Oral Judgment :
By this chamber summons filed by the defendant, it is prayed that the plaint in this suit be returned to the plaintiff for presentation in appropriate court at Chennai and in the alternative to reject the plaint on the ground that the suit is barred by law of limitation and that the plaint does not disclose cause of action for the reliefs claimed in the suit.
2. Some of the facts relevant for the purpose of deciding this chamber summons are summarized as under :
(a) By an Equipment Lease Agreement dated 30th June, 1992 entered into between Plaintiff and defendant, the defendant gave on lease one Himson scragg SDS8 Texturising machine (hereinafter referred to as the said machine) for the period of five years on the terms and conditions mentioned in the said agreement. The said machine was installed at the factory premises of Garware Nylons Limited, an associate company of the plaintiff at Ahmednagar and the said associate company was using the said machine. The registered office of the defendant company is at Chennai. Defendant has one of its subordinate office at Mumbai. It is the case of the plaintiff that in the month of August, 1996, the said Garware Nylon Ltd suspended its operation. One of the creditor of the said Garware Nylon Limited filed petition in this court being Company Petition No. 5 of 1992 inter alia praying for winding up of the said company. The Plaintiff vide letter dated 19th June, 1997 requested the defendant to take necessary steps to recover possession of the said machine. On 5th September, 1997, the Official Liquidator attached to this court came to be appointed as provisional liquidator of the said Garware Nylons Limited and took charge and control of the assets of the said company including machine which was given on lease to the plaintiff by the defendant. It is the case of the plaintiff that the plaintiff though repeatedly told defendant to file appropriate proceedings in this court to get the machine released, defendant did not take any steps promptly. Only in the month of October, 1997, defendant filed company application praying for direction against the provisional liquidator to hand over the said machine to the defendant. Plaintiff thereafter requested the defendant vide letter dated 9th March, 1998 to take steps to obtain necessary court orders to take possession of the said machine. Plaintiff also alleged that due to such attitude of the defendant, the endeavour of the plaintiff of putting the said machine to use were being lost. By letter dated 9th March, 1998, defendant demanded amount of Rs.43,70,346/- from the plaintiff as arrears of the lease rentals. The plaintiff by letter dated 17th March, 1998 denied its liability. On 18th December, 1998, this court appointed official liquidator of the assets of the said company. The defendant thereafter demanded arrears of Rs.46,39,657/- from the plaintiff vide letter dated 4th April, 1998. Plaintiff once again denied the liability by letter dated 29th April, 1998 and called upon the defendant to take steps to take possession of the said machine.
(b) Defendant vide its advocates letter dated 16th June, 1998, called upon the plaintiff to pay Rs.88,28,637/- and stated that it was obligation of the plaintiff to keep the lease equipments at all times in its possession and control. Plaintiff vide letter dated 30th June, 1998, denied the said allegations of the defendant and denied the liability.
Plaintiff vide letter dated 19th December, 1998 once again alleged that the defendant had not taken any steps to get possession of the said machine. The defendant vide its advocate's letter dated 6th January, 1999, denied the said allegations and stated that the defendant had taken the steps to recover possession of the said machine. Defendant called upon the plaintiff to pay Rs.88,28,637/- with further interest. Defendant vide advocates' letter dated 29th January 1999 reiterated that plaintiff had failed to pay the outstanding amount of the defendant. On 1st April, 1999, defendant called upon the plaintiff to make payment of Rs.1,06,25,329/-. Plaintiff vide letter dated 5th May, 1999 alleged that the defendant was liable to pay to the plaintiff damages suffered by the plaintiff due to loss of income resulting from the irresponsible attitude of the defendant. Defendant by advocate's letter dated 31st January. 2001 called upon the plaintiff to make payment of Rs.3,51,22,041.62/- by referring to agreement dated 13.11.1995. Plaintiff vide advocates letter dated 8th March, 2001 denied the allegations. On 30th April, 2001, plaintiff filed suit in this court for declaration that defendant is liable to pay to the plaintiff an amount of Rs.1,93,78,667/- together with further interest on the said sum at the rate of 18% p.a. with quarterly rests from the date of the suit till payment and/or realization. The writ of summons in the suit was served upon the defendant on 7th August, 2008, at the registered office of the defendant. On 28th January, 2009, defendant filed this chamber summons.
3. Learned counsel for the defendant in support of the Chamber summons submits as under :
(a) That the registered office of the defendant is at Chennai. The loan application was made by the plaintiff to the defendant at its registered office at Chennai. The lease agreement was entered into at Chennai. Learned counsel submits that the defendant along with their letter dated 30th March, 1996 had forwarded three sets of hire purchase/lease agreement dated 30th November, 1995 to the plaintiff having its office at Mumbai for due execution at their end and requested to return the same alongwith various payments. It is submitted that Plaintiff thereafter forwarded all these documents referred therein along with original lease agreement to the defendant at its registered office at Chennai and the said agreement was accepted at Chennai. The learned counsel invited my attention to clause 31 of the said agreement which reads as under :
â31. CURRENCY :
All monetary reference in this agreement refer to Indian Currency and all payments are to be made in Indian Currency at the office of integrated Finance Company Limited, Madras.â
(b) Reliance is also placed on clause 16 (i) and (ii) which is extracted as under :
â16. EXCLUSIONS :
(a) The lessee acknowledges and agrees with the lessor:
(I) that the lessor shall not be liable to the Lessee for any liability, claim, loss, damage or expense of any kind of nature.
(I) caused directly or indirectly by the Equipment or any inadequacy thereof for nay purpose, or any defect therein or by the use thereof, or
(II) in relation to any repairs, servicing, maintenance, or adjustments thereto, or to any delay in providing or failure to provide the same, or in relation to any interruption or loss of use thereof or any loss of business or any damage whatsoever and howsoever caused.
(c ) Reliance is also placed on Clause 17(a) to (c) which read as under :
â17. The Lessee will indemnify the Lessor and keep the Lessor indemnified at all times against :
(a) Loss by seizure under distress for rent, execution or other legal process;
(b) loss destruction of, or damage to the Equipment by Fire, Accident or any other causes whatsoever.
(c ) any clams arising out of the use, operation or keeping of the Equipment.
(d) â¦.
(e) â¦.â
(d) Clause 38 of the said agreement which is relevant for the purpose of deciding this Chamber summons reads as under :
â38. In the event of dispute under this or any of the agreements entered into between the Lessor and the Lessee in connection with the Lease of the Equipment mentioned in the Schedule A the Courts in Madras alone will have jurisdiction.â
(e) Learned counsel for defendant submits that all the correspondence exchanged by parties were at the registered office of the defendant situated at Chennai. The supervision, control and management of the said equipment was carried out by the defendant from its registered office at Chennai. All the consideration payable by the plaintiff to the defendant was at its registered office at Chennai. It is submitted that the dispute raised in the suit is regarding the lease agreement which was executed at Chennai. Claims made by the plaintiff for damages are not independent of the lease agreement. It is submitted that in the absence of lease agreement, such claim would not have arisen. Learned counsel submits that in view of section 92 of the Evidence Act, no evidence can be permitted contrary to the written contract which provides that the payments were to be made at registered office of the defendant at Chennai. It is submitted that the correspondence would indicate that the actual administration of the property was done by the defendant from Chennai. The learned counsel submits that the original agreement entered into between the parties was revised by entering into supplementary agreement on 30.11.1995 which agreement was also executed at Chennai. It is submitted that in the said agreement, the schedule of payment was revised. Clause 39 of the said agreement also provided that in the event of dispute under that agreement or any of the agreements entered into between the lessor and the lessee in connection with the lease of equipment mentioned in schedule A, the courts at Madras will alone have jurisdiction. Learned counsel submits that there is no other lease agreement entered into between the parties except these two agreements referred aforesaid. Learned counsel submits that since the agreement in question was executed at both the places i.e. at Mumbai and Chennai and it was sent to Chennai by the plaintiff where it was accepted, part of cause of action had also arisen at Chennai and in view of the agreement recorded in clause 39 of the lease agreement, Chennai court alone will have jurisdiction to entertain the suit.
