Indian Overseas Bank, Madras Vs.
Chemical Construction Company & Ors  INSC 97 (3 May 1979)
SARKARIA, RANJIT SINGH SARKARIA, RANJIT SINGH
CITATION: 1979 AIR 1514 1979 SCR (3) 920 1979
SCC (4) 358
Code of Civil Procedure, 1908-S. 25 as
amended in 1976- Scope of-Jurisdiction of Supreme Court to transfer a suit from
one court to another-Explained.
The first respondent entered into a contract
with the second respondent for the erection of a factory in a place named Seoni
in Madhya Pradesh. Under the Scheme for re- discounting of bills, the first
respondent discounted with its Banker (petitioner), the Bills of Exchange in
respect of sale of machinery. When the second respondent failed to honour the
Bills, the drawees of the Bills filed a suit in the District Court, Seoni
against the petitioner Bank and others seeking certain reliefs. The
petitioner-Bank on the other hand filed a suit in the Madras High Court against
the first respondent and others. In a petition under s. 25 of the Code of Civil
Procedure, 1908 (as amended in 1976) the petitioner sought transfer of the suit
filed in Seoni to the file of the Madras High Court.
Allowing the petition,
HELD: 1. Section 25 of the Code of Civil
Procedure as amended in 1976 empowers the Supreme Court to direct that any
suit, appeal or other proceeding be transferred from a High Court or other
Civil Court in one State to a High Court or other Civil Court in any other
State, if it is satisfied that such an order is expedient in the ends of
2. The principle governing the general power
of transfer and withdrawal under s. 24 of the Code is that the plaintiff is the
dominus litis and as such entitled to institute his suit in any forum which the
law allows him.
The Court should not lightly change that
forum and compel him to go to another Court with consequent increase in
inconvenience and expense of prosecuting his suit. The mere balance of
convenience in favour of proceedings in another Court albeit a material
consideration, may not always be a true criterion justifying the transfer. The
power of transfer of a civil proceeding to another Court conferred under the
new Section 25 C.P.C. on the Supreme Court is far wider and so is the amplitude
of the expression "expedient in the interests of justice" which
furnishes a general guideline for the exercise of the power. [925E-F]
3. One of the broad propositions as to what
may constitute a ground for transfer of a civil suit from one court to another
is that where two suits raising common questions of facts and law between
parties, common to both the suits are pending in two different Courts, it is
generally in the interests of justice to transfer one of these suits to the
other forum to be tried by the same Court with consequent avoidance of
multiplicity in the trial of the same issues and the risk of conflicting
decisions thereon. [925H] 921
4. In the instant case, a comparative study
of the issues framed in the two suits shows that the principal common question
arising in each of these suits is whether the second respondent and the fourth
respondent were bound to make payments. The receiving party in both the suits
was the petitioner. According to the allegations in the petition, the Bills of
Exchange were drawn in Madras an ddiscounted in Madras and also rediscounted
with the Industrial Bank and payments were to be made expressly in Madras. Both
the parties were the same and the material issues in both of them were common
or inter-dependent. If the two suits are allowed to continue in their original
forums, there is a possibility of conflicting findings on the question of
liability. The evidence in both the suits would mostly be common and is locally
available at Madras.
Transfer of the Seoni suit to the Madras High
Court will avoid multiplicity in the Trial of the common issues and obviate the
risk of conflicting decisions. In the circumstances it is manifestly expedient,
in the interests of justice that both the suits should be tried by the Madras
High Court on its original side by the same Judge or Judges.
5. The second respondent's apprehension that
the transfer of the Seoni suit to Madras would cause an increase in expenses of
litigation and inconvenience to them is not well founded. Both the suits are
more or less at the same stage. Common evidence is to be found locally in
Madras. The fourth respondents who were the guarantors, had no objection to the
transfe of the Seoni suit to Madras. The balance of convenience is also in
favour of the Seoni suit being transferred to the Madras High Court which is a
superior forum than the District Court at Seoni. [927C-D]
ORIGINAL JURISDICTION : Transfer Petition No.
26 of 1978.
