A.B.C. LAMINART PVT. LTD. & ANR. v. A.P. AGENCIES, SALEM

Citation: [1989] 2 S.C.R. 1

Court: Supreme Court of India

Bench: G.L. OZA, K.N. SAIKIA

Case summary

218 of 1978 allowing the appeal and setting aside the judgment of the Subordinate Judge at Salem in original suit No 302 of 1975 on the preliminary question of jurisdiction....

Judgment text

The Judgment of the Court was delivered by ,. I. K. N. SAIKIA, J. This is an appeal by special leave from the judgment and order of the High Court at Madras dated 4th November, 1980 in C. M. A. No. 218 of 1978 allowing the appeal and setting aside the judgment of the Subordinate Judge at Salem in original suit No 302 of 1975 on the preliminary question of jurisdiction. The first appellant is a manufacturer and supplier of metallic '-f.. yarn under the name and style 'Rupalon Metallic Yarn' having its registered office at Udyognagar, Mohamadabad, Gujarat within the jurisdiction of the Civil Court of Kaira. The second appellant is a sister concern of the first appellant doing business with it. The respondent is a registered partnership firm doing business in metallic yarn and other allied products at Salem. 1>- The first petitioner entered into an agreement with the respondent on 2. 10.

1974 whereunder the appellants were to supply 5000 ~ bobbins of Rupalon Metallic Yarn to the respondent at the rate of Rs. 35 per bobbin as stipulated in different clauses of the agreement. " Clause 11 of the agreement provided as follows: "Any dispute arising out of this sale shall be subject to y Kaira jurisdiction. " Disputes having arisen out of the contract the respondent filed a suit, being original suit No. 302 of 1975, against the appellants in the Court of Subordinate Judge at Salem for the recovery of a sum of Rs. 1,63,240 claiming to be the balance of the advance remaining in the hands of the appellants and also a sum of Rs. 2. 40,000 towards damages. The appellants took a number of defences and also took a preliminary objection that the Subordinate Judge at Salem had no ~ jurisdiction to entertain the suit as parties by express contract had agreed to confer exclusive jurisdiction in regard to all disputes arising out of the contract on the civil Court at Kaira.

>- The Trial Court, inter alia, framed issue No. 2 as follows: ;:: 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. 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 Jaw 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.

Every- -i" thing 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. Under section 20(c) of the Code of Civil Procedure subject to the .. \ limitation stated therebefore, 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 apy 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. " The above Explanation III has not been omitted but nevertheless it may serve a guide. There must be a connecting factor. 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 dete;mination 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. 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 Courts. 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? -' In S. Manuel Raj & Co. v. J. Mani/al & Co. , AIR 1963 Guj.

148 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. Haji Hassan, A. LR. 1970 Cal.

342 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 Code of Civil Procedure, as the cause of action, admittedly x 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 J:the parties to make a chaise 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 j.

_ to the plaintiff to object to the order for return of the plaint for presentalion to the Court at Salem as the choice of forum in case of alternalive forums lies with the plaintiff and the plaintiff having debarred or precluded itself from going 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.