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Case Number

Appeal No. 425 of 1976, Suit No. 189 of 1976

Attorney(S)

H.K. Mitter with P. Chatterjee
P.K. Roy
B.K. Chatterjee
for Dena Bank

Judges

A.N Sen
Bimal Chandra Basak, JJ.

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Smart Summary

Structured Summary of the Opinion (A.N. Sen, J.)

Factual and Procedural Background

This appeal arises from an order dated 22 November 1976 of Ajay K. Basu, J., dismissing an application made by the appellants (defendants Nos. 1 and 2) for a stay of a suit instituted by the plaintiff and for related reliefs (including an injunction and revocation of leave under Clause 12 of the Letters Patent).

The plaintiff instituted the suit on 26 April 1976 seeking, inter alia, a decree for Rs. 7,58,322.48; alternatively a decree against defendants Nos. 1 and 2 (or alternatively defendant No. 3) for Rs. 1,77,106.44 with interest from 28 June 1973; and a claim for damages and other reliefs. The plaintiff also sought leave under Clause 12 of the Letters Patent and Order II Rule 2 CPC.

The dispute arises from a written contract between the plaintiff and defendant No. 2 (who is the sole proprietor of defendant No. 1) for the sale of 10,000 kgs of Chloramphenicol Powder I.P. to be supplied 2,000 kgs per month from April to August 1973 at Rs. 340/- per kg FOB Bombay. The contract required the plaintiff to open a confirmed irrevocable revolving letter of credit for Rs. 34,00,000/-, and explicitly stated: “This contract is subject to Bombay jurisdiction.”

The plaintiff's pleaded cause of action against defendants Nos. 1 and 2 is that they supplied talcum powder instead of chloramphenicol, and the plaintiff claims refund and damages. Dena Bank (defendant No. 3) was impleaded alleging that goods in its custody may have been altered and because the bank was involved in related transactions.

Defendants Nos. 1 and 2 applied for a stay of the suit and revocation of leave under Clause 12. The trial judge dismissed that application (by the order under appeal), and no separate judgment was delivered by the learned trial judge. The defendants appealed that dismissal.

Legal Issues Presented

Whether the specific contractual clause “This contract is subject to Bombay jurisdiction” requires that suits arising under the contract be brought in Bombay and consequently whether this Court should stay or decline to entertain the suit.
Whether the impleading of Dena Bank (defendant No. 3), a party not bound by the contract between the plaintiff and defendants Nos. 1 and 2, prevents enforcement of the forum-selection clause and thus permits the plaintiff to proceed in this Court.
Whether the Bombay Court has jurisdiction over Dena Bank (considering the bank's head office and the plaintiff's averments) and, relatedly, how the balance of convenience should be assessed in light of the forum clause and the presence of an additional non-contractual party.

Arguments of the Parties

Appellants' (Defendants Nos. 1 & 2) Arguments

The contract contains a specific covenant making the contract subject to Bombay jurisdiction; that covenant should be enforced and therefore this Court should not entertain the suit.
Reliance on authorities (including Hakam Singh v. Gammon (India) Ltd. and a Division Bench decision in Sri Rajendra Mills Ltd. v. H.V.M. Haji Hasan Dada) to support enforcement of the forum clause.
The fact that Dena Bank has been impleaded does not materially affect the enforceability of the forum clause; the suit should be stayed and, if necessary, transferred or returned so it can be instituted in Bombay.
The balance of convenience strongly favors trial in Bombay.

Plaintiff's Arguments (as presented by Mr. Roy)

Accepts generally that forum covenants are normally enforceable but contends that because Dena Bank (defendant No. 3) is a party, the plaintiff could not possibly file the suit in Bombay — the Bombay court would not have jurisdiction over Dena Bank in respect of the present suit as framed.
Argued that each branch of a bank constitutes a separate entity and relied on the Privy Council decision The King v. Irvine Lovitt (1912 AC 212) and a local decision (Hansraj Bajaj v. Text Indian Overseas Bank Ltd., AIR 1956 Cal 33) to support the proposition that transactions with a particular branch should be litigated within the jurisdiction of that branch.
Submitted that the balance of convenience is overwhelmingly in favour of this Court (presumably Calcutta) for trial so far as the plaintiff and Dena Bank are concerned, pointing to the plaintiff's transactions with a particular branch of the bank located within this Court's jurisdiction.

