Prasad Vs. Prodigy Electronics Ltd. & Anr  Insc 1241 (10 December 2007)
Thakker & Altamas Kabir
APPEAL NO. 5751 OF 2007 ARISING OUT OF SPECIAL LEAVE PETITION (C) NO. 12405 OF
2006 C.K. THAKKER, J.
present appeal is directed against the judgment and order passed by the High
Court of Delhi on April 26, 2006 in I.A. No. 9562 of 2005 in Civil Suit (OS)
No. 819 of 2005. By the said order, the High Court dismissed an application
filed by the appellant herein under Order VII, Rules 10 and 11 of the Code of
Civil Procedure, 1908 (hereafter referred to as 'the Code').
Shortly stated the facts are that 'Prodigy Electronics Ltd.'-plaintiff
(respondent No.1 herein) ('the Company' for short) was formed and incorporated
under the laws of Hong Kong and is engaged in the business of trading
electronic goods under the name and style 'Prodigy Electronics', Hong Kong. The
main area of business of the Company is Printed Circuit Board (PCB). The
business carried on by the Company involves keen understanding of the
requirements of the customers in order that the products may be manufactured to
the specific needs of the customers and they may be made available at
competitive prices. The Company is, therefore, required to take care of the
consumer- complaints, if any. It also involves a reach into the market
identifying the potential consumers of the products which involves substantial
investment of time, effort and finance. According to the Company, it has
developed solid reputation in India under
the trade name and trade mark 'Prodigy Electronics' in the field of electronics
generally and PCBs particularly.
According to the plaintiff-Company, on July 22, 2002, the defendant (appellant herein)
joined Prodigy Electronics in India as a
representative for marketing PCB products of the Company in India. An employment contract was entered
into on October 2, 2003 between the defendant-employee and
the said contract, the defendant was given full-time employment in the Company
at Hong Kong in the capacity of 'International
Business Development Manager'. He was given job profile of conducting all
business of the Company in India.
Subsequently, at the request of the defendant who put forward personal reasons,
he was relocated to India and a new employment agreement
dated September 13,
2004 was signed by the
parties. It was agreed that the job location of the appellant would be India. The defendant's tenure in India started from October 1, 2004. The Company was to bear all
expenditure, including travel-expenses of the defendant. According to the
Company, however, after relocation to India in October, 2004, the defendant tendered his resignation by e-mail on
the ground of personal problems. It was also stated that he would decide his
next course of action later on. Though the Company gave assurance to the
defendant to support in his personal problems, the defendant did not withdraw
the resignation and thus his employment came to be terminated on December 20, 2004. According to the Company, the
defendant sent another e-mail on December 20, 2004 giving assurance to the Company
that though he would continue to be involved in marketing of PCB products, he
would be associating himself with manufacturers other than the customers and
suppliers of the Company.
is the allegation of the Company that the defendant contacted potential
customers of the Company and informed them that he was representing 'Prodigy'.
He also submitted quotes for PCB products. It was also the case of the Company
that the defendant participated in the Trade Fair in Delhi (Componex/Electronic India, 2005)
which was held between February
1, 2005 to February 4, 2005 at Pragati Maidan, New Delhi. In the said Trade Fair, the
defendant used the goodwill and passed on the trade name of the plaintiff-
Company. In the course of inquiries about the data generated about PCB
customers, the organizers of the Trade Fair informed the Company that Multi
Circuit Board (CHINA) Ltd., Hong Kong had
participated in the fair and information could be obtained from them. It was
averred that the Company was shocked to receive the said information since
Multi Circuit Board (CHINA) Ltd. was the manufacturer from whom the Company
used to source its products for its Indian customers. The further inquiry by
the Company revealed that the said Multi Circuit Board (CHINA) Ltd. had a
representative in India and he was none else but the
defendant who operated under the name and style of "Prodigy Circuit
Boards". On being contacted, Multi Circuit Board (CHINA) Ltd. also
confirmed that it had executed a contract with the defendant. It also came to
the notice of the Company that the defendant had registered a deceptively
similar domain name 'www.prodigycircuits.com' as far back as on October 5, 2004 while he was still in the
employment of the Company. The Company was thus convinced that the defendant
had not resigned on account of personal reasons or family problems but he
wanted to misuse confidential information which he had received from the
Company and he wanted to take undue advantage in spite of the agreement entered
into with the Company. The Company also discovered that the defendant had
incorporated a Company under the name and style of 'Canton Treasure Corporation
Ltd.' on July 16, 2004 when he was stationed in Hong Kong and was still serving with the
Company. Thus, obvious breach of employment contract was committed by the
view of the above facts and breach of contract by the defendant, the plaintiff-
Company on May 28, 2005, filed a suit being Civil Suit (OS) No. 819 of 2005 in
the High Court of Delhi at New Delhi (Original Jurisdiction) for permanent and
mandatory injunction against the defendant as also for damages by ordering
rendition of accounts.
the plaint, the Company filed an application under Order XXXIX, Rules 1 and 2
read with Section 151 of the Code for interim injunction restraining the
defendant from using the name 'Prodigy', 'Prodigy Circuit' or any other
identical or deceptively similar name or from passing off any such identical or
deceptively similar trade mark or trade name.
