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1960 DIGILAW 244 (MP)

Suleman Bhanji v. Emandi Pydiraju

1960-08-29

S.P.BHARGAVA, T.C.SHRIVASTAVA

body1960
JUDGMENT S.P. Bhargava, J. This appeal arises oat of a suit (Civil Suit No. 4-B of 1955) instituted by the Plaintiffs-Appellants in the Court of First Civil Judge, Raipur, claiming Rs. 5,847-2-0 as the price of goods supplied to the Defendant. The Plaintiffs alleged in the plaint that the Defendant entered into a contract through his representative with the Plaintiff (No. 1) through his commission agent, Plaintiff (No. 2), for the purchase of two wagon loads of bones at the rate of Rs. 230 per ton F. O. R. Raipur on 25-2-1952 or thereabout. The contract was alleged to be made at Raipur. The goods in pursuance of the contract were despatched in the month of June 1952 and were received by the Defendant. The Defendant, however, purported to have stocked the goods for the Plaintiffs as they were not according to sample and were of inferior quality. The Defendant did not pay the price of the goods. Hence, Plaintiff No. 1 joining Plaintiff No. 2 as merely a pro forma Plaintiff with him, brought this suit for the recovery of price and interest. The Defendant (Respondent) contested the suit on various grounds. He objected to the suit being tried at Raipur. He firstly contested that the contract was not made at Raipur as alleged and, therefore, no part of the cause of action arose at Raipur. His second ground of objection was that the parties had agreed in writing (Exh. D-1) that in case of a dispute, Vishakhapatnam jurisdiction was the place of settlement. The trial Court framed four preliminary issues covering the objection about jurisdiction of the Raipur Courts to try the suit. It held that the contract was made at Raipur and, therefore, the suit was triable at Raipur but it further held that the agreement recorded in Exh. D-1 dated 26-2-1952 was made between the parties and on the basis of this agreement, it had no jurisdiction. Consequently, the trial Court ordered the plaint to be returned to the Plaintiffs for presentation to the proper Court. Being aggrieved by this decision, the Plaintiffs have filed this appeal. D-1 dated 26-2-1952 was made between the parties and on the basis of this agreement, it had no jurisdiction. Consequently, the trial Court ordered the plaint to be returned to the Plaintiffs for presentation to the proper Court. Being aggrieved by this decision, the Plaintiffs have filed this appeal. Shri Y. S. Dharmadhikari, Learned Counsel for the Appellants, raised the following two questions for determination in this appeal: That there was no agreement made between the parties precluding the Raipur Courts from trying this suit; and That in any event, the agreement between the parties that suit relating to disputes between them should be instituted in one only out of the two Courts having jurisdiction was not valid under Sections 28 and 23 of the Contract Act. With regard to the first point, Shri Dharmadhikari urged that the agreement (Exh. D-l) which contained the term in these words "In case of a dispute, Vishakhapatnam jurisdiction is the place for settlement" does not necessarily mean that the suit could not be instituted at Raipur because the word 'only' was not used after the word 'Vishakhapatnam jurisdiction' or before the word 'place' in the term just quoted. Secondly, be argued that the agreement (Exh. D-1) was written in English. Plaintiff No. 2 who signed this document clearly stated in his deposition that be did not understand English. Further, it was stated that the document did not bear the signatures of Plaintiff No. 1 (who is the real Plaintiff in the case). He also urged that Plaintiff No. 2 had no authority on behalf of Plaintiff No. 1 to enter into any agreement excluding the jurisdiction of the Raipur Courts. This contention, in our view, is without any force. On the Plaintiffs' side, Rahmatullah (P. W. 1), who is the second Plaintiff in the case, was the only person examined as a witness. He admitted in his deposition the correctness of the facts recorded in Exh. D-1 and he admitted his own signatures on this document. The Plaintiffs did not aver anything in their plaint challenging any of the terms contained in the document. It is clear beyond doubt that the Plaintiffs had the knowledge of this document from the very beginning. He admitted in his deposition the correctness of the facts recorded in Exh. D-1 and he admitted his own signatures on this document. The Plaintiffs did not aver anything in their plaint challenging any of the terms contained in the document. It is clear beyond doubt that the Plaintiffs had the knowledge of this document from the very beginning. Defendant's witness Kosru Laxman Murthy (D. W. 1) clearly stated in his deposition that it was settled that if any dispute would arise, it would be settled within the jurisdiction of the Vishakhapatnam Courts. There is nothing to disbelieve this witness. We, therefore, find that the lower Court was correct in holding that there was an agreement between the parties as contained in Exh. D 1. The Plaintiffs stressed the omission of the word 'only' in the said written term and contended that in the absence of that word, the suit could be instituted at Raipur. This contention is also without any substance. Similar question arose in the case of Continental Drug Company v. Chemoids and Industries Ltd. AIR 1956 Cal 161 . In that case, the agreement was in the following terms: "Any dispute arising between the parties, settlement of same legally or otherwise, will be decided in Bombay". It was