Appeal (Lodg.) No.194 of 2012,Summons For Judgment No.35 of 2011,Summary Suit No.2522 of 2010

1st April, 2013

Petitioner Counsel: Mr. S.D. Deshmukh,Mr. Suraj S. Kudalkar
Respondent Counsel: Mr. Tejas Vora,Mr. Girish Vora,Mr. Ajay Singh,Mr. Sagar Kasar

Cases Cited:
A.B.C. Laminart Pvt. Ltd. Vs. A.P. Agencies, AIR 1989 SC 1239 [Para 9,16]
Hakam Singh Vs. M/s. Gammon (India) Ltd., (1971) 3 SCR 314 [Para 11]
Angile Insulations Vs. Davy Ashmore India Ltd., AIR 1995 SC 1766 [Para 12]
M/s. Hanil Era Textiles Ltd. Vs. M/s. Puromatic Filters (P) Ltd., 2004(5) ALL MR 534 (S.C.)=AIR 2004 SC 2432 [Para 12]
Interglobe Aviation Limited Vs. N. Satchidanand, 2011 ALL SCR 1933 : (2011) 7 SCC 463 [Para 13]
A.V.M. Sales Corporation Vs. Anuradha Chemicals Private Limited, 2012 ALL SCR 605 : (2012) 2 SCC 315 [Para 14]

JUDGMENT

Dr. D. Y. CHANDRACHUD, J. :- This Appeal arises from an order of a Learned Single Judge dated 17 December 2011 making absolute a Summons for Judgment in a suit under Order 37 of the Code of Civil Procedure 1908.

2. The Respondent has its registered office at Vadodara and a corporate office at Mumbai. The Appellant has a local office at Mumbai and a registered office at Patna. Five purchase orders were placed by the Appellant upon the Respondent between 20 July 2009 and 26 November 2009 from its local office at Mumbai for the supply of goods. In pursuance of the purchase orders goods were supplied by the Respondent from Vadodara to Roorkee in the State of Uttaranchal. The Appellant issued four cheques towards payment of the price of the goods sold, supplied and delivered. Two of the cheques dated 4 January 2010 and 12 February 2010 were drawn on the HDFC Bank at Roorkee. One of the cheques dated 6 February 2010 was drawn on the Daman Branch of the HDFC Branch while the final cheque dated 24 May 2010 was drawn on the ICICI Bank at its Prabhadevi Branch at Mumbai in part-payment. The cheques were returned dishonoured. The Respondent instituted a suit under Order 37 of the Code of Civil Procedure 1908 for the price of the goods sold, supplied and delivered.

3. At the hearing of the Summons for Judgment the Appellant contested the jurisdiction of this Court to entertain and try the suit on the ground that the following condition of the purchase orders conferred exclusive jurisdiction on the Courts at Patna:

"22. JURISDICTION : Our company's Registered office at Patna hence it is specifically understood that the courts in Patna only shall have Jurisdiction to settle any other dispute arising in relation to this order."

4. The Learned Single Judge rejected the objection as to jurisdiction and made the Summons for Judgment absolute. The Single Judge noted that the agreement was entered into by the parties at Mumbai which was evident from the fact that the Appellant had placed an order on the Respondent in Mumbai which was accepted by the Respondent in Mumbai. Clause 22 was held not to be applicable.

5. On behalf of the Appellant it has been submitted that -

(i) Where two or more Courts have jurisdiction to entertain and try a suit, parties can by agreement confer exclusive jurisdiction upon one of those Courts;

(ii) Since the Appellant has its registered office at Patna, the Court at Patna would have jurisdiction under Section 20(a) of the Code of Civil Procedure;

(iii) Hence parties by their agreement could legitimately confer jurisdiction exclusively on the Courts at Patna to try any suit arising out of the contract.

6. On the other hand, counsel appearing on behalf of the Respondents has adverted to the settled position in law as emanating from the judgments of the Supreme Court and submitted that -

(i) No part of the cause of action in the present case has arisen at Patna;

(ii) There is absolutely no nexus in relation to the contract in question for the sale, supply and delivery of goods with Patna;

(iii) In such an event this Court would have jurisdiction to entertain and try the suit. The contract was concluded in Mumbai and part payment has been effected in Mumbai.