Notice was issued to defendant. He filed his written statement on November 10, 2005. The defendant also filed an
application under Order VII, Rules 10 and 11 of the Code praying for
rejection/return of plaint for presentation to proper Court. It was contended
by the defendant that the plaint disclosed no cause of action and was liable to
further stated that no requisite Court fee had been paid within the time
granted by the Court and on that ground also, the plaint deserved to be
rejected. It was also asserted that there was an agreement between the
plaintiff-Company and the defendant by which exclusive jurisdiction was granted
to Courts in Hong Kong and jurisdiction of all other
Courts had been ousted and on that ground also Delhi Court had no jurisdiction in the matter.
High Court, as observed earlier, considered the application of the defendant
and by the impugned order, dismissed it holding that the agreement did not take
away jurisdiction of the Court as contended by the defendant and the
application had been filed only with a view to delay the progress of the suit
which was liable to be dismissed and it was accordingly dismissed with costs of
appellant-defendant has challenged the said order by filing the present appeal.
On August 7, 2006, notice was issued by this Court
and in the meantime further proceedings in the suit were stayed.
have heard learned counsel for the parties.
The learned counsel for the appellant contended that the High Court was wholly
wrong in holding that Courts in India could entertain a Civil Suit and the application filed by the
defendant-appellant was liable to be rejected. According to the learned
counsel, the agreement entered into between the parties made it expressly clear
that the law applicable, in case of dispute between the parties would be law of
Hong Kong Special Administrative Region and, hence, Indian Courts have no
jurisdiction to entertain, deal with and decide such question.
also submitted by the learned counsel that in the light of the agreement
between the parties, only remedy available to the plaintiff-Company was to take
appropriate proceedings in accordance with law in a competent Court in Hong Kong and no Indian Court could have jurisdiction inasmuch as
jurisdiction of all Courts in India is
barred by necessary implication. The counsel also contended that the High Court
committed an error in holding that Delhi High Court had jurisdiction as the
defendant was residing in Delhi. In the
plaint itself, the plaintiff gave the address of the defendant of Ghaziabad which is not in Delhi but in Uttar Pradesh (U.P.).
counsel also made grievance that the High Court was not right in observing that
the defendant wanted to delay the proceedings and was not justified in imposing
costs of Rs.4,000/-. It was, therefore, submitted that the appeal deserves to
be allowed by setting aside the order passed by the High Court.
The learned counsel for the respondent-Company, on the other hand, supported
the order passed by the High Court.
submitted that the only thing which was relevant in the agreement was as to
applicability of laws. As per settled legal position, a suit could be
instituted in Delhi as part of cause of action had
arisen within the territorial jurisdiction of that Court. The High Court was
right in observing that applicability of law had nothing to do with situs of a
suit and since the defendant had used the trade mark/trade name of the
plaintiff in Delhi in Trade Fair, it was open to the
plaintiff Company to institute a suit in Delhi.
submitted that it is really surprising that though Hong Kong based Company
institutes a suit in Delhi where the defendant had used the trade mark/trade
name, where he resides and thus it is much more convenient to him to defend the
suit, yet he objects to the proceedings which clearly goes to show that the
only intention on the part of the defendant is to delay the proceedings. The
High Court was, therefore, right in dismissing the application and in ordering
payment of costs by him. It was, therefore, submitted that the appeal deserves
to be dismissed.
Having heard the learned counsel for the parties, in our opinion, no case has
been made out by the appellant from which it can be said that Delhi Court had no jurisdiction. Both the
learned counsel referred to the agreement dated September 13, 2004 entered into between the parties. Clause 10 of the agreement
relates to "Resignation and Termination of Service". In accordance
with the said clause, the appellant herein left the plaintiff-Company. Clause
10 stipulates that in the event of resignation or termination for any reason,
the employee would not engage himself in a similar or competitive business for
a period of two years, nor he would contact or solicit any customer or supplier
with whom the employer conducted business during the employment. Clause 14
provides for 'Conflict of Interest'. Clause 15 deals with 'Confidentiality'. It
recites that upon accepting employment with Prodigy, the defendant would
maintain confidentiality which would mean that he would not disclose any
'Prodigy confidential information' either during or after his employment to anyone
outside the Company, nor would use it for personal benefit. Clause 18 is
material for the purpose of controversy and may be reproduced:
The terms and conditions as stipulated above shall be interpreted in accordance
to the laws of the Hong Kong Special Administrative Region.
