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Case Number

C R.P No. 1348 of 1977

Advocates

Mr. K. Chandramouli for Petr.
Mr. V.V Lakshmimrayanan for Respt.

Judges

Ismail, J.

Acts

S. 28 of the Contract Act.

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Smart Summary

Summary of the Opinion (Civil Revision Petition concerning jurisdiction clause)

Factual and Procedural Background

The respondent (plaintiff in the original suit) sued the petitioner (defendant in O.S. No. 1317 of 1975 before the District Munsif, Coimbatore) for recovery of Rs. 2,500. The claim was founded on an agreement dated 5 July 1961 by which the plaintiff-respondent was appointed sole selling distributor for biscuits manufactured by the petitioner in the Districts of Coimbatore and Nilgiris, and on subsequent transactions between the parties.

The petitioner raised a preliminary objection before the District Munsif, contending that Clause 13 of the parties' agreement provided that only the courts in the City of Bombay would have jurisdiction to decide disputes between the parties. The District Munsif held that he had jurisdiction to entertain the suit because a part of the cause of action arose in Coimbatore. The petitioner filed the present Civil Revision Petition under Section 115, C.P.C., challenging that order of the District Munsif.

Legal Issues Presented

Whether an agreement between parties conferring exclusive jurisdiction on the courts of Bombay (Clause 13) can oust the jurisdiction of another court which nevertheless has jurisdiction in law because a part of the cause of action arose within its territory.
Whether the District Munsif, Coimbatore, was correct in exercising jurisdiction despite the contractual venue/stipulation and whether a revisional court should interfere with that exercise of jurisdiction under Section 115, C.P.C.
Whether entertaining the suit in Coimbatore, in spite of the forum-selection clause, would cause a failure of justice such that interference in revision would be warranted (with reference to Section 21, C.P.C.).

Arguments of the Parties

Petitioner's Arguments

The parties' agreement contains Clause 13 stipulating that only courts in the City of Bombay shall have jurisdiction to decide disputes between the parties.
Accordingly, even though a part of the cause of action arose in Coimbatore (giving the Coimbatore court jurisdiction in law), the respondent should have filed the suit in Bombay as per the contractual agreement; the Coimbatore Court therefore lacked jurisdiction to entertain the suit in view of the parties' agreement.

Respondent's Position (as reflected in the opinion)

The respondent filed the suit in Coimbatore for recovery of Rs. 2,500, claiming entitlement on the basis of the distributorship appointment and subsequent transactions.
It is not disputed that a part of the cause of action arose in Coimbatore and that the Coimbatore court therefore had jurisdiction in law.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Snehalkumar Sarabhai v. Economic Transport Organisasion and others (Gujarat High Court)	Parties may lawfully agree to restrict disputes to a particular court, but such a stipulation does not divest another court that otherwise has jurisdiction of its power to try the suit; an ouster clause operates as a contractual estoppel between parties but cannot tie the hands of a court. An excluded court may nevertheless ignore the stipulation if enforcing it would be oppressive or would deny justice given the surrounding circumstances and stakes.	The District Munsif relied on and followed this decision. The revisional court found no authority to render the Gujarat High Court reasoning erroneous and therefore accepted that the Coimbatore court could, in appropriate circumstances, ignore the venue stipulation.
Nanak Chand Shudurain v. The Tinnevelly Tuticorin Electric Supply Co. Ltd. (Bench of this Court)	Distinction between lack of jurisdiction (competency) and irregular exercise of jurisdiction: where multiple competent courts exist, parties may contract to vest jurisdiction in one of them; a clear, unambiguous choice of forum is not hit by Section 28 of the Contract Act. An irregular exercise of jurisdiction does not render the resultant decree a nullity; objections can be waived.	The opinion invoked this authority to explain that even if the Coimbatore court's exercise of jurisdiction was contrary to the contractual stipulation, it would be an irregular exercise (not total want of jurisdiction) and therefore subject to the revisional court's discretion under Section 115, C.P.C. The court used this to support non-interference unless there would be failure of justice.

