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Case Number

Appeal from Original Order no. 74 of 1944, from an order of Mr. Damodar Prasad, Additional Subordinate Judge of Muzaffarpur, dated the 18th February, 1944

Advocates

P.R Das, S.N Bose and P.K Bose, for the appellants.
Lalnarain Sinha and T.P Singh, for the respondents.

Judges

Fazl Ali, C.J
Ray, J.

Acts

section 20, clause (c) of the Code of Civil Procedure
section 24 of the Code of Civil Procedure
SECTION 6 CONTRACT ACT

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Smart Summary

Structured Summary of the Opinion — Fazl Ali, C.J. (Appeal concerning jurisdiction under Section 20(c) CPC)

Factual and Procedural Background

This is an appeal from an order of the Additional Subordinate Judge, Muzaffarpur dated 18 February 1944. The appellant is a limited liability company with a business office at Muzaffarpur that undertakes engineering works. On 18 July 1939 the company signed an agreement (signed at Muzaffarpur) to construct a bridge over the Panchaney river for the District Board of Gaya for Rs. 98,635 and deposited security money at Gaya.

The District Board (through its representatives) later decided to abandon the bridge project. After correspondence and negotiation, the plaintiff (appellant company) alleged that the contract was cancelled by the defendant by a telegram of 15 October 1939 (confirmed by a letter of 16 October 1939). The plaintiff claimed that, as a consequence of cancellation, it had incurred costs and losses and sued for damages of Rs. 48,858-4-0 with pendente lite and future interest.

The defendant filed a written statement. The Subordinate Judge framed eight issues and tried the suit. On 18 January 1944 the trial concluded and on 18 February 1944 judgment was delivered. The Subordinate Judge found for the plaintiff on all material issues except Issue No. 3 which asked whether the suit was triable at Muzaffarpur; he answered Issue No. 3 against the plaintiff and held that the court at Muzaffarpur had no jurisdiction, directing the plaint to be returned for filing in the proper court. The plaintiff appealed that order.

Legal Issues Presented

Whether the Subordinate Judge at Muzaffarpur was correct in law in holding that he had no jurisdiction to try the suit — i.e., the correct construction and application of section 20, clause (c) of the Code of Civil Procedure in the circumstances of this case.
As a subsidiary question, whether the place where a contract is made, performed, or revoked determines the forum when a suit is for damages for breach of contract (with specific focus on whether revocation at Muzaffarpur gave Muzaffarpur jurisdiction).
Whether the appeal as filed against the District Board of Gaya (after amendment of the cause-title) is competent given that the suit was originally framed against the Chairman of the District Board.

Arguments of the Parties

Appellant's Arguments

The appellant argued that part of the cause of action arose at Muzaffarpur because the agreement was signed by the plaintiff at Muzaffarpur before submission to the defendant at Gaya; an offer originates where it is made and the offer is part of the cause of action under section 20(c) CPC.
Reliance was placed on authorities said to support that the place where an offer originated may determine jurisdiction: notably Dobson Burlow v. Bengal Spinning and Weaving Co. and Engineering Supplies, Ltd. v. Dhandhania.
The appellant also relied on the contention that the contract was revoked by communication (telegram and letter) which, by the plaintiff's account, was communicated to the plaintiff at Muzaffarpur on 15 October 1939, making Muzaffarpur a proper forum.

