applied.  A class of judges while administering law honestly believe that,

if they are satisfied that,  in any second appeal brought before them evidence has been

grossly misappreciated either by the lower appellate court or by both the courts below, it

is their duty to interfere, because they seem to feel that a decree following upon a gross

misappreciation of evidence involves injustice and it  is the duty of the High Court to

redress such injustice.  We would like to reiterate that the justice has to be administered

in accordance with law.

When  Section  100  C.P.C.  is  critically  examined  then,  according  to  the

legislative  mandate,  the  interference  by  the  High  Court  is  permissible  only  in  cases

involving substantial questions of law.

Some leading Cases decided after 1976 amendment

In Bholaram v. Amirchand (1981) 2 SCC 414 a three-Judge Bench of this court

reiterated the statement of law.  The High Court,  however, seems to have justified its

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interference in second appeal  mainly on the  ground that  the judgments of the courts

below were perverse and were given in utter disregard of the important materials on the

record particularly misconstruction of the rent note.  Even if we accept the main reason

given by the High Court the utmost that could be said was that the findings of fact by the

courts below were wrong or grossly inexcusable but that by itself would not entitle the

High Court to interfere in the absence of a clear error of law.

In  Kshitish Chandra Purkait v.  Santosh Kumar Purkait [(1997) 5 SCC 438], a

three judge Bench of this court held: (a) that the High Court should be satisfied that the

case involved a substantial question of law and not mere question of law; (b) reasons for

permitting the plea to be raised should also be recorded; (c) it has the duty to formulate

the substantial questions of law and to put the opposite party on notice and give fair and

proper opportunity to meet the point.   The court also held that it is the duty cast upon

the High Court to formulate substantial question of law involved in the case even at the

initial stage.   

This court had occasion to determine the same issue in  Dnyanoba Bhaurao

Shemade v.  Maroti Bhaurao Marnor (1999) 2 SCC 471.  The court stated that the High

Court  can  exercise  its  jurisdiction  under  Section  100  C.P.C.  only  on  the  basis  of

substantial questions of law which are to be framed at the time of admission of the second

appeal and the second appeal has to be heard and decided only on the basis of the such

duly framed substantial questions of law.  

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A mere look at the said provision shows that the High Court can exercise its

jurisdiction under Section 100 C.P.C. only on the basis of substantial questions of law

which are to be framed at the time of admission of the second appeal and the second

appeal has to be heard and decided only on the basis of such duly framed substantial

questions of law.  The impugned judgment shows that no such procedure was followed by

the learned Single Judge.  It is held by a catena of judgments by this court, some of them

being, Kshitish Chandra Purkait v. Santosh Kumar Purkait (1997) 5 SCC 438 and Sheel

Chand v.  Prakash Chand (1998)  6 SCC 683 that  the judgment  rendered by the High

Court  under Section  100 C.P.C.  without  following the  aforesaid procedure cannot  be

sustained.  On this short ground alone, this appeal is required to be allowed.

In Kanai Lal Garari v. Murari Ganguly (1999) 6 SCC 35 the court has observed

that it is mandatory to formulate the substantial question of law while entertaining the

appeal in absence of which the judgment is to be set aside.   In Panchugopal Barua v.

Umesh Chandra Goswami (1997) 4 SCC 713 and Santosh Hazari v. Purushottam Tiwari

(2001) 3 SCC 179 the court reiterated the statement of law that the High Court cannot

proceed to  hear a second appeal without  formulating the  substantial  question  of law.

These judgments  have been referred to  in  the  later judgment  of K.  Raj  and Anr.  v.

Muthamma (2001) 6 SCC 279.   A statement of law has been reiterated regarding the

scope and interference of the court in second appeal under Section 100 of the Code of

Civil Procedure.

In Ishwar Dass Jain v. Sohan Lal (2000) 1 SCC 434, this court in para 10, has

stated:

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“Now under Section 100 CPC, after the 1976 Amendment,  it  is essential for the High Court to formulate a substantial question of law and it is not permissible to reverse the judgment of the first appellate court without doing so.”

Again in Roop Singh v. Ram Singh (2000) 3 SCC 708, this court has expressed

that the jurisdiction of a High Court is confined to appeals involving substantial question

of law. Para 7 of the said judgment reads:

“7. It is to be reiterated that under Section 100 CPC jurisdiction of the High Court to entertain a second appeal is confined only to such appeals which involve a substantial question of law and it does not confer any jurisdiction on the High Court to interfere with pure questions of fact while exercising its jurisdiction under Section 100 CPC. That apart, at the time of disposing of the matter the High Court did not even notice the question of law formulated by it at the time of admission of the second appeal as there is no reference of it in the impugned judgment….”