Court's Reasoning and Analysis

The court proceeded by first acknowledging three undisputed facts: (1) the Bombay courts have jurisdiction because the petitioner resides in Bombay; (2) the Coimbatore court has jurisdiction because part of the cause of action arose there; and (3) Clause 13 of the agreement designates courts in the City of Bombay as the only courts to decide disputes between the parties.

The court considered the conventional rule — that parties who agree on a particular forum should sue there — but then examined and accepted the line of reasoning in Snehalkumar Sarabhai (Gujarat High Court). That decision holds that while a venue stipulation is valid between parties, it cannot strip a court of its statutory jurisdiction; an excluded court may nonetheless try a suit if insisting on the stipulated forum would be oppressive or deny justice, having regard to surrounding circumstances and the stakes involved.

The petitioner was invited to produce authority directly contradicting the Gujarat High Court approach but failed to do so. The court observed that novelty of an approach is not by itself a reason to reject it; in the absence of contrary authority the court saw no basis for declining to follow the Gujarat High Court.

The court then examined the matter from another angle using the Nanak Chand Shudurain precedent: there is a marked distinction between the total absence of jurisdiction (which would make any trial void) and an irregular exercise of jurisdiction by a court that is competent in law. Because the Coimbatore court had statutory jurisdiction (part of the cause of action arose there), entertaining the suit despite the contractual stipulation would at most be irregular exercise rather than want of jurisdiction. An irregular exercise does not automatically invalidate the proceedings and gives a revisional court discretionary power under Section 115, C.P.C. to decide whether to interfere.

Applying these principles, the court considered whether permitting the Coimbatore court's order to stand would occasion a failure of justice or cause irreparable injury. Taking into account the modest sum claimed (Rs. 2,500) and the distance between Coimbatore and Bombay, the court concluded that compelling the plaintiff to litigate in Bombay would amount to a denial of justice. Thus, even if the District Munsif erred in holding jurisdiction, the revisional court would not be bound to interfere under Section 115, C.P.C.

The court also applied Section 21, C.P.C., which precludes objections as to place of suing in appellate/revisional courts unless such objection was taken at the earliest opportunity and there has been a consequent failure of justice. Here the objection was taken at the earliest possible opportunity, but the court found no failure of justice that would justify interfering with the District Munsif's order.

Holding and Implications

Holding: The Civil Revision Petition is dismissed. The court refused to interfere with the District Munsif's order that it had jurisdiction to entertain and try the suit.

DISPOSITION: The revisional petition fails and is dismissed; there will be no order as to costs.

Implications:

Direct effect on the parties: The District Munsif, Coimbatore's order upholding jurisdiction stands and the plaintiff may proceed in Coimbatore; the petitioner’s challenge is unsuccessful.
On precedent and law: The court followed the Gujarat High Court's reasoning in Snehalkumar Sarabhai and relied on the Bench decision in Nanak Chand Shudurain to frame the distinction between lack of jurisdiction and irregular exercise. The decision applies discretionary principles under Section 115, C.P.C. and procedural safeguards under Section 21, C.P.C. to decline interference where forcing litigation in the contractually stipulated forum would result in injustice given the circumstances and stakes. The opinion does not purport to overrule existing authorities nor to set a broadly framed new precedent for all forum-selection disputes beyond the facts and reasoning stated.

No costs were awarded.

