Delhi High Court
Jasmine & Company vs State Of Nagaland on 20 January, 2009
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS)No.3773A/1990
%20.01.2009 Date of decision: January 20, 2009
JASMINE & COMPANY ....... Plaintiff
Through: Mr. R.P. Bansal, Sr. Advocate with
Mr. Vijay Kumar, Mr. Sheetesh
Khanna, Mr. Promod Tyagi & Ms.
Rajni Singh, Advocates.
Versus
STATE OF NAGALAND ....... Defendant
Through: Mr. Kapil Kher, Advocate.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may
be allowed to see the judgment? Yes
2. To be referred to the reporter or not? Yes
3. Whether the judgment should be reported
in the Digest? Yes
RAJIV SAHAI ENDLAW, J.
1. This petition under Section 20 r/w Section 8 of the Indian Arbitration Act, 1940 was filed in relation to an agreement dated 6th September, 1988 between the Governor of Nagaland on the one hand and the petitioner on the other hand and which is not disputed between the parties. The said agreement provides for arbitration as under:-
"In case of any differences or dispute between the government and the organizing agent on any matter pertaining to or arising out of the agreement, the issue of dispute will be referred to arbitration in Nagaland to a sole arbitrator to be appointed by the government whose decision shall be final and binding on both the parties".CS(OS)No.3773A/1990 Page 1 of 15
2. It is the case in the petition that the Government of Nagaland had under the agreement aforesaid appointed the petitioner as a sole organizing agent for the Nagaland State Lotteries in the name and style of Sri Lakshmi Lottery; that the agreement was for three years; the lottery was to be freely sold all over India; that the respondent State will place orders with the printers for printing of lottery tickets and the petitioner will pay the cost of the paper and printing charges for the same; that the prize money up to Rs.5,000/- to the winner, will be distributed directly by the petitioner as the organizing agent but the prize amounts exceeding Rs.5,000/- shall be deposited by the petitioner with the respondent government in advance for being distributed amongst the winners. It is further the case of the petitioner that the petitioner in the pursuance to the aforesaid agreement invested monies in printing, posters, banners, advertisement throughout the country; that the major markets for the sale of such lotteries were the State of Tamil Nadu and the State of Kerala. Under the said agreement, the petitioner was to furnish a guarantee of Rs.15 lac to the respondent government for the due performance of the agreement and for compensating the respondent government for any loss or damage that may be caused or suffered by the government on account of any breach by the petitioner. The petitioner claims to have furnished a bank guarantee of UCO Bank, Connaught Place, New Delhi in favour of the Governor/Director of Nagaland Lotteries, Kohima. It is further the case of the petitioner that the petitioner organized from Delhi the sale of lottery tickets in different part of the country; that out of the total agreed 156 weekly draws, the lottery continued till the 65th draw but thereafter the Governments of Tamil Nadu and Kerala banned the sale of the tickets of the lottery assuming it to be a private lottery; that in spite CS(OS)No.3773A/1990 Page 2 of 15 of representations of the petitioner the respondent did not render the necessary clarification to the Governments of Tamil Nadu and Kerala claiming lottery to be the lottery of the respondent State; consequently the petitioner could not make payments for the draws already scheduled; that the petitioner moved the Madras High Court against the said illegal ban and in the said writ petition the respondent State was also made a party but the respondent State failed also to file an affidavit in those proceedings; that the respondent thereafter cancelled the contract with the petitioner. The disputes that had arisen between the parties have been listed in para 11 of the petition. The respondent State had also invoked the bank guarantee for Rs.15 lac and with respect whereto not only a dispute was raised but an application being I.A.No.11299/1990 under Order 41 r/w II Schedule of the 1940 Act was also filed.
3. The petitioner invoked the territorial jurisdiction of this court pleading that the entire business was transacted from Delhi; orders for printing of tickets were placed at Delhi; office of the respondent is also located at Delhi; that the petitioner works for gain and resides at Delhi; the expenses were to be defrayed at Delhi; that the accounts were maintained at Delhi and the bank guarantee was issued at Delhi.
