Corporation Vs. M/S. Anuradha Chemicals Pvt. Ltd.
Jurisdiction Special Leave Petition (C) No.10184 of 2008]
J U D G M E N T
ALTAMAS KABIR, J.
23rd December, 1988, the parties to the Special Leave Petition entered into an Agreement
at Calcutta for supply of chemicals manufactured by the Respondent to the Petitioner.
In continuation of the aforesaid Agreement, the parties arrived at a Mutual Understanding
on 15th May, 1989, whereby the Respondent would adjust the advance lying with it
and would exclusively supply to the Petitioner its two products, namely, Sodium
Chromate and Sodium Dichromate in West Bengal, Bihar, Orissa and Assam.
The Understanding between
the parties included other terms and conditions as well. The terms of the Understanding
entered into between the parties were reduced into writing in an agreement and the
same was executed at Calcutta on 5th August, 1989, reiterating the terms of the
Understanding and containing an additional clause indicating that "Any dispute
arising out of this agreement will be subject to Calcutta jurisdiction only."
certain differences arose between the parties relating to the supply of goods in
question, the Petitioner herein filed Original Suit No.588 of 1991 in the Calcutta
High Court on 27th August, 1991, for recovery of its alleged dues from the
Respondent, after giving due adjustment of the amount of the Invoices raised by
the Respondent and filed its claim only for the balance amount, along with penalties
etc. Upon receiving summons of the suit filed by the Petitioner, the Respondent
on 12th September, 1991, filed a separate suit against the Petitioner at Vijayawada
for recovery of a sum of 3,86,453.05, treating the Purchase Order dated 12th February,
1990, to be independent of the Agreement and also sought recovery of supplies made
under the Invoices raised by the Respondent upon the Petitioner.
Petitioner duly contested the Suit filed by the Respondent by filing Written Statement,
along with relevant documents, in support of its case. Out of the several issues
raised by the Petitioner, one was the issue relating to the jurisdiction of the
Vijayawada 4Court to entertain the Suit on account of the exclusion clause by which
all actions arising out of the Agreement and the Memorandum of Understanding were
to be subject to the Calcutta jurisdiction only.
The other issue of importance
was with regard to adjustment, inasmuch as, the Purchase Order dated 12th February,
1990, was treated as independent of the Understanding and Agreement arrived at between
the parties. Rejecting the objection relating to jurisdiction, the Principal Senior
Civil Judge, Vijayawada, by his judgment and decree dated 5th March, 1999, decreed
the Respondent's Suit (Original Suit No.519 of 1991) with costs for a sum of 3,86,453.05,
together with interest at the rate of 12% per annum, from the date of the Suit till
realisation of the principal amount of 2,98,267.50.
The Petitioner filed First
Appeal No.1352 of 1999 before the Andhra Pradesh High Court against the aforesaid
judgment and decree dated 5th March, 1999. By judgment and order dated 18th January,
2007, the learned Single Judge of the High 5Court dismissed the Appeal filed by
the Petitioner. It is against the aforesaid judgment of the learned Single Judge
of the Andhra Pradesh High Court in the First Appeal preferred by the Petitioner
that the present Special Leave Petition has been filed.
from the other grounds taken with regard to factual aspect of the matter, grounds
have also been taken regarding the exclusive jurisdiction of the Courts at Calcutta
agreed to by the parties in the Agreement and whether the same was not binding
upon the parties. A further ground has also been taken as to whether in breach of
the Agreement, the Respondent was entitled to invoke the jurisdiction of a Court
at Vijayawada, whose jurisdiction stood ousted by the Agreement entered into
between the parties.
the strength of the pleadings of the parties, five issues were framed by the Trial
Court, of which the first issue was whether the Court at Vijayawada had territorial
jurisdiction to entertain the suit. By his judgment and decree dated 5th March,
1999, in O.S. No.519 of 1991, the learned Principal Senior Civil Judge, Vijayawada,
held that the Court at Vijayawada had jurisdiction to entertain the Suit as part
of the cause of action for the suit arose within its jurisdiction.
