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Angile Insulations v. Davy Ashmore India Ltd. And Another
Factual and Procedural Background
The appellant instituted a suit before the Court of the Subordinate Judge, Dhanbad, seeking recovery of money alleged to be due under a contract executed by the first respondent. The respondents objected to the court’s territorial jurisdiction, invoking clause (21) of the contract which conferred exclusive jurisdiction on courts within the territorial limits of the High Court of Karnataka, Bengaluru. By order dated 1 September 1983 the trial court returned the plaint for presentation before a proper court. The appellant’s revision petition (C.R. No. 20 of 1984) was dismissed by the High Court on 17 August 1987. The present appeal was filed before the Supreme Court by special leave.
Legal Issues Presented
- Whether, notwithstanding Section 20 of the Code of Civil Procedure, 1908, clause (21) of the contract validly confers exclusive jurisdiction on courts within the territorial jurisdiction of the High Court of Karnataka.
- Consequently, whether the Court of the Subordinate Judge, Dhanbad, lacked jurisdiction to entertain the appellant’s suit and was justified in returning the plaint.
Arguments of the Parties
Appellant's Arguments
- Invoked Section 20 CPC, contending that because the contract was executed in Dhanbad, part of the cause of action arose there, enabling the suit to be filed in Dhanbad.
- Relied on the Explanation to Section 20 to assert that the Dhanbad court had territorial jurisdiction.
Respondents' Arguments
- Relied on clause (21) of the contract, which states that any legal proceedings shall fall exclusively within the jurisdiction of courts situated within the territorial limits of the High Court at Bengaluru, thereby ousting the jurisdiction of the Dhanbad court.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| A.B.C Laminart (P) Ltd. v. A.P. Agencies, (1989) 2 SCC 163 | Parties may, by contract, choose one of several competent courts to have exclusive jurisdiction, provided the clause is clear, unambiguous, and not hit by Sections 23 or 28 of the Contract Act. | The Court applied this precedent to uphold clause (21) as a valid exclusive-jurisdiction clause, observing that it was explicit and not contrary to public policy. |
Court's Reasoning and Analysis
The Supreme Court began by reiterating the general rule under Sections 16–20 of the CPC that a suit may be instituted where the defendant resides or where the cause of action arises, wholly or in part. However, this general rule is subject to any valid contractual stipulation on jurisdiction. Examining clause (21), the Court found the language “Any legal proceeding will, therefore, fall within the jurisdiction of the above court only” to be clear and unequivocal.
Relying on the decision in A.B.C Laminart, the Court held that when two or more courts are competent, parties can legitimately agree to vest jurisdiction in one of them. Such an agreement is not barred by Sections 23 or 28 of the Contract Act unless it ousts the jurisdiction of all competent courts, which was not the case here because courts in Karnataka are competent forums.
The Court noted that the appellant never pleaded that clause (21) was void or opposed to public policy. Accordingly, the parties were bound by their agreement, and the Dhanbad court lacked jurisdiction. The High Court, therefore, rightly affirmed the trial court’s order returning the plaint.
Holding and Implications
The appeal is dismissed.
Immediate Effect: The plaint must be presented before a court of competent jurisdiction within the territorial limits of the High Court of Karnataka. Broader Implication: The decision reaffirms that explicit and unambiguous exclusive-jurisdiction clauses are enforceable when multiple courts are otherwise competent, thereby reinforcing commercial certainty in contractual dispute-resolution clauses without setting any new precedent beyond existing Supreme Court jurisprudence.
Order
1. Leave granted.
2. The appellant had initiated action in the Court of Subordinate Judge, Dhanbad for recovery of certain amounts said to be due from the first respondent. The appellant filed the case on a contract executed by the first respondent. On filing the suit for recovery of the amounts, the respondents raised the objection as regards the jurisdiction of the court and placed reliance on clause (21) of the contract. The trial court returned the plaint for presentation to the proper court by its order dated 1-9-1983. Thereon, the appellant carried the matter in revision to the High Court. The High Court in the impugned order made in CR No. 20 of 1984 dated 17-8-1987 upheld the view of the trial court and dismissed the revision. Thus, this appeal by special leave.
3. The principal contention raised by the appellant is that Section 20 of CPC provides that where cause of action had arisen partly within territorial jurisdiction of one court or partly in another court, it would be open to the parties to avail of the remedy at the court where part of the cause of action had arisen. In support thereof, he contended that the contract was entered into and executed within the jurisdiction of the Court of the Subordinate Judge, Dhanbad. Therefore, by operation of the Explanation to Section 20, it must be deemed that the cause of action had arisen within the local limits of the jurisdiction of the Court of Subordinate Judge, Dhanbad.
4. Normally, the plea of jurisdiction of the Court is to be considered in accordance with Sections 16 to 20 of CPC. Section 20 provides that subject to some limitations, every suit shall be instituted in a 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 carried on business, or personally works for gain; or any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides or carried 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.
5. So, normally that court also would have jurisdiction where the cause of action, wholly or in part, arises. But it will be subject to the terms of the contract between the parties. In this case, clause (21) reads thus:
“This work order is issued subject to the jurisdiction of the High Court situated in Bangalore in the State of Karnataka. Any legal proceeding will, therefore, fall within the jurisdiction of the above court only.”
A reading of this clause would clearly indicate that the work order issued by the appellant will be subject to the jurisdiction of the High Court situated in Bangalore in the State of Karnataka. Any legal proceeding will, therefore, be instituted in a Court of competent jurisdiction within the jurisdiction of High Court of Bangalore only. The controversy has been considered by this Court in A.B.C Laminart (P) Ltd. v. A.P Agencies (1989) 2 SCC 163. Considering the entire case law on the topic, this Court held that the citizen has the right to have his legal position determined by the ordinary Tribunal except, of course, subject to contract (a) when there is an arbitration clause which is valid and binding under the law, and (b) when parties to a contract agree as to the jurisdiction to which dispute in respect of the contract shall be subject. This is clear from Section 28 of the Contract Act. But an agreement to oust absolutely the jurisdiction of the court will be unlawful and void being against the public policy under Section 23 of the Contract Act. We do not find any such invalidity of clause (21) of the contract pleaded in this case. On the other hand, this Court laid that where there may be two or more competent courts which can entertain a suit consequent upon a part of the cause of action having arisen therewith, if the parties to the contract agreed to vest jurisdiction in one such court to try the dispute which might arise as between themselves, the agreement would be valid. If such a contract is clear, unambiguous and explicit and not vague, it is not hit by Sections 23 and 28 of the Contract Act. This cannot be understood as parties contacting against the statute. Mercantile law and practice permit such agreements.
6. In this view of the law and in view of the fact that the agreement under which clause (21) was incorporated as one such clause, the parties are bound by the contract. The contract had not been pleaded to be void and being opposed to Section 23 of the Contract Act. As seen, clause (21) is unambiguous and explicit and that, therefore, the parties having agreed to vest the jurisdiction of the court situated within the territorial limit of High Court of Karnataka, the Court of Subordinate Judge, Dhanbad in Bihar State has no jurisdiction to entertain the suit laid by the appellant. Therefore, the High Court was right in upholding the order of the trial court returning the plaint for presentation to the proper court.
7. The appeal is accordingly dismissed. No costs.
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