Respondent's Arguments

The respondent contended that the appeal was incompetent because the suit as originally pleaded named the Chairman of the District Board as defendant, whereas the appeal was brought against the District Board of Gaya (an objection based on identity of parties and maintainability of the appeal).
The respondent's counsel also argued that the amendment substituting the District Board as defendant may have been without jurisdiction (the court observed that it would not decide that question in the appeal).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Read v. Brown	Used in support of an accepted definition of "cause of action" (the Court quotes Lord Justice Fry's expansive description: "Everything which, if not proved, gives the defendant an immediate right to judgment...").	The court cited this authority (along with Cooke v. Gill) to explain what constitutes a cause of action and to show that a cause of action includes all facts material to entitlement to judgment; it informed the analysis of where a cause of action arises under s.20(c) CPC.
Cooke v. Gill	Also cited for the definition and scope of "cause of action" in contract suits.	Used by the court as part of the accepted authorities defining "cause of action"; contributed to the court's explanation that cause of action includes making of the contract and its breach.
Engineering Supplies, Ltd. v. Dhandhania & Co. (observations of Rankin, C.J.)	Quoted for observations on the meaning of "cause of action" and relevant tests for deciding jurisdiction under section 20.	The court relied on these observations to reinforce the legal meaning of "cause of action" and to explain that the place where contract was made or where breach occurred are proper fora; the court noted that Rankin, C.J.'s view had been relied on by counsel.
Dobson Burlow v. Bengal Spinning and Weaving Co.	Relied upon by the appellant's counsel as authority possibly supporting the proposition that the place where an offer originated may affect jurisdiction.	The court observed that this decision, together with the Engineering Supplies decision, at first sight seemed to support the appellant's contention but the court declined to accept the broader proposition that mere making of an offer necessarily determines jurisdiction in every case.

Court's Reasoning and Analysis

The court framed the dispute as primarily a question of jurisdiction under section 20, clause (c) of the Code of Civil Procedure: whether part of the cause of action arose at Muzaffarpur so that the Subordinate Judge there could try the suit.

The court first explained the legal meaning of "cause of action" (drawing on accepted authorities): it comprises every fact material to the plaintiff's entitlement to succeed — concretely, in a breach of contract action, (1) formation/making of the contract and (2) its breach.

The court considered the appellant's argument that the contract was "made" (or the offer originated) at Muzaffarpur because the plaintiff signed the agreement there. The court rejected the broad proposition that the mere making of an offer in a place is by itself sufficient to confer jurisdiction there, reasoning that if every step in contract formation could determine jurisdiction, multiple courts might be competent and the object of section 20 (including protecting defendants and providing certainty as to forum) would be defeated. However, the court did not decide finally that signing at Muzaffarpur could never count as part of a cause of action; rather, it said that it was unnecessary to resolve that narrower question in this case.

The decisive analytical point for the court was that, although the contract was completed at Gaya, the contract was revoked or cancelled in circumstances that meant the revocation was communicated to and became effective at Muzaffarpur. The court treated revocation as part of the cause of action in a breach claim — if a contract is revoked in one place, that locality may supply part of the cause of action and therefore be a proper forum.

The court applied statutory principles from the Contract Act: section 6 (proposal revoked by communication of notice of revocation by the proposer) and section 4 (communication is complete as against the person to whom it is made when it comes to his knowledge). The plaintiff's pleaded facts were that the District Engineer sent a telegram on 15 October 1939 (and a confirming letter of 16 October) effecting cancellation, and the plaintiff had expressly required that any cancellation decision reach their Muzaffarpur office by 15 October to permit them to notify suppliers. The telegram and correspondence showed the cancellation reached the plaintiff at Muzaffarpur on 15 October.

On this basis the court concluded that part of the cause of action — the revocation/cancellation of the contract — arose at Muzaffarpur. That conclusion, together with the legal position on communication of revocation, made Muzaffarpur a proper forum under section 20(c) CPC and therefore the Additional Subordinate Judge had jurisdiction to try the suit.

The court also dealt briefly with the procedural objection that the appeal was brought against the District Board whereas the suit initially named the Chairman. The Subordinate Judge had earlier held that paragraph 2 of the plaint plainly described the defendant as the District Board of Gaya represented by its Chairman, and the cause-title had been amended to substitute the District Board; the appellate court observed that whether the amendment was made without jurisdiction was not a matter it would decide in this appeal.

Holding and Implications

Holding: The appeal was allowed. The appellate court set aside the order of the Additional Subordinate Judge which had held that the Muzaffarpur court had no jurisdiction and had directed the plaint to be returned. The appellate court held that the Additional Subordinate Judge at Muzaffarpur was competent to try the suit and to pass a proper decree.

