New Holland Tractors (India) Pvt. Ltd. Vs. Raja Industrial Works and ors. - Court Judgment

Swatanter Kumar, J.

1. The plaintiff filed a suit for recovery of Rs. 1,33,62,163/- against the defendants on the basis that the parties negotiated and after some correspondence, the plaintiff issued a Letter of Intent dated 17th December, 1998 in favor of defendant No. 1 expressing its willingness to appoint defendant No. 1 as its non-exclusive authorized dealer and authorized service representative at Shimoga with concentration areas of Chikmagalur, Chitradurga and Bellary districts of Karnataka State subject to defendant No. 1 fulfillling the conditions of the Letter of Intent. This letter was issued from the registered office of the plaintiff at Delhi which was endorsed and signed by the defendants and their representatives at Delhi on 17th December, 1998. The plaintiff maintains running account in respect of each of its dealers. The supplies are made to the dealers subject to the terms and conditions stated on the invoices raised by the plaintiff each time the supply of product or part is made to the dealer. Running account in respect of dealership of defendant No. 1 was also maintained. As on December 31, 2002, there was a debit balance of more than Rs. 1.35 crores against defendant No. 1 as there was a great fall in maintenance of financial discipline/obligation on the part of the defendants. The defendant No. 1 vide letter dated January 6, 2003 wrote to the Managing Directors of the plaintiff about the amounts due. Vide letter dated 6th January, 2003, the defendants stated that there was great hardship which they were going through after taking the New Holland dealership and requested the plaintiff to help them generously. The statement of accounts between the parties has been filed on record. The plaintiff issued legal notices dated November 28, 2003 to the defendants. The defendants though replied to the notice on 22.12.2003 but thereafter they maintained complete silence. The plaintiff stated to the defendants that they were not paying the amount despite admitting their liabilities and now were putting a false case that they had discharged their liabilities. The confirmation letter dated 21.4.2003 has been filed on record as Annexure-P14 to the plaint wherein the defendants confirmed that a balance of Rs. 1,08,68,575/- was due to the plaintiff as on 31.3.2003. Based on these documents the present suit was filed.

2. The defendants appeared and vide order dated July 25, 2005, they were granted time to file written statement within six weeks. The directions were also issued to the parties for filing of documents etc. However, in the meanwhile, the defendants filed an application being is No. 6689/2005 under the provisions of Order 7 Rule 10 and 11 CPC read with Section 151 of the CPC praying that the application be allowed and the plaint of the plaintiff be rejected as this court has no jurisdiction to entertain and decide the suit on the ground that no cause of action or part thereof has arisen within the territorial jurisdiction of this court. The invoices do not contain any clause vesting jurisdiction in the courts at Delhi and the parties had not entered into any dealership agreement.

3. This application was contested and it was prayed on behalf of the plaintiff that the application should be dismissed with reference to the averments made in the plaint. It is a settled proposition of law that this court would have the territorial jurisdiction to entertain and decide the present suit if the cause of action or any part thereof has arisen within the territorial jurisdiction of this court, particularly keeping in view the terms and conditions printed at the back of every invoice in relation to vesting the jurisdiction in the courts at Delhi alone. Thus, the only relevant issue for determination of the present application is whether any cause of action or part thereof had arisen within the territorial jurisdiction of this court.

4. It is further a settled canon of civil jurisprudence that the court while considering an application under Order 7 Rule 11 of the CPC has to assume that the facts averred in the plaint are primarily correct particularly when such averments are supported by the documents in the case. Reference in this regard can be made to the judgment of ABN-Amre Bank v. the Punjab Urban Planning and Development Authority 1993(3) PLR 479, where the court held as under:-

7. It is a settled rule of law that the plea of rejection of plaint is founded on the 'PLEA OF DEMURRER'. A person raising such plea in law has to take the facts as stated by the opponent as correct. Despite tentative admission of such correctness, the plaint does not disclose a complete or even partial cause of action or the relief claimed is barred by law and thus, the plaint is liable to be rejected within the provisions of Order 7 Rule 11 of the Code of Civil Procedure. Plain language of this rule shows that for determination of an application under this provision, the Court has to look into the plaint. This concept has been extended by judicial pronouncement of various courts so as to take within its ambit even the documents filed by the plaintiff Along with plaint or subsequent thereto but prior to the hearing of such application....

