Subash Projects & Marketing Limited v. State Bank of Hyderabad
2018-02-06
SOUMEN SEN
body2018
DigiLaw.ai
JUDGMENT : SOUMEN SEN, J. The defendant No. 3 has filed this application for revocation of leave under Clause 12 of the Letters Patent. In the alternative, a prayer is made for referring the dispute forming the subject matter of the suit to arbitration in accordance with the Arbitration Agreement between the parties. 2. The plaintiff has filed a suit in this Court after obtaining leave under Clause 12 of the Letters Patent. In the suit, the plaintiff has essentially prayed for delivery up and cancellation of four bank guarantees issued by the defendant No. 2 in favour of the defendant No. 1. 3. The plaintiff contends that the plaintiff and the defendant No. 2 entered into a Memorandum of Understanding (MOU) dated 15th October, 1999 to collaborate for preparation and submission of a tender in response to a notice issued by the National Highway Authorities of India, the defendant No. 4, for “Four Laning of KM.156.000 to KM 163.895 of Gauwahati Bypass section of N.H -37 in the State of Assam (contract Package No. SW/7-(AS)” on the basis of the distribution of work in 40:60 approximately. Pursuant to such MOU, the defendant No. 3 had submitted their tender to the defendant No. 4 and the work was ultimately allotted to the defendant No. 3. Subsequent to acceptance of the offer by the defendant No. 4, the plaintiff and the defendant No. 1 entered into a new agreement on 25th April, 2000 superseding the earlier MOU. The said agreement was executed outside the jurisdiction of this Court. Under the agreement dated 25th April, 2000, the plaintiff was to work as a sub-contractor under the defendant No. 3 subject to getting permission from the defendant No. 4. The plaintiff obtained a mobilization advance of Rs. 1.82 crores from the defendant No. 3 against the submission of four bank guarantees. Such four bank guarantees of Rs. 45.50 lakhs each were issued by the defendant No. 1 being the bankers of the plaintiff from the office of the defendant at Park Street within the jurisdiction of this Court to the defendant No. 2, the banker of the defendant No. 3 of such jurisdiction of this Court. The defendant No. 4 by letters dated 19th September, 2000 and October 3, 2000 directed the defendant No. 3 not to give any portion of the work awarded under any sub-contract.
The defendant No. 4 by letters dated 19th September, 2000 and October 3, 2000 directed the defendant No. 3 not to give any portion of the work awarded under any sub-contract. In respect of the specific request relating to the plaintiff it is alleged that the defendant No. 4 was of the opinion that the plaintiff does not have the requisite experience in the field of High Way engineering. In view of the failure on the part of the defendant No. 3 to obtain permission from the defendant No. 4 to allow the plaintiff to act as sub-contractor, the four bank guarantees had become null and void. The defendant Nos. 1 and 2 are aware of the terms of the agreement and the circumstances under which the said bank guarantees have now become unenforceable. Notwithstanding the same, the defendant No. 3 has not discharged the said bank guarantees and the said defendant Nos. 1, 2 and 3 and each of them are threatening to encash the said four bank guarantees. In view of the cancellation of the said agreement by the defendant No. 3 by its letter dated 30th November, 2000, the plaintiff is entitled to treat the said four bank guarantees issued at the instance of the plaintiff by the defendant No. 1 as void and unenforceable by the defendant Nos. 2 or defendant Nos. 3 against the plaintiff in any manner whatsoever. In Paragraph 32 of the plaint, the plaintiff has made the necessary averments to show that a part of the cause of action has arisen from within the jurisdiction of this Court and, accordingly, has prayed for revocation of leave under Clause 12 of the Letters Patent. 4. It is elementary that in deciding an application for revocation of leave under Clause 12 of the Letters Patent, the averments made in the plaint are required to be taken as true and correct. The plaintiff has admitted that in Paragraph 5 of the plaint that the agreement dated 25th April, 2000 was executed at Mumbai. However, the bank guarantees forming the subject matter of the suit were issued from within the jurisdiction of this Court and are now sought to be invoked at Calcutta within the jurisdiction of this Court. The plaintiff under the agreement dated 25th April, 2000 was required to issue four performance bank guarantees.