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Renown Biscuit Company, A Partnership Firm, Biscuit, Manufacturers, Session Road, Cross Lane, Bombay-27 v. Kamalanathan

1. The defendant in O.S No. 1317 of 1975 on the file of the Court of the District Munsif, Coimbatore, is the petitioner herein. The suit was filed by the respondent herein for recovery of a sum of Rs. 2,500/- on the basis of the appointment of the plaintiff-respondent as the sole selling distributor for the biscuits manufactured by the petitioner in the Districts of Coimbatore and Nilgiris on 5th July, 1961, and on account of the transactions that took place between the parties, the plaintiff-respondent claiming to be entitled to the amount in question. The petitioner raised a preliminary objection to the jurisdiction of the Court of the District Munsif, Coimbatore. The petitioner's case was that Clause 13 of the agreement entered into between the parties contemplated the Courts situate in the City of Bombay alone having jurisdiction to entertain any dispute between the parties. The existence of such a Clause in the agreement is not disputed. Equally, as part of the cause of action arose within the Court of the District Munsif, Coimbatore, there is no dispute that that Court has jurisdiction. In view of this, the petitioner's case is that notwithstanding the fact that in law the Court in Coimbatore has jurisdiction, in view of the agreement entered into between the parties, the respondent should have filed the suit only in the Court in Bombay, and, therefore, the Court in Coimbatore did not have jurisdiction to entertain the suit in question. The learned District Munsif held that he had jurisdiction to entertain the suit, and therefore, decided the question of jurisdiction in favour of the respondent herein. It is this order which is sought to be revised in the present petition.

2. There is no controversy on the following facts: (1) The Court in Bombay has jurisdiction, because the petitioner-defendant resides in Bombay. (2) The Court in Coimbatore has jurisdiction because a part of the cause of action arose there. (3) The parties, in Clause 13 of the agreement entered into between them, have agreed that no Court other than the Courts in the City of Bombay shall have jurisdisction to decide any dispute that may be arising between the parties. In such a context, the general rule is no doubt that the plaintiff-respondent will have to file the suit in the Court in Bombay. However, the Gujarat High Court in Snehalkumar Sarabhai v. Economic Transport Organisasion and others,1 had struck a new path. In paragraph 3 of the judgment, it was stated that,

“While parties can lawfully enter into an agreement to restrict a dispute to a particular court having jurisdiction, that stipulation though valid cannot take away the jurisdiction of the court which admittedly has jurisdiction. The ouster clause can operate as estoppel against the parties to the contract. It cannot tie the hands of the court and denude it of the power to do justice. It is no doubt true that ordinarily courts would respect the agreement between the parties which is borne out of the meeting of their minds and out of considerations of convenience. But, the Courts are not obliged to do so in every case. In a case like the present where the claim is Rs. 1,207.92 to oblige the plaintiff to go to Calcutta merely for the pleasure of respecting the stipulation embedded in the contract between the parties is to deny justice. A new approach to this question deserves to be made, for, the ouster clause is calculated to operate as an engine of oppression and as a means to defeat the ends of justice, for, in a case like the present it would be oppressive to drive the plaintiff all the way to Calcutta to recover a small sum of Rs. 1,208/-. The cost of travelling and litigation will far exceed the stakes involved, and even a rightful claimant would be obliged to abandon his claim, rather than incur greater expenditure than the sum involved in order to seek redress. In this back-drop the question assumes importance whether the stipulation to confine the jurisdiction in one of the Courts robs the excluded Court of its power to try the suit. Now, such a stipulation may be legal and binding to parties. That, however, does not mean that it divests the court of its jurisdiction. The plaintiff cannot insist that a Court other than the stipulated Court should try the suit. But, the Court on its part is not bound by the stipulation. The stipulation can be ignored by the excluded court which otherwise possesses jurisdiction if it is considered to be oppressive having regard to the surrounding circumstances including the stakes involved.”

It is this judgment of the Gujarat High Court that was followed by the learned District Munsif in the present case. As soon as this judgment was cited, I asked the learned counsel for the petitioner to bring to my notice any authority or principles which will render the decision of the Gujarat High Court erroneous. The learned Counsel, even after taking an adjournment was not able to bring to my notice any authority or principle to that effect. All that he contends is that the courts have held that when the parties so agreed to oust the jurisdiction of one court which has got jurisdiction in law and vests the jurisdiction in another Court, which also has jurisdiction, then the parties must go to that court only. But, that is not a principle which can be said to render the new approach referred to by the Gujarat High Court erroneous. If every new approach has to be frowned upon solely on the ground that it is new, there will be neither growth nor progress. Under the circumstances, in the absence of anything directly contrary to the decision of the Gujarat High Court, I do not see any jurisdiction for not following it.