(f) Learned counsel submits that the payment was made by the defendant to M/s./ Garware Nylons Limited at the instance of the plaintiff. It is the case of the plaintiff that there was no use of machine by the plaintiff as defendant did not shift the said equipment from the custody of the said M/s. Garware Nylon Limited which claim is arising out of use of the equipment under the said two lease agreements. It is submitted that there is no delay in taking out chamber summons. Writ of summons was served in the year 2008 and within four months, the chamber summons came to be filed by the defendant. Plaintiff took more than 7 years to serve writ of summons upon the defendant. Learned counsel submits that the main cause of action is founded on the lease agreement.
(g) Learned counsel for the defendant invited my attention to various paragraphs of the plaint in support of his submission that the entire plaint proceeds on the premise that the defendant had failed to comply with their obligation to shift machine from the premises of Gareware Nylon Limited as a result thereof, plaintiff suffered damages. It is submitted that since part of cause of action has arisen within the jurisdiction of this court and part of cause of action had arisen within the jurisdiction of Chennai Court, in view of the agreement entered into between the parties conferring jurisdiction on Chennai Court, this court will have no jurisdiction to entertain, try and dispose of the suit. In support of this plea, the learned counsel placed reliance upon the judgment of the Supreme Court in the case of ABC Laminart Pvt. Ltd. Vs. A.P. Agencies, 1989 SCC 163 and in particular paragraphs 8, 9, 11, 12, 13 to 18, 20 to 22 which read thus :
â8. The next question is whether Clause 11 is valid, and if so, what would be its effect As Clause 11 formed part of the agreement it would be valid only if the parties could have validly agreed to it. It is common knowledge that the law of contract only prescribes certain limiting principles within which parties are free to make their own contracts. An agreement enforceable at law is a contract. An agreement which purports to oust the jurisdiction of the Court absolutely is contrary to public policy and hence void. Each of the citizens has the right to have his legal position determined by the ordinary Tribunal except, of course, in a contract (a) when there is an arbitration clause which is valid and binding under the law, and (b) when parties to a contract agree as to the jurisdiction to which disputes in respect of the contract shall be subject. "It has long been established", say Cheshire and Fifoot, "that a contract which purports to destroy the right of one or both of the parties to submit questions of law to the court is contrary to public policy and is void pro tanto." However, arbitration is a statutory mode of settlement; and as a matter of commercial law and practice parties to a contract may agree as to the jurisdiction to which all or any disputes on or arising out of the contract shall be subject.
9. Section 28 of the Indian Contract Act, 1872 provides that every agreement by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunal, or which limits the time within which he may thus enforce his rights, is void to that extent. This is subject to exceptions, namely, (i) contract to refer to arbitration and to abide by its award, (2) as a matter of commercial law and practice to submit disputes on or in respect of the contract to agreed proper jurisdiction and not other jurisdictions though proper. The principle, of Private International Law that the parties should be bound by the jurisdiction clause to which they have agreed unless there is some reason to contrary is being applied to municipal contracts. In Lee v. Showmen's Guild Lord Denning said:
parties cannot by contract oust the ordinary courts from their jurisdiction They can, of course, agree to leave questions of law, as well as questions of fact, to the decision of the domestic tribunal. They can, indeed, make the tribunal the final arbiter on questions of fact, but they cannot make it the final arbiter on questions of law. They cannot prevent its decisions being examined by the courts. If parties should seek, by agreement, to take the law out of the hands of the courts and put it into the hands of a private tribunal, without any recourse at all to the courts in cases of error of law then the agreement is to that extent contrary to public policy and void.
11. 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.
12. A cause of action means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. Everything which if not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relation whatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff.
13. Under Section 20(c) of the CPC subject to the limitation stated theretofore, every suit shall be instituted in a court within the local limits of whose jurisdiction the cause of action, wholly or in part arises. It may be remembered that earlier Section 7 of Act 7 of 1888 added Explanation III as under:
Explanation III. In suits arising out of contract the cause of action arises within the meaning of this section at any of the following places, namely:
1. the place where the contract was made ;
2. the place where the contract was to be performed or performance thereof completed ;
3. the place where in performance of the contract any money to which the suit relates was expressly or impliedly payable.
14. The above Explanation III has now been omitted but nevertheless it may serve a guide. There must be a connecting factor.
15. In the matter of a contract there may arise causes of action of various kinds. In a suit for damages for breach of contract the cause of action consists of the making of the contract, and of its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. The making of the contract is part of the cause of action. A suit on a contract, therefore, can be filed at the place where it was made. The determination of the place where the contract was made is part of the law of contract. But making of an offer on a particular place does not form cause of action in a suit for damages for breach of contract. Ordinarily, acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a court within whose jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have performed or its performance completed. If the contract is to be performed at the place where it is made, the suit on the contract is to be filed there and nowhere else In suits for agency actions the cause of action arises at the place where the contract of agency was made or the place where actions are to be rendered and payment is to be made by the agent. Part of cause of action arises where money is expressly or impliedly payable under a contract. In cases of repudiation of a contract, the place where repudiation is received is the place where the suit would lie. If a contract is pleaded as part of the cause of action giving jurisdiction to the Court where the suit is filed and that contract is found to be invalid, such part of cause of the action disappears. The above are some of the connecting factors.
16. So long as the parties to a contract do not oust the jurisdiction of all the Courts which would otherwise have jurisdiction to decide the cause of action under the law it cannot be said that the parties have by their contract ousted the jurisdiction of the Court. If under the law several Courts would have jurisdiction and the parties have agreed to submit to one of these jurisdictions and not to other or others of them it cannot be said that there is total ouster of jurisdiction. In other words, where the parties to a contract agreed to submit the disputes arising from it to a particular jurisdiction which would otherwise also be a proper jurisdiction under the law their agreement to the extent they agreed not to submit to other jurisdictions cannot be said to be void as against public policy. If on the other hand the jurisdiction they agreed to submit to would not otherwise be proper jurisdiction to decide disputes arising out of the contract it must be declared void being against public policy. Would this be the position in the instant case?
17. In S. Manuel Raj and Co. v. J. Manilal and Co. MANU/GJ/0069/1963 : AIR1963Guj148 where one of the parties to the contract signed an order form printed by the other party containing the words "subject to Madras jurisdiction" and sent the order form to the other party it was held that the party must be assumed to have agreed that Madras was the place for settlement of the dispute and it was not open to that person who signed the order form of the opposite party containing the printed words to show that printed words were not part of the contract and that those words in the contract was to exclude the jurisdiction of other Courts and to keep sole jurisdiction to one Court, It was observed that the object of printing such words as "subject to Madras jurisdiction" in the contract was to exclude the jurisdiction of other Courts and to give sole jurisdiction to one Court and it was in consonance with the commercial practice in India. Similarly in Sri Rajendra Mills v. HajiHassan MANU/WB/0064/1970 : AIR1970Cal342 where there was a contract between the plaintiff and defendant No. 1 under which the parties agreed that all suits arising on or out of the contract, would be instituted in the Court at Salem, the Division Bench held that it was true that the suit could have been instituted either at Salem or at Howrah under Section 20(c) of the CPC, as the cause of action, admittedly arose in part in both the places and it was therefore a case where two Courts had concurrent jurisdiction and in such a case it was open to the parties to make a choice restricting the Court in which the suit under or upon the contract could be instituted. In other words, both the Courts having territorial jurisdiction the parties by their agreement waived their right, to institute any action, as aforesaid except at Salem. It was observed that under those circumstances it was not open to the plaintiff to object to the order for return of the plaint for presentation to the Court at Salem as the choice of forum in case of alternative forums lies with the plaintiff and the plaintiff having debarred or precluded itself from doing to any other Court except at Salem which would be a proper Court as against the defendants it would not be just to allow the plaintiff at the instance of any other party or under cover of its objection to institute the suit except in the Court at Salem.
