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New Moga Transport C... v. United India Insuran...
Factual and Procedural Background
Malwa Cotton Spinning Mills Ltd. (“Plaintiff 2”) purchased 29 bales of material and entrusted their carriage to New Moga Transport Co. (“Defendant 1”) for delivery to Barnala. The goods, loaded in Truck No. HYN 6973, reached the vicinity of Plaintiff 2’s factory at Barnala on 23-5-1993, where they were completely destroyed by fire allegedly caused by an electrical short-circuit.
Plaintiff 2 claimed Rs 5,10,000 from Defendant 1. As no payment was made—save for a non-delivery certificate—United India Insurance Co. Ltd. (“Plaintiff 1”), which had insured the consignment, settled the loss for Rs 4,63,516, obtained a letter of subrogation-cum-special power of attorney from Plaintiff 2, and sued Defendant 1 in the Civil Court at Barnala.
Defendant 1 objected to venue, relying on a consignment-note clause declaring that only the court at Udaipur (the transporter’s head-office city) would have jurisdiction. The trial court rejected the objection; the first appellate court allowed it; the High Court, in revision under Section 115 CPC, reinstated the trial court’s view. Defendant 1 appealed to the Supreme Court.
Legal Issues Presented
- Whether, in view of the jurisdiction clause in the consignment note specifying the “court at Udaipur” as the exclusive forum, the Civil Court at Barnala lacked jurisdiction to entertain the suit.
Arguments of the Parties
Appellant (Defendant 1)
- The consignment note expressly vested exclusive jurisdiction in the court at Udaipur; by agreement the parties validly ousted all other forums.
- The High Court overlooked this contractual exclusion and erroneously restored the trial court’s decision.
Respondent 1 (Plaintiff 1)
- The clause is vague—referring merely to “court at head office city” without identifying that city—and therefore incapable of excluding ordinary jurisdiction.
- Reliance on such a technical plea has delayed adjudication; both the trial court and High Court correctly treated Barnala as a competent forum.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Patel Roadways Ltd. v. Prasad Trading Co., (1991) 4 SCC 270 | Interpretation of Section 20 CPC and its Explanation concerning a corporation’s business location and jurisdiction. | Relied on to analyse how causes of action and corporate offices affect territorial jurisdiction. |
| Hakam Singh v. Gammon (India) Ltd., (1971) 1 SCC 286; AIR 1971 SC 740 | Parties may, by contract, choose one of several competent courts; such a clause is not against public policy. | Cited to affirm the validity of exclusive jurisdiction clauses when multiple courts are otherwise competent. |
| Shriram City Union Finance Corp. Ltd. v. Rama Mishra, (2002) 9 SCC 613; AIR 2002 SC 2402 | Re-emphasised the principle from Hakam Singh and clarified that once parties choose a forum, they are bound by it. | Used to underscore that the presence of the word “alone”/“only” can effectively exclude other forums. |
Court's Reasoning and Analysis
The Supreme Court began with Section 20 CPC, noting that a plaintiff ordinarily has a choice of forums where (a) the defendant resides or carries on business, or (c) the cause of action arises. However, a defendant may protect itself from litigation in multiple venues through an exclusion clause.
Analysing the Explanation to Section 20, the Court distinguished between a corporation’s principal and subordinate offices, stressing that the clause allows jurisdiction to be localised when the cause of action arises where a subordinate office exists.
Turning to the contract, the consignment note contained two crucial statements: (1) “The court at head office city shall only be the jurisdiction…”, and (2) an explicit designation at the top that “Udaipur court” has jurisdiction. Unlike a vague clause, the presence of the specific place—Udaipur—clearly manifested the parties’ intent to confer exclusive jurisdiction there.
Relying on Hakam Singh and Shriram City Union Finance, the Court reiterated that parties may restrict litigation to one of multiple competent forums, provided the chosen court itself possesses jurisdiction. As Udaipur was concededly a competent forum, the clause was enforceable. The High Court had therefore erred in dismissing the exclusion and restoring the trial court’s decree.
Holding and Implications
Held: Appeal Allowed. The Supreme Court set aside the High Court’s judgment and reinstated the first appellate court’s order, declaring that only the court at Udaipur has jurisdiction. The Barnala court must return the plaint within four weeks for filing at Udaipur, where limitation will not be pleaded.
Implications: The decision reinforces that an unambiguous contractual clause selecting one competent court is binding and ousts the jurisdiction of other courts. While not creating new law, it affirms existing precedent and underscores the necessity for clear drafting to effectuate jurisdiction-selection clauses.
Arijit Pasayat, J.— Leave granted.
2. In this appeal, the only question that is raised is whether the High Court's conclusion that the civil court at Barnala had jurisdiction to try the suit filed by Respondent 1 United India Insurance Co. Ltd. (hereinafter referred to as “Plaintiff 1”) and Malwa Cotton Spinning Mills Ltd. (hereinafter referred to as “Plaintiff 2”) is correct or not. While the trial court held that the Barnala court had jurisdiction, the first appellate court held otherwise. Accepting the revision filed under Section 115 of the Code of Civil Procedure, 1908 (in short “CPC”) the High Court by the impugned judgment held that the trial court's view was correct.
