Bombay High Court
Control Print (India) Limited vs Cab Machines S.A. And Anr. on 24 June, 1997
Equivalent citations: (1997)99BOMLR187
Author: S.S. Nijjar
Bench: S.S. Nijjar
JUDGMENT S.S. Nijjar, J.
1. The plaintiffs have filed the above suit claiming-declaration that the agency agreement entered into between the plaintiff and Defendant No. 1 is valid, subsisting and binding on defendant No. 1 and the defedants be ordered and decreed to perform the terms of the said agreement in its letter and spirit. Further declaration is sought that the purported termination of the agency agreement by fax message dated 28th March, 1995 is not in accordance with the terms of the agreement and is illegal, arbitrary and not binding on the plaintiffs and the agency agreement continued to be subsisting and operative. Damages in the sum of Rs. 7,24,00,000/- in lieu of performance of the agency agreement are also claimed.
2. This Notice of Motion has been taken out by the plaintiffs with prayers that the defendants be directed by a mandatory interim order to operate the agency agreement between the plaintiffs and defendant No. 1 by routing all sales of equipments of defendants No. 1 in India, Pakistan, Nepal, Bangladesh and Sri Lanka only through the plaintiffs and to pay to the plaintiffs commission on invoice value of all equipments sold by defendant No. 1 in terms of Clause 2 of the agency agreement and to furnish full and final accounts in this Court for the sales effected in the countries mentioned above and deposit the commission in terms of Clause 2 of the agency agreement in this Court with liberty to withdraw the same. It is further prayed that the defendants be restrained from appointing anybody else except the plaintiffs as selling agents for their equipments in the countries mentioned above. Further an order is sought to direct the defendants to retain the amounts payable by them to the defendants for purchase of equipments from defendant No. 1 as per particulars which are tabulated in a statement appended to the Notice of Motion as Exhibit-A. An affidavit in support of the Notice of Motion has been filed. On 16th August, 1995, ad-interim injunction in terms of prayers Clause (c) operative only up to 31st August, 1995 was granted. On 4th September, 1995, however, this Court after hearing the Counsel for the parties refused to grant any ad-interim relief. Thereafter an appeal was filed against the aforesaid order being Appeal Lodging No. 692 of 1995 which came to be decided on 5th September, 1995. The learned single Judge was directed to dispose of the Notice of Motion on or before 30th October, 1995. The order dated 16th August, 1995 was not restored. However, Respondent No. 1 was directed to furnish a Bank Guarantee in an amount of Rs. 30 lakhs until the Notice of Motion is disposed of. The Bank Guarantee was to be furnished within 10 days. Respondent No. 1 was also given liberty in the alternative to deposit the amount in cash in the office of the Prothonotary and Senior Master. The Bank Guarantee was furnished. By order dated 5th December, 1995 time for disposing of the Notice of Motion was extended. The matter was again heard at length by Justice Dhanuka on 12th December, 1995. The Prothonotary and Senior Master was directed, to encash the said Bank Guarantee for Rs. 30 lakhs as expeditiously as possible and release a sum of Rs. 8,56,000/- in favour of the plaintiffs. The balance amount was directed to be reinvested by the Prothonotary and Senior Master in the same Bank in a fixed deposit for such period as is deemed fit. On the basis of what is stated in paragraph 8 of the said order, preliminary issues were framed which are as follows.
(a) Whether this Hon'ble Court has jurisdiction to entertain this suit?
(b) Whether the jurisdictional clause extracted in para 5 of the affidavit in reply dated 2nd September, 1995 is valid and enforceable as contained by the defendants in affidavit in reply or as to whether the said clause is void and of no legal consequence as contended by the plaintiffs in the plaint and affidavit in rejoinder herein.
Again matter appears to have been taken in appeal where an order came to be passed in terms of Minutes of the order dated 11th January, 1996. Order dated 12th December, 1995 of Mr. Justice Dhanuka was modified to the extent that payment directed to be made lo the Respondent No.l of Rs. 8,56,000/-shall be against a Bank Guarantee for the like amount to be furnished by Respondent No. 1 to the Prothonotary and Senior Master pending the hearing and final disposal of the Notice of Motion. The matter came up for hearing before Mr. Justice Dhanuka again on 1st February, 1996. At that time it was stated by the Counsel for the plaintiffs that they would be interested in leading oral evidence. The matter was, therefore, adjourned for fixing date of hearing of the Notice of Motion when oral evidence can be recorded, if led by the parties. Thereafter Notice of Motion came up for hearing on a number of occasions before this Court. On 28th April, 1997 Counsel for the parties stated that it will not be necessary to lead evidence on the issue of jurisdiction at this stage, Thus the matter has now been taken up for final hearing.
3. The relevant facts as culled out from the various pleadings of the parties for the purpose of decision of this Notice of Motion may now be noticed.
4. The plaintiffs are a company engaged in the business of manufacture sale, supply and services of various engineering and other allied equipments relating to cables. Defendant No. 1 is a Swiss Company incorporated in Switzerland and also engaged in the business of manufacture, production and sale of various equipments and goods or cable works also having Bombay office address at 301, Sargam, Plot No. 4 Sector-1, Charkop, Kandivili (West), Bombay- 400 067.