18. In Hakam Singh v. Gammon (India) Ltd. MANU/SC/0001/1971 : [1971]3SCR314 where the appellant agreed to do certain construction work for the respondent who had its principal place of business at Bombay on the terms and conditions of a written tender. Clause 12 of the tender provided for arbitration in case of dispute. Clause 13 provided that not-withstanding the place where the work under the contract was to be executed the contract shall be deemed to have been entered into by the parties at Bombay, and the Court in Bombay alone shall have jurisdiction to adjudicate upon. On dispute arising between the parties the appellant submitted a petition to the Court at Varanasi for an order under Section 20 of the Arbitration Act, 1940 that the agreement be filed and an order of reference be made to an arbitrator or arbitrators appointed by the Court. The respondent contended that in view of the Clause 13 of the arbitration agreement only the Courts at Bombay had jurisdiction. The Trial Court also held that the entire cause of action had arisen at Varanasi and the parties could not by agreement confer jurisdiction on the Courts at Bombay which they did not otherwise posses. The High Court in revision held that the Courts at Bombay had jurisdiction under the general law and hence could entertain the petition and that in view of Clause 13 of the arbitration agreement the petition could not be entertained at Varanasi and directed the petition to be returned for presentation to the proper Court, On appeal there-from one of the questions that fell for consideration of this Court was whether the Courts at Bombay alone had jurisdiction over the dispute. It was held that the CPC in its entirety applied to proceedings under the Arbitration Act by virtue of Section 41 of that Act. The jurisdiction of the Court under the Arbitration Act to entertain proceedings for filing an award was accordingly governed by the provisions of the CPC, By the terms of Section 20(a) of the CPC read with explanation II thereto the respondent company which had its principal place of business at Bombay was liable to be sued at Bombay. It was held that it was not open to the parties to agreement to confer by their agreement jurisdiction on a Court which did not possess under the Code. But where two Courts or more have under the CPC jurisdiction to try the suit or proceeding an agreement between the parties that the dispute between them shall be tried one of such Courts was not contrary to public policy and such an agreement did not contravene Section 28 of the Contract Act. Though this case arose out of an arbitration agreement there is no reason why the same rule should not apply to other agreements in so far as jurisdiction is concerned, Without referring to this decision a Division Bench of the Madras High Court in Nanak Chand v. T.T. Elect. Supply Co. MANU/TN/0162/1975 : AIR1975Mad103 observed that competency of a Court to try an action goes to the root of the matter and when such competency is not found, it has no jurisdiction at all to try the case. But objection based on jurisdiction is a matter which parties could waive and it is in this sense if such jurisdiction is exercised by Courts it does not go to the core of it so as to make the resultant judgment a nullity. 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 causes action having arisen there within, if the parties to the contract agree to vest jurisdiction in one such court to try the dispute which might arise as between themselves the agreement would be valid. If such a contract is clear, unambiguous and explicit and not vague it is not hit by Sections 23 and 28 of the Contract Act This can not be understood as parties contracting against the Statute Mercantile Law and practice permit such agreements.
20. When the Court has to decide the question of jurisdiction pursuant to an ouster clause it is necessary to construe the ousting expression or clause properly. Often the stipulation is that the contract shall be deemed to have been made at a particular place. This would provide the connecting factor for jurisdiction to the Courts of that place in the matter of any dispute on or arising out of that contract. It would not, however, ipso facto take away jurisdiction of other Courts. Thus, in Salem Chemical Industries v. Bird and Co. MANU/TN/0285/1979 : AIR1979Mad16 where the terms and conditions attached to the quotation contained an arbitration clause provided that : "any order placed against this quotation shall be deemed to be a contract made in Calcutta and any dispute arising there-from shall be settled by an Arbitrator to be jointly appointed by us" it was held that it merely fixed the situs of the contract at Calcutta and it did not mean to confer an exclusive jurisdiction on the Court at Calcutta, and when a part of the cause of action had arisen at Salem, the Court there had also jurisdiction to entertain the suit under Section 20(c) of the CPC.
21. From the foregoing decisions it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other Courts. When the clause is clear, unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other Courts should avoid exercising jurisdiction, As regards construction of the ouster clause when words like 'alone', 'only, 'exclusive' and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim 'expressio unius est exclusio alterius' expression of one is the exclusion of another may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed
22. Coming to Clause 11 we already found that this clause was included in the general terms and conditions of sale and the order of confirmation No. 68/59 dated 2.10.1974 with the general terms and conditions was sent from Udyognagar, Mohmadabad, Gujarat to the respondent's address at 12 Suramangalam Road Salem, Tamilnadu. The statement made in the Special Leave Petition that Udyognagar, Mohamadabad, Gujarat is within the jurisdiction of the civil Court of Kaira has not. been controverted. We have already seen that making of the contract was a part of the cause of action and a suit on a contract therefore could be filed at the place where it was made. Thus Kaira court would even otherwise have had jurisdiction. The bobbins of metallic yarn were delivered at the address of the respondent at Salem which, therefore, would provide the connecting factor for Court at Salem to have jurisdiction. If out of the two jurisdictions one was excluded by Clause 11 it would not absolutely oust the jurisdiction of the Court and, therefore, would not he void against public policy and would not violate Sections 23 and 28 of the Contract Act. The question then is whether it can construed to have excluded the jurisdiction of the Court at Salem. In the clause 'any dispute arising out of this sale shall be subject to Kaira jurisdiction' ex facie we do not find exclusive words like 'exclusive', 'alone, 'only' and the like. Can the maxim 'expressio unius est exclusio alterius' be applied under the facts and circumstances of the case? The order of confirmation is of no assistance. The other general terms and conditions are also not indicative of exclusion of other jurisdictions.
Under the facts and circumstances of the case we hold that while connecting factor with Kaira jurisdiction was ensured by fixing the situs of the contract within Kaira other jurisdictions having connecting factors were not clearly, unambiguously and explicitly excluded. That being the position it could not be said that the jurisdiction of the Court at Salem which Court otherwise had jurisdiction under law through connecting factor of delivery of goods thereat was expressly excluded. We accordingly find no error infirmity in the impugned judgment of the High Court.â
(h) Learned counsel for the defendant also placed reliance upon the judgment of the Supreme Court in the case of RenusagarPower Co. Ltd. Vs. General Electric Company and another, (1984) 4 SCC 679 and in particular paragraph 25, 45 to 47 which read as under :
â25. Four propositions emerge very clearly from the authorities discussed above
1. Whether a given dispute inclusive of the arbitrator's jurisdiction comes within the scope or purview of an arbitration clause or not primarily depends upon the terms of the clause itself; it is a question of what the parties intend to provide and what language they employ,
2. Expressions such as "arising out of" or "in respect of" or "in connection with" or "in relation to" or "in consequence of" or "concerning" or "relating to" the contract are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope) of the arbitration agreement.
3. Ordinarily as a rule an arbitrator cannot clothe himself with power to decide the questions of his own jurisdiction (and it will be for the Court to decide those questions) but there is nothing to prevent the parties from investing him with power to decide those questions, as for instance, by a collateral or separate agreement which will be effective and operative.
4. If, however, the arbitration clause, so widely worded as to include within its scope questions of its existence validity and effect (scope), is contained in the underlying commercial contract then decided cases have made a distinction between question as to the existence and or validity of the agreement on the one hand and its effect (scope) on the other and have held that in the case of former those questions cannot be decided by the arbitrator, as by sheer logic the arbitration clause must fall along with underlying commercial contract which is either nonexistent or illegal while in the case of the latter it will ordinarily be for the arbitrator to decide the effect or scope of the arbitration agreement i.e. to decide the issue of arbitrability of the claims preferred before him.