Dena Bank's Arguments (Defendant No. 3, as presented by Mr. Chatterjee)

As regards the bank, the cause of action arises within the jurisdiction of this Court, and the balance of convenience for trial of the bank-related cause of action is overwhelmingly in favour of this Court.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Hakam Singh v. Gammon (India) Ltd., (1971) 1 SCC 286 : AIR 1971 SC 740	Cited in support of enforcing a contractual forum-selection clause (i.e., enforcing agreed jurisdiction).	The court noted this decision as lending clear support to enforcing the specific clause making the contract subject to Bombay jurisdiction.
Sri Rajendra Mills Ltd. v. H.V.M. Haji Hasan Dada, AIR 1970 Cal 342	Discussed the effect of a contractual forum covenant and the plaintiff's choice of forum where alternate forums exist; used to show plaintiff cannot institute suit elsewhere if it has waived other forums.	The court relied on the observations in this decision (quoted in the opinion) as supporting the view that the plaintiff, having limited its choice of forum by contract, cannot avoid that limitation by invoking another forum or by impleading other parties.
AIR 1977 Cal 20 (unnamed in text)	Relied upon by appellants as a supporting authority (context: enforcing forum clause).	The court treated this decision as additional support for enforcing the clause requiring Bombay jurisdiction.
Decision of Andhra Pradesh High Court, AIR 1962 Andh Pra 452	Relied upon by appellants (context: supporting enforcement of forum clause).	Considered by the court as further authority supporting enforcement of the Bombay forum clause.
The King v. Irvine Lovitt, 1912 AC 212 (Privy Council)	Cited by the plaintiff to support the proposition that each branch of a bank may constitute a separate entity (relevance: jurisdiction over particular branch).	The court recorded the plaintiff's reliance on this decision but ultimately found that the Bombay Court could have jurisdiction over Dena Bank (head office in Bombay) and did not accept that impleading the bank defeated the forum clause.
Hansraj Bajaj v. Text Indian Overseas Bank Ltd., AIR 1956 Cal 33 (P.B. Mukharji, J.)	Relied upon by plaintiff to support the proposition about bank branches; also referenced in the opinion regarding jurisdictional matters.	The court observed that even the decision of P.B. Mukharji, J. (AIR 1956 Cal 33) makes clear that Bombay Court has jurisdiction to try and entertain the suit in the facts of this case; the court relied on this to support its conclusion that Bombay has jurisdiction over the bank at least in part.

Court's Reasoning and Analysis

The court's analysis proceeded from the contractual text and the facts pleaded in the plaint. The decisive factual and legal starting point was the explicit contractual provision: “This contract is subject to Bombay jurisdiction.”

Step-by-step reasoning:

The court accepted the general legal principle acknowledged by both sides: a specific forum-selection covenant in a contract is normally enforced unless good grounds exist not to enforce it. The court observed that the authorities relied upon by appellants clearly supported enforcing such covenants.
The court examined whether the impleading of Dena Bank (a party not to the contract) changed the analysis. It concluded that mere impleading of the bank does not entitle the plaintiff to sue in a Court other than that agreed upon in the contract between the plaintiff and defendants Nos. 1 and 2.
The court assessed whether the Bombay Court would have jurisdiction over Dena Bank. It found that the bank’s head office is at Bombay and that, on the averments in the plaint, part of the cause of action against the bank arises in Bombay. Thus it could not be said that the Bombay Court would have no jurisdiction over the bank.
The court considered the balance of convenience. Apart from the contractual provision, the facts and circumstances (including where the cause of action against defendants Nos. 1 and 2 arose) indicated that the balance of convenience for at least those defendants strongly favoured Bombay. When the entire case was considered, the balance of convenience for trial of the cause as a whole was held to be overwhelmingly in favour of the Bombay Court.
Based on the foregoing—(a) the enforceable forum clause, (b) the availability of Bombay jurisdiction over the bank (head office in Bombay and parts of cause of action arising there), and (c) the balance of convenience—the court concluded that the defendants’ application for stay should succeed.

The court expressly noted that the trial judge had dismissed the defendants' application without delivering a judgment; the appellate court reviewed the matter on the merits and set aside that dismissal.

Holding and Implications

Holding:

APPEAL ALLOWED. The order of the learned trial judge dismissing the defendants' application is set aside. There will be an order in terms of prayer (a) of the Notice of Motion and an order staying the suit and all further proceedings in this Court in terms of prayer (b).

Direct implications for the parties:

The suit pending before this Court is stayed; the plaintiff is bound by the contractual clause requiring Bombay jurisdiction for claims arising under the contract and must pursue enforcement accordingly.
The court directed that each party shall pay and bear its own costs in the appeal.

Broader implications:

The opinion enforces the principle that a clear forum-selection clause in a contract will ordinarily be enforced and that the mere presence of a non-contractual party (here, a bank) as an additional defendant does not, by itself, permit a plaintiff to override the contractual choice of forum — particularly where the court specified in the contract (Bombay) can be shown to have jurisdiction over the non-contractual party (for example, by its head office being in that forum or by part of the cause of action arising there).

The opinion does not state that it sets any new legal precedent beyond applying existing principles; it resolved the dispute on the basis of the contractual clause, factual averments regarding jurisdiction and the balance of convenience.