Again in Santosh Hazari v. Purushottam Tiwari (deceased) by LRs. (2001) 3 SCC

179, another three-Judge Bench of this court correctly delineated the scope of Section 100

C.P.C..  The court observed that an obligation is cast on the appellant to precisely state in

the memorandum of appeal the substantial question of law involved in the appeal and

which the appellant proposes to  urge before the court.   In the said judgment,  it  was

further mentioned that the High Court must be satisfied that a substantial question of law

is involved in the case and such question has then to be formulated by the High Court.

According to the court the word substantial, as qualifying “question of law”, means – of

having substance, essential, real, of sound worth, important or considerable.  It is to be

understood  as  something  in  contradistinction  with  –  technical,  of  no  substance  or

consequence, or academic merely.  However, it is clear that the legislature has chosen not

to qualify the scope of “substantial question of law” by suffixing the words “of general

importance” as has been done in many other provisions such as Section 109 of the Code of

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Article 133(1) (a) of the Constitution.

In Kamti Devi (Smt.) and Anr. v. Poshi Ram (2001) 5 SCC 311 the court came to

the  conclusion  that  the  finding  thus  reached  by  the   first  appellate  court  cannot  be

interfered with in a second appeal as no substantial question of law would have flowed out

of such a finding.

In Thiagarajan v.  Sri Venugopalaswamy B. Koil [(2004) 5 SCC 762], this court

has held that the High Court in its jurisdiction under Section 100 C.P.C. was not justified

in interfering with  the  findings of fact.   The court  observed that  to say the  least the

approach of the High Court was not proper.  It is the obligation of the courts of law to

further the clear intendment of the legislature and not frustrate it by excluding the same.

This court in a catena of decisions held that where findings of fact by the lower appellate

Court are based on evidence, the High Court   in second appeal cannot substitute its own

findings  on  reappreciation  of  evidence  merely on  the  ground that  another  view  was

possible.    

In the same case, this court observed that in a case where special leave petition

was filed against a judgment of the High Court interfering with findings of fact of the

lower appellate court.  This court observed that to say the least the approach of the High

Court  was  not  proper.   It  is  the  obligation  of  the  courts of  law to  further the  clear

intendment  of  the  legislature and not  frustrate it  by  excluding the  same.   This  court

further observed that the High Court in second appeal cannot substitute its own findings

on reappreciation of evidence merely on the ground that another view was possible.

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This court again reminded the High Courts in Commissioner, Hindu Religious

& Charitable Endowments v. P. Shanmugama [(2005) 9 SCC 232] that the High Court has

no jurisdiction in second appeal to interfere with the finding of facts.

Again, this court in the case of State of Kerala v. Mohd. Kunhi [(2005) 10 SCC

139] has reiterated the same principle that the High Court is not justified in interfering

with the concurrent findings of fact.    This court observed that,  in doing so, the High

Court has gone beyond the scope of Section 100 of the Code of Civil Procedure.

Again, in the case of Madhavan Nair v. Bhaskar Pillai [(2005) 10 SCC 553], this

court observed that the High Court was not justified in interfering with the concurrent

findings of fact.  This court observed that it is well settled that even if the first appellate

court commits an error in recording a finding of fact, that itself will not be a ground for

the High Court to upset the same.    

Again, in the case of  Harjeet Singh v.  Amrik Singh [(2005) 12 SCC 270], this

court with anguish has mentioned that the High Court has no jurisdiction to interfere

with the findings of fact arrived at by the first appellate court.   In this case, the findings

of the trial court and the lower appellate court regarding readiness and willingness to

perform their part of contract was set aside by the High Court in its jurisdiction under

Section  100 C.P.C.   This  court,  while  setting  aside  the  judgment  of  the  High  Court,

observed that the High Court was not justified in interfering with the concurrent findings

of fact arrived at by the courts below.

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In  the  case of  H.  P.  Pyarejan v.  Dasappa [(2006)  2  SCC 496]  delivered on

6.2.2006, this court found serious infirmity in the judgment of the High Court.  This court

observed that it suffers from the vice of exercise of jurisdiction which did not vest in the

High Court.   Under Section 100 of the Code (as amended in 1976) the jurisdiction of the

court  to  interfere  with  the  judgments  of  the  courts  below  is  confined  to  hearing  of

substantial questions of law.   Interference with the finding of fact by the High Court is

not  warranted  if  it  invokes  reappreciation  of  evidence.   This  court  found  that  the

impugned judgment of the High Court was vulnerable and needed to be set aside.