45. Lastly, we would refer to the decision of this Court in Union of India v. Salween Timber Construction (India) and Ors. MANU/SC/0261/1968 : [1969]2SCR224 where the Court has laid down the test for determining the question whether the arbitrators would have jurisdiction to adjudicate upon a claim made by one of the parties to a Contract, though not strictly arising "under" it. In that case a dispute arose between the appellant (Union of India) and the respondent regarding the supply of timber made by the respondent under a contract between the parties. One of the items in dispute was a claim by the respondent that there was an excess supply of timber to cover up possible rejection, which should have been returned by the appellant with compensation for deterioration, or that payment should be made for it as the market rate. The appellant contended that the terms of contract did not require the respondent to tender for inspection any quantity in excess of the contracted quantity, that the claim was in detinue relating to an involuntary bailment and not in relation to anything done in the performance, implementation or execution of the contract and therefore, it was not a dispute arising out of the contractor in connection with the contract. Arbitration Clause in the contract covered any question or dispute arising under the contract or 'in connection with the Contract'. On the question whether the arbitrators had jurisdiction to adjudicate upon that claim this Court, relying upon its earlier decision in Ruby General Insurance Co. Ltd. v. Peary Lal Kumar MANU/SC/0001/1952 : [1952]1SCR501 held, that the test for determining the question is whether recourse to the contract by which both the parties are bound, was necessary for the purpose of determining whether the claim of the respondent was justified or otherwise and since it was necessary in the case to have recourse to the terms of the contract for the purpose of deciding the matter in dispute the matter was within the scope of the arbitration clause and the arbitrators had jurisdiction to decide it.
46. As stated earlier since this third claim for compensatory damages is directly, closely and inextricably connected with the terms and conditions of the Contract, the payments to be made there-under and the breaches thereof and since for adjudication thereof recourse to the Contract would be necessary it will have to be held that it is a claim "arising out of" and in any event "related to" the Contract.
47. As regards the two decisions, Monro v. Bognor Urban District Council (supra) and Ghewarehand Rampuria v. Shiva Jute Bailing Ltd. (supra) relied upon by Counsel for Renusagar we would like to point out that both are distinguishable and each turned on its own facts. In the former case the contractor had filed a suit to recover damages for the fraudulent misrepresentation as also to have the contract declared void on the ground that his consent thereto had been obtained by fraudulent misrepresentation and in effect the Court of Appeal held that the alleged fraudulent misrepresentation was not a dispute "upon or in relation to or in connection with the Contract and, therefore, the suit was not liable to stayed nor was the dispute liable to be referred to arbitration. In the latter case the suit was based wholly on tort and tort alone and the action complained of was totally unconnected with the Contract; the High Court actually recorded a finding that the cause of action in the suit had no connection direct or indirect with the Contract itself and the reference to the Contract was only a link in the story to show how the goods came to be in the possession of the defendants and the claim was not based in any way on or related to the contract itself. In the final analysis the question as to whether a claim based on tort is a claim de hors the contract which contains the arbitration clause or is directly or inextricably connected with the contract has to be decided on the facts of each case and the language used in the arbitration clause.â
(i) Learned counsel for the defendant placed reliance on the judgment of this court in case of Pacific Refractories Ltd. Vs. Stein Heurtey India Projects Pvt Ltd. AIR 2006 BOMBAY 231 and in particular paragraphs 35 to 40 which read thus :
â35. Mr. Kutty relied upon the judgment of a learned Single Judge of the Kerala High Court in the case of The National Starch and Chemicals v. WeikfieldProducts Co. (India) MANU/KE/0062/1990 : AIR1990Ker291 . The judgment is of no assistance to Mr. Kutty for the clause that fell for consideration was entirely different from Article 39. The same reads as under :
Jurisdiction All transactions are subject to Poona jurisdiction." While construing this clause, it was held as under :
6. ...
In the clause it is significant to note that the parties have not used the word "Courts". What is stated is 'transactions are subject to Poona jurisdiction'.
An analysis of this clause would certainly imply that when the transaction is subject to Poona jurisdiction impliedly the parties agree that if there is any dispute and if it has to be settled by a Court of law, it can be Court in Poona. This itself requires unravelling of the implication of the words 'transactions are subject to Poona jurisdiction'. After finding that the clause implicit that 'Poona jurisdiction' means Courts in Poona, further it has to be found that for excluding the jurisdiction of courts at Trivandrum, which have got jurisdiction over the subject-matter, have lost that jurisdiction because the parties have confined the jurisdiction to settle their dispute exclusively in the Courts in Poona.
(emphasis supplied)
The case therefore is clearly distinguishable from the facts of the present case. Further, with great respect, I am unable to agree with the learned Judge, who has held interalia as follows :
5...
This I say because that the ouster of jurisdiction is to be found only if the Court finds that the terms excluding the jurisdiction of the Court in the agreement are unequivocal, total perfect straight and downright. It should be explicitly expressed and should be clear, peremptory definitive and decisive as to the point that the parties agreed that only in one Court and in that Court alone the dispute has to be settled.
6...
7. In, Secretary, Vikalanga Sevaka Coop. Society Ltd. v. Sheth Brothers this Court said that ouster of jurisdiction must be proved by express words or by necessary or inevitable implications. By using the word 'inevitable implications' the Court is putting more emphasis on the fact that a probability or possibility of an implication is insufficient. Inevitable means a result that cannot be avoided, not admitting of escape or evasion; that cannot fail to occur. So it is said that there is no good in arguing with the inevitable (Lowell). So the implication to oust the jurisdiction should be cosmetic preordained and fatalistic. The implication itself must be definitive and decisive.
Further, the reliance upon the above extracts alone is incorrect for the learned Judge himself qualified the same by stating that even where the words are not explicit, the Court is not powerless to examine to a certain extent, to find out whether by clear implication, there is exclusion of jurisdiction.
On the basis of the aforesaid clause, the learned Judge came to the conclusion that there is no specific word excluding the jurisdiction of Trivandrum Sub Court. If by that the learned Judge meant, as by Mr. Kutty contended he did, that the clause must contain specific words such as "only" or "alone" before the Court comes to the conclusion as to the ouster of jurisdiction of Courts other than those named in the clause I respectfully disagree with the learned Judge. Such construction would, in fact, be contrary to the aforesaid judgments of the Supreme Court.
36. In the present case, the defendant's principal office is in Calcutta. It is for this reason that Article 43 of the Contract required all communication to be addressed to the Managing Director in Calcutta. The communication of the acceptance by the plaintiff of the offer was required to be made in Calcutta. Article 12 of the Contract required the plaintiff to keep the defendant informed of the progress of work by forwarding monthly status reports for the defendant's review. Article 12 also required the plaintiff to report immediately to the defendant any exigencies in the work. The implementation and the execution of the contract was monitored by the defendants fromCalcutta. Even the Arbitration Clause requires the proceedings to take place under the jurisdiction of the Calcutta High Court, The same reads as under :
ARTICLE 40 ARBITRATION :
All unresolved disputes arising in connection with the Contract shall be resolved through an arbitrator acceptable to both the parties. In the event of failure in selecting any mutually acceptable arbitrator, arbitration proceedings will take place under the jurisdiction of Calcutta High Court. All involved parties shall abide by the findings of the Arbitrator or the verdict of arbitration by Calcutta High Court. The terms of the Contract shall in all respects be construed and operated as a Indian Contract and in conformity with Indian Laws.
Performance of the Contract shall continue during Arbitration proceedings unless the Purchaser shall advise the suspension of the contract as a whole or part thereof.
37. An important question to be determined in such cases, would be the reason for the inclusion of such a clause. The Calcutta High Court and Courts situated within the territorial limit of the Calcutta High Court (for brevity referred to as the Calcutta High Court), in any event, had jurisdiction. Thus, in the present case, Article 39 was not for the purpose of conferring jurisdiction on the Calcutta High Court because the parties were of the view that otherwise the Calcutta High Court would have no jurisdiction. Parties cannot by consent confer jurisdiction upon a place or a Court which has none. I am not, however, on the question of law. I am considering what the parties had in mind when they entered into the contract. The Calcutta High Court, in any event, had jurisdiction and the parties knew, and, in any event, must be deemed to have known the same.