Prepared strictly from the text of the provided opinion. No information has been added beyond what appears in the opinion.

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M/S. Shah Prabhudas Gulabchand And Another v. Eurasian Equipments And Chemicals Ltd. And Another

A.N Sen, J.:— This appeal arises out an order passed by Ajay K. Basu, J. on the 22nd November, 1976 dismissing the application of the appellants who happened to be defendants Nos. 1 and 2 in the suit for stay of the suit filed by the plaintiff in this Court, for an injunction restraining the plaintiff from proceeding with the suit, for revoking leave under Cl. 12 of the Letters Patent and for other reliefs.

2. The plaintiff instituted this suit in this Court on the 26th April, 1976. In the suit, the prayer of the plaintiff is for a decree for Rs. 7,58,322.48 p. and in the alternative (i) a decree against the defendants Nos. 1 and 2 or alternatively against the defendant No. 3 for Rupees 1,77,106.44 p. with interest thereon @ 12% per annum or at such other rate as may be prescribed from June 28, 1973 till the institution of the suit, (ii) an enquiry into the damages as pleaded in para. 11 of the plaint and decree for such sum as may be found due to the plaintiff, interest and other reliefs.

3. The plaintiff also prayed for leave under Cl. 12 of the Letters Patent and under O. II, R. 2 of the CPC. The plaintiff entered into a contract with the defendant No. 2 who is the sole proprietor of the defendant No. 1. The said contract was in writing and under the said contract the plaintiff agreed to buy and the defendants were to sell 10,000 Kgs. of Chloramphenicol Powder I.P to be supplied during the months of April, May, June, July and August, 1973 @ 2,000 Kgs. each month at the agreed price of Rs. 340/- per Kg. F.O.B Bombay. Under the terms of the said agreement between the parties the plaintiff was to open in favour of the defendant No. 1 a confirmed irrevocable revolving Letter of Credit for Rs. 34,00,000/- equivalent to the value of 10,000 Kgs. of the said merchandise. The said contract contains a clause to the following effect:

“This contract is subject to Bombay jurisdiction.”

4. In this suit the plaintiffs cause of action against the defendants Nos. 1 and 2 is that the defendants instead of supplying Chloramphenicol Powder have supplied Talcum Powder in breach of the said contract between the parties and on the basis of such cause of action the plaintiff has asked for refund of the money paid in respect of the said supply and also for damages. The plaintiff in this suit has impleaded Dena Bank as a party defendant being defendant No. 3. The cause of action of the plaintiff against Dena Bank is that in the event it be held that the defendants Nos. 1 and 2 had supplied proper materials then the said materials which went into the custody of Dena Bank must have been changed in the custody of the Dena Bank.

5. The defendants Nos. 1 and 2 thereafter made this application for stay of this suit and also for revocation of leave under Cl. 12 of the Letters Patent. The said application of the defendant No. 2 was opposed by the plaintiff and also by the defendant No. 3. The learned trial Judge was pleased to dismiss the said application of the defendants Nos. 1 and 2 by his order under appeal. It appears that the learned trial Judge did not deliver any judgment.

6. The principal contention of the appellants before us has been that in view of the specific provision in the contract between the plaintiff and the defendant No. 2 that the contract is subject to Bombay jurisdiction, this Court should not entertain this suit. Reliance has been placed on the decision of the Supreme Court in the case of Hakam Singh v. Gammon (India) Ltd.† ., (1971) 1 SCC 286 : AIR 1971 SC 740 and also decision of the Division Bench of this Court in the case of Sri Rajendra Mills Ltd. v. H.V.M Haji Hasan Dada reported in AIR 1970 Cal 342. Reliance has also been made in this connection on two other decisions, one of which is reported in AIR 1977 Cal 20 and the other is a decision of the Andhra Pradesh High Court, reported in AIR 1962 Andh Pra 452.

7. Mr. Mitter, appearing on behalf of the appellants, has contended that in view of the specific covenant in the contract and in the light of the decisions in the above cases, the learned Trial Judge should have made an order staying the suit in this Court. He has further argued that the fact that Dena Bank has been impleaded as a party to this suit does not make any material difference and in support of this contention he has placed particular reliance on the decision of the Division Bench of this Court in AIR 1970 Cal 342 and he has drawn our attention to the following observation at page 342:

“It appears, however, as we have already stated, that the instant suit could have been instituted either at Howrah or at Salem and the plaintiff, by reason of the above contract, had validly waived its right to institute the suit except at Salem. In such circumstances, it is not open to the plaintiff to object to the order for return of the plaint for presentation to the Court at Salem. It is not also open to defendant No. 2 to object to the same course as the choice of forum in case of alternative forums, lies with the plaintiff and the plaintiff having debarred or precluded itself from going to any other Court except the Court at Salem which would be a proper Court as against defendant No. 2 also, 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.”