However, the bank guarantees forming the subject matter of the suit were issued from within the jurisdiction of this Court and are now sought to be invoked at Calcutta within the jurisdiction of this Court. The plaintiff under the agreement dated 25th April, 2000 was required to issue four performance bank guarantees. The said four bank guarantees were issued by the defendant No. 1 within the jurisdiction of this Court. Accordingly, a part of cause of action has arisen within the jurisdiction of this Court. However, the difficulty arises elsewhere, namely, the agreement dated 25th April, 2000. The said agreement contains a forum selection Clause in Clause 35 which reads: “35. The legal jurisdiction of this agreement will be Mumbai.” 5. Although, the jurisdictional clause does not specifically say that the courts at Mumbai alone will have jurisdiction to decide any dispute arises out of this agreement but it is clear that the parties have intended to have their disputes resolved at Mumbai. In view of the recent decision of the Hon'ble Supreme Court in Swastik Gases Private Limited v. Indian Oil Corporation Ltd. reported at (2013) 9 SCC 32 , the jurisdiction of this Court is excluded. 6. In Swastik Gases Pvt. Ltd. (supra) the Hon'ble Supreme Court was interpreting a jurisdictional clause being Clause 18 of the said Agreement which reads:- “18. Jurisdiction The agreement shall be subject to jurisdiction of the courts at Kolkata.” 7. This Clause was interpreted to mean that where the contract specifies where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. The intention of the parties by having Clause 18 in the agreement is clear and unambiguous that the Courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. The word “acceptance” of the jurisdictional clause in the agreement would be rendered meaningless where it not given its natural and plain meaning. The use of words like “only”, “exclusively”, “alone” and so on are not necessary to convey the intention of the parties in an exclusion of jurisdiction clause of an agreement. 8. It is contended that the defendant Nos.
The use of words like “only”, “exclusively”, “alone” and so on are not necessary to convey the intention of the parties in an exclusion of jurisdiction clause of an agreement. 8. It is contended that the defendant Nos. 1, 2 and 4 are not parties to the agreement and, accordingly, the said jurisdictional clause cannot apply in the instant case as the suit is essentially for declaration that the bank guarantees are null and void. No part of cause of cause of action against the defendant No. 1 would be said to have arisen at Mumbai. 9. The plaintiff has admitted in the plaint that pursuant to the agreement dated 25th April, 2000 and in accordance with the terms mentioned therein, the plaintiff from its office at Park Street within the jurisdiction of this Court has submitted four several bank guarantees of Rs. 45.50 lakhs each as advanced payment guarantees to the banker of the defendant No. 3 being the defendant No. 2 at Mumbai outside the jurisdiction of this Court. The four bank guarantees as advanced payment guarantees were issued at the request of the plaintiff by the bankers of the plaintiff that is the defendant No. 1 from its office at 113, Park Street, Calcutta within the jurisdiction of this Court. 10. The grievance of the plaintiff is that the defendant No. 3 did not take due care and has failed to make proper representation to the appropriate authorities of the defendant No. 4 as a result whereof the defendant No. 3 was prevented from engaging any sub-contractor. It is alleged that the defendant No. 3 has procured the letters dated 19th September, 2000 and 11th December, 2000 from the defendant No. 4 after having obtained benefits of the tender with the help and assistance of the plaintiff in order to retain benefits of the entire contract to itself and in defeating the rights and benefits of the plaintiff in a substantial portion thereof. 11. The plaintiff has also averred that the cause of action in respect of the performance bank guarantees is not and cannot be conveniently made the subject matter of the instant suit as the bankers concerned were different. 12. There cannot be any quarrel with the proposition of law that the parties by agreement cannot confer jurisdiction on a Court which does not otherwise have the jurisdiction to try and determine the suit.