38. Further, atleast three places would have jurisdiction in respect of disputes arising under the contract. The Calcutta High Court, as we have seen, has jurisdiction. If a claim was to be brought against the plaintiff by the defendant, the Courts in Bombay, would certainly have jurisdiction for the defendant carries on business in Bombay. Thirdly, the place where the contract was to be performed would have jurisdiction. The goods were supplied by the defendant from Rajasthan to the defendants in Bellary, Karnataka.
39. Added to this is the fact that Mr. Kutty did not offer any explanation for the inclusion of Article 39. The inclusion of a term in a contract must signify something unless it is shown to have been included by mistake. It is not the plaintiff's case that the parties were not adidem or that the clause was included in the contract by mistake. It is not the plaintiff's case that they were unaware of Article 39 in the contract. It is not the plaintiff's case that the clause was inserted for a purpose other than for the purpose of conferring jurisdiction. It is not even the plaintiff's case that the parties were of the view that the Calcutta High Court would otherwise have no jurisdiction and that the clause was therefore included. To reject Mr. Tulzapurkar's submission would be to render Article 39 otiose.
40. In the circumstances, the only logical explanation for the inclusion of Article 39 was to confine the jurisdiction to the Calcutta High Court and the Courts situated within the territorial limit of the Calcutta High Court, in respect of disputes arising from the contract and to exclude the jurisdiction of the Courts in any other place
4. Mr Cama, learned counsel appearing for the plaintiff submits as under:
(a) That claim for damages made in the plaint filed by the plaintiff is not a dispute arising under contract. There is no other agreement entered into between the parties in connection with lease agreement. It is submitted that dispute is neither under the said agreement nor under any other agreement. Dispute arose because defendant did not take any steps to apply to the Official Liquidator for possession of the machinery. The claim made by the plaintiff is in the nature of tort and not under any of the agreements. Mr Cama submits that there is no prayer for delivery of machine or for any payment under the lease agreement. Merely because in the plaint reference is made to the agreement vaguely, it cannot be construed that the claim has been made under the said agreement. Mr Cama placed reliance on Clauses 5, 13 and 16(1) of the agreement and submits that there is no provision in the lease agreement for payment of any damages by the defendant to the plaintiff. Mr Cama also invited my attention to para 6 of the rejoinder filed by the defendant in support of his submission that it was the case of the defendant that the defendant was not liable to the plaintiff for any liability, claim, loss, damages or expenses of any kind or nature whether caused directly or indirectly by the equipment or any inadequacy thereof for any purpose or any loss or any damage whatsoever as agreed under the said lease agreement. It is submitted that defendant thus cannot raise a plea that claims made by the plaintiff are under the said lease agreement and/or arising out of the agreement. Mr Cama also placed reliance on para 4 of the letter dated 1st April 1999 from the defendant to the plaintiff in which defendant denied that it was their obligation to apply to the Official Liquidator for possession of machinery. It is submitted that failure to apply for possession of equipment by the defendant to Official Liquidator was not under any provision of the contract. It is submitted that lifting of the machinery from the factory of the associate company of the plaintiff by the defendant was also not under any obligation under the contract.
(b) As far as clause 38 of the lease agreement is concerned, it is submitted by Mr Cama that since there was no other lease agreement entered into between the parties in connection with the lease of equipment mentioned in ScheduleA, defendant cannot place reliance on the second part of clause 38 in support of submission that the dispute in connection with the lease agreement has to be referred to the Court in Madras alone or that the Courts in Madras alone will have jurisdiction. Mr Cama learned counsel distinguished the Judgment of RenusagarPower Company Ltd. (supra) by placing reliance on para 37 in support of his submission that merely because the plaintiff referred to the contract in he claim, it would not mean that claim was under the contract. Mr Cama learned counsel placed reliance on the Judgment of Calcutta High Court in case of GhewarchandRampuria Vs. Shiva Jute Bailing Ltd. reported in A.I.R. 1950 Calcutta 568 and in particular paragraphs 4 to 7 in support of his submission that the claim made by the plaintiff was outside the contract and was not in relation to the contract. Paragraphs 4 to 7 of the said Judgment read thus:
(4) If we examine the facts of the present case, it will appear that when the quantity of jute was delivered, by the plaintiff to the defendant that act was in the performance of the terms of the contract. The rejection of a portion of the quantity so delivered as not being of the required quality was also without doubt in relation to the contract itself. After the plaintiff had been requested to take delivery of the rejected jute, that quantity of jute from that moment belonged to the plaintiff and the defendant had not right whatever to retain possession of that quantity of jute. If the defendant does not deliver the jute which he was bound to do after the jute had been rejected, the cause of action which arises is not based upon any provision in the contract at all but on the alleged act of the defendant in retaining possession of goods which the defendant had no right to do.
(5) The cause of action as laid in the plaint is stated to have arisen on 29th October 1946 when the defendant is alleged to have wrongfully refused to return the said bales. The cause of action is not laid on the rejection of the jute far less on the delivery which had been effected previously under the contract itself. No provisions contained in the contract are required to be interpreted or even referred to and the Court is not required, on the plaint as filed, to consider any of the terms contained in the contract.
(6) An action is not to be considered to be in relation to and in connection with a contract merely because it is shown that if there had never been any contract there would not have been any cause of action, there would never have been any wrongful refusal of returning the bales had not there been an earlier rejection of the bales under the contract. Vide observations by Pickford L.J. In Monrore v. Bognor Urban District council, (1915) 3 K. B. 167: (84 L. J. K. B. 1091) relied upon by this Court, in Jourmull Parasram V. Louis Drefus and Co., Ltd, 52 C.W.N. 137 : (A. I. R. (36) 1949 Ca. 179). What the Court is to look into is what the substance of the plaint is but not how the claim is framed. If the cause of action on which the claim is based is an independent one which does not arise on the contract or is in relation to the contract, it is idle to suggest that merely because at some earlier stage there was a contract and, not giving the history of the case, some reference has to be made to a previous contract, it cannot be said in every such case that it is in some way or other related to the contract. Reliance however was placed by the-learned advocate on behalf of the opposite party on Woolf v. Collis Removal Services, (1948) 1 K. B. 11. As observed by Lord Asquith, the breach in this particular case on which the cause of action was based was principally one of neglect in the performance of the contract itself. Under the contract, a party was bound to take due care of the different items of furniture and if such articles had been removed to an undesirable place and no proper care had been taken during the period the goods were so stored there, it is the failure of the party to take due care of those articles which they were bound to do under the contract. In this view of the reading of the contract, the Court of appeal came to the conclusion that even though the suit was technically framed in tort, there is a sufficiently close connection between the claim as made and the transaction as under the contract to bring the claim within the arbitration clause. It was further observed that claims which were entirely unrelated to the transaction covered by the contract would no doubt be excluded. The claim in that case was held to be one which came within the arbitration clause as having arisen though not directly but at least indirectly under the contract.
(7) Whether in a case the dispute arisen out of the contract or its in relation to the contract or not must depend on the particular facts of each case. The facts of the case now before us however do not make it possible to attract the special reasons given by the Court of Appeal in Woolf v. Collis Removal Service, (1948 1 K.B. 11) (supra). The cause of action in this case is based wholly upon tort and tort alone which has got no connection direct or indirect with the contract itself. As indicated already, the reference to the contract is only a link in the story to show how the goods came to be in the possession of the defendants and the claim is not based in any way or related to the contract itself.
(c) Mr Cama learned counsel also placed reliance on the Judgment of court of Appeal in case of MonroVs. Bognor Urban District Counsel reported in ( 915) 3. K.B. 167 (All Eng. Reporter 523) and in particular three paragraphs on pages 524, 525 and 526. The said paragraphs relied upon by Mr Cama of the said Judgment are extracted thus:
âThe plaintiff's claim is
âfor damages for fraudulent misrepresentation by the defendants whereby the plaintiff was induced to enter into a contract with the defendants for sewerage and other works at Bognor and has suffered a loss, and for an injunction to restrain the defendants from using or in any way dealing with the plaintiff's plant and materials now on the defendant's premises.â
The defendants would only have a right to deal with materials and plants under the contract, and the plaintiff is asking for an injunction to prevent them from doing so. The claim then goes on :
âThe plaintiff also claims for work and labour done, money expended, and materials supplied by the plaintiff for the defendants at their requestâ.
