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I.V.R. Constructions Limited, represented by its Joint General Manager (Legal) v/s Technocraft Industries India Limited, represented by its Director, Bombay & Another

    Civil Miscellaneous Appeal No.330 of 2009

    Decided On, 30 December 2009

    At, High Court of Andhra Pradesh

    By, THE HONOURABLE MR. JUSTICE V.V.S. RAO & THE HONOURABLE MR. JUSTICE B.N. RAO NALLA

    For the Appellant: S. Niranjan Reddy, Advocate. For the Respondent: R1, Tara Sharma, R2, Deepak Bhattacharjee, Advocates.



Judgment Text

V.V.S. Roa, J, J.


1. This miscellaneous appeal is by the plaintiff against the judgment and decree dated 03.3.2009 in O.S.No.809 of 1997 passed by the Court of VIII Additional Senior Civil Judge, (FTC), City Civil Court, Hyderabad. The suit was filed for declaration and permanent injunction. By impugned judgment, the Court below ordered to return the plaint to be presented to the proper territorial Court. In this appeal, the appellant is referred to as plaintiff and respondents 1 and 2 are referred to as defendants 1 and 2.


2. The first defendant is a company incorporated under the Companies Act, 1956, having its Registered Office at Marol Industrial Area, MIDC, Mumbai. The plaintiff entered into a contract valued at Rs.2,61,91,236/- with first defendant at Mumbai for construction/erection of spinning mill at Murbad in Thane District, State of Maharashtra. Time is essence of the contract. The construction has to be commenced by 10.1.1995 and completed within a period of 11 months by 30.11.1995. The first defendant paid mobilisation advance of Rs.21,40,000/- and the plaintiff gave and executed a Bank Guarantee (BG) for the said amount through second defendant Bank. Alleging that the plaintiff failed to complete the work within the stipulated time, first defendant sought to invoke BG, in November 1996.The plaintiff assured to complete the work and extended BG upto 31.3.1997.But the work was allegedly abandoned in January 1997 before completing the same. As a result, the contract stood terminated on 31.3.1997.The plaintiff then filed the suit before the Court below for declaration and injunction restraining the first defendant from invoking BG alleging that the first defendant played fraud on the plaintiff by fabricating a bill as if it is prepared by the plaintiff with a view to set up false claim and realised the BG amount unjustly. The plaintiff also alleged that they raised a bill for a sum of Rs.2,16,27,551/- towards works executed, cost of extra items operated not covered by the agreement on account of idling of plant and machinery, for the delays caused by the defendant in not giving site in time, not giving details of drawings in time and also not supplying the power as per terms and conditions.


3. The first defendant opposed the suit raising the following contentions and pleas. The contract was executed on 28.1.1994 at Bombay for construction of spinning mill at Murbad. The first defendant agreed to give Rs.21,40,000/- as mobilisation advance and initial deposit of Rs.6,07,000/- against two BGs of plaintiff. The same was furnished on 28.12.1994.The BG will become payable unconditionally on demand without protest. The second defendant bank agreed to pay BG amount irrevocably if the same is not utilized by the plaintiff and gave enforceability to BG till the advance is fully recovered from the plaintiff. Plaintiff failed to complete the work within the stipulated time of extended period. The work was not completed and mobilisation advance was not utilized. Contract was terminated on 03.1.1997.Therefore BG was invoked but in view of the ad interim injunction the second defendant did not make the payment against BG demanded on 12.3.1997.The first defendant also opposed the suit contending that the Court at Hyderabad has no jurisdiction, that cause of action or part of cause of action did not arise at Hyderabad and that as per clause 66 of contract, only Courts at Bombay have jurisdiction. The allegation that first defendant resorted to fraud is denied. The plaintiff filed rejoinder disputing the scope of BG and also denied the allegation that the first defendant has not recovered mobilisation advance from the bills. Second defendant filed a memo adopting rejoinder filed by the plaintiff as their written statement.


4. First defendant filed I.A. No.2354 of 1997 raising objection to the territorial jurisdiction of the Court below. By an order dated 28.4.2001, the said I.A., was dismissed relying on the decision of the Supreme Court in Hindustan Construction Co. Ltd v State of Bihar (1999) 8 SCC 436 = AIR 1999 SC 3710 = 2000 (1) An. W.R. 1 (SC) to the effect that BG is separate, distinct and independent contract. It may be mentioned that the learned Judge also observed that first defendant will be at liberty to raise the jurisdictional issue at the time of disposal of the suit. It may also be mentioned that the plaintiff filed I.A.No.981 of 1997 for ad interim injunction restraining first defendant from encashing two BGs. The same was dismissed by the Court below on 13.2.1998, aggrieved by which AAO No.424 1998 was filed. A Division Bench of this Court partly allowed the appeal on 25.9.2000 restraining the first defendant from invoking BG for Rs.21,40,000/-.However, while permitting encashment of BG for Rs.6,70,000/-, the High Court directed to dispose of the suit by 28.2.2001.


