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jurisdiction of a court under an agreement confined one court is valid ?=whether, if two Courts have jurisdiction to entertain a Suit, whether the parties may by mutual agreement exclude the jurisdiction of one of the Courts, having regard to the =”Thus it is now a settled principle 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 therewithin, 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 and cannot also be understood as parties contracting against the statute.”

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1

 

REPORTABLE

 

 

IN THE SUPREME COURT OF INDIA

 

CIVIL APPELLATE JURISDICTION

 

SPECIAL LEAVE PETITION (C) No.10184 of 2008

 

 

A.V.M. SALES CORPORATION … PETITIONER

 

 

VS.

 

 

M/S. ANURADHA CHEMICALS PVT. LTD. … RESPONDENT

 

 

J U D G M E N T

 

 

ALTAMAS KABIR, J.

 

1. On 23rd December, 1988, the parties to the Special

 

Leave Petition entered into an Agreement at Calcutta

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for supply of chemicals manufactured by the Respondent

 

to the Petitioner. In continuation of the aforesaid

 

Agreement, the parties arrived at a Mutual

 

Understanding on 15th May, 1989, whereby the Respondent

 

would adjust the advance lying with it and would

 

exclusively supply to the Petitioner its two products,

 

namely, Sodium Chromate and Sodium Dichromate in West

 

Bengal, Bihar, Orissa and Assam. The Understanding

 

between the parties included other terms and conditions

 

as well. The terms of the Understanding entered into

 

between the parties were reduced into writing in an

 

agreement and the same was executed at Calcutta on 5th

 

August, 1989, reiterating the terms of the

 

Understanding and containing an additional clause

 

indicating that “Any dispute arising out of this

 

agreement will be subject to Calcutta jurisdiction

 

only.” [Emphasis supplied].

 

 

2. Since certain differences arose between the parties

 

relating to the supply of goods in question, the

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Petitioner herein filed Original Suit No.588 of 1991 in

 

the Calcutta High Court on 27th August, 1991, for

 

recovery of its alleged dues from the Respondent, after

 

giving due adjustment of the amount of the Invoices

 

raised by the Respondent and filed its claim only for

 

the balance amount, along with penalties etc. Upon

 

receiving summons of the suit filed by the Petitioner,

 

the Respondent on 12th September, 1991, filed a separate

 

suit against the Petitioner at Vijayawada for recovery

 

of a sum of 3,86,453.05, treating the Purchase Order

 

dated 12th February, 1990, to be independent of the

 

Agreement and also sought recovery of supplies made

 

under the Invoices raised by the Respondent upon the

 

Petitioner.

 

 

3. The Petitioner duly contested the Suit filed by the

 

Respondent by filing Written Statement, along with

 

relevant documents, in support of its case. Out of the

 

several issues raised by the Petitioner, one was the

 

issue relating to the jurisdiction of the Vijayawada

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Court to entertain the Suit on account of the exclusion

 

clause by which all actions arising out of the

 

Agreement and the Memorandum of Understanding were to

 

be subject to the Calcutta jurisdiction only. The

 

other issue of importance was with regard to

 

adjustment, inasmuch as, the Purchase Order dated 12th

 

February, 1990, was treated as independent of the

 

Understanding and Agreement arrived at between the

 

parties. Rejecting the objection relating to

 

jurisdiction, the Principal Senior Civil Judge,

 

Vijayawada, by his judgment and decree dated 5th March,

 

1999, decreed the Respondent’s Suit (Original Suit

 

No.519 of 1991) with costs for a sum of 3,86,453.05,

 

together with interest at the rate of 12% per annum,

 

from the date of the Suit till realisation of the

 

principal amount of 2,98,267.50. The Petitioner filed

 

First Appeal No.1352 of 1999 before the Andhra Pradesh

 

High Court against the aforesaid judgment and decree

 

dated 5th March, 1999. By judgment and order dated 18th

 

January, 2007, the learned Single Judge of the High

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Court dismissed the Appeal filed by the Petitioner. It

 

is against the aforesaid judgment of the learned Single

 

Judge of the Andhra Pradesh High Court in the First

 

Appeal preferred by the Petitioner that the present

 

Special Leave Petition has been filed.