The following amendment was subsequently made : â The plaintiff also claims a declaration that the said contract is void and that it be rescinded.â The defendants applied to stay the action and to have it referred to arbitration under the arbitration clause. They filed an affidvit to which the plaintiff filed another affidavit in reply. He was cross-examined upon that affidvit before the master, who came to the conclusion that there was not ground for the charge of fraud. Now, I do not think that that was a question for the master at all.
The question was whether this actions should be stayed. In my opinion this is in no sense of the word an action upon the contract at all. It is an action for damages for fraudulent misrepresentation which induced the plaintiff to enter into the contract, and it is also an action for an injunction to prevent the defendants from using or in any way dealing with the plaintiff's plant and material, and then, in the alternative, although not in terms so expressed, there is a claim for work and labour done upon a quantum meruit which he could not maintain if his contract were in existence, because he could then only sue for any instalments that might be due according to the terms of the contract. It is, therefore, in no sense an action on the contract at all. Nor do I think that it is an action in relation to or in connection with the contract. In one sense it is an action in relation to or in connection with the contract, because if there has never been any contract there would never have been any cause of action, there would never have been any representation, and there would never have been any claim for damages. But it is not in relation to or in connection with the contract, in my opinion, within the meaning of the arbitration clause. That being so, I think the action is with reference to matters wholly outside the powers of the arbitrator and with which he could not possibly deal. It may be a very bad action; the master thinks it is. The defendants, if they have a sufficiently strong opinion about it, and if they have sufficient materials to do so, have the power to apply to stay the action or to dismiss it on the ground of it being frivolous and vexatious, or on the ground that the claim discloses no cause of action, or that it is an abuse of the process of court. They have all those steps that they can take if they think fit to do so. But that is not the point that we have to decide. What we have to decide is whether this is an action that ought to be brought withing the provisions of the arbitration within that clause. I do not think that it is an action which comes within the arbitration clause at all, and therefore I think there was no power to stay it, and ought not to have been stayed. I think the master proceeded on a wrong basis He said :
âI do not think this is a well-founded action. I think there is no case of fraud, and therefore I will stay the action and send it to arbitration â that is to say, I will send to arbitration something that the arbitrator has no owner to deal with at all.
âBANKES, L.J. â I agree. It seems to me that a person who takes out a summons such as this to stay proceedings on the ground that the question which is thereby raised ought to be referred to arbitration as, the first step, to establish that the matter in question in the legal proceedings is one which is within the scope of the submission to arbitration, and that is the real question which has to be decided here. In the first place, one has to see what the matter in question in the legal proceedings is, and then to consider whether it comes within the scope of the submission to arbitration. Here the plaintiff has brought an action and endorsed his claim upon the writ. The defendants without waiting for the statement of claim which I think they might have done, have elected to take out a summons at once to stay the action of which the claim has been indorsed on the writ. I do not think the plaintiff ought to be in a better position he had amended the writ. At the same time, I do not think that the amendment alters the character of the claim. It is a claim for damages for fraudulent misrepresentation whereby the plaintiff was induced to enter into a contract, and there are claims for consequential relief, one of which put in the form of a claim for work and labour done, but the essence of the claim is that the plaintiff is asserting that he was induced by fraud to enter into the contract, and that therefore the contract never was binding. If that is the nature of the claim, it seems to me plain that it does not come within the scope of the submission to arbitration, and it is no answer to say that the plaintiff has mistaken his remedy and ought not to have brought this form of claim which he cannot substantiate, and, if you look into it, you will find that he ought to have brought a different action altogether, and, if he had, it would have been plain that it came within the submission to arbitration.â
(d) Mr Cama also placed reliance upon the Judgment of Queen's Bench Division in case of Government of Gibraltar Vs. Kenny And Anr. Reported in 1956 (3) ALL England Reporter 22 and in particular portion at page Nos.25 and 26 which reads thus
âI must now deal with the merits of the claim as it is framed before me. The question has to be judged by an interpretation of the arbitration clause and the claims which are sought to be made in the arbitration.
In my view, this arbitration clause is very wide. It covers
â ⦠any dispute or difference (which) shall arise or occur between the parties hereto in relation to any thing or matter arising out of or under this agreement ...â
The distinction between matters â arising out ofâ and â underâ the agreement is referred to in most of speeches in Heyman v. Darwins, Ltd. (4) (1942) 1 All E.R. 337) and it is quite clear that â arising out of â is very much wider than âunderâ the agreement. This clause incorporates a difference or dispute in relation to any thing or matter âarising out ofâ as well as âunderâ the agreement, and, in my view, everything which is claimed here in this arbitration can be said to be a dispute or difference in relation to something â arising out of â the agreement.â
(e) Mr Cama learned counsel submits that claims made by the plaintiff for damages is outside the contract and is a claim in tort for damages. Mr Cama submits that correspondence exchanged between the parties would not confer the jurisdiction on a particular Court. Learned counsel submits that it is not in dispute that a subordinate office of the defendant is situated at Mumbai. As far as loan application relied upon by the defendant which shows that the same was addressed to the defendant at its registered office is concerned, learned counsel submits that the said loan application was in a standard format and no reliance can be placed on it for the purpose of jurisdiction. Learned counsel submits that payment was made admittedly by the defendant to Garware Nylons Ltd. and not to the plaintiff. Payment was made through the State Bank of Travancore Bombay branch. Receipt acknowledging such payment was issued by Garware Nylons Ltd. at Mumbai. It is submitted that agreement annexed to the plaint would also indicate that the same was also signed by the defendant at Mumbai. Mr Cama submits that Official Liquidator who had taken possession of machinery was appointed by this Court in company petition. It was the case of the plaintiff that defendant had failed to apply to Official Liquidator for possession of machinery who was appointed by this Court. That will also indicate that this court only has jurisdiction to entertain, try and dispose of this suit.
(f) Mr Cama, learned counsel placed reliance on the Judgment of Supreme Court in case of M/s Patel Roadways Ltd., Bombay Vs. M/s. Prasad Trading Company reported in AIR 1992 Supreme Court 1514 and in particular paragraphs 6 to 9 in support of his submission that if the company has its subordinate office within the jurisdiction of a particular Court that Court will have jurisdiction in respect of any cause of action arising at any place where it has also subordinate office. Paragraphs 5 to 9 of the said Judgment read thus :
5. It has been urged by the learned Counsel for the appellant that apart from the courts within whose territorial jurisdiction the goods were delivered to the appellant for transport, the courts at Bombay also had jurisdiction to entertain a suit arising out of the contract between the parties in view of the Explanation to Section 20 of the Code inasmuch as the principal office of the appellant was situate in Bombay. According to learned Counsel for the appellant since courts at two places namely Madras and Bombay had jurisdiction in the matter, the jurisdiction of the courts in" Madras was ousted by the clause in the contract where-under the parties had agreed that jurisdiction to decide any dispute under the contract would be only in the courts at Bombay. Consequently the courts where the two suits were instituted had no jurisdiction to entertain them and the trial court in each of the two cases as well as the High Court erred in law in taking a contrary view.