5. Learned Senior Civil Judge framed seven issues. The suit went to trial. Plaintiff examined three witnesses and marked 17 documents including Exs.A3 to A13 photocopies of BGs. First defendant examined one witness. The learned trial Judge however considered issue No.5 as to whether it has no jurisdiction to try the suit. Considering the decision of Supreme Court in South East Asia Shipping Co. Ltd v Nav Bharat Enterprises Pvt. Ltd. (1996) 3 SCC 443 = 1996 (2) ALT 9 (D.N.) and also oral and documentary evidence especially clause 66 in Ex.A16 contract, dated 28.12.1994, the Court below came to the conclusion that it lacks territorial jurisdiction to entertain the suit.


6. The learned Counsel for plaintiff and first defendant made their submissions and also relied on precedents. From these submissions the question that requires consideration is whether the Court of VIII Additional Senior Civil Judge lacks territorial jurisdiction to try the suit of plaintiff.


7. The admitted facts are as follows. The plaintiff is a civil construction company. The first defendant which was erecting a spinning mill at Murbad in State of Maharashtra, awarded contract in favour of plaintiff for a total value of Rs.261.94 lakhs. The contract/agreement was executed on 28.12.1994.The work was to be completed in 11 months. The first defendant gave mobilisation advance as well as initial deposit against two BGs for Rs.21,40,000/- and Rs.6,70,000/- respectively executed by the plaintiff. The work allegedly was not completed within time and when first defendant attempted to invoke BG, plaintiff agreed to extend the same and also to complete the work. Allegedly it was not done and only part of the work was completed. The first defendant then sent invocation letter to second defendant requesting for payment of BG amounts. By that time, plaintiff instituted O.S. No.809 of 1997 for declaration and perpetual injunction. It is also not denied that clause 66 of contract deals with jurisdiction of the Court and reads as under.


Notwithstanding any other court or courts having jurisdiction to decide the question(s) forming the subject matter of the reference if the same had been the subject matter of a suit, any and all actions and proceedings arising out of relative to the contract (including any arbitration in terms thereof) shall be only in the Court of competent jurisdiction in this behalf as mentioned in Appendix to Tender and only the said Court(s) shall have jurisdiction to entertain and try any such action(s) and/or proceedings(s) to the exclusion of all other courts.


Appendix To Tender


Item No.

Item

Ref. to Tender document

Amount/Period etc.,



1 to 10 omitted



11.

Venue of Arbitration

Clause 62

BOMBAY



12.

Jurisdiction of Court

Clause 66

BOMBAY



13 and 14 omitted




8. As already noticed, the learned trial Judge relied on clause 66 and South East Asia Shipping Co. Ltd (supra) to conclude that it has no territorial jurisdiction. Counsel for the plaintiff relies on State of Mahrarashtra v National Construction Company (1996) 1 SCC 735 = 1996 (1) ALT 14 (D.N.), to contend that remedy arising out of BG is independent and, therefore, notwithstanding the factual aspects noticed herein above, the Court at Hyderabad had jurisdiction. We are afraid, we cannot accept such submission.


9. Sections 16 to 21 of Code of Civil Procedure 1908 (CPC), deal with pecuniary and territorial jurisdiction of the Court. Section 16 to 18 of CPC deal with the suits in relation to or arising out of or connected with immovable property. Section 19 of CPC deals with suits for compensation for wrongs to person or movables. Section 20 of CPC speaks of general jurisdictional provision regarding suits where the defendants reside or cause of action arises. The same reads as under.


?20. Other suits to be instituted where defendants reside or cause of action arises? Subject to the limitations aforesaid, every suit shall be instituted in Court within the local limits of whose jurisdiction?


(a) 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


(b) 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 on business, or personally work for gain, as aforesaid, acquiesce in such institution; or


(c) the cause of action, wholly or in part, arises.


Explanation: A corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.?


10. Indisputably the first defendant has its registered office and carries on its business in Murbad in State of Maharashtra. There is no dispute that the contract was signed at Bombay and the work is to be executed at Murbad. Section 20(a) and (b) of CPC would oust the jurisdiction of the Courts at Hyderabad. There is no dispute on this. Plaintiff attempts to bring the case under Section 20(c) of CPC. According to him, second defendant executed BG, which is enforceable at Hyderabad, and, therefore, part of cause of action arises at Hyderabad. There is no doubt that BG was given by second defendant on behalf of first defendant at Hyderabad, undertaking to pay on demand to first defendant without demur to the extent of guaranteed sum and then recover the same from the plaintiff. In the nature of things, it is for the first defendant to invoke BG and demand payment from second defendant and such payment can be made either at Hyderabad or at Bombay. From this, can it be said that part of cause of action has arisen at Hyderabad?