4. Vide ex parte order dated 18th December, 1990, finding the letter of invocation of the bank guarantee to be not in accordance with the terms of the guarantee, the respondent was restrained from recovering the amounts under the bank guarantee. The said CS(OS)No.3773A/1990 Page 3 of 15 order has remained in force for the last 18 years. Though there was no direction for the petitioner to keep the bank guarantee alive but during the hearing, on inquiry the senior counsel for the petitioner stated that the bank guarantee had been kept alive. Even otherwise, it is the admitted position that the bank guarantee had been invoked within the period of its validity. If such invocation is stayed by an interim order of the court, the petitioner which has sought said interim order from the court is expected and required to keep the bank guarantee alive and the liability of the bank to make payment thereunder remains subject to the final order in the legal proceedings.
5. The respondent on being served with the notice of the petitioner filed a reply contesting the territorial jurisdiction of this court to entertain the petition. It was stated that the agreement between the parties was executed at Kohima, the bank under the guarantee had agreed to make payment to the respondent government at Kohima; that the agreement was entered into in pursuance to the petitioner approaching the respondent at Kohima and the arbitration was to be at Kohima. It was further contended that no cause of action had accrued to the petitioner against the respondent at Delhi and even if the Delhi courts had jurisdiction, the said jurisdiction was excluded vide the following clause 33 in the agreement:
"33. The legal jurisdiction of this agreement will be in Kohima"CS(OS)No.3773A/1990 Page 4 of 15
6. The Respondent denied that there was any office of the Directorate of lotteries of the State of Nagaland at Delhi and it was stated that there was a general guest house of the State of Nagaland, as of other States at Delhi. It was denied that any monies had been received by the respondent State at Delhi. On merits, it was stated that in fact the petitioner was a defaulter and had not deposited the dues in time and the respondent was left with no other alternative but to suspend the holding of the draws because the government was liable to make the payments to the prize winners and which could only be done from the amount required to be deposited by the petitioner and which the petitioner had failed to do.
7. The petitioner filed a replication to the reply/written statement aforesaid of the respondent. The petitioner reiterated the stand in the petition and denying that of the respondent. It was stated that under the agreement the petitioner was required to get the tickets printed and the same were got printed at New Delhi.
8. The petitioner has filed an affidavit of its proprietor Smt. Jasmine Madan and the respondent has filed the affidavit of its Assistant Resident Commissioner, New Delhi Mr. K.K. Sarkar. Pursuant to directions, the parties have also filed synopsis of their submissions.
9. From the aforesaid, it will be apparent that the existence of the arbitration agreement the disputes and the arbitrability thereof CS(OS)No.3773A/1990 Page 5 of 15 is not controverted. The opposition is to the territorial jurisdiction of this court and to the stay of encashment of bank guarantee by this court. As far as the territorial jurisdiction is concerned, the emphasis of the senior counsel for the petitioner was on the matter having remained pending in this court for the last 18 years, the proprietor of the petitioner being of advance age, of inconvenience to the petitioner in going to Nagaland if the arbitration proceedings were at Nagaland owing to insurgency therein and even otherwise; of the petitioner having become entitled to reference to arbitration at Delhi owing to the mere long pendency of the matter before this court. In law, it was contended that notwithstanding the aforesaid clause as to the jurisdiction of Kohima, it was argued that it did not oust the territorial jurisdiction of courts at Delhi in as much as the words ONLY, ALONE, EXCLUSIVE were not used therein.
10. Per contra, the counsel for the respondent with reference to clauses 9,22,29 & 33 of the agreement and paragraph 15 of the reply on merits of the respondent has argued that the parties had agreed to the territorial jurisdiction of the courts at Kohima only.
11. The respondent having set up the plea of territorial jurisdiction at the first available instance, the said plea has to be adjudicated. There are two limbs of the same. Firstly, whether the courts at Delhi have any territorial jurisdiction and secondly if so, whether the territorial jurisdiction of the courts at Delhi has been ousted by agreement.