6. Having heard learned Counsel for the parties we find it difficult to, agree with this submission. For the sake of convenience Section 20 of the Code except the illustrations is reproduced hereunder:
â20. 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, at 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.â
7. In Hakam Singh v. Gammon (India) Ltd. MANU/SC/0001/1971 : [1971]3SCR314 it was held that "corporation" referred to in Section 20 meant not only a statutory corporation but also a company registered under the Indian Companies Act. It was also eld that it is not open to the parties by agreement to confer jurisdiction on any court which it did not otherwise possess under the Code. But where two courts have jurisdiction under the Code to try a suit or proceeding an agreement between the parties that the dispute between them shall be tried in one of such courts is not contrary to public policy nor does such an agreement contravene Section 28 of the Contract Act. In that case also there was a Clause in the agreement being Clause No. 13 which provided that not with striding the place where the work under the contract was to be executed the contract shall be deemed to have been entered into between the parties at Bombay and the court in Bombay alone shall have jurisdiction to adjudicate thereon. The trial court had held that the entire cause of action had arisen at Varanasi and the parties could not by agreement confer jurisdiction on the courts at Bombay which they did not otherwise possess. In a civil revision filed by the respondent the Allahabad High Court held that the courts at Bombay had also jurisdiction and in of Clause 13 of the agreement the jurisdiction of the courts at Varanasi stood ousted. It is in the appeal against the said judgment of the High Court that the propositions of law referred to above were laid down by this Court. It was held that since the respondent had its head office at Bombay the courts at Bombay also had jurisdiction by virtue of Section 20 of the Code read with its Explanation and in view of Clause 13 of the agreement between the parties the courts in Bombay alone had jurisdiction in the matter. The appeal was accordingly dismissed. This view was reiterated by this Court in Globe Transport Corporation Triveni Engineering Works and Anr. MANU/SC/0011/1983 : (1983)4SCC707.
8. Reliance has been placed by learned Counsel for the appellant on these two decisions and if it can be held that the courts at Bombay also had jurisdiction in the two suits referred to above the judgments appealed against will have to be set aside on the basis of these decisions. The question, however, is as to whether in any of these two suits the courts at Bombay also had jurisdiction apart from the courts within whose jurisdiction the goods were entrusted to the appellant for purposes of transport. Having given our anxious consideration to the matter we are of the opinion that the courts at Bombay in these two cases did not at all have jurisdiction and consequently the agreement between the parties conferring exclusive jurisdiction on courts at Bombay is of no avail.
9. Clauses (a) and (b) of Section 20 inter alia refer to a court within the local limits of whose jurisdiction the defendant inter alia "carries on business". Clause (c) on the other hand refers to a court within the local limits of whose jurisdiction the cause of action wholly or in part arises. It has not been urged before us on behalf of the appellant that the cause of action wholly or in part arose in Bombay. Consequently Clause (c) is not attracted to the facts of these cases. What has been urged with the aid of the Explanation to Section 20 of the Code is that since the appellant has its principal office in Bombay it shall be deemed to carry on business at Bombay and consequently the courts at Bombay will also have jurisdiction. On a plain reading of the Explanation to Section 20 of the Code we find an apparent fallacy in the aforesaid argument. The Explanation is in two parts, one before the word "or" occurring between the words "office in India" and the words "in respect of" and the other thereafter. The Explanation applies to a defendant which is a corporation which term, as seen above, would include even a company such as the appellant in the instant case. The first part of the Explanation applies only to such a corporation which has its sole or principal office at a particular place. In that event the courts within whose jurisdiction the sole or principal office of the defendant is situate will also have jurisdiction inasmuch as even if the defendant may not be actually carrying on business at that place, it will "be deemed to carry on business" at that place because of the fiction created by the Explanation. The latter part of the Explanation takes care of a case where the defendant does not have a sole office but has a principal office at one place and has also a subordinate office at another place. The words "at such place" occurring at the end of the Explanation and the word "or" referred to above which is disjunctive clearly suggest that if the case falls within the latter part of the Explanation it is not the Court within whose jurisdiction the principal office of the defendant is situate but the court within whose jurisdiction it has a subordinate office which alone shall have jurisdiction "in respect of any cause of action arising at any place where it has also a subordinate office".
(g) Mr Cama also placed reliance on the Judgment of this Court in case of KotakMahindra Finance Ltd. Vs. Thoman Educational Tust and Ors. reported in 2003 (5) B.C.R. 579in support of his submission that since no cause of action has arisen at Chennai, parties cannot confer jurisdiction on such Court which does not have jurisdiction. Reliance is placed on paragraphs 3,4 and 5 of the said judgment. Mr Cama submits that this Court has adverted to the Judgment of Supreme court in case of A.B.C. Laminart Pvt. Ltd.(supra) and has held that the petitioner therein had its subordinate office at Chennai. Loan was granted at Chennai. Agreement was entered into at Chennai, then it would be that place where the cause of action had arisen which is deemed place where the plaintiffs were carrying on business and thus, any clause in the agreement conferring the jurisdiction on any other court which does not have jurisdiction would be of no consequence. Paragraphs 3,4 and 5 of the said Judgment read thus :
â3. We may now advert to the judgment in the case of A.B.C. Laminart Pvt. Ltd. (supra). That was a case again where the respondents before the Apex Court had filed a suit in the year 1975 before the Subordinate Judge of Salem. There was a clause in the agreement providing that any dispute arising out of that sale shall be subject to Kaira jurisdiction. A preliminary issue was raised whether the Court had jurisdiction. The trial Court found that it had no jurisdiction considering Clause 11. In an Appeal preferred the Madras High Court allowed the Appeal and set aside the judgment of the trial Court. That is how an S.L.P. was preferred before the Apex Court. The Apex Court quoted with approval the observation of Lord Denning in Lee v. Showmen's Guild of Great Britain, that "Parties cannot by contract oust the ordinary courts of their jurisdiction." In A.B.C. Laminart's case there was an additional issue as to whether such an agreement ousting jurisdiction would be hit by Section 28 and 23 of the Indian Contract Act. The Apex Court referred to the judgment in Hakam Singh (supra) and approved the ratio of that judgment. The Apex Court noted that "where there may be two or more competent courts which can entertain a suit consequent upon a part of the cause or action having arisen within the jurisdiction of one such Courts to try the dispute which might arise as between themselves, the agreement would be valid, however by such an agreement the parties could not confer jurisdiction on a Court where no part of cause of action had arisen.
We then have the judgment of the Apex Court in the case of M/s. Patel Roadways Ltd. (supra) which judgment is in respect of a cause arising after the amendment to the Code of Civil Procedure by the Act of 1976. A Bench consisting of 3 Judges of the Apex Court was considering Section 20 and the explanation to the C.P.C. The Court noted that before the amendment there were two explanations. The 1st explanation had been dropped and the second explanation was now the only explanation. We may refer to the said explanation as the entire argument and the judgment of the Apex Court was based on that explanation.
Explanation: A Corporation shall be deemed to carry on business at its sole of 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."
In para. 8 the Apex Court posed the following question:"
The question, however, is as to whether in any of these two suits, the courts at Bombay also had jurisdiction apart from the courts within whose jurisdiction the goods were entrusted to the appellant for purposes of transport.
The Apex Court answered the question as under:-
"Having given our anxious consideration to the matter we are of the opinion that the Courts at Bombay in these two cases did not at all have jurisdiction and consequently the agreement between the parties conferring exclusive jurisdiction on courts at Bombay is of no avail."
It was admitted in those two cases that no part of the cause of action had arisen within the jurisdiction of Bombay. The jurisdiction was sought to be pleaded based on the agreement between the parties. The trial Court held that the Court had no jurisdiction. The order was affirmed in Appeal by the Madras High Court and that is how the matter went upto the Apex Court.
The explanation for consideration may now be split up for the purpose of correctly understanding it. So suit up. it can be read as under:-
"A Corporation shall be deemed to carry on business at its sole or principal office in India;
"A corporation shall be deemed to carry on business in respect of any cause of action arising at any place where it has also a subordinate office, at such place."