held that the suit was triable by the Court at Bombay only. In another case Mehta and Company v. Vijayam and Company AIR 1925 Mad 1145, there was a clause to the same effect without containing the word 'only'. It was held in that case that the suit was entertainable only in the Court contemplated under the agreement. Thus, it is clear that the absence of the word 'only' does not in any way materially affect the position. Want of authority of Plaintiff No. 2 to enter into any agreement restricting the choice of forum has neither been pleaded nor proved. The point does not seem to have been raised before the trial Court at all. In these circumstances, this point also is without any merit. Thus, the first contention raised by Shri Dharmadhikari cannot be accepted. The Learned Counsel for the Appellants next contended that the clause restraining the choice of forum in the document (Exh. D-1) is void being against the provisions of Section 28 of the Contract Act. It was urged that the agreement absolutely restrains the Plaintiffs from pursuing the remedy at Raipur. The Learned Counsel for the Appellants next contended that the clause restraining the choice of forum in the document (Exh. D-1) is void being against the provisions of Section 28 of the Contract Act. It was urged that the agreement absolutely restrains the Plaintiffs from pursuing the remedy at Raipur. On behalf of the Plaintiffs, reliance was placed upon the authority in National Petroleum Company v. Rebello AIR 1935 Nag 48, Ram Bahadur Thakur and Company v. Devidayal (Sales) Ltd. AIR 1954 Bom 176 , Marittima Italiana Steamship Company v. Burjor AIR 1930 Bom 185 and Lakhinarayan Ramniwas v. L T. S. P. A. D. N. S. in Triesta AIR 1960 Cal 155 . In National Petroleum Company v. Rebello AIR 1935 Nag 48, it was held that the agreement was contrary to public policy and, therefore, the Nagpur Court had no jurisdiction to try the case. The contrary view, however, has been consistently taken in a long line of cases. In the case of National Petroleum Company of Bombay v. Meghraj 1937 NLJ 247 : ILR 1939 Nag 641, Pollock J. took the view that: Where two Courts have jurisdiction to try a suit, an agreement between the parties that disputes "between them should be tried at one place rather than the other is enforceable. The case reported in National Petroleum Company v. Rebello AIR 1935 Nag 48, was referred to in this ruling and was not followed. In Musa Ji Lukman Ji v. Durga Das AIR 1946 Lah 57, a Full Bench of the Lahore High Court reviewed the various authorities and observed: An agreement between parties to a contract to the effect that a suit concerning disputes arising between them on the basis of that contract should be instituted in one only out of two competent Courts having territorial jurisdiction over the subject-matter of that suit is valid and enforceable and is not void under Section 28. Section 28 prevents parties from divesting Courts of their inherent jurisdiction and makes void only those agreements which absolutely restrict a party to a contract from enforcing the rights under that contract in ordinary tribunals. Section 28 prevents parties from divesting Courts of their inherent jurisdiction and makes void only those agreements which absolutely restrict a party to a contract from enforcing the rights under that contract in ordinary tribunals. But it has no application when a party agrees not to restrict his right of enforcing his rights in the ordinary tribunals....but only agrees to a limitation of the choice of forum which the law has conferred upon him and to a selection of one of those ordinary tribunals in which ordinarily a suit would be tried. (ii) Again, the very, same point was considered by a Division Bench of the Madras High Court consisting of Rajmannar C. J. and Venkatarama Aiyar J. in H.K. Dada (India) Ltd. v. M.P.S. Mills Company, Ltd. AIR 1954 Mad 845 . Their Lordships dissented from the view taken in National Petroleum Company v. Rebello AIR 1935 Nag 48, and Musa Ji Lukman Ji v. Durga Das AIR 1946 Lah 57 and at great length discussed the view taken by the High Courts at Bombay, Calcutta, Allahabad and Lahore in different cases observed as under: We have no hesitation in accepting the view taken in the two decisions of this Court in AIR. 1925 Mad. 1145 : AIR. 1944 Mad. 47 which has been accepted by almost all the Courts in this country. We hold that Clause 8 of the suit contract is not void as one falling within the mischief of Section 28, Contract Act. The same point came up to be considered by a Full Bench of the Madhya Bharat High Court in the case of Prem Adib Pictures v. New Sound Pictures AIR 1955 MB 193. After reviewing authorities, all the three learned Judges agreed between the parties to choose one of the two alternative Courts in which the suit could be brought, then such an agreement was a valid one. In Ram Bahadur Thakur and Company v. Devi dayal (Sales) Ltd. AIR 1954 Bom 176 , which has been relied upon by the Appellants, it has been observed in paragraph 5 of the judgment: It is almost elementary that parties by their agreement cannot confer jurisdiction upon a Court which has no jurisdiction, nor can they by their agreement oust the jurisdiction of the Court when the Court possesses jurisdiction. But, it is equally well settled that parties can by a contract prefer one of the two competent Courts. This ruling also directly helps the case of the Respondent and supports the view taken by the lower Court. (iii) In Lakhinarayan Ramniwas v. L. T. S. P. A. D. N. S. in Triesta AIR 1960 Cal 155 there was a contract entered into by two Italians containing a