3. The dispute arose in the following background:
Plaintiff 2 had purchased certain articles which were booked in 29 bales. Material was booked with New Moga Transport Co., the present appellant (Defendant 1) for transportation to Barnala. The goods were loaded in Truck No. HYN 6973. The consignment reached Barnala at 9.30 a.m on 23-5-1993 near the factory of Plaintiff 2. On account of a fire which took place allegedly due to electric short-circuiting there was destruction of whole of the materials. Plaintiff 2 claimed that he had suffered loss and lodged a claim for a sum of Rs. 5,10,000 against the present appellant i.e Defendant 1. Since nothing was paid and only a non-delivery of goods certificate was issued by the appellant (Defendant 1), Respondent 1 (Plaintiff 1) settled the claim for a sum of Rs. 4,63,516 on the basis of the surveyor's report and the amount was paid to Plaintiff 2 and due receipt was obtained. Plaintiff 2 on receipt of the amount executed a letter of subrogation-cum-special power of attorney, assigning, abandoning and transferring all the rights in favour of Plaintiff 1 who claims compensation from Defendant 1 i.e the present appellant. In the suit a specific plea inter alia was taken by the present appellant that the court at Barnala had no jurisdiction to deal with the suit. With reference to the consignment note, it was submitted that the court at Udaipur alone had jurisdiction to deal with the matter. In the consignment note it was indicated that the court having jurisdiction was the one situated at Udaipur. As noted above, the trial court did not accept the plea that the court at Udaipur alone had jurisdiction. But in appeal, the first appellate court upset the verdict of the trial court. By the impugned judgment the High Court restored the judgment of the trial court and held that the plaintiffs were entitled to relief and the court at Barnala had jurisdiction.
4. In support of the appeal, learned counsel for the appellant (Defendant 1) submitted that the High Court has clearly overlooked the fact that the parties by an agreement have fixed a particular court to be the court that has the jurisdiction to try the suit. Without any plausible reason or basis the High Court upset the decision of the first appellate court.
5. Undisputedly, in the consignment note it was stated as follows:
“The court at head office city shall only be the jurisdiction in respect of all claims and matters arising under the consignment at the goods entrusted for transport.”
Additionally, at the top of the consignment note the jurisdiction has been specified to be with Udaipur court. With reference to the aforesaid indication in the consignment note, learned counsel for the appellant stated that there is clear exclusion of the courts other than the chosen one and, therefore, the suit could not have been entertained at any other place. Unfortunately, the High Court did not appreciate the factual position in its proper perspective holding that the court at Barnala would have got jurisdiction in the ordinary course. Because of the exclusion clause as embodied in the consignment note and specific indication in the consignment note that the Udaipur court alone has jurisdiction the High Court was not justified in its conclusion.
6. Learned counsel appearing for Respondent 1 (Plaintiff 1) submitted that the consignment note was not clear and what was stated in the consignment note was “the court at head office city shall only be the jurisdiction in respect of all claims and matters arising under the consignment at the goods entrusted for transport”. Though the parties could by agreement restrict the jurisdiction to a court which along with other courts had jurisdiction, yet in view of the vague indication of the court relating to jurisdiction, the High Court has rightly interfered. It was submitted that basing on such technical pleas there has been considerable delay in proceeding with the matter and the trial court and the High Court were justified in holding that the court at Barnala had jurisdiction. A very technical plea had been advanced by Defendant 1 (appellant herein) to defeat the purpose of the suit. It is submitted that the consignment note refers to the head office without specifying as to where the head office was. In view of the vague indication it cannot be said that the parties by agreement excluded the jurisdiction of one of the courts. It is, therefore, not possible to know as to whether the court referred to in clause 16 in the consignment note refers to any particular court having jurisdiction or was unconnected with the jurisdiction.
7. Similar question has been examined by this Court on several occasions.
8. Section 20 CPC reads as follows:
“20. Other suits to be instituted where defendants reside or cause of action arises.—Subject to the limitations aforesaid, 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 carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries 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, as aforesaid, acquiesce in such institution; or
(c) the cause of action, wholly or in part, arises.
Explanation.—A corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.”
9. Normally, under clauses (a) to (c) the plaintiff has a choice of forum and cannot be compelled to go to the place of residence or business of the defendant and can file a suit at a place where the cause of action arises. If the defendant desires to be protected from being dragged into a litigation at some place merely because the cause of action arises there it can save itself from such a situation by an exclusion clause. The clear intendment of the Explanation, however, is that where the corporation has a subordinate office in the place where the cause of action arises it cannot be heard to say that it cannot be sued there because it does not carry on business at that place. Clauses (a) and (b) of Section 20 inter alia refer to a court within the local limits of whose jurisdiction the defendant inter alia “carries on business”. Clause (c) on the other hand refers to a court within the local limits of whose jurisdiction the cause of action wholly or in part arises.