CS(OS)No.3773A/1990 Page 6 of 15
12. The plaintiff has stated that agreement was entered into at Delhi. The witness of the defendant has deposed that it was executed at Kohima. Neither called the witness of the either for cross examination in spite of the matter having remained pending for 18 long years. The encashment of the bank guarantee having been stayed, the petitioner appears to have been in no hurry to have the petition disposed of.
13. One has to thus fall back on the documents only to determine the aforesaid two aspects. The agreement does not specify the place of its execution. The agreement is signed by Smt. Jasmine Madan the then partner of the petitioner and by the then Joint Secretary (Budget) and Ex-officio Director of Nagaland State Lotteries, Kohima. The agreement is witnessed by two persons. One of them has given his address of Kohima and the other of New Delhi. In the circumstances, it appears that the agreement was executed on behalf of the petitioner at New Delhi and on behalf of the respondent at Kohima and so witnessed.
14. The agreement is of assistance to be rendered by the petitioner to the Government of Nagaland in running Nagaland State Lottery. The agreement guarantees profit at 3.3% of the gross face value of tickets printed. The guaranteed profit money and the conducting expenses for a month were agreed to be paid to the Government only through demand draft payable at Kohima. Prize money for all the draws was also agreed to be similarly paid by the petitioner at Kohima. The petitioner was to arrange to get the tickets printed CS(OS)No.3773A/1990 Page 7 of 15 from a press as approved by the respondent government and the petitioner was to bear the entire expenditure for printing of tickets including the cost of paper and other connected expenditure and settle the accounts directly with the printing press for lifting the tickets directly from the press and the government was not to bear any responsibility for the same. All the other payments due from the petitioner to the respondent were also payable at Kohima. The petitioner was to arrange to make the necessary publicity of the lottery outside the State of Nagaland at its own expenses. The prize money in excess of Rs.5,000/- was to be disbursed by the Directorate of Nagaland State after deduction of income tax at source. The government was also entitled to disburse prizes of Rs.5,000/- or less if any claim was received directly from the prize winner by debiting such amount to the petitioner. The draw of the lottery was to be held at any place in Nagaland as to be decided by the respondent for each draw and under the strict supervision of the Nagaland Government.
15. The petitioner has relied upon letters dated 27th June, 1990 & 16th September, 1990 to the respondent and the letter dated 29 th June, 1990 and order dated 6th January,1982 of the respondent. All are to/from Kohima, Nagaland and not from any office of the respondent at New Delhi. Similarly, the respondent has also relied upon and referred to the letters dated 21st December, 1987 of the petitioner to the respondent and the letters dated 25th May, 1989, 26th September, 1989, 19th April, 1990, 29th June, 1990 and telegrams dated 8th February, 1990 & 28th June, 1990 of the respondent to the petitioner and which are all also from Kohima, Nagaland. There is CS(OS)No.3773A/1990 Page 8 of 15 not a single document to show any office of the respondent at Delhi or of anything having transacted between the petitioner and the respondent at Delhi. The plea of the petitioner of the respondent having office at Delhi is not borne out. Delhi being the capital of the country, all states have their state guest houses and resident commissioners in Delhi. To that extent, all states have presence in Delhi. But that cannot give freedom to a party to sue the State Government in Delhi for the reason of the states guest houses and resident commissioners being at Delhi. In spite of express pleading of the respondent of the Director of lotteries of the Nagaland Government having no office at Delhi, nothing was brought on record to show that the said Directorate was having any presence at Delhi.
16. With respect to the execution of the agreement also, as aforesaid, the proprietor of the petitioner has in her affidavit not stated that the persons singing the agreement on behalf of the respondent were at Delhi and similarly the witness of the respondent has also not stated that the petitioner signed the agreement at Kohima. Both have deposed with respect to their signatures only. Even if the statements of both are to be believed, in normal course for human conduct, it would be the petitioner who would be signing the agreement at Delhi and sending to Kohima for signatures on behalf of the respondent. It is highly unbelievable that the officer of the respondent would sign both copies of the agreement first without even the signatures of the petitioner and send the same for signatures of the petitioner. An entrepreneur is willing to take such risk of signing before the other party but a government official is CS(OS)No.3773A/1990 Page 9 of 15 rarely known to be doing so. On this premise also the contract would be concluded only on the official of the respondent affixing the signature at Kohima.