7. Section 20 of the Code of Civil Procedure provides as follows :

"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. Where two or more Courts have jurisdiction to entertain and try a suit, parties may by their agreement confer exclusive jurisdiction to entertain and try the suit upon one of those Courts. However, it is not open to parties by an agreement to confer exclusive jurisdiction on a Court which does not possess jurisdiction in the first place, for, such an agreement would be void.

9. The leading judgment of the Supreme Court on the subject is in A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies AIR 1989 SC 1239. In that case the First Appellant had its registered office at Udyognagar, Mohamadabad, Gujarat which fell within the jurisdiction of the Civil Court at Kaira. An agreement was entered into between the First Appellant and the Respondent under which goods were sold, supplied and delivered to the Respondent which carried on business at Salem. The Respondent instituted a suit at Salem for the recovery of the balance price and for damages. The Appellant contested the territorial jurisdiction of the Court at Salem, relying on Clause 11 of the agreement which stipulated that any dispute arising out of the sale shall be subject to Kaira jurisdiction. The Supreme Court held as follows :

"If therefore it is found in this case that Clause 11 has absolutely ousted the jurisdiction of the Court it would be against public policy. However, such will be the result only if it can be shown that the jurisdiction to which the parties have agreed to submit had nothing to do with the contract. If on the other hand it is found that the jurisdiction agreed would also be a proper jurisdiction in the matter of the contract it could not be said that it ousted the jurisdiction of the Court. This leads to the question in the facts of this case as to whether Kaira would be proper jurisdiction in the matter of this contract." (at paragraph 10 page 1242.)

10. The test that was applied by the Supreme Court is that "The jurisdiction of the Court in matter of a contract will depend on the situs of the contract and the cause of action arising through connecting factors."( at paragraph 11 page 1243.)

11. The Supreme Court held that in the matter of a contract, the acceptance of an offer and its intimation result in a contract and the suit can be filed in a Court without whose jurisdiction the acceptance was communicated. After referring to the earlier judgment in Hakam Singh v. M/s. Gammon (India) Ltd. (1971) 3 SCR 314., the Supreme Court held as follows :

"Thus it is now a settled principle that where there may be two or more competent Courts which can entertain a suit consequent upon a part of the cause of action having arisen therewithin, if the parties to the contract agreed to vest jurisdiction in one such court to try the dispute which might arise as between themselves the agreement would be valid."

12. On the facts of that case, however, the Supreme Court came to the conclusion that Clause 11 of the agreement did not use words of exclusivity so as to confer jurisdiction only on Courts at Kaira. Hence, while the connecting factor with Kaira jurisdiction was ensured by fixing the situs of the contract within Kaira, other jurisdictions having connecting factors were not clearly and explicitly excluded. The judgment in A.B.C. Laminart Pvt. Ltd. has been subsequently followed in Angile Insulations v. Davy Ashmore India Ltd. AIR 1995 SC 1766.. In a subsequent decision in M/s. Hanil Era Textiles Ltd. v. M/s. Puromatic Filters (P) Ltd. AIR 2004 SC 2432 : [2004(5) ALL MR 534 (S.C.)]. the Appellant had placed a purchase order in pursuance of which the Respondent had supplied goods from New Delhi. The Respondent instituted a suit for the recovery of its dues at New Delhi. The Appellant relied upon Clause 17 of the contract under which any legal proceedings arising out of the order were to be subject to the jurisdiction of the Courts in Mumbai. The Appellant moved an application under Order 7 Rule 10 of the Code of Civil Procedure on the ground that under Clause 17 it was only the Courts at Mumbai which could exercise jurisdiction. The objection was overruled by the Learned Trial Judge and in appeal by the High Court. The Supreme Court held that though Clause 17 was not qualified by words such as 'alone', 'only' or 'exclusive', nonetheless it could be inferred that the jurisdiction of other Courts except at Mumbai was excluded for the following reasons :