8. Mr. Mitter has also submitted that the balance of convenience in the facts and circumstances of this case is overwhelmingly in favour of the cause being tried in Bombay.

9. Mr. Roy, appearing on behalf of the plaintiff, does not dispute the proposition that if the contract contains a specific provision or covenant as to any particular forum where suits or proceedings are to be instituted in respect of or arising out of the said contract, the said covenant should normally be enforced unless there is good ground for not enforcing the same. Mr. Roy has contended that in the instant case as Dena Bank is a party to the suit the plaintiff could not possibly file the suit at Bombay. It is his contention that the suit as framed cannot be instituted in Bombay, as Bombay Court has no jurisdiction to entertain the suit against Dena Bank. He has also argued that the balance of convenience is overwhelmingly in favour of this Court for the trial of the case in so far as the plaintiff and the defendant No. 3, Dena Bank are concerned. Mr. Roy has submitted that the plaintiff had transaction with the particular branch of Denk in Calcutta and the said branch constitutes a separate entity and the suit in relation to any transaction with the said branch should be filed in a Court within whose jurisdiction the said branch is situated. In support of this contention that each branch of a bank constitutes a separate entity. Mr. Roy has relied on the decision of Privy Council in the case of The King v. Irvine Lovitt, reported in 1912 AC 212 and also on the decision of P.B Mukharji, J in the case of Hansraj Bajaj…Plaintiff; v. Text Indian Overseas Bank Ltd.…Defendant., AIR 1956 Cal 33.

10. Mr. Chatterjee, appearing on behalf of the Dena Bank has submitted before us that so far as the bank is concerned the cause of action arises within the jurisdiction of this Court and the balance of convenience for trial of the cause of action in this case against the bank is overwhelmingly in favour of this Court.

11. In our opinion, in view of the specific provision in the contract making the contract subject to Bombay Jurisdiction the application of the defendants should succeed. The decisions relied on by Mr. Mitter clearly lends support to this view. The mere fact that the Dena Bank has been impleaded as a Party to this suit does not entitle the plaintiff to file this suit in this Court in breach of the specific provision contained in the contract. It cannot be said in the instant case that the Bombay Court will have no jurisdiction to try this suit against Dena Bank. The head office of Dena Bank is at Bombay and it also appears on the basis of averments made in the plaint that Part of the cause of action against Dena Bank also arises in Bombay. The plaintiff and the said defendants entered into the said contract containing the said specific provision regarding their choice of forum. Apart from the said specific provision in the contract, it also appears from the facts and circumstances of this case that the balance of convenience for trial of the cause of action at least against the defendants Nos. 1 and 2 is entirely in favour of the Bombay Court. As the plaintiff who has the choice of forum is obliged to institute this suit in the Bombay Court in view of the specific covenant in the contract, the fact that Dena Bank who is not a Party to the contract is also made party to the suit does not authorise or entitle the plaintiff to file the suit in this Court on the basis of the said contract in breach of the specific provision contained therein.

12. In view of the provision contained in the said contract, the choice of forum of the plaintiff is restricted only to Bombay Court in respect of enforcement of any claim under the contract or on the basis of the contract containing this special provision regarding forum. The question of balance of convenience of the defendant No. 3 in the facts and circumstances of this case, loses a great deal or its importance and the question of balance of convenience of the defendant No. 3 has also to be considered in the background of the entire facts and circumstances of this case. It cannot be disputed in our opinion that the Bombay Court has jurisdiction to try and entertain the suit. Even, the decision of P.B Mukharji, J in AIR 1956 Cal 33 makes this position abundantly clear. We are further of the opinion that on a consideration of the entire facts and circumstances of this case, the balance of convenience for trial of the cause as a whole is overwhelmingly in favour of the Bombay Court.

13. In that view of the matter, the appeal succeeds. The order passed by the learned Trial Judge is set aside. There will be an order in terms of prayer (a) of the Notice of Motion and there will be an order staying the suit and all further proceedings thereon in this Court in terms of prayer (b).

14. In the facts and circumstances of this case we direct that each party will pay and bear its own costs.

15. Bimal Chandra Basak, J.:— I agree.

16. Appeal allowed.

M/S. Shah Prabhudas Gulabchand And Another v. Eurasian Equipments And Chemicals Ltd. And Another

Structured Summary of the Opinion (A.N. Sen, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellants' (Defendants Nos. 1 & 2) Arguments

Plaintiff's Arguments (as presented by Mr. Roy)

Dena Bank's Arguments (Defendant No. 3, as presented by Mr. Chatterjee)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

M/S. Shah Prabhudas Gulabchand And Another v. Eurasian Equipments And Chemicals Ltd. And Another

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