17. As far as the other grounds urged by the petitioner to show the Delhi courts having jurisdiction or to show that the cause of action, had the claims/disputes been the subject matter of the suit, had accrued at Delhi, it would be seen that the same relate to the affairs which under the agreement were the responsibility of the petitioner and with respect to which the petitioner had agreed to keep the respondent indemnified. The lottery as per the agreement was to have a pan India presence. The petitioner had absolute freedom to perform its part of the agreement of managing the lottery from any place. The petitioner was not even required to seek the approval of the respondent of such place. The courts of a place where a party required to perform certain acts leading to performance of its obligations under the agreement performs such act, do not get territorial jurisdiction to adjudicate disputes between the parties. An architect employed at Delhi for preparation of drawings for a project at Delhi, merely if goes to Bombay and prepares the drawings at Bombay, would not give the courts at Bombay the territorial jurisdiction over the disputes, if any. Similarly, in the present case, from the agreement aforesaid it is clear that the material performance of the obligations was to be at Kohima. All payments including guaranteed payments were to be made by the petitioner to the respondent by bank draft payable at Kohima. The prize monies were to be deposited in Kohima, the draws were be held in Kohima and the prize monies were to be disbursed from Kohima. Merely CS(OS)No.3773A/1990 Page 10 of 15 because for the purposes of the said draws the petitioner managed its business from Delhi or got the tickets and other publicity material printed at Delhi, as it could have got done from anywhere else in India, would not give the courts at Delhi territorial jurisdiction. Thus, it cannot be said that owing to the signing of the agreement or anything done by the petitioner at Delhi as pleaded, any part of the cause of action has accrued at Delhi.
18. The courts at Delhi having not been found to have jurisdiction, the plea of the respondent has to be accepted and notwithstanding the long lapse of time, this court, even on compassionate grounds as pleaded cannot vest jurisdiction in discharge. The apex court in Harshad Chiman Lal Modi Vs. DLF Universal AIR 2005 SC 4446 has laid down that where the court has no territorial jurisdiction, such jurisdiction cannot be vested by consent or acquiescence or waiver and any order of that court would be a nullity.
19. On the second limb also, I find that inspite of the words such as ONLY, ALONE, EXCLUSIVE having not been used in the jurisdiction clause in the agreement, on a reading of the entire agreement, the intent of the parties thereto was of ousting/excluding the territorial jurisdiction of all other courts and of reserving the jurisdiction of the courts at Kohima, Nagaland only, which otherwise had jurisdiction, as aforesaid. Though neither parties has filed the sample lottery ticket got printed but it was common for such lottery tickets also to have a term that all disputes were subject to the exclusive jurisdiction of the courts of the capital of the state running CS(OS)No.3773A/1990 Page 11 of 15 the lottery. I have no doubt in my mind that the lottery tickets printed in pursuance to the agreement between the parties in the present case also would have a term thereon of the jurisdiction of the courts at Nagaland only.
20. The apex court in Hanil Era Textiles Ltd. Vs. Puromatic Filters (P) Ltd. AIR 2004 SC 2432 has held that where ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other courts; when the clause is clear, unambiguous and specific accepted notions of contract would bind the parties and unless absence of ad idem can be shown the other courts should avoid exercising jurisdiction. It was held that even without such words as ALONE, ONLY or EXCLUSIVE, in appropriate cases the maxim Expressio Unius Est Exclusio Alterious i.e. expression of one is the exclusion of another may be applied.
21. In the present case, the petitioner while entering into the agreement was aware that the respondent was wanting the jurisdiction in legal matters to be at Nagaland only and had agreed to make the payments at Nagaland to the draw of lotteries at Nagaland and to the disbursement of prizes from Nagaland and perhaps as aforesaid also to disputes with customers of lottery being subject to the jurisdiction of courts at Nagaland. The petitioner was thus fully aware that notwithstanding the petitioner being at Delhi the Delhi courts would not have jurisdiction. As aforesaid, the dealing also was throughout with the respondent at Nagaland. In CS(OS)No.3773A/1990 Page 12 of 15 the circumstances, I find that the parties had agreed to oust the jurisdiction of the courts at Delhi.