5. Reference can also be made to the judgment of Supreme Court in Liverpool & London S.P. & I. Association Ltd. v. M.v. Sea Success I and another : (2004)9SCC512 , wherein the Supreme Court held as under:-

139. Whether a plaint discloses a cause of action or not is essentially a question of act. But whether it does or does not must be found out from reading the plaint itself. For the said purpose the averments made in the plaint in their entirety must be held to be correct. The test is as to whether if the averments made in the plaint are taken to be correct in their entirety, a decree would be passed.

6. In the plaint, the plaintiff has specifically averred that the parties had negotiations, exchanged correspondence and the Letter of Intent dated 17.12.1998 was signed at Delhi. Further, it is stated that the payments were being received by the plaintiff at Delhi and the period of Letter of Intent was also extended from Delhi. The defendants had also admitted their liability at Delhi and confirmed the same by different documents including 6.1.2003 and the payments which were received at Delhi from the defendants were also encased at Delhi. In paragraph Nos. 23 and 24 of the plaint, definite averments have been made in regard to the above and it is specifically stated that on the back of every invoice, there was a clause exclusively vesting the jurisdiction in the courts at Delhi. The Clause reads as under:-

The letter of intent is subject to Delhi jurisdiction and the same has been signed, executed and accepted at Delhi by both you and New Holland Tractors (India) Ltd.

7. In the application under Order 7 Rule 11, the applicants have no-where stated that the averments of the plaint are factually incorrect. On the contrary what is stated is that the dealership agreement was not signed and the above clause printed at the back of the invoices cannot oust the jurisdiction of other courts and as such the parties are not consensus ad idem and the courts at Delhi would have no jurisdiction. It is no-where stated that the Letter of Intent was not confirmed at Delhi. In fact, what is stated is that the same was extended up to 16th December, 1999 and thereafter the agreement was not extended. As such, the jurisdiction would not be vested in this court. The Letter of Intent which was extended by letter dated 4th June, 1999 is stated to have been signed and confirmed between the parties at Delhi while all other terms and conditions of the previous agreement were extended. The plaintiff has filed various copies of the invoices during the relevant period that they were issued at Delhi and every invoice contained the above exclusive jurisdiction clause and the parties are bound by the terms and conditions of a written document and cannot be permitted to challenge the same in any case at this stage of the proceedings. The counsel for the plaintiff has also relied upon the judgment of the Supreme Court in A.B.C. Laminart Pvt. and anr. v. A.P. Agencies, Salem : [1989]2SCR1a to contend that where confirmation order acknowledging receipt of orders, registering it ' subject to terms and conditions overleaf' within the clause making disputes subject to jurisdiction of a particular court, would be enforceable and form part of the main contract. It is also held by the Supreme Court in this case that such a contract to choose jurisdiction between two courts is not opposed to public policy.

8. It may be noticed that the objection as to place of sue has to be taken at the first instance in terms of Section 21 of the Code. In terms of Section 20 of the Code, the suit shall be instituted in a court within the local limits of whose jurisdiction cause of action wholly or in part arises. The expression 'cause of action' has received liberal but definite construction in various pronouncements of the court. The cause of action which would determine jurisdiction of the court in consonance with these provisions essentially has to be material part of the entire chain of cause of action. The cause of action alleged to have arisen within the territorial jurisdiction of the court must be substantial in reference to the transaction in question. At this stage usefully reference can be made to certain principles governing the jurisdiction of the court under Order 7 Rule 11. in a recent judgment of this court in the case of Arunesh Punetha v. Boston Scientific Corporation and Ors. (CS(OS) No. 951/2004) decided on 25.08.2005 where the court held as under:-