12. There cannot be any quarrel with the proposition of law that the parties by agreement cannot confer jurisdiction on a Court which does not otherwise have the jurisdiction to try and determine the suit. Under the Code of Civil Procedure as well Clause 12 of the Letters Patent, save and except, disputes relating to immovable properties outside the jurisdiction of the Calcutta High Court, a Court would have jurisdiction to try a suit if the entirety of the cause of action arises within its jurisdiction irrespective of whether the defendant may dwell or carry on business or personally work for gain or if a part of the cause of action arises within the jurisdiction of this Court. The jurisdiction of the High Court to try and determine the suit is by virtue of Clause 12 of the Letters Patent. The circumstances under which a suit under Clause 12 of the Letters Patent would lie has been elaborately discussed in Chainrup Sampatram v. Punjab & Sind Bank reported at 2009 (1) CHN 346 at Paragraph 24 which reads:— “24. There are three limbs to Clause 12 of the Letters Patent: the first limb covers suits for land or other immovable property, which is not germane for the present purpose; the second limb speaks of the place of accrual of the cause of action in the suit, requiring no previous leave if the cause of action arises wholly within jurisdiction but requiring previous leave if only a part - however infinitesimal or significant - of the cause of action arises within jurisdiction; and, the third is the situs of the defendant at the time of commencement of the suit. A suit for land (or other immovable property) stands on a different pedestal and it is unnecessary to go into that aspect of Clause 12 here. But in a suit which is not a suit for land (or other immovable property) the plaintiff has a choice of invoking the jurisdiction of this Court on either of the two remaining limbs of Clause 12.
But in a suit which is not a suit for land (or other immovable property) the plaintiff has a choice of invoking the jurisdiction of this Court on either of the two remaining limbs of Clause 12. If there is a solitary defendant in a suit which is not a suit for land (or other immovable property), the plaintiff may unquestionably institute it on the Original Side of this Court if the entirety of the cause of action arises within the original jurisdiction of the Court and irrespective of where the defendant may dwell or carry on business or personally work for gain. If there is a solitary defendant in a suit which is not a suit for land (or other immovable property), the plaintiff may institute it on the original side of this Court if a part of the cause of action arises within the original jurisdiction of this Court irrespective of where the defendant may dwell or carry on business or personally work for gain, subject, however, to obtaining prior leave under Clause 12 to institute the suit. If there is a solitary defendant in a suit which is not a suit for land (or other immovable property), the plaintiff may institute it on the original side of this Court if the defendant, at the time of the commencement of the suit, dwells or carries on business or personally works for gain within the original jurisdiction of this Court, irrespective of where the cause of action may be arisen. The second and third limbs of Clause 12 that cover suits other than suits for land (or other immovable property) are, in a sense, mutually exclusive; in that the plaintiff has the choice of either founding territorial jurisdiction on situs of cause of action or on location of the defendant at the time of commencement of the suit. In a suit other than a suit for land (or other immovable property) where the plaintiff sues more than one defendant, either of the last two limbs of Clause 12 of the Letters Patent has to be satisfied in respect of each defendant in the suit for the action to be launched on the Original Side of this Court.” 13. In fact, the agreement dated 25th April, 2000, the letter of termination and the perceived threat of invocation of bank guarantee all have taken place at Mumbai.
In fact, the agreement dated 25th April, 2000, the letter of termination and the perceived threat of invocation of bank guarantee all have taken place at Mumbai. The essential dispute is between the plaintiff and the defendant No. 3. 14. In so far as the Courts not governed by Letters Patent, provisions of the Code of Civil Procedure would apply. Any agreement between the parties containing a Forum Selection Clause for adjudication of the dispute would certainly override Clause 12 of the Letters Patent. If it is found that the said forum is otherwise inextricable connected with the subject matter of the dispute, the said forum alone would have the jurisdiction to decide the dispute to the exclusion of others. On the basis of the averments made in the plaint, it cannot be said that no part of the cause of action has arisen at Mumbai. In fact, the award of contract, the letter of termination and invocation of bank guarantee all have taken place at Mumbai. The argument that the suit cannot be filed against the bank at Mumbai appears to be misconceived. The essential dispute is between the plaintiff and the defendant No. 1. The furnishing of bank guarantee is not a material fact on which the cause of action in the suit is founded. In South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. reported at (1996) 3 SCC 443 in a similar situation it was held by the Hon'ble Supreme Court that since the bank guarantee was executed and the said guarantee was invoked at Delhi, the Court would not assume jurisdiction. The findings of the Hon'ble Supreme Court are stated below:- “2. The only controversy is whether the Delhi High Court has jurisdiction to entertain the suit. It is an admitted position that the contract was executed in Bombay. It is also an admitted position that the performance of obligation and liabilities under the contract was required to be done in Bombay inasmuch as Cargo of livestock was to be transported in the ship from Kandla to Daman or Jeddah. It is also an admitted position that in furtherance of the execution of the contract at Bombay, the respondents had executed the bank guarantee at Delhi and had transmitted it to Bombay for performance of the contract.