Direct consequences and orders made:

The order finding lack of jurisdiction and directing return of the plaint was set aside and the appeal allowed with costs.
Because the Subordinate Judge who tried the case (Mr. Damodar Prasad) had been transferred to Gaya and he had recorded the evidence, the court directed under section 24 of the Code of Civil Procedure that the suit be transferred to Mr. Damodar Prasad's court at Gaya so that he may pronounce the final judgment (the court considered it undesirable that the final judgment be pronounced by a judge who had not recorded the evidence).

No broader doctrine or new precedent was announced beyond application of existing principles on "cause of action," the effect of revocation communications under the Contract Act (sections 4 and 6), and the ordinary tests for jurisdiction under section 20(c) CPC. The court confined itself to applying those principles to the facts and did not purport to lay down a new rule on whether every act in contract formation (such as an offer signed) will always confer jurisdiction.

Disposition

APPEAL ALLOWED. Costs awarded to the appellant. The Subordinate Judge's order declining jurisdiction is set aside and the suit is to be transferred to enable the judge who recorded evidence to pronounce final judgment.

Judge composition: Fazl Ali, C.J. (delivered the leading opinion); Ray, J. concurred.

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A.B. & Co. Ltd. v. District Board

Fazl Ali, C.J:— This is an appeal from an order passed by the Additional Subordinate Judge of Muzaffarpur, dated the 18th February, 1944, in a suit instituted by the appellant Company to recover damages for breach of a contract from the defendant. The suit was against the Chairman of the District Board of Gaya but in paragraph 2 of the plaint it was stated that

“the defendant in the suit is the District Board of Gaya represented by its Chairman”.

The learned Subordinate Judge has held that he has no jurisdiction to try the suit and has directed the plaint to be returned to the appellant for being filed in proper court. The appellant being dissatisfied with this order has preferred the present appeal.

The plaintiff's case is fully set out in the plaint but the allegations which are material for the purpose of deciding the point before us may be reproduced as follows:—

The appellant is a limited liability Company which has its business office in the town of Muzaffarpur and among other things carries on the business of constructing buildings, bridges and other works involving skill in engineering. On the 18th July, 1939, an agreement was signed by the plaintiff at its Muzaffarpur office whereby the plaintiff Company undertook to construct for the District Board of Gaya a bridge over the river Panchaney for a sum of Rs. 98,635 and according to the terms of the agreement deposited a certain sum at Gaya as security money., A few months later the defendant decided to abandon the project of constructing the bridge and after some discussion between the representatives of the parties, the plaintiff Company informed the defendant by their letter, dated the 12th October, 1939, that if the contract was cancelled, the plaintiff Company would charge Rs. 41,000 for the prices of materials already ordered for, fabricated and collected and if by the 15th October, 1939, the final instruction of cancellation reached them, then the plaintiff Company would stop fabrication and collection of further materials by informing the suppliers. On the 15th October, 1939, the defendant through the District Engineer of the District Board sent the following telegram to the plaintiff Company:

“Your…… cancel order for balance materials Panchaney bridge work stopped.”

This telegram was confirmed by a letter and then followed some correspondence between the parties which shows that the defendant desired that the plaintiff Company should have the balance of the materials which were to be used in constructing the bridge fabricated and collected and the plaintiff Company informed the defendant that owing to war conditions the prices of steel materials had risen and the balance of materials could not be had unless an extra cost was agreed to be borne by the District Board. In March or April, 1941, the defendant made an attempt to have the bridge constructed by another party with the materials supplied by the plaintiff Company according to the plan and design made by the plaintiff Company to which the plaintiff Company protested strongly. A proposal was then made on behalf of the District Board asking the plaintiff Company to construct the bridge if the District Board agreed to pay Rs. 4,480 as extra cost due to increased prices of materials. To this the plaintiff Company made a counter proposal suggesting the necessity of obtaining a priority certificate to enable them to buy the required materials from dealers of iron goods and also for ascertaining quotations of prices of iron goods then prevailing in Calcutta. Ultimately the attempt to revive the contract completely failed and as the bills submitted by the plaintiff Company were not paid, the plaintiff Company was compelled to bring a suit in which the plaintiff Company claimed Rs. 48,858-4-0, with pendente lite and future interest, as damages for breach of contract.