In Chandrika Singh (Dead) by LRS & Another v. Sarjug Singh & Another (2006)

12 SCC 49, this court again reiterated legal position that the High Court under section

100 CPC has limited jurisdiction.  To deal with cases having a substantial question of law,

this court observed as under:

“12. … While  exercising  its  jurisdiction  under Section  100  of  the  Code  of  Civil Procedure,  the  High  Court  is  required to  formulate  a  substantial  question  of  law in relation to  a finding of fact.   The High Court  exercises a  limited jurisdiction  in  that behalf.  Ordinarily unless there exists a sufficient and cogent reason, the findings of fact arrived at by the courts below are binding on the High Court…”

In Chacko & Another v. Mahadevan (2007) 7 SCC 363,  while dealing with the

jurisdiction of sections 96 and 100 CPC, this court laid down as under:

“6. It may be mentioned that  in a first appeal filed under Section 96 CPC, the appellate court  can go into  questions  of fact,  whereas in  a second appeal filed under Section 100 CPC the High Court cannot interfere with the findings of fact of the first appellate court, and it is confined only to questions of law.”

In  Bokka Subba Rao v. Kukkala Balakrishna & Others  (2008) 3 SCC 99, this

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court has clearly laid down that without formulating substantial questions of law under

section 100 CPC, the High Court cannot interfere with the findings of fact.  The court laid

down as under:  

“4. … It is now well settled by a catena of decisions of this Court that the High Court  in  second  appeal,  before  allowing  the  same,  ought  to  have  formulated  the substantial questions of law and thereafter, to decide the same on consideration of such substantial questions of law … .”

In  Nune Prasad & Others v. Nune Ramakrishna  (2008) 8 SCC 258, this court

laid down that the legislature has conferred a limited jurisdiction under section 100 CPC

on the High Court to deal with the cases where substantial question of law is involved.   

In  Basayyal Mathad v. Rudrayya S. Mathad & Others  (2008) 3 SCC 120, this

court has held that interference by the High Court without framing substantial question

of law is clearly contrary to the mandate of section 100 CPC.

In Dharam Singh v. Karnail Singh & Others, (2008) 9 SCC 759, this court again

crystallized the legal position in the following words:

“13. The plea about proviso to Sub-section (5) of Section 100 instead of supporting the stand of the respondent rather goes against them. The proviso is applicable only when any substantial question of law has already been formulated and it empowers the High Court to hear, for reasons to be recorded, the appeal on any other substantial question of law. The expression "on any other substantial question of law" clearly shows that there must be some substantial question of law already formulated and then only another substantial question of law which was not formulated earlier can be taken up by the High Court for reasons to be recorded, if it is of the view that the case involves such question.”

In  Narendra Gopal  Vidyarthi  v.  Rajat  Vidyarthi,  2008  (16)  SCALE 122,  this

court laid down that  the High Court would be justified to interfere under section 100

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CPC only if it involves substantial question of law.  

In a recent  judgment  U.R.  Virupakshaiah v.  Sarvamma & Another,  2009 (1)

SCALE 89, this court has once again crystallized the legal position after 1976 Amendment

of the CPC.  The court observed as under:

“The Code of Civil Procedure was amended in the year 1976 by reason of Code of Civil Procedure (Amendment) Act, 1976. In terms of the said amendment, it is now essential for the High Court to formulate a substantial question of law. The judgments of the trial court and the First Appellate Court can be interfered with only upon formulation of a substantial question of law…”

It is a matter of common experience in this court that despite clear enunciation

of law in a catena of cases of this court, a large number of cases are brought to our notice

where the High Court under section 100 CPC are disturbing the concurrent findings of

fact without formulating the substantial question of law.  We have cited only some cases

and  these  cases  can  be  easily  multiplied  further  to  demonstrate  that  this  court  is

compelled to  interfere in  a large number of  cases decided  by the  High  Courts under

section 100 CPC.  Eventually this  court has  to  set aside these judgments of the High

Courts and remit the cases to the respective High Courts for deciding them de novo after

formulating  substantial  question  of  law.   Unfortunately,  several years  are lost  in  the

process.  Litigants find it both extremely expensive and time consuming. This is one of the

main reasons of delay in the administration of justice in civil matters.

In  this  view  of  the  matter,  we  are  constrained  to  set-aside  the  impugned

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judgment of the High Court and remit the second appeal to the High Court for deciding it

de novo on merits after framing the substantial question of law.  In order to further avoid

delay, we direct the parties to appear before the High Court on 16.3.2009.  This case has

been pending for quite a long time, therefore, we request the High Court to dispose of the

second appeal as expeditiously as possible.

The appeal is accordingly disposed of leaving the parties to bear their own costs.  

…….……………………..J. (Dalveer Bhandari)

…….……………………..J. (Harjit Singh Bedi)

New Delhi; February 23, 2009.