 

 

4. Apart from the other grounds taken with regard to

 

factual aspect of the matter, grounds have also been

 

taken regarding the exclusive jurisdiction of the

 

Courts at Calcutta agreed to by the parties in the

 

Agreement and whether the same was not binding upon the

 

parties. A further ground has also been taken as to

 

whether in breach of the Agreement, the Respondent was

 

entitled to invoke the jurisdiction of a Court at

 

Vijayawada, whose jurisdiction stood ousted by the

 

Agreement entered into between the parties.

 

 

5. On the strength of the pleadings of the parties,

 

five issues were framed by the Trial Court, of which

 

the first issue was whether the Court at Vijayawada had

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territorial jurisdiction to entertain the suit. By his

 

judgment and decree dated 5th March, 1999, in O.S.

 

No.519 of 1991, the learned Principal Senior Civil

 

Judge, Vijayawada, held that the Court at Vijayawada

 

had jurisdiction to entertain the Suit as part of the

 

cause of action for the suit arose within its

 

jurisdiction. The learned Trial Judge, accordingly,

 

decreed the Suit, as indicated hereinabove. In the

 

First Appeal, being F.A. No.1352 of 1992, the learned

 

Single Judge of the Andhra Pradesh High Court observed

 

that the main contention of the Appellant before the

 

High Court, who is the Petitioner herein, was that the

 

Principal Senior Civil Judge, Vijayawada, had no

 

jurisdiction to entertain the Suit as no part of the

 

cause of action had arisen at Vijayawada. According to

 

the Petitioner, its place of business was at Calcutta

 

and the Agreement for the supply of the goods in

 

question was also entered into at Calcutta. The goods

 

were to be delivered at Calcutta and payment in respect

 

thereof was to be made at Calcutta and, accordingly,

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the Court at Vijayawada had no territorial jurisdiction

 

to entertain the Suit under Section 20 of the Code of

 

Civil Procedure as no part of the cause of action had

 

arisen within its jurisdiction. It was also emphasised

 

that in the Agreement which was made Exh.D-5, it has

 

been stipulated in Column 13 that any dispute arising

 

out of the Agreement would be subject to the Calcutta

 

jurisdiction only.

 

 

6. The question involved in this Special Leave

 

Petition has several dimensions, including the question

 

as to whether the parties to an agreement can contract

 

in violation of Sections 23 and 28 of the Indian

 

Contract Act, 1872. Obviously, the parties cannot

 

contract against the statutory provisions. A connected

 

question would arise as to whether the parties to an

 

agreement can confer jurisdiction on a Court which has

 

no territorial or pecuniary jurisdiction to entertain a

 

matter? The answer to the second question is also in

 

the negative. However, in this case a slightly

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different question arises, namely, as to whether if two

 

Courts have jurisdiction to try a suit, can the parties

 

to an agreement mutually agree to exclude the

 

jurisdiction of one Court in preference to the other

 

and as to whether the same would amount to violation of

 

the provisions of Sections 23 and 28 of the Indian

 

Contract Act? The said question has been answered in

 

the affirmative by the Trial Court and has been upheld

 

by the High Court.

 

 

7. The question which has been raised in this Special

 

Leave Petition is not new and has been considered by

 

this Court earlier in several decisions. We are,

 

therefore, required to consider as to whether the cause

 

of action for the Suit filed by the Respondent in

 

Vijayawada arose within the jurisdiction of the Court

 

of the Principal Senior Civil Judge at Vijayawada,

 

exclusively, or whether such cause of action arose both

 

in Vijayawada and also in Calcutta? As has been

 

mentioned hereinbefore on behalf of the Petitioner, it

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had been urged that the entire cause of action for the

 

Suit had arisen within the jurisdiction of the Calcutta

 

Courts and the Courts at Vijayawada had no jurisdiction

 

whatsoever to entertain a suit pertaining to the

 

Understanding and Agreement arrived at between the

 

parties. However, it was contended on behalf of the

 

Respondent that its Registered Office was situate at

 

Vijayawada, the Invoices for the goods were raised at

 

Vijayawada, the goods were dispatched from Vijayawada

 

and the money was payable to the Plaintiff or its

 

nominee at Vijayawada, by way of Demand Drafts and,

 

accordingly, the Courts at Vijayawada had jurisdiction

 

to entertain the Suit.