"Therefore, what is to be seen is whether in the facts and circumstances of the present case, it can be inferred that the jurisdiction of all other Courts except Courts in Mumbai is excluded. Having regard to the fact that the order was placed by the defendant at Bombay, the said order was accepted by the branch office of the plaintiff at Bombay; the advance payment was made by the defendant at Bombay; and as per the plaintiff's case the final payment was to be made at Bombay; there was a clear intention to confine the jurisdiction of the Courts in Bombay to the exclusion of all other Courts. The Court of Additional District Judge, Delhi had, therefore, no territorial jurisdiction to try the suit."

13. The same principle was reiterated in a subsequent decision of the Supreme Court in Interglobe Aviation Limited v. N. Satchidanand (2011) 7 SCC 463 : [2011 ALL SCR 1933]. in the following terms :

"As per the principle laid down in ABC Laminart¹, any clause which ousts the jurisdiction of all courts having jurisdiction and conferring jurisdiction on a court not otherwise having jurisdiction would be invalid. It is now well settled that the parties cannot by agreement confer jurisdiction on a court which does not have jurisdiction; and that only where two or more courts have the jurisdiction to try a suit or proceeding, an agreement that the disputes shall be tried in one of such courts is not contrary to public policy. The ouster of jurisdiction of some courts is permissible so long as the court on which exclusive jurisdiction is conferred, had jurisdiction. If the clause had been made to apply only where a part of cause of action accrued in Delhi, it would have been valid. But as the clause provides that irrespective of the place of cause of action, only courts at Delhi would have jurisdiction, the said clause is invalid in law, having regard to the principle laid down in ABC Laminart¹. The fact that in this case, the place of embarkation happened to be Delhi, would not validate a clause, which is invalid."

14. In A.V.M. Sales Corporation v. Anuradha Chemicals Private Limited (2012) 2 SCC 315 : [2012 ALL SCR 605]. there was an agreement between the parties at Calcutta for the supply of chemicals by the Respondent to the Petitioner. The agreement stipulated that any dispute arising out of the agreement would be subject only to Calcutta jurisdiction. A suit was filed in the Calcutta High Court for the recovery of dues against the Respondent. The Respondent upon receiving summons filed a separate suit at Vijayawada which was contested by the Petitioner on the ground inter alia that the jurisdiction of the Court at Vijayawada was ousted by the exclusionary clause. Both the Trial Court and the High Court in first first appeal rejected the objection to jurisdiction. In that context, the Supreme Court held as follows :

"It has often been stated by this Court that cause of action comprises a bundle of facts which are relevant for the determination of the lis between the parties. In the instant case, since the invoices for the goods in question were raised at Vijayawada, the goods were dispatched from Vijayawada and the money was payable to the Respondent or its nominee at Vijayawada, in our view, the same comprised part of the bundle of facts giving rise to the cause of action for the Suit. At the same time, since the Petitioner/ Defendant in the Suit had its place of business at Calcutta and the Agreement for supply of the goods was entered into at Calcutta and the goods were to be delivered at Calcutta, a part of the cause of action also arose within the jurisdiction of the Courts at Calcutta for the purposes of the suit. Accordingly, both the Courts within the jurisdiction of Calcutta and Vijayawada had jurisdiction under Section 20 of the Code of Civil Procedure to try the Suit, as part of the cause of action of the Suit had arisen within the jurisdiction of both the said Courts."

15. Since both the Courts were held to have jurisdiction in the matter of the contract, the jurisdiction of the Court at Vijayawada was held to be ousted by virtue of the exclusionary clause.