The Apex Court noted this aspect of the matter and held that this explanation refers to Section 20(a) of the C.P.C. alone. The Apex Court thereafter held that the Corporation can be sued at its sole or principal office in India as by the explanation it is deemed to carry on business. Secondly if the Corporation has a subordinate office at any other place and the cause of action has arisen at that place then the deemed place to carry on business is with such place. The observations are reflected in the following passage:-
The Explanation is really an explanation to Clause (a). It is in the nature of a clarification on the scope of Clause (a) viz. as to where the corporation can be said to carry on business. This, it is clarified, will be the place where the principal office is situated (whether or not any business actually is carried off there) or the place where a business is carried on dividing rise to a cause of action (even though the principal office of the Corporation is not located there) so long as there is a subordinate office of the Corporation situated at such place. The linking together of the place where the cause of action arises with the place where a subordinate office is located clearly shows that the intention of the legislature was that, in the case of a corporation, for the purposes of Clause (a), the location of the subordinate office, within the local limits of which a cause of action arises, is to be the relevant place for the filing of a suit and not the principal lace of business. If the intention was that the location of the sole or principal office as well as the location of the subordinate office (within the limits of which a cause of action arises) are to be deemed to be places where the corporation is deemed to be carrying on business, the disjunctive "or" will not be there. Instead, the second part of the Explanation would have read" and, in respect of any cause of action arising of any place where it has a subordinate office, also at such place".
4. If the law declared by the Apex Court is now so understood the question would be on the facts of the case as to which is the deemed place where the Corporation carries on business. Merely because the plaintiff issued the notice of termination at Mumbai that by itself would not give a cause for filing a suit in Mumbai if the defendants were not carrying on business in Mumbai or residing in Mumbai as admittedly the agreement was entered into at Chennai. The defendants reside or carry off business at Chennai. The clause pertaining to ouster was based on the fact that the petitioners were deemed to be carrying on business at Mumbai. Once petitioner had a subordinate office at Chennai, the loan was granted in Chennai as also the agreement was entered into at Chennai and it is that place where the cause of action has arisen which is the deemed place where the petitioners are carrying on business. If that be so the clause in the agreement would be of no consequence considering Sections 23 and 28 of the Indian Contract Act and consequently, the preliminary objection raised that this Court has no jurisdiction, will have to be upheld.
5. That would be the position under Section 20 of the C.P.C. Considering Section 120 of C.P.C. Sections 16, 17 and 20 shall not apply to the High Court in the exercise of its Original Civil Jurisdiction which includes this High Court. Therefore, the judgment in M/s. Patel Roadways Ltd. (supra) in so far as this Court is concerned will be inapplicable as the judgment is based on the interpretation of the explanation to Section 20. Filing of Suits on the Original Side of this court are governed by Clause 12 of the Amended Letters Patent of this Court. The same reads as follows:-
"âAnd we do further ordain that the said High Court of judicature at Bombay, in the exercise of its ordinary original civil jurisdiction, shall be empowered to receive, try, and determine suits of every description, If in the case of suits for land or other immovable property such land or property shall be situated, or in all other cases if the cause of action shall have arisen, either wholly, or in case the leave of the Court shall have been first obtained, in part, within the local limits of the ordinary original jurisdiction of the said High Court or if the defendant at the time of the commencement of the suit shall dwell or carry on business, or personally work for gain, within such limits; except that the said High Court shall not have such original jurisdiction in cases falling within the jurisdiction of the Small Causes Court at Bombay, or the Bombay City Civil Court."
Applying Clause 12 it will be clear that as the defendants do not dwell, carry on business or personally work for gain and for that matter the suit is not in respect of immovable property situated within the jurisdiction of this Court and as no part of the cause of action has arisen, wholly within the jurisdiction of this Court, this Court could not be the Court having jurisdiction over the subject matter considering Section 2(e) of the Arbitration and Conciliation Act, 1996. It is, therefore, clear that the application under Section 9 moved before this Court would be without jurisdiction.â
5. Learned counsel appearing on behalf of the defendant in rejoinder submits that in absence of agreement between the parties, no such claim would have arisen. It is submitted that entire claim made in the plaint is based on the agreement. Parties had agreed that all payments would be made at Madras. Correspondence exchanged between the parties would also indicate that control, maintenance and supervision of the property was done from Madras by the defendant. Learned counsel submits that expression 'under this agreement' or 'in connection therewith' cannot be read disjunctively. Expression 'in connection with' has to be read with 'under contract'. Learned counsel submits that if clause 16(i) and (ii) is considered, there would be no cause of action. Under clause 17, plaintiff has to indemnify losses suffered by the defendant. It is submitted that payment was made to Garware Nylons Ltd. by the defendant at the instance of the plaintiff. It is the case of the plaintiff themselves that there was no use of machinery by the plaintiff as defendant did not shift the machine. My attention is invited to paragraphs 2,6 and 16 of the plaint. Learned counsel distinguished the Judgment of Supreme Court in case of Patel Roadways (supra) on the ground that Supreme Court was not dealing with a situation where cause of action had arisen within the jurisdiction of two courts and parties by agreement had conferred the jurisdiction on one of such two Courts exclusively. Learned counsel also distinguished the Judgment of Calcutta High Court in case of Ghewarchand(supra) and submits that court has to see the substance of the plaint and not how claim is claimed. It is submitted that entire cause of action is founded on the agreement. Claims made by the plaintiffs for damages is contrary to the agreed terms of contract and it was the claim arising under the contract itself. It is submitted that the Judgment of Queen's Bench and Court of Appeal relied upon by the plaintiff are of no assistance to the plaintiff. The facts before the Courts in those Judgments are totally different. There was no such agreement entered into between the parties conferring the jurisdiction on one of the two Courts having jurisdiction. It is submitted that payments were made at Madras by the plaintiff. Loan was sanctioned from Madras.
6.In so far as Judgment of this Court in case of Kotak Mahindra Ltd. (supra) relied upon by the plaintiff, learned counsel appearing for defendant submits that the said Judgment would not apply to the facts of this case. Admittedly in that case, the agreement was entered into outside the jurisdiction of this Court. The defendants were also residing or carrying on business outside the jurisdiction of this Court. It is submitted that in view of Section 120 of Code of Civil Procedure 1908, Sections 16, 17 and 20 of Code of Civil Procedure 1908, would not apply to this Court in exercise of its original civil jurisdiction which includes High Court. The Judgment of this Court in case of KotakMahindra Ltd. (supra) thus, is of no assistance to the plaintiff.
REASONS AND CONCLUSION:
7. The questions that arise for determination of the court in this proceedings are :
(1) Where the cause of action had arisen for making claim for damages as claimed in the suit?
(2) Whether the Courts in Madras alone or this court has jurisdiction to entertain, try and dispose of this suit.
8. On perusal of the lease agreements and also correspondence annexed to the pleadings would indicate that the registered office of the defendant is situated at Chennai. The application for hire purchase/ lease was submitted by the plaintiff at the registered office of the defendant situated at Chennai. The defendant had released the amount in favour of Garware Nylons from Chennai by cheque drawn at Bank at Mumbai. Clause 31 of the lease agreement categorically provides that all the monetary reference in the agreement referred to Indian Currency and all payments were to be made in Indian Currency at the office of Integrated Finance Company Limited, Madras. The record also indicates that the entire control of the machine was from the registered office of the company situated at Chennai. The payment in favour of Garware Nylons was made by the defendant at the request of the plaintiff which was its associate company. The machine were being used by the associate company of the plaintiff situated at Ahmednagar. Defendant had forwarded three sets of hire purchase/lease agreement to the plaintiff for execution at their end at Mumbai with a request to send the agreements to the defendant at its registered office at Chennai. The agreements duly signed by the plaintiff at Mumbai were signed by the defendants at Chennai. On perusal of the plaint and in particular paragraph 25 clearly shows that the suit has been filed in this court on the averment that the defendant carries on business within the jurisdiction of this court. Para 24 of the plaint indicates that the plaintiff has not only referred to the equipment lease agreement dated 30th June, 1992 entered into between the parties but has also led emphasis on the said agreement and stated that the said machine was the sole and exclusive property of the defendant and under the said agreement the plaintiff had no right, title and interest therein except as lessee. It is the case of the plaintiff that though plaintiff was regularly paying lease rentals under the said agreement, defendant failed to take possession of the said machine from the premises of Garware Nylons Ltd. in respect of which Official Liquidator came to be appointed by t