The learned Trial Judge,
accordingly, decreed the Suit, as indicated hereinabove. In the First Appeal, being
F.A. No.1352 of 1992, the learned Single Judge of the Andhra Pradesh High Court
observed that the main contention of the Appellant before the High Court, who is
the Petitioner herein, was that the Principal Senior Civil Judge, Vijayawada, had
no jurisdiction to entertain the Suit as no part of the cause of action had arisen
According to the Petitioner,
its place of business was at Calcutta and the Agreement for the supply of the goods
in question was also entered into at Calcutta. The goods were to be delivered
at Calcutta and payment in respect thereof was to be made at Calcutta and, accordingly,
7the Court at Vijayawada had no territorial jurisdiction to entertain the Suit under
Section 20 of the Code of Civil Procedure as no part of the cause of action had
arisen within its jurisdiction. It was also emphasised that in the Agreement which
was made Exh.D-5, it has been stipulated in Column 13 that any dispute arising out
of the Agreement would be subject to the Calcutta jurisdiction only.
question involved in this Special Leave Petition has several dimensions,
including the question as to whether the parties to an agreement can contract in
violation of Sections 23 and 28 of the Indian Contract Act, 1872. Obviously, the
parties cannot contract against the statutory provisions. A connected question would
arise as to whether the parties to an agreement can confer jurisdiction on a Court
which has no territorial or pecuniary jurisdiction to entertain a matter?
The answer to the second
question is also in the negative. However, in this case a slightly different
question arises, namely, as to whether if two Courts have jurisdiction to try a
suit, can the parties to an agreement mutually agree to exclude the jurisdiction
of one Court in preference to the other and as to whether the same would amount
to violation of the provisions of Sections 23 and 28 of the Indian Contract Act?
The said question has been answered in the affirmative by the Trial Court and has
been upheld by the High Court.
question which has been raised in this Special Leave Petition is not new and has
been considered by this Court earlier in several decisions. We are, therefore,
required to consider as to whether the cause of action for the Suit filed by the
Respondent in Vijayawada arose within the jurisdiction of the Court of the Principal
Senior Civil Judge at Vijayawada, exclusively, or whether such cause of action
arose both in Vijayawada and also in Calcutta?
As has been mentioned
hereinbefore on behalf of the Petitioner, it had been urged that the entire
cause of action for the Suit had arisen within the jurisdiction of the Calcutta
Courts and the Courts at Vijayawada had no jurisdiction whatsoever to entertain
a suit pertaining to the Understanding and Agreement arrived at between the parties.
However, it was contended
on behalf of the Respondent that its Registered Office was situate at Vijayawada,
the Invoices for the goods were raised at Vijayawada, the goods were dispatched
from Vijayawada and the money was payable to the Plaintiff or its nominee at Vijayawada,
by way of Demand Drafts and, accordingly, the Courts at Vijayawada had jurisdiction
to entertain the Suit.
has often been stated by this Court that cause of action comprises a bundle of facts
which are relevant for the determination of the lis between the parties. In the
instant case, since the invoices for the goods in question were raised at Vijayawada,
the goods were dispatched from Vijayawada and the money was 10payable to the
Respondent or its nominee at Vijayawada, in our view, the same comprised part of
the bundle of facts giving rise to the cause of action for the Suit.
At the same time, since
the Petitioner/ Defendant in the Suit had its place of business at Calcutta and
the Agreement for supply of the goods was entered into at Calcutta and the goods
were to be delivered at Calcutta, a part of the cause of action also arose within
the jurisdiction of the Courts at Calcutta for the purposes of the suit. Accordingly,
both the Courts within the jurisdiction of Calcutta and Vijayawada had jurisdiction
under Section 20 of the Code of Civil Procedure to try the Suit, as part of the
cause of action of the Suit had arisen within the jurisdiction of both the said
leads us to the next question as to whether, if two Courts have jurisdiction to
entertain a Suit, whether the parties may by mutual agreement exclude the jurisdiction
of one of the Courts, having regard to the provisions of Sections 23 and 28 of
the Indian Contract Act, 1872. Section 23 of the aforesaid Act indicates what
considerations and objects are lawful and what are not, including the considerations
or objects of an agreement, if forbidden by law. Section 28 of the Act, which has
a direct bearing on the facts of this case, clearly spells out that any agreement
in restraint of legal proceedings is void.