S. T. Desai, K. Jayaram and K. Ramkumar for
T. S. Vishwanatha Rao and A. T. M. Sampath
for Respondent No. 1 B. D. Bal and Mrs. Jayashree Wad for Respondent No. 2 The
Judgment of the Court was delivered by SARKARIA, J.-This is a petition under
Section 25 of the Civil Procedure Code 1908, as amended by Act 104 of 1976 for
transfer of suit IB of 1972 instituted in the Court of District Judge, Senoi,
Madhya Pradesh by the second respondent herein, against the petitioner and
respondents 1, 3 & 4 to the file of the High Court of Madras (Original
Side). The facts material to this petition are as under The first respondent,
M/s. Chemical Construction Company, is a registered partnership having its
registered office at No. 14, Milestone Mathura Road, Faridabad, Haryana and
Head Offise at Madras. It is represented by its partners Shri T. V. P. Nambiar,
Shri O. P. Nambiar, Shri O. V. Nambiar, Smt. Leela Nambiar and Smt. Nirmala
922 The second respondent, Rajadhiraj
Industries Pvt. Ltd., has its registered office at Seoni, Madhya Pradesh. It is
represented by its Managing Director, Shri Harishchandra Singhania.
The third respondent, Industrial Development
Bank of India Ltd. has its registered office at Bombay and branch offices at
other places, including one at Madras.
The fourth respondent is Madhya Pradesh
Financial Corporation, incorporated under the State Financial Corporation Act,
1957, having its registered office in Indore, Madhya Pradesh.
The first respondent (manufacturer) entered
into a contract on November 11, 1969 with the second respondent to erect a
plant for manufacture of hydrogenated vegetable oil.
There was a supplementary agreement between
them on January 24, 1970. The cost of the plant was Rs. 25,00,000/-. The third
respondent (for short called the Industrial Bank), agreed to finance the
manufacturer (first respondent) under a Scheme called the "Bills
Rediscounting Scheme". Under that Scheme the manufacturer would obtain in
convenient mutually agreed instalments the value of the machinery supplied
within a few days of its delivery by discounting with his banker the bills of
exchange arising out of the sale of the machinery, either before or after
acceptance by the second respondent (purchaser). The bankers of the
manufacturer/seller would take up the discounted bills and get them
rediscounted by the Industrial Bank, prior to their due dates, thus reimbursing
themselves with the amounts paid to the manufacturer. The discounting bank
would be liable to pay to the Industrial Bank the amounts under the bills on
their due dates.
The discounting bank would normally requires
the second respondent to accept the bills/promissory notes, after the payment
had been guaranteed on his behalf by its banker or the fourth respondent (the
State Financial Corporation) etc.
The petitioners, it is alleged, acted as
discounting bank under the Scheme. The first respondent and the second
respondent took advantage of the Scheme, and pursuant to an agreement for
supply of materials between the first and second respondents, the fourth
respondent executed an irrevocable guarantee on November 3, 1970 and a
supplementary guarantee on February 18, 1971 in favour of the petitioner on
behalf of second respondent.
It is further alleged that in pursuance of
the independent agreement, the petitioner had discounted a total of 9 Usance
Bills to the extent of Rs. 9.42 lacs which were drawn by the first respondent
and 923 accepted by the second respondent. The first eight of these bills were
rediscounted by the petitioner with the third respondent (the Industrial Bank)
for a total sum of Rs. 6.99 lacs, which amount was subsequently paid over to
the third respondent by the petitioner but none of these eight bills was paid
by the second respondent to the petitioners on the due dates. The remaining
bill for Rs. 2,43,376/- was not rediscounted by the petitioner with the third
In September 1972, the drawees of the bills
(second respondent) filed suit No. IB/1972 in the District Court, Seoni against
the etitioner and the respondents 1, 3 & 4, seeking a decree for (a) one
lac of rupees against the first respondent on account of damages for breach of
contract; (b) directing the petitioners (Indian Overseas Bank) and respondents
1 & 3 jointly and severally to deliver up the guarantee deeds dated
November 3, 1970 and February 18, 1971 and the 9 Usance Bills and for
cancellation of the same by the Court; (c) permanent injunction restraining the
petitioner Bank and respondents 1 & 3 from enforcing the aforesaid
guarantee and the 9 Usance Bills; (d) permanently restraining the guarantor
(fourth respondent) from discharging any liability under the aforesaid
guarantees, dated November 3, 1970 and February 18, 1971. It was alleged in the
plaint by the second respondent that acceptance of the bills was vitiated by
false representation made by the agent of the petitioner Bank. The defendants
in the Seoni suit (petitioner and respondent 1 herein) filed their written
statements denying the allegations and claim made in the plaint. In March 1978,
the District Judge, Seoni framed issues in that suit.