16. In the present case, there is absolutely no doubt about the factual position that no part of the cause of action has arisen within the territorial limits of the Courts at Patna. The Appellant placed a purchase order upon the Respondent through its local office at Mumbai for the sale, supply and delivery of goods. The goods were supplied by the Respondent in pursuance of the purchase order from Vadodara to Roorkee. The Appellant issued several cheques including among them a cheque drawn at the Prabhadevi Mumbai Branch of the ICICI bank in part-payment all of which were returned upon presentation as dishonoured. The cause of action comprises of every fact which is necessary for a plaintiff to establish and prove in order to obtain a judgment. The cause of action consists of a bundle of facts which when established entitles the plaintiff to relief against the Defendant on the basis of the law which governs. In the case of a suit on a contract the acceptance of an offer and its intimation result in the contract being brought into existence and the suit can be filed in the Court within whose jurisdiction the acceptance was communicated. There is in the present case absolutely no connection of Patna with the accrual of the cause of action. But, according to the Defendant - Appellant since it has its registered office at Patna, a suit against the Appellant could well have been instituted within the territorial limits of the Civil Court at Patna and hence the clause in the purchase order would confer exclusive jurisdiction on the Courts at Patna. According to the Appellant, under Section 20(a) a defendant can be sued at the place where at the time of the commencement of the suit the defendant carries on business. The explanation to Section 20(a) stipulates that 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 sub-ordinate office, at such place. In ABC Laminart (supra) the Supreme Court dealt with a situation where the First Appellant against whom a suit was brought in Kaira had its registered office within the jurisdiction of the Civil Court at Kaira. The Supreme Court, adverted to the provisions that were contained in Section 7 of Act 7 of 1888 by which an explanation was introduced to provide inter alia that in suits arising out of a contract the cause of action arises within the meaning of the Section at the place where the contract was made, where it was to be performed or where in performance of the contract any money to which the suit relates was expressly or impliedly payable. Noting that Explanation III has now been omitted in the Code of Civil Procedure of 1908, the Supreme Court held nonetheless that it may serve as a guide and that "there must be a connecting factor"(at paragraph 14 page 1243). The connecting factor in that case as the Supreme Court noted was ensured by fixing the situs of the contract with Kaira. The exclusionary clause was however held not to unambiguously exclude the jurisdiction of the other Courts. In a case such as the present, before the exclusionary clause can be held to apply, it would be necessary for the Appellant to demonstrate that the place of the Courts where exclusive jurisdiction is claimed has a connecting nexus with the situs of the contract. For it is when the cause of action for the institution of the suit can be regarded as having occurred within the jurisdiction of more than one Court that parties can by their agreement confer jurisdiction on one of those Courts exclusively. In the present case, the contract was entered into and concluded at Mumbai. Part-payments were made by the Appellant to the Respondent at Mumbai. The Appellant placed a purchase order upon the Respondent through its own local office at Mumbai. Goods were supplied by the Respondent from Vadodara to the Appellant at Roorkee. Absolutely no part of the cause of action has occurred within the territorial jurisdiction of the Courts at Patna. In such a situation and having regard to the settled principle of law which emerges from the judgments of the Supreme Court noted above, the exclusionary clause will have no effect whatsoever.

17. The Learned Single Judge construed Clause 22 to operate only when there is a dispute. In the view of the Learned Single Judge since in the present case there was no dispute on the merits of the matter, the ouster of jurisdiction would not come into operation since according to the impugned order, Clause 22 pertained not to a dispute as to jurisdiction but only a dispute on the merits of the matter. We are unable to subscribe to the correctness of this part of the reasoning of the Learned Single Judge. With all due respect, the issue as regards the ouster of jurisdiction has to be considered independently. However, for the reasons that we have elucidated earlier, we have come to the conclusion that the clause conferring exclusive jurisdiction on the Courts at Patna would have no application in the facts of the present case having regard to the fact that no part of the cause of action in relation to the contract in question had occurred in Patna.

18. There is no defence to the claim on merits. The claim arises out of a written contract as borne out of the purchase orders. The cheques issued by the Appellant to the Respondent were dishonoured upon presentation.

19. For these reasons, we do not find any reason to interfere. Though during the course of the hearing, counsel appearing on behalf of the Appellant has sought to make a submission in regard to the price which has been charged, it has been fairly admitted that this was not raised in the hearing before the Learned Single Judge. For these reasons, we do not find any merit in the Appeal. The Appeal shall accordingly stand dismissed.

There shall be no order as to costs.

Stay refused.

Appeal dismissed.