3. The Supreme Court in a very recent judgment titled as Liverpool & London S.P. & I. Association Ltd. v. M.V.Sea Success I and another : (2004)9SCC512 , discussed at great length not only the ambit and scope of these provisions but also commented upon certain vital issues in relation to maintainability and adjudication of an application under Order VII Rule 11 of the Code. This judgment in fact has been heavily relied upon by the learned counsel appearing for the non-applicant/plaintiff in support of his submissions. While describing the meaning of cause of action, the court held as under:-

XXX XXX XXX XXX

Cause of action

140. A cause of action is a bundle of acts which are required to be pleaded and proved for the purpose of obtaining relief claimed in the suit. For the aforementioned purpose, the material facts are required to be stated but not the evidence except in certain cases where the pleading relies on any misrepresentation, fraud, breach of trust, willful default or undue influence.

149. In D. Ramachandran v. R.v. Janakiraman : [1999]1SCR983 it has been held that the court cannot dissect the pleading into several parts and consider whether each one of them discloses a cause of action.

152. So long as the claim discloses some cause of action or raises some questions fit to be decided by a judge, the mere fact that the case is weak and not likely to succeed is no ground for striking it out. The purported failure of the pleadings to disclose a cause of action is distinct from the absence of full particulars. (See Mohan Rawale : (1994)2SCC392 )

155. The reason for the aforementioned conclusion is that if a legal question is raised by the defendant in the written statement, it does not mean that the same has to be decided only by way of an application under Order 7 Rule 11 of the Code of Civil Procedure which may amount to prejudging the matter.

4. Further while discussing the scope and nature of the order passed under Order VII Rule 11 and what could constitute a cause of action in contra-distinction to no cause of action, the Supreme Court held as under::-

132. It is trite that a party should not be unnecessarily harassed in a suit. An order refusing to reject a plaint will finally determine his right in terms of Order 7 Rule 11 of the Code of Civil Procedure.

133. The idea underlying Order 7 Rule 11(a) is that when no cause of action is disclosed, the courts will not unnecessarily protract the hearing of a suit. Having regard to the changes in the legislative policy as adumbrated by the amendments carried out in the Code of Civil Procedure, the courts would interpret the provisions in such a manner so as to save expenses, achieve expedition and avoid the court's resources being used up on cases which will serve no useful purpose. A litigation which is in the opinion of the court is doomed to fail would not further be allowed to be used as a device to harass a litigant. (See Azhar Hussain v. Rajiv Gandhi : [1986]2SCR782 p>

9. Reliance by the plaintiff has also been placed upon another judgment of this court in the case of Pramod Kumar Gupta v. M/s. Skylink Chemicals : 93(2001)DLT143 in support of his contention that as per the averments made in the plaint, the defendants had approached the plaintiff for carrying on the business and for signing of the agreement in question at Delhi in addition to the fact that the Letter of Intent was signed and confirmed at Delhi would sufficiently provide territorial jurisdiction of this court.

10. Furthermore, an applicant raising an objection in regard to maintainability of the suit at the very threshold of the proceedings has to at least prima facie take the averment made in the plaint as correct unless the documents placed on record including that of the plaintiff demonstrate that the plaint is patently vexacious based on false-hood and such averments cannot be taken as correct. Reference in this regard can be made to the judgment of this court in Skipper v. Atma Ram Properties Pvt. Ltd. : 56(1994)DLT514 .

11. It may not be permissible to rely on such facts. That certainly is not the case here. The documents afore-referred to some extent support the case of the plaintiff and the pleas raised by the defendants can only be substantiated during the course of full trial. From the documents it is clear that integral cause of action has arisen within the territorial of this court as per the averments made in the plaint and it cannot be said at this stage of the proceedings that this court has no territorial jurisdiction to entertain and decide the present suit.

12. For the reasons afore-recorded, I find no merit in this application and the same is dismissed while leaving the parties to bear their own costs.

13. The suit be listed before the Joint Registrar for directions.