For the sake of reference,
the same is extracted hereinbelow : "28. Agreements in restrain of legal proceedings,
void - [Every agreement, (a) 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 tribunals, or which limits the time within which he
may thus enforce his rights, or (b) which extinguishes the rights of any party thereto,
or discharges any party thereto from any liability, under or in respect of any contract
on the expiry of a specified period so as to restrict any party from enforcing his
rights, is void to the extent.] Exception 1 : Saving of contract to refer to arbitration
dispute that may arise.-
This 12 section shall
not render illegal contract, by which two or more persons agree that any dispute
which may arise between them in respect of any subject or class of subjects shall
be referred to arbitration, and that only the amount awarded in such arbitration
shall be recoverable in respect of the dispute so referred. Exception 2 : Saving
of contract to refer question that have already arisen. –
Nor shall this section
render illegal any contract in writing, by which two or more persons agree to refer
to arbitration any question between them which has already arisen, or affect any
provision of any law in force for the time being as to reference to arbitration."
what Section 28 read with Section 23 does, is to make it very clear that if any
mutual agreement is intended to restrict or extinguish the right of a party from
enforcing his/her right under or in respect of a contract, by the usual legal proceedings
in the ordinary Tribunals, such an agreement would to that extent be void. In other
words, parties cannot contract against a statute.
of the earlier cases in which this question had arisen, was the case of A.B.C. Laminart
Pvt. Ltd. & Anr. Vs. A.P. Agencies, Salem [AIR 1989 SC 1239 = (1989) 2 SCC 163].
In the said case, the cause of action for the suit had arisen both within the jurisdiction
of the Civil Court at Salem in Andhra Pradesh and in the Civil Court of Kaira
in the State of Gujarat. The question arose as to whether since by mutual agreement
the jurisdiction had been confined only to the Courts within Kaira jurisdiction,
the suit filed at Salem was at all maintainable?
This Court, inter alia,
held that there could be no doubt that an agreement to oust absolutely the jurisdiction
of the Court will be unlawful and void, being against public policy. However, such
a result would ensue if it is shown that the jurisdiction to which the parties had
agreed to submit had nothing to do with the contract.
If, on the other hand,
it is found that the jurisdiction agreed would also be a proper jurisdiction in
the matter of the contract, it could not be said that it ousted the jurisdiction
of the Court. After considering the facts involved in the said case and the submissions
made on behalf of the parties, this Court observed as follows :
"Thus it is now a
settled principle that where there may be two or more competent Courts which can
entertain a suit consequent upon a part of the cause of action having arisen therewithin,
if the parties to the contract agreed to vest jurisdiction in one such Court to
try the dispute which might arise as between themselves, the agreement would be
valid. 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 and cannot also be understood
as parties contracting against the statute."
similar view was taken by this Court in Angile Insulations vs. Davy Ashmore India
Ltd. & Anr. [(1995) 4 SCC 153], wherein the Hon'ble Judges while referring to
the decision of this Court in A.B.C. Laminart Pvt. Ltd.'s case (supra), inter alia,
held that where two Courts have jurisdiction consequent upon the cause of action
or a part thereof arising therein, if the parties agree in clear and
unambiguous terms to exclude 15the jurisdiction of the other, the said decision
could not offend the provisions of Section 23 of the Contract Act. In such a case,
the suit would lie in the Court to be agreed upon by the parties.
Court has consistently taken the same view in several subsequent cases. We may refer
to one such decision of this Court in Hanil Era Textiles Ltd. Vs. Puromatic Filters
(P) Ltd. [AIR 2004 SC 2432 = (2004) 4 SCC 671], where part of the cause of action
arose at both Delhi and Bombay. This Court held that the mutual agreement to exclude
the jurisdiction of the Delhi Courts to entertain the suit was not opposed to public
policy and was valid.
indicated herein earlier, in this case also the cause of action for the Original
Suit No.519 of 1991, filed by the Respondent before the Principal Senior Civil Judge,
Vijayawada, arose partly within the 16jurisdiction of the Calcutta Courts and the
Courts at Vijayawada.
regard to the provisions referred to hereinabove, though the Courts at
Vijayawada would also have jurisdiction, along with the Courts at Calcutta, to
entertain and try a suit relating to and arising out of the Agreement dated 23rd
December, 1988, and the Mutual Understanding dated 15th May, 1989, such jurisdiction
of the Courts at Vijayawada would stand ousted by virtue of the exclusion clause
in the Agreement.
Special Leave Petition has, therefore, to be allowed. The decree passed by the Principal
Senior Civil Judge, Vijayawada in O.S. No.519 of 1991, and the impugned judgment
of the High Court dated 18th January, 2007, are set aside. The Trial Court at Vijayawada
is directed to return the plaint of the Original Suit No.519 of 1991 to the Plaintiff
to present the same before the appropriate Court in Calcutta having jurisdiction
to try the suit.
Special Leave Petition is, accordingly, allowed, but there will be no order as