22. The counsel for the respondent has also in this regard rightly relied upon Engineering Projects (India) Ltd. Vs. Greater Noida Industrial Development Authority 113 (2004) DLT 465 & M/s Filmistan Distributor India Pvt. Ltd. Vs. M/s Pooja Movies 1985 Arbitration Law Reporter 227 (Delhi) and Capital Fire Engineers Vs. State Bank of Patiala 2006 II AD (Delhi) 29 and Rattan Singh Associates (P) Ltd. Vs. Gill Power Generation Co. Pvt. Ltd. Manu/DE/0413/2007.
23. Having decided against the petitioner on the aspect of the territorial jurisdiction, the ex parte order of injunction of encashment of bank guarantee axiomatically goes. Even, otherwise, I may notice that the bank guarantee in the present case obliged the bank to, without any demur demand from the Governor or Director stating that the amount claimed is due by way of loss or damage caused to us or would be caused to or suffered by the Governor/Director by reason of any breach by the petitioner of any of the terms & conditions contained in the said agreement. Such demand was to be conclusive as regards the amount due and payable by the bank under the guarantee. The respondent in its letter of invocation of the bank guarantee dated 4th August 1990 inter-alia intimated to the bank that the petitioner had failed to meet the financial obligation in connection with her organizing of lottery with the Government of Nagaland and gave notice to the bank that a sum of Rs.15 lac of which guarantee had been given be paid immediately. The beneficiary of a bank guarantee cannot be expected to use/repeat CS(OS)No.3773A/1990 Page 13 of 15 ditto the same language as in the bank guarantee, though it is advisable to do so to avoid any disputes. What has to be seen is whether the conditions for invocation of the bank guarantee are stated to have existed or not. In the present case, the bank guarantee required the respondent to state that the amount claimed was due as aforesaid. The language of the invocation letter substantially complies with the said requirement and or means the same thing as set out in the bank guarantee. Insistence on the same language in such commercial transactions would tantamount to this court interfering in the bank guarantees and which practice has otherwise been deprecated by the apex court. Thus, even if this court would have had territorial jurisdiction, the petitioner was not entitled to restrain the encashment of bank guarantee.
24. Unfortunately, the bank guarantee has remained stayed for over 15 years. It was invoked on 4th August, 1990 and in spite of more than 18 years having elapsed the payment has still not reached to the respondent. The whole purpose of insistence on the bank guarantee has been lost. Under the scheme of the lottery, the responsibility for payment of the prize money was of the State Government. It is not seriously disputed that the prize money has been disbursed by the Government without the petitioner reimbursing the same to the Government. Whether the petitioner was liable to reimburse the same or not is a dispute to be adjudicated by arbitration. However, the reason for the bank guarantee was that during the pendency of the said dispute the money should be in the pocket of the respondent. That purpose has unfortunately been defeated. Accordingly, while returning this CS(OS)No.3773A/1990 Page 14 of 15 petition for filing in the court of appropriate jurisdiction if so deemed appropriate by the petitioner, the petitioner at whose insistence the payment under the guarantee was stayed is directed to ensure payment by its banker under the guarantee to the respondent within 30 days of this order. I was inclined to, for the sake of doing complete justice between parties to also award interest at 12% per annum for the period for which the payment under the bank guarantee has been delayed but I am refraining from doing so. However, if the payment is not made under the bank guarantee within 30 days aforesaid, the petitioner shall also be liable to pay interest at 18 % for the delay thereafter on the amount of the bank guarantee. The bank issuing the guarantee, though not a party to the present petition be also communicated this order for compliance thereof.
25. The respondent shall also be entitled to costs of Rs.25,000/- from the petitioner.
RAJIV SAHAI ENDLAW (JUDGE) January 20, 2009 PP CS(OS)No.3773A/1990 Page 15 of 15