is this Clause (Clause 18), which requires interpretation. According to the
appellant, since the terms and conditions in the agreement have to be
interpreted in accordance with the laws of Hong Kong, no Court in any country other than a Court in Hong Kong shall have jurisdiction to
entertain a suit, petition, application or any other proceeding.
submission of the respondent-Company, on the other hand, is that what is agreed
upon is not territorial jurisdiction of a Court but applicability of laws.
Clause 18 deals with the second eventuality and declares that terms and
conditions of the agreement would be interpreted in accordance with the laws of
find considerable force in the submission of the learned counsel for the
respondent Company. In our view, 'cause of action' and 'applicability of law'
are two distinct, different and independent things and one cannot be confused
with the other. The expression 'cause of action' has not been defined in the
Code. It is however settled law that every suit presupposes the existence of a
cause of action. If there is no cause of action, the plaint has to be rejected
[Rule 11(a) of Order VII). Stated simply, 'cause of action' means a right to sue.
It consists of material facts which are imperative for the plaintiff to allege
and prove to succeed in the suit. The classic definition of the expression
('cause of action') is found in the observations of Lord Brett in Cooke v.
Gill, (1873) 8 CP 107 : 42 LJ CP 98.
His Lordship stated;
of action means every fact which it would be necessary for the plaintiff to
prove, if traversed, in order to support his right to the judgment of the
A.B.C. Laminart Pvt. Ltd. v. A.P.
(1989) 2 SCC 163, this Court said;
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".
Now, Sections 16 to 20 of the Code deal with territorial jurisdiction of a
Court (place of suing). Whereas Sections 16 to 18 relate to immovable property,
suits for compensation for wrongs to persons or movables have been dealt with
under Section 19. Section 20 of the Code is a residuary provision and covers
all cases not falling under Sections 16 to 19.
The relevant part of Section 20 reads thus;
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
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
any of the defendants, where there are more than one, at the time of the
commencement of the suit, actually and voluntarily resides, or carries on
business, or personally works for gain, provided that in such case either the
leave of the Court is given, or the defendants who do not reside, or carry or
business, or personally work for gain, as aforesaid, acquiesce in such institution
cause of action, wholly or in part, arises.
Bare reading of Clause (c) leaves no room for doubt that a suit would lie in a
court within the local limits of whose jurisdiction the cause of action has
arisen, wholly or partly.
Section 20 has been designed to secure that justice might be brought as near as
possible to every man's hearthstone and that the defendant should not be put to
the trouble and expense of traveling long distances in order to defend himself.
According to the plaintiff-Company, a suit instituted on the Original Side of
the High Court of Delhi is maintainable since a part of cause of action had
accrued within the territorial jurisdiction of Delhi Court (breach of agreement by defendant). The argument of the
defendant that the agreement was executed in Hong Kong and hence suit could have been instituted only in that
country is, in our opinion, not well founded. It is no doubt true that the suit
could have been instituted in Hong Kong as
well. That, however, does not take away the jurisdiction of Delhi Court where a part of cause of action has
arisen. In the plaint, it was specifically alleged by the plaintiff Company
that the defendant committed breach of terms and conditions of agreement during
the Trade Fair in February, 2005 held in Pragati Maidan, Delhi. It was, therefore, open to the
plaintiff Company to institute a suit in a competent Court within the
jurisdiction of Delhi and that is how the suit is filed
in the High Court on its Original Side. In our considered opinion, therefore,
the contention of the appellant-defendant that the agreement was executed in a
foreign country or the defendant was a resident of Ghaziabad (Uttar Pradesh)
cannot take away, exclude or oust the jurisdiction of Delhi Court in view of
the averment made in the plaint that a part of cause of action had arisen
within the local limits of Delhi.
was submitted by the learned counsel for the appellant that once there is an
agreement as to choice of Court or forum, the parties are bound by it. For the
said proposition, our attention has been invited to several decisions rendered
by this Court. We do not intend to burden our judgment on that point as the law
is well settled and the learned counsel for the respondent-Company has not
disputed the proposition. What was contended was that Clause 18 does not take
away the jurisdiction of a competent Court and the agreement did not exclude
territorial jurisdiction of any Court.
Learned counsel for the appellant relied on a decision of this Court in British
India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries & Ors.,
(1990) 3 SCC 481. In that case, the plaintiff purchased from the
defendant-Company raw cashew nuts which were shipped in a vessel chartered by
the Company incorporated in England.