3. The matter could be looked at from another point of view also. What is involved in the present case is not the total want of jurisdiction on the part of the Court of the District Munsif, Coimbatore. But for the contract entered into between the parties, there is no dispute that under the Code of Civil Procedure, the learned District Munsif, Coimbatore, will have jurisdiction since a part of the cause of action arose within his jurisdiction. In such a context, when the plaintiff is to be compelled to file a suit in the Court of Bombay, it is not because that the Court in Coimbatore did not have jurisdiction in law, but the parties having entered into a contract between them, they are compelled to stick to the terms of the contract. As pointed out by a Bench of this Court in Nanak Chand Shudurain v. The Tinnevelly Tuticorin Electric Supply Co. Ltd.

“A marked distinction exists between cases in which courts lack jurisdiction to try the cases and where jurisdiction is irregularly exercised by courts. In the former case the Court ought not to have entered upon trial of the suit; in the latter it could have avoided trial, but necessarily not. Competency of a Court to try an action goes to the root of the matter and when such competence is not found, it has no jurisdiction at all to try the case. But, objection based on jurisdiction is a matter which parties could waive, and it is in this sense if such jurisdiction is exercised by Courts, it does not go to the core of it so as to make the resultant judgment a nullity. Equally well-settled is the proposition that where there are two or more competent Courts which can entertain a suit consequent upon a part of the cause of action having arisen within the jurisdiction of each of these courts, parties to the concerned transaction can contract to vest jurisdiction in one of such Courts to try disputes which might arise as between themselves. If such a contract is clear, unambiguous, not vague and explicit, it is not hit by S. 28 of the Contract Act. This should not be understood as parties contracting against statute But, this is one of many series of contracts available in mercantile practice and forged in the name of commercial expediency.”

Thus, it will be seen that even if the learned District Munsif of Coimbatore entertains and disposes of the suit, it will only be an irregular exercise of jurisdiction and the resultant decree will not be a nullity. In such a situation, when the matter is brought before this Court under S. 115 C.P.C, this court has a discretion not to interfere with the order complained of unless, if the order is allowed to stand it would occasion failure of justice or cause irreparable injury to the party against whom it was made. In this particular case, having regard to the stake involved and the distance between Coimbatore and Bombay, it will be causing failure of justice if the plaintiff is driven to go to Bombay for the purpose of instituting the suit for the recovery of this small amount. Therefore, even if the decision of the Gujarat High Court is not correct, and, therefore, the learned District Munsif is wrong in holding that he had jurisdiction to try the suit, yet I am not bound to interfere with that conclusion in exercise of the powers of this court under S. 115, C.P.C

4. There is another aspect of the matter which also can be taken note of. S. 21 of the Code of Civil Procedure states:

“No objection as to the place of suing shall be allowed by any Appellate or Revlsional Court unless such objection was taken in the court of the first instance at the earliest possible opportunity and in all cases where issues are settled at or before such settlement, and unless there has been a consequent failure of justice.”

It is true that in this case the objection has been taken by the petitioner at the earliest possible opportunity, and yet what has to be established under S. 21 (1) C. P. C. is that entertainment of the suit by the learned District Munsif, Coimbatore, has caused failure of justice. I am unable to hold that on the facts of this case, for the reasons already mentioned, there has been a failure of justice by the learned District Munsif holding that he had jurisdiction to entertain and try the suit. For all these reasons, the Civil Revision Petition fails and is dismissed. There will be no order as to costs.

VCS

Renown Biscuit Compa... v. Kamalanathan