10. On a plain reading of the Explanation to Section 20 CPC it is clear that the Explanation consists of two parts: (i) before the word “or” appearing between the words “office in India” and the words “in respect of”, and (ii) the other thereafter. The Explanation applies to a defendant which is a corporation, which term would include even a company. The first part of the Explanation applies only to such corporation which has its sole or principal office at a particular place. In that event, the court within whose jurisdiction the sole or principal office of the company is situate will also have jurisdiction inasmuch as even if the defendant may not actually be carrying on business at that place, it will be deemed to carry on business at that place because of the fiction created by the Explanation. The latter part of the Explanation takes care of a case where the defendant does not have a sole office but has a principal office at one place and has also a subordinate office at another place. The expression “at such place” appearing in the Explanation and the word “or” which is disjunctive clearly suggest that if the case falls within the latter part of the Explanation it is not the court within whose jurisdiction the principal office of the defendant is situate but the court within whose jurisdiction it has a subordinate office which alone has the jurisdiction “in respect of any cause of action arising at any place where it has also a subordinate office”.
11. Section 20, before the amendment of CPC in 1976, had two Explanations being Explanations I and II. By the Amendment Act, Explanation I was omitted and Explanation II was renumbered as the present Explanation. Explanation which was omitted reads as follows:
“Explanation I.—Where a person has a permanent dwelling at one place and also a temporary residence at another place, he shall be deemed to reside at both places in respect of any cause of action arising at the place where he has such temporary residence.”
12. This Explanation dealt with the case of place of residence of the defendant and provided with regard to a person having a permanent dwelling at one place and also temporary at another place, that such person shall be deemed to reside at both places in respect of any cause of action arising at the place where he has such temporary residence. The language used in Explanation II, on the other hand, which is the present Explanation, was entirely different. Had the intention been that if a corporation had its principal office at one place and a subordinate office at another place and the cause of action arose at the place where it had its subordinate office it shall be deemed to be carrying on business at both places, the language used in Explanation II would have been identical to that of Explanation I which was dealing with a case of a person having a permanent dwelling at one place and also temporary residence at another place.
13. The above position was noted in Patel Roadways Ltd. v. Prasad Trading Co. (1991) 4 SCC 270
14. By a long series of decisions it has been held that where two courts or more have jurisdiction under CPC to try a suit or proceeding, an agreement between the parties that the dispute between them shall be tried in any one of such courts is not contrary to public policy and in no way contravenes Section 28 of the Indian Contract Act, 1872. Therefore, if on the facts of a given case more than one court has jurisdiction, parties by their consent may limit the jurisdiction to one of the two courts. But by an agreement parties cannot confer jurisdiction on a court which otherwise does not have jurisdiction to deal with a matter. [See Hakam Singh v. Gammon (India) Ltd. (1971) 1 SCC 286, AIR 1971 SC 740 and Shriram City Union Finance Corpn. Ltd. v. Rama Mishra (2002) 9 SCC 613, AIR 2002 SC 2402.]
15. In the aforesaid factual background, the facts of the case at hand have to be looked into.
16. Had it only been indicated in the consignment note that the court at head office city had jurisdiction then in the absence of a precise indication of the place what would have been the consequence, we are not presently concerned, more particularly, when the consignment note itself had indicated that the court at Udaipur alone had jurisdiction.
17. As was observed by this Court in Shriram case (2002) 9 SCC 613, AIR 2002 SC 2402 referring to Hakam Singh case (1971) 1 SCC 286, AIR 1971 SC 740 an agreement affecting jurisdiction of courts is not invalid. It is open to the parties to choose any one of the two competent courts to decide the disputes. Once the parties bind themselves as such it is not open for them to choose a different jurisdiction.
18. Above being the factual and legal position, the inevitable conclusion is that the High Court was not justified in upsetting the order of the first appellate court. It is not a case where the chosen court did not have jurisdiction. The only question, therefore, related to exclusion of the other courts.
19. The intention of the parties can be culled out from use of the expressions “only”, “alone”, “exclusive” and the like with reference to a particular court. But the intention to exclude a court's jurisdiction should be reflected in clear, unambiguous, explicit and specific terms. In such case only the accepted notions of contract would bind the parties. The first appellate court was justified in holding that it is only the court at Udaipur which had jurisdiction to try the suit. The High Court did not keep the relevant aspects in view while reversing the judgment of the trial court. Accordingly, we set aside the judgment of the High Court and restore that of the first appellate court. The court at Barnala shall return the plaint to Plaintiff 1 (Respondent 1) with appropriate endorsement under its seal which shall present it within a period of four weeks from the date of such endorsement of return before the proper court at Udaipur. If it is so done, the question of limitation shall not be raised and the suit shall be decided on its own merits in accordance with law. The appeal is allowed. No costs.
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