In the Seoni Suit, the second respondent made
an application for interim injunction restraining the petitioner from enforcing
the rights in respect of the Usance Bills accepted by the second respondent and
regarding the guarantees furnished by the fourth respondent. The District Judge
dismissed that application; but on appeal, the High Court of Madhya Pradesh
granted the interim injunction as prayed for. On appeal by the petitioner, this
Court by its order, dated March 20, 1974, set aside the High Court's order and
vacated the interim injunction as regards the petitioner and the fourth
respondent subject to the petitioner undertaking to reimburse the fourth
respondent in accordance with the directions of the Court depending upon the
result of the Seoni Suit. As a result the impediment in the way of the
petitioner for enforcing its rights was removed.
The petitioner bank filed suit C.S. No.
143/75 in the High Court of Madras against respondents 1 & 4 herein (as
also five other defen- 924 dants, who are partners of the first respondent two
of whom had furnished collateral securities by way of equitable mortgages. In
this Madras suit, the petitioner herein, has prayed for the following reliefs:
(i) Directing the respondents, herein,
(except respondent 3), jointly and severally to pay to the plaintiff-petitioner
the sum of Rs. 10,62,364.57 under the Bills Purchase Account together with
interest on the said nine Usance Bills.
(ii) Directing the first respondent herein,
and their partners to pay to the plaintiff-petitioner the sum of Rs. 1,28,154.57
under the overdraft account of the first defendant firm together with interest.
Passing of a mortgage preliminary decree against defendants 5 and 6 therein,
(two of the partners of the first respondent, herein).
It is note-worthy that respondents 1, 2 and 4
herein, have filed their written statements in that suit before the Madras High
Court, which on November 2, 1977, framed 12 issues. Issues 1 and 6 run as
(1) Whether the defendant (first respondent,
herein) is liable pay the suit claim under the Bills purchase account ? (6)
Whether the defendant (second respondent, herein) is not liable for the suit
claim as an acceptor under the Bills Purchase Account.
A comparative study of the issues framed in
the two suits, one at Seoni and the other at Madras, shows that the principal
common question arising in each of these two suits, is : whether the second
respondent and the fourth respondent, herein, are bound to make payment, the
second respondent as acceptor of the bills of exchange and the fourth
respondent as guarantors for due payment there under.
The receiving party in both the suits is the
petitioner, herein. According to the allegations in the present petition, the
bills of exchange were drawn in Madras and discounted in Madras and also
rediscounted with the Industrial Bank and payments were to be made expressly in
Madras. Under an interim order dated April 9, 1976 passed by the High Court of
Madras in the said suit, the fourth respondent has deposited with the
petitioner herein, a sum of Rs. 10 lacs as and by way of deposit. Apart from a
claim for damages of Rs. 1 lac against the first respondent herein, (the
manufacturers), no money claim has been made against the petitioner in the
Seoni Suit. Nor has the petitioner made any counter-claim in the Senoi Suit.
925 We are of opinion, this petition must
succeed. Section 25 of the Code of Civil Procedure as substituted for the
former section by the Code of Civil Procedure (Amendment) Act, 1976, empowers
this Court to direct that any suit, appeal or other proceeding be transferred
from a High Court or other Civil Court in one State to a High Court or other
Civil Court in any other State, if it is satisfied that such an order is
"expedient in the ends of justice". The former Section 25 empowered
the State Government to transfer, on receiving a report from the Judge
concerned of the High Court to transfer suits or proceedings in certain
circumstances from one High Court to another High Court. The scope of the
former Section was very restricted as it provided only for transfer of any
proceeding pending in a High Court presided by a Single Judge. It was thought
that the State Government was not the appropriate agency for exercising this
power of transfer, obviously because such exercise is a judicial function. For
these reasons, the new Section 25 which has been substituted for the former
one, confers on this Court very wide powers of transfer which are as extensive
as its powers under Section 406 of the Code of Criminal Procedure, 1973.
The principle governing the general power of
transfer and withdrawal under Section 24 of the Code is that the plaintiff is
the dominus litis and, as such, entitled to institute his suit in any forum
which the law allows him.
The Court should not lightly change that
forum and compel him to go to another Court, with consequent increase in
inconvenience and expense of prosecuting his suit. A mere balance of
convenience in favour of proceedings in another Court, albeit a material
consideration may not always be a sure criterion justifying transfer.