 

 

8. It has often been stated by this Court that cause

 

of action comprises a bundle of facts which are

 

relevant for the determination of the lis between the

 

parties. In the instant case, since the invoices for

 

the goods in question were raised at Vijayawada, the

 

goods were dispatched from Vijayawada and the money was

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payable to the Respondent or its nominee at Vijayawada,

 

in our view, the same comprised part of the bundle of

 

facts giving rise to the cause of action for the Suit.

 

At the same time, since the Petitioner/ Defendant in

 

the Suit had its place of business at Calcutta and the

 

Agreement for supply of the goods was entered into at

 

Calcutta and the goods were to be delivered at

 

Calcutta, a part of the cause of action also arose

 

within the jurisdiction of the Courts at Calcutta for

 

the purposes of the suit. Accordingly, both the Courts

 

within the jurisdiction of Calcutta and Vijayawada had

 

jurisdiction under Section 20 of the Code of Civil

 

Procedure to try the Suit, as part of the cause of

 

action of the Suit had arisen within the jurisdiction

 

of both the said Courts.

 

 

9. This leads us to the next question as to whether,

 

if two Courts have jurisdiction to entertain a Suit,

 

whether the parties may by mutual agreement exclude the

 

jurisdiction of one of the Courts, having regard to the

11

provisions of Sections 23 and 28 of the Indian Contract

 

Act, 1872. Section 23 of the aforesaid Act indicates

 

what considerations and objects are lawful and what are

 

not, including the considerations or objects of an

 

agreement, if forbidden by law. Section 28 of the Act,

 

which has a direct bearing on the facts of this case,

 

clearly spells out that any agreement in restraint of

 

legal proceedings is void. For the sake of reference,

 

the same is extracted hereinbelow :

 

 

“28. Agreements in restrain of legal

proceedings, void – [Every agreement,

 

(a) by which any party thereto is restricted

absolutely from enforcing his rights under

or in respect of any contract, by the

usual legal proceedings in the ordinary

tribunals, or which limits the time within

which he may thus enforce his rights, or

 

(b) which extinguishes the rights of any party

thereto, or discharges any party thereto

from any liability, under or in respect of

any contract on the expiry of a specified

period so as to restrict any party from

enforcing his rights, is void to the

extent.]

 

Exception 1 : Saving of contract to refer to

arbitration dispute that may arise.- This

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section shall not render illegal contract, by

which two or more persons agree that any

dispute which may arise between them in respect

of any subject or class of subjects shall be

referred to arbitration, and that only the

amount awarded in such arbitration shall be

recoverable in respect of the dispute so

referred.

 

Exception 2 : Saving of contract to refer

question that have already arisen. – Nor shall

this section render illegal any contract in

writing, by which two or more persons agree to

refer to arbitration any question between them

which has already arisen, or affect any

provision of any law in force for the time

being as to reference to arbitration.”

 

 

10. Basically, what Section 28 read with Section 23

 

does, is to make it very clear that if any mutual

 

agreement is intended to restrict or extinguish the

 

right of a party from enforcing his/her right under or

 

in respect of a contract, by the usual legal

 

proceedings in the ordinary Tribunals, such an

 

agreement would to that extent be void. In other

 

words, parties cannot contract against a statute.