It is also an admitted position that in furtherance of the execution of the contract at Bombay, the respondents had executed the bank guarantee at Delhi and had transmitted it to Bombay for performance of the contract. The question, therefore, is whether any part of the cause of action had arisen in Delhi. The learned Counsel for the respondents had relied upon a judgment of this Court in ABC Laminart Pvt. Ltd. v. A.P Agencies, Salem [1989] 2 SCR 1 a to contend that since part of the cause of action had arisen in Delhi, the High Court on the original side has jurisdiction to entertain the suit. We are unable to accept the contention. 3. 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 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.” 15. The said judgment was considered in The Iron and Steel Company Limited v. Tiwari Road Lines reported at (2007) 5 SCC 703 in Paragraph 11 which reads:— “11. Learned Counsel for the appellant has also submitted that City Civil Court, Hyderabad had no jurisdiction to entertain the application moved by the respondent as no part of cause of action had accrued there.
Learned Counsel for the appellant has also submitted that City Civil Court, Hyderabad had no jurisdiction to entertain the application moved by the respondent as no part of cause of action had accrued there. In this connection, he has referred to Clause (b) of Sub-section (12) of Section 11 and Clause (e) of Sub-section (1) of Section 2 of the Act which will govern the question of jurisdiction as to Chief Justice of which High Court has to be approached for moving an application under Section 11 of the Act. Learned Counsel has submitted that the tenders were floated at Kolkata, the respondent submitted the tender at Kolkata, the agreement was executed at Kolkata and, therefore, the Court at Hyderabad had no jurisdiction to entertain the application. Learned Counsel has also submitted that the view taken by the High Court that as the bank guarantee was furnished at Hyderabad and was encashed at Hyderabad, “the court at Hyderabad has jurisdiction is erroneous in law inasmuch as the agreement did not contain any clause regarding the place from where the bank guarantee had to be furnished. Learned Counsel has submitted that there was only a requirement for furnishing the bank guarantee and that it could be furnished from anywhere in India and since in the present case the bank guarantee was furnished by the respondent from a bank at Hyderabad it was encashed there and, therefore, the said fact was wholly irrelevant for deciding the plea of jurisdiction. He has also relied upon a decision of this Court in South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. [1996] 3 SCR 405, in support of his contention that the submission of the bank guarantee from Hyderabad or the encashment thereof does not constitute even a part of cause of action to confer jurisdiction on the Court at Hyderabad. Though we find substance in the contention raised by the learned Counsel for the appellant but in view of our finding recorded on the main point, we do not consider it necessary to express any final opinion on the second contention.” 16. In the instant case, there cannot be any doubt that a part of cause of action has arisen at Mumbai and appropriate Court at Mumbai alone would have jurisdiction to decide the dispute. The plaintiff cannot avoid its disputes being tried in Mumbai. 17.
In the instant case, there cannot be any doubt that a part of cause of action has arisen at Mumbai and appropriate Court at Mumbai alone would have jurisdiction to decide the dispute. The plaintiff cannot avoid its disputes being tried in Mumbai. 17. In view thereof, the leave granted under Clause 12 of the Letters Patent is revoked. The Plaint filed in the suit is returned to the plaintiff in order to enable the plaintiff to institute the suit before the appropriate Court at Mumbai upon furnishing an authenticated copy of the Plaint in the Department concerned. In view of the aforesaid, the suit shall not be shown as pending and stands disposed of in so far as this court is concerned. 18. The applicant realizing that there is no arbitration agreement between the parties has not pressed Prayer (d) of the Notice of Motion. 19. G.A No. 1085 of 2001 stands disposed of. 20. C.S No. 70 of 2001 stands disposed of. 21. However, there shall be no order as to costs. 22. Urgent Photostat certified copy of this judgment, if applied for, be given to the parties on usual undertaking.