clause of arbitration and a term to the effect that a suit arising out of and based on the contract should be instituted in Italy. A suit, however, was brought on the original side of the Calcutta High Court by the holder of bills of lading. In the context of these facts, it was observed by their Lordships: Even though such a term in the contract is valid, it cannot be pleaded as a bar to the jurisdiction of an Indian Court which otherwise has jurisdiction to try a suit instituted before it. Parties cannot by a private agreement, whether such agreement has been entered into in India or outside India, take away a jurisdiction which is vested in the Indian Court to try the suit, just as the parties cannot by such agreement confer upon it jurisdiction to try a case which it has otherwise no jurisdiction to try. But, their Lordships further said that in such a case when the attention of the Court in which the suit is instituted is drawn to a contractual stipulation of this kind, the Court may in the exercise of its discretion stay its hands and refuse to try the suit until the competent judicial authority to whose decision the parties have agreed to submit their disputes, has pronounced its decision. This case is no authority for holding that an agreement between the parties restricting their choice of forum to one Court out of the two or more Courts having jurisdiction to try the matter is void. This case is no authority for holding that an agreement between the parties restricting their choice of forum to one Court out of the two or more Courts having jurisdiction to try the matter is void. As a matter of fact, this very principle was stated in the Lahore case, reported above, in which his Lordship Abdur Rahman J. brought out clearly the ratio decidendi of the decision, thus: But in agreeing not to bring suits in one out of the two Courts, both of which were competent to try them, parties cannot be said to have contracted out of the jurisdiction vested in that Court or to be depriving it of the jurisdiction which it otherwise possessed (and would continue to possess as long as it could entertain a suit of that kind in accordance with the law in force) but to have deprived themselves of the right of proceeding in that Court with a reservation that they would continue to have a right to proceed in others which have in law jurisdiction to try. The parties did not thus deprive any Courts of its inherent or even territorial jurisdiction but themselves of their right of exercising it partially in one out of the two or three Courts. Jurisdiction is one thing, right to exercise it another. Accordingly, we hold that where there are two competent Courts which can deal with the subject-matter of litigation, it is open to the parties to a contract to agree that disputes in respect thereof should be adjudicated upon by one of the two competent Courts and such an agreement is perfectly legal and not contrary to Section 28 of the Contract Act. Shri Dharmadhikari, Learned Counsel for the Appellants, has urged one more point. He relies upon the dictum in Dwarka Rubber Works v. Chhotelal AIR 1956 MB 120 wherein it was held by Khan J.:- Although an agreement confining the parties to have recourse to only one of the several competent Courts may not be within the mischief of Section 28 of the Contract Act, yet it is of such a nature that if permitted, it defeats the provisions of Law under Section 20 of the Code of Civil Procedure Code. It is, therefore, hit by Section 23(2) of the Contract Act, and being unenforceable thereunder, cannot be pleaded in bar of action in one of such Courts. It is, therefore, hit by Section 23(2) of the Contract Act, and being unenforceable thereunder, cannot be pleaded in bar of action in one of such Courts. With great respect, we are unable to agree with this view. When the law prescribes that a suit could be instituted on consideration of facts in more Courts than one, it essentially leaves the option with the party to pursue his remedy in any Court of his choice. The Plaintiff as dominus litis has the right to choose his forum. There is nothing wrong in permitting the parties to come to an agreement between them and say that they would prefer one of the Courts of competent jurisdiction as being the Court most convenient to them in which action may be brought. Such an agreement is not of such a nature that if permitted, it would defeat the provisions of any law. No provision of law is defeated by such an agreement. Such an agreement does neither confer jurisdiction on a Court which has one, nor oust the jurisdiction that a Court has. Such an agreement is, in our judgment, prohibited neither by the language nor by the spirit of the Contract Act and the Court is bound by the rules of justice, equity and good conscience to give effect to it. It may be interesting to note that in National Petroleum Company, Ltd., Bombay v. Meghraj and Anr. 1937 NLJ 247 : ILR 1939 Nag 641, Musa Ji Lukman Ji v. Durga Das AIR 1946 Lah 57 and H. K. Dada (India) Ltd. v. M. P. S. Mills Company, Ltd. AIR 1954 Mad 845 , the agreement restricting choice of forum was sought to be attacked under the provisions of Section 23 of the Contract Act. However, the attack was by challenging the agreement on the ground of public policy and not by saying that the agreement was void because it would defeat the provisions of any law. The Defendant was, therefore, within his rights in pleading the agreement in bar of the present suit that was brought against him in violation of the terms of the agreement (Exh. D-1). The appeal is, therefore, dismissed with costs. Appeal dismissed