As compared with Section 24, the power of
transfer of a civil proceeding to another Court, conferred under the new
Section 25 on the Supreme Court, is far wider. And, so is the amplitude of the
expression, "expedient in the interest of justice" which furnishes a
general guideline for the exercise of the power. Whether it is expedient or
desirable in the interest of justice to transfer a proceeding to another Court
is a question which depends on the circumstances of the particular case.
Although the exercise of this discretionary
power cannot be imprisoned within them straight jacket of any cast iron formula
uniformly applicable to all situations, yet, certain broad propositions as to
what may constitute a ground for transfer can be deduced from judicial
One of them is that where two suits raising
common questions of facts and laws between parties common to both the suits are
pending in two different courts, it is generally in the interest of justice to
transfer one of those suits to the other forum to be tried by the same Court,
with consequent avoidance of multiplicity in the trial of the same issues and
the risk of conflicting decisions thereon.
The instant case falls squarely within this
Here, in the two suits, one in the District
Court, Seoni, Madhya Pradesh, and the other filed by the petitioner in the High
Court of Madras, the parties are the same except that in the Madras suit five
other persons who are alleged to be partners of the first respondent, herein
and two of whom furnished collateral securities, have also been joined as
defendants. Further, the material issues in both the suits are common or
interdependent. For instance, issue No. 14 in the Seoni Suit is substantially
the same as issue No. 7 framed by the Madras High Court in the suit filed there
by the petitioner. The questions involved, inter alia, in issues 9, 10, 12, 18,
19 and 20 in the Seoni Suit have a substantial bearing on the decision of
issues 1, 2, 6, 8, 9 and 10 framed in the Madras Suit. The basic question
commonly arising in each of the two suits concerns the liability of the second
respondent and the fourth respondent to make payment as the acceptor of the
bills of exchange and the guarantors, respectively, for due payment under those
bills. If the two suits are allowed to continue in their original forums there
is a possibility of conflicting findings on the question of liability under the
Usance Bills and under the guarantees. It is not disputed (we are told) that the
payment of the bills were to be made to the petitioner bank at Madras. The
evidence in both the suits would mostly be common and locally available at
Transfer of the Seoni suit to Madras High
Court will avoid multiplicity in the trial of the common issues and obviate the
risk of conflicting decisions. Under the circumstances, it is manifestly
"expedient in the interest of justice" that both the suits should be
tried by the Madras High Court on its Original Side by the same Judge/Judges.
Mr. Bal appearing for the second respondent,
opposed this petition for transfer. Learned counsel submitted that for a small
company like respondent 2 it will simply be impossible to fight the litigation
at Madras, and the extra expenditure that will have to be incurred by his
clients in undertaking frequent visits to Madras which is about 1000 miles from
Seoni, may prove too heavy a financial burden for it. Another apprehension
expressed by the council was that the objection as to want of territorial
jurisdiction in the Madras Court 927 taken by the second respondent, will, in
effect, be rendered sterile the proposed transfer of Seoni suit to Madras.
Counsel suggested the proper course is to
stay the subsequenty instituted suit at Made under Section 10 of the Code of
Civil Procedure till the disposal the suit at Seoni by the District Judge.
We are unable to accept any of these
arguments. Both the suits at Madras and Seoni are more or less at the same
stage. Evidence has not yet commenced in either of the suits. The defendants in
both the suits have filed their written statements. The second respondent has
appeared in the Madras High Court and joined issue with the petitioner-
plaintiff there. It seems that the common evidence, which will mostly be
documentary, is to be found locally at Madras. The fourth respondents who are
the guarantors, have no objection to the transfer of the Seoni suit to Madras.
The second respondents' apprehensions,
therefore, about the transfer causing extraordinary increase in expenses of
litigation and inconvenience to them, are much too exaggerated. Rather, the
balance of convenience is in favour of the Seoni suit being transferred to the
Madras High Court which is a superior forum than the District Court, Seoni.
As regards the second submission of Mr. Bal,
we make it clear that the transfer of the Seoni suit to Madras will be without
prejudice to the objection raised by the second respondent, herein, as to the
Madras High Court's jurisdiction to try the suit, already instituted there by
Mr. Bal's argument founded on Section 10 of
the Code of Civil Procedure does not arise in this transfer petition, and we
express no opinion on it.
For the foregoing reasons we allow this
petition and transfer suit No. IB of 1972 filed by the second respondent herein
in the Court of the District Judge, Seoni, Madhya Pradesh, to the file of the
High Court of judicature at Madras (Original Side).
P.B.R. Petition allowed.