11. It is settled law that any agreement between the parties to the contract cannot validly take away the jurisdiction possessed by the Court, though ouster clause can operate as estoppel against the parties to the contract. But if more than one Court has jurisdiction under the statute, it is always open to the parties to agree to the jurisdiction of one Court to the exclusion of the other. In such cases, the plaintiff cannot insist that one Court (whose jurisdiction is excluded) should try the suit ignoring the jurisdiction of the Court which the parties agreed to submit.


12. In the leading case on the subject in Hakam Singh v Gammon (India) Ltd., (1971) 1 SCC 286 = AIR 1971 SC 740 the appellant accepted the contract for construction work of the respondent Gammon. Clause 13 of the contract provided that the contract shall be deemed to have been entered into in Bombay and the Courts in Bombay alone shall have jurisdiction to adjudicate the disputes. Disputes arose and Hakam Singh filed a petition before Varanasi Court under Section 20 of the Arbitration Act, 1940, for reference to arbitrator. Placing reliance on clause 13, the petition was opposed, but Subordinate Judge allowed the petition. The High Court of Allahabad set aside the same. Before the Supreme Court, it was urged that mere factum of carrying on business at Bombay would not vest Bombay Courts with jurisdiction to adjudicate the matter. The Supreme Court agreeing with the High Court, dismissed the appeal observing as under.


?By Clause 13 of the agreement it was expressly stipulated between the parties that the contract shall be deemed to have been entered into by the parties concerned in the City of Bombay. In any event the respondent have their principal office in Bombay and they were liable in respect of a cause of action arising under the terms of the tender to be sued in the Courts at Bombay. It is not open to the parties by agreement to confer by their agreement jurisdiction on a Court which it does not possess under the Code. But where two courts or more have under the CPC jurisdiction to try a suit or proceeding an agreement between the parties that the dispute between them shall be tried in one of such Courts is not contrary to public policy. Such an agreement does not contravene Section 28 of the Contract Act.


(emphasis supplied)?


13. In ABC Laminart Pvt. Ltd., v AP Agencies, Salem (1989) 2 SCC 163 = AIR 1989 SC 1239, under an agreement ABC Laminart having its registered office at Udyog Nagar in Gujarat within the jurisdiction of District Court of Kaira, agreed to supply metallic yarn to respondent having business at Salem in Tamil Nadu. Clause 11 of the agreement provided that disputes shall be subject to Kaira jurisdiction. When the disputes arose, respondent filed a suit before Subordinate Judge, Salem, for recovery of certain amounts, which was opposed, inter alia, on the ground of lack of jurisdiction. The trial Judge dismissed the suit agreeing with defendant but, appeal was allowed by High Court of Madras against which ABC Laminart preferred civil appeal by special leave. Apex Court dismissed the appeal following Hakam Singh (4 supra).The cause of action is explained by the Supreme Court as follows.


?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 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.


It was further held as follows.


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 Court. 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.


(emphasis supplied)?


14. From the two leading judgments noticed herein above, we are convinced that in view of clause 66 of the contract read with relevant Appendix to the Tender, parties agreed to oust the jurisdiction of Hyderabad Courts and submit only to Bombay Courts. Even if BG is distinct and an independent contract among the plaintiff and defendants 1 and 2, as held by the Supreme Court in National Construction Company (3 supra), it is only the Bombay Courts, which have jurisdiction as agreed by the parties. In South East Asia Shipping Ltd (2 supra), the appellant and respondent entered into contract executed at Bombay for shipment of livestock from Kandla to Damman or Zedda. Nav Bharat executed BG at Delhi and sent to Bombay for performance of the contract. When disputes arose Nav Bharat filed suit in Delhi High Court for perpetual injunction restraining South East Shipping from enforcing BG. The learned Single Judge rejected the case on the ground that no part of cause of action had arisen within the jurisdiction of Delhi Court. The Division Bench however reversed. The appeal of

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South East Shipping was allowed by apex Court holding that even if BG is executed at Delhi, cause of action or part of cause of action would not arise there. The Supreme Court allowed the appeal observing as follows. ?It is settled law that cause of action consists of bundle of facts which give cause to enforce the legal injury for redress in a court of law. The cause of action means, therefore, every fact, which if transversed, 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 claim 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 would possibly accrue or would arise. In view of the admitted position that contract was executed in Bombay, i.e., within the jurisdiction of the High Court of Bombay, performance of the contract was also to be done within the jurisdiction of the Bombay High Court; merely because bank guarantee was executed at Delhi and transmitted for performance to Bombay, it does not constitute a cause of action to give rise to the respondent to lay the suit on the original side of the Delhi High Court. The contention that the Division Bench was right in its finding and that since the bank guarantee was executed and liability was enforced from the bank at Delhi, the Court got jurisdiction, cannot be sustained. (emphasis supplied)? 15. On consideration of the factual background of the case and the decision of the Supreme Court especially those in Hakam Singh (4 supra) and South East Asia Shipping Ltd., (2 supra), which directly apply to the facts of this case, we are convinced that the appeal is without any merit and deserves to be dismissed. 16. The civil miscellaneous appeal is accordingly dismissed without costs.
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