The defendant filed a long written statement in reply to the plaint the contents of which need not be reproduced here and the Subordinate Judge after framing eight issues proceeded to try the suit. The trial was concluded on the 18th January, 1944, and on the 18th February, 1944, the learned Subordinate Judge delivered a judgment in which he decided all the material issues in favour of the plaintiff Company excepting issue no. 3 which raised the question as to whether the suit was triable at Muzaffarpur. He answered issue no. 3 against the plaintiff Company and directed the plaint to be returned for being filed in a court at Gaya.

The only question to be decided in this appeal is whether the view of the Subordinate Judge is correct in law. The answer to this question depends upon the construction of section 20, clause (c) of the Code of Civil Procedure with reference to the facts of the present case. Under this clause a suit may be instituted where the cause of action, wholly or in part, arises. A cause of action should ordinarily mean the fact or facts which compel a plaintiff to bring an action in court, but it is now generally accepted that the expression means in the words of Lord Justice Fry—“Everything which, if not proved, gives the defendant an immediate right to judgment—every fact which is material to be proved to entitle the plaintiff to succeed and every fact which the defendant could have a right to traverse”. [See Read v. Brown and Cooke v. Gill and also the observations of Rankin, C.J, in Engineering Supplies, Ltd. v. Dhandhania & Co.] It is obvious that in a suit to recover damages for a breach of contract the cause of action consists of (1) the making of a contract and (2) its breach and therefore the suit may be filed either at the place where the contract was made or at the place where it should have been performed and where the breach occurred. In the present Civil Procedure Code there are only two explanations to section 20. The previous Code had a third explanation which was to the following effect:—

“In suits arising out of contract the cause of action arises within the meaning of this section at any of the following places:—

(1) the place where the contract was made;

(2) the place where the contract was to be performed and performance thereof completed;

(3) the place where in performance of the contract any money to which the suit relates was expressly or impliedly payable.”

This third explanation has been omitted but there can be no doubt that the tests mentioned in it are still good tests. The first point which has therefore to be determined is the place where the contract was made. It has been argued on behalf of the appellant that since a contract involves an offer and an acceptance, the place where the offer originated may determine the forum because the offer is part of the cause of action. It is further urged on behalf of the appellant that inasmuch as in the present case on the 18th July, 1939, the plaintiff signed the agreement at Muzaffarpur before submitting it to the defendant at Gaya, part of the cause of action arose at Muzaffarpur and the suit was therefore triable by the Additional Subordinate Judge. In support of this contention reliance was placed by Mr. Das, the learned Counsel for the appellant, on the decision of Fulton, J., in Dobson Burlow v. Bengal Spinning and Weaving Co. and of Rankin, C.J, in Engineering Supplies, Ltd. v. Dhandhania. These cases seem at first sight to support Mr. Das's contention but as at present advised I am not prepared to subscribe to the view that the mere making of an offer is a part of the cause of action, and a suit is triable at a place where the offer originated even though the offer was accepted within the jurisdiction of another court. If every step taken in the completion of a contract is sufficient to determine the jurisdiction of a court, then the case may be triable by any number of courts and the object of the section which among other things aims at giving some protection to the defendant and also at introducing some measure of certainty as to the place of trial may be defeated. As I shall, however, show presently it is not necessary in this case to decide whether the mere fact that the agreement was signed by the plaintiff at Muzaffarpur, is sufficient to determine the jurisdiction of the court at Muzaffarpur to try the present suit.