Clause 3 of the Bill of Lading dealt with jurisdiction of the Court. The said
clause read as under:
JURISDICTION: The contract evidenced by this bill of lading shall be governed
by English law and disputes determined in England or, at the option of the Carrier, at the port of destination according
to English law to the exclusion of the jurisdiction of the Courts of any other
Though the above clause made it clear that the dispute should be determined in England, this Court held that the objection
as to territorial jurisdiction had been waived by the defendant. So far as the
law is concerned, it was held that proper law to govern the contract was
The learned counsel for the appellant submitted that the ratio laid down in
British India Steam Navigation Co. applies to the case on hand and the High
Court of Delhi committed an error of law in not upholding the objection of the
defendant that Indian
Court had no
jurisdiction to deal with the matter.
are unable to agree. Clause 3, as extracted hereinabove, clearly provided that
the contract would be governed by English law.
High Court was, therefore, right in observing that the case is not relevant so
far as the question raised in the present matter.
The counsel also referred to National Thermal Power Corporation v. Singer
Company & Ors., (1992) 3 SCC 551. The parties in that case by an agreement
had chosen the jurisdiction of one Court to the exclusion of the other.
Likewise, they also agreed as to the applicability of law. In the light of the
fact situation, the Court held that the parties are bound by such Agreement and
it has to approach a Court in consonance with the agreement. This judgment also
does not help the appellant in the instant case.
Our attention was also invited to Technip S.A.
v. S.M.S. Holding (P) Ltd. & Ors., (2005) 5 SCC 465. Even that case also
does not help the appellant. What was held there was as to the law applicable
to the dispute and not the territorial jurisdiction of the Court. On the
contrary, para 23 of the said decision goes to show that territorial
jurisdiction of the Court and applicability of law are two different things and
even if a matter is decided in the country other than the country where the agreement
has been executed, the law which would apply would be the law agreed by the
The Court stated;
The relationship of Technip to Coflexip whether one of control or not is really
a question of their status.
applicable law would therefore be the law of their domicil, namely, French law.
Having determined their status according to French Law, the next question as to
their obligation under the Indian Law vis a vis SEAMEC would have to be
governed exclusively by Indian law (in this case the Act and the Regulations).
SATs error lay in not differentiating between the two issues of status and the
obligation by reason of the status and in seeking to cover both under a single
system of law".
the case on hand, we have referred to the relevant clauses of the agreement.
18 provides for applicability of law and it specifically declares that the
terms and conditions of the agreement shall be interpreted in accordance with
'the laws of Hong Kong Special Administrative Region'. That, in our judgment,
does not mean that a suit can be instituted only in Hong Kong and not in any other country.
Territorial jurisdiction of a Court, when the plaintiff intends to invoke
jurisdiction of any Court in India, has to
be ascertained on the basis of the principles laid down in the Code of Civil
Procedure. Since a part of 'cause of action' has arisen within the local limits
of Delhi as averred in the plaint by the plaintiff Company, the question has to
be considered on the basis of such averment.
it is alleged that the appellant- defendant had committed breach of agreement
by using trade mark/trade name in Trade Fair, 2005 in Delhi, a part of cause of action has
arisen in Delhi. The plaintiff-Company, in the
circumstances, could have filed a suit in Delhi. So far as applicability of law is concerned, obviously as and when the
suit will come up for hearing, the Court will interpret the clause and take an
appropriate decision in accordance with law. It has, however, nothing to do
with the local limits of the jurisdiction of the Court. The High Court, in our
opinion, was right in rejecting the application and in overruling preliminary
objection. Since prima facie the plaint disclosed a cause of action as also
territorial jurisdiction of the Court, the High Court rightly rejected both the
contentions and no error was committed by it in not rejecting plaint, nor
returning it for presentation to proper Court. 'Applicability of Hong Kong
Law', 'entering into an agreement in Hong Kong' or 'defendant residing in Ghaziabad
(Uttar Pradesh)' or any of them does not take away the jurisdiction of Delhi
Court since a 'cause of action' at least in part, can be said to have arisen in
Delhi. We, therefore, see no substance in the contention of the defendant-
far as imposition of costs is concerned, normally it is in the discretion of
the Court. When the Court, in the light of the facts before it, satisfied that
the defendant wanted to delay the proceedings and ordered him to pay costs of
Rs.4,000/-, it would not be appropriate to interfere with that part of the
For the foregoing reasons, the appeal deserves to be dismissed and is
accordingly dismissed. However, in the facts and circumstance of the case,
there shall be no order as to costs.