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11. One of the earlier cases in which this question had

 

arisen, was the case of A.B.C. Laminart Pvt. Ltd. &

 

Anr. Vs. A.P. Agencies, Salem [AIR 1989 SC 1239 =

 

(1989) 2 SCC 163]. In the said case, the cause of

 

action for the suit had arisen both within the

 

jurisdiction of the Civil Court at Salem in Andhra

 

Pradesh and in the Civil Court of Kaira in the State of

 

Gujarat. The question arose as to whether since by

 

mutual agreement the jurisdiction had been confined

 

only to the Courts within Kaira jurisdiction, the suit

 

filed at Salem was at all maintainable? This Court,

 

inter alia, held that there could be no doubt that an

 

agreement to oust absolutely the jurisdiction of the

 

Court will be unlawful and void, being against public

 

policy. However, such a result would ensue if it is

 

shown that the jurisdiction to which the parties had

 

agreed to submit had nothing to do with the contract.

 

If, on the other hand, it is found that the

 

jurisdiction agreed would also be a proper jurisdiction

 

in the matter of the contract, it could not be said

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that it ousted the jurisdiction of the Court. After

 

considering the facts involved in the said case and the

 

submissions made on behalf of the parties, this Court

 

observed as follows :

 

“Thus it is now a settled principle 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 therewithin,

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 and

cannot also be understood as parties

contracting against the statute.”

 

 

12. A similar view was taken by this Court in Angile

 

Insulations vs. Davy Ashmore India Ltd. & Anr. [(1995)

 

4 SCC 153], wherein the Hon’ble Judges while referring

 

to the decision of this Court in A.B.C. Laminart Pvt.

 

Ltd.’s case (supra), inter alia, held that where two

 

Courts have jurisdiction consequent upon the cause of

 

action or a part thereof arising therein, if the

 

parties agree in clear and unambiguous terms to exclude

15

the jurisdiction of the other, the said decision could

 

not offend the provisions of Section 23 of the Contract

 

Act. In such a case, the suit would lie in the Court

 

to be agreed upon by the parties.

 

 

13. This Court has consistently taken the same view in

 

several subsequent cases. We may refer to one such

 

decision of this Court in Hanil Era Textiles Ltd. Vs.

 

Puromatic Filters (P) Ltd. [AIR 2004 SC 2432 = (2004) 4

 

SCC 671], where part of the cause of action arose at

 

both Delhi and Bombay. This Court held that the mutual

 

agreement to exclude the jurisdiction of the Delhi

 

Courts to entertain the suit was not opposed to public

 

policy and was valid.

 

 

14. As indicated herein earlier, in this case also the

 

cause of action for the Original Suit No.519 of 1991,

 

filed by the Respondent before the Principal Senior

 

Civil Judge, Vijayawada, arose partly within the

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jurisdiction of the Calcutta Courts and the Courts at

 

Vijayawada.

 

 

15. Having regard to the provisions referred to

 

hereinabove, though the Courts at Vijayawada would also

 

have jurisdiction, along with the Courts at Calcutta,

 

to entertain and try a suit relating to and arising out

 

of the Agreement dated 23rd December, 1988, and the

 

Mutual Understanding dated 15th May, 1989, such

 

jurisdiction of the Courts at Vijayawada would stand

 

ousted by virtue of the exclusion clause in the

 

Agreement.

 

 

16. The Special Leave Petition has, therefore, to be

 

allowed. The decree passed by the Principal Senior

 

Civil Judge, Vijayawada in O.S. No.519 of 1991, and the

 

impugned judgment of the High Court dated 18th January,

 

2007, are set aside. The Trial Court at Vijayawada is

 

directed to return the plaint of the Original Suit

 

No.519 of 1991 to the Plaintiff to present the same

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before the appropriate Court in Calcutta having

 

jurisdiction to try the suit.

 

 

17. The Special Leave Petition is, accordingly,

 

allowed, but there will be no order as to costs.

 

 

 

 

…………………………………………J.

(ALTAMAS KABIR)

 

 

New Delhi ………………………………………J.

Dated: 17.01.2012 (CYRIAC JOSEPH)

 

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