One of the important points in the present case is that the contract which was undoubtedly completed at Gaya is stated to have been cancelled or revoked at Muzaffarpur. There can be no doubt that revocation is part of the cause of action in a suit for breach of a contract and therefore the place where the contract was revoked may determine the forum for the trial of the present suit. Section 6 of the Contract Act provides that a proposal is revoked by the communication of notice of revocation by the proposer to the other party. Section 4 of the Act provides that the communication of a revocation is complete as against the person to whom it is made, when it comes to his knowledge. The plaintiff's case is that the revocation was made by a telegram of the 15th October, 1939, which was duly confirmed by the defendant by his letter, dated the 16th October, 1939. Under the law the revocation was not complete until the telegram and the letter in question reached the plaintiff Company.

The same conclusion can be arrived at by a perusal of the correspondence between the parties. It appears that on the 12th October 1939, the plaintiff's manager wrote a letter to the District Engineer of Gaya as representative of the District Board which runs as follows:—

“With reference to your no. 4417 of 3rd October, 1939, and two proposals we beg to reply as follows:—

1. Total cancellation of works:—

If the order is to be cancelled we shall have to ask you to take over materials to the value of approximately Rs. 41,000.

This material has already been received and partly fabricated and is of no use to us.

It consists of Trough plates, cross girders, etc.

The balance of the materials have not yet been supplied and can be cancelled provided the decision reaches us at Muzaffarpur by 15th October, 1939, to enable us to inform the suppliers.”

Upon this a telegram was despatched by the District Engineer to the plaintiff Company on the 15th October in these terms:—

“Your…… cancel order for balance materials Panchaney bridge work stopped.”

The telegram was confirmed afterwards by a letter, dated the 16th October, 1939. As has already been stated the plaintiff's case is that the contract which has been broken was regarding the construction by the plaintiff Company of a bridge over the river Panchaney and this contract was revoked by the defendant when he decided to stop the Panchaney bridge work. The parties had agreed that this revocation to be effective must be communicated to the plaintiff Company at Muzaffarpur on the 15th October, 1939, and this was done. There can be no doubt therefore that part of the cause of action arose at Muzaffarpur and the learned Additional Subordinate Judge had full jurisdiction to try the suit.

It is contended on behalf of the respondent that the present appeal is incompetent because, whereas the suit in the court of the Additional Subordinate Judge was against the Chairman of the District Board, the present appeal has been filed against the District Board of Gaya. It appears that a similar point was raised on behalf of the respondent before the learned Subordinate Judge and it was contended that the suit was not maintainable as the District Board was not the defendant; but he negatived this contention in these words:—

“In this connection paragraph 2 of the plaint may be looked to. Though the defendant has been described as the Chairman of the District Board of Gaya, paragraph 2 clearly mentions that the defendant in this suit is the District Board of Gaya represented by its Chairman. In view of this specific allegation there cannot be any manner of doubt that the defendant is the District Board and not the Chairman in person or anybody else. The suit therefore as framed is maintainable.”

A reference to the plaint shows that the cause-title has been amended and the District Board of Gaya has now been substituted as defendant in place of the Chairman of the District Board of Gaya. The present appeal has been filed against the District Board in conformity to the amended plaint. The learned Advocate for the respondent contended that the amendment was without jurisdiction, but with that question we are not concerned in this appeal.

I would, therefore allow this appeal with costs, and set aside the order of the learned Additional Subordinate Judge holding that he had no jurisdiction to try the suit and directing the plaint to be returned for being filed in proper court. In my opinion the learned Additional Subordinate Judge was quite competent to try the suit and to pass a proper decree therein.

We are informed that Mr. Damodar Prasad, the Subordinate Judge, against whose decision this appeal is directed, has been transferred to Gaya. As it will not be desirable that the final judgment in this case should be pronounced by a Judge who did not record the evidence, I would direct under section 24 of the Code of Civil Procedure that the suit may be transferred to the court of Mr. Damodar Prasad at Gaya to enable him to pronounce the final judgment in the suit.

Ray, J.:— I agree.

Appeal allowed.

K.D

A.B. & Co. Ltd. v. District Board

Structured Summary of the Opinion — Fazl Ali, C.J. (Appeal concerning jurisdiction under Section 20(c) CPC)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Disposition

A.B. & Co. Ltd. v. District Board

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