5. By a fax message dated 27th July, 1994 the defendant No. 1 enquired, from the plaintiffs whether they will be interested in becoming the agents of the defendant No. 1. The defendant had come to know that the plaintiffs were associated with a firm known as "Beta Instruments", Belgium and had been referred to the plaintiffs by them. Plaintiffs replied that they would be interested and that further negotiations can be conducted with their Mr. Joshi who would be visiting Geneva in August, 1994. Mr. Joshi did visit Geneva between 24th and 28th August, 1994. Defendant No. 1 had made arrangements for the stay of Mr. Joshi in Switzerland. The proposal for the agency agreement was forwarded by a fax message by the defendant No. 1 to the plaintiff on 29th November, 1994. From 27th July, 1994 till the termination of the agreement there was continuous interaction between the plaintiffs, defendants and the proposed clients of the defendants. Messages were sent by the defendants to varios parties in India indicating to them that the plaintiffs were the agents of the defendants in India and the other countries mentioned in the proposal for the agency agreement, hereinafter called "the proposal". Even the visit of the defendant No. 2 to India on three occassions were organised in consultation with the plaintiffs. The proposed clients of the defendants were also making enquiries from the plaintiffs. The plaintiffs had managed to procure two orders from Gujarat Optical Communication Ltd. and GTCL Mobile Com Technology Ltd. on 18th March, 1995 (Exhs. AA and BB). The defendant No. 1 by fax transmission dated 20th March, 1995 responded to the aforesaid orders by giving the quotations. On 27th March, 1995 plaintiffs in their letter requested defendant No. 1 to use Zumbach Models or the equivalent Beta make instruments for the supplies to the aforesaid two customers. On 9th March, 1995 (Exh.Z) plaintiffs sent a fax message to defendant No. 1 stating therein that the entire agreement is acceptable to them but for Clause 4.2 which was sought to be modified. This request was renewed on 27th March, 1995. However, the plaintiffs received a communication dated 28th March, 1995 in which it was mentioned that defendant No. 1 propose to open their own office in India and manufacture some of the parts locally, and therefore, it is mentioned that they were constrained to terminate the agreement with the plaintiffs as of 31st March, 1995. The plaintiffs were informed that they would be paying commission of one per cent on all written orders received prior to 31st March, 1995 for which a letter of credit is opened by 30th April, 1995 at the latest. The plaintiffs objected to the termination of the agreement by their letter dated 30th March, 1995. The Advocate's notice was also sent by the plaintiffs to defendant No. 1 on 19th April, 1995. When no response was received the above noted suit has been filed and Notice of Motion has been taken out.
6. In the affidavit in support of the Notice of Motion facts as narrated in the plaint have been reiterated. The facts which have been stressed upon are that the agreement could not be terminated without giving three months notice. On the basis of the orders already received before the termination of the agreement, the plaintiffs would be entitled to commission at the rates specified in the agreement. Tentatively damages have been computed at a sum of Rs. 6,12,00,000/-. Since the defendants have no business interest in India it would be necessary to protect the claim of the plaintiff.
7. The defendants have stated that there is no concluded contract between the plaintiff and the defendant. Exhibit-P was merely aproposal of the agency agreement. The agreement was to be accepted by 30th November, 1994. It was not accepted. The plaintiff rather made a counterproposal on 9th March, 1995 which was reiterated on 27th March, 1995. This counter proposal was not accepted by the defendants. Various letters were written to the clients only to indicate that they were negotiating for an exclusive agency agreement with the plaintiff. In the alternative it is submitted that this Court has no jurisdiction as the jurisdiction of the Indian Courts stands excluded by Clause 5 of the proposal of agency agreement. Clause 4.2, 5 and 6 arc as under:
4.2 The Agent will visit each client in India, Pakistan, Nepal, Bangladesh, Sri Lanka at least 6 times (average) per year.
5. This contract is under the jurisdiction of Swiss law.
Any and all disputes arising from this contract shall be submitted exclusively to the competent courts of the canton of Vaud. The right to appeal to the Swiss Federal Supreme Court is reserved.
6. Validity of Agreement.
The agreement is valid from this date and for an unspecified period. This contract may be cancelled by either party at any time, following 3 (three) months notice by registered letter.
In any event it is stated by the Defendants that the agency agreement has been validly terminated. They have agreed to payment of one percent commission by way of goodwill gesture on their part. This commission has only to be paid against written orders received upto 31st March, 1995. The two orders received were subsequently cancelled. Therefore, no commission is payable to the plaintiffs.
8. I have heard Counsel for the parties at length. The Court has been taken through the pleadings and the documents by Counsel for both the parties. The submissions made by both the Counsel are actually contained in the pleadings themselves. It is submitted by the Counsel for the plaintiff that there is a concluded contract between the parties which is evident from the following facts.
The defendants voluntarily sent a fax message dated 27th July, 1994 making enquiries from the plaintiffs as to whether they would be prepared to represent the defendants as the sole agents for promotion of their equipment on the Indian market. The plaintiffs were contacted because of their high reputation and were introduced by Beta. Mr. Joshi of the Plaintiffs did visit the defendants to negotiate for an agreement. Even prior to the agreement dated 29th November, 1994 the defendants had informed various prospective customers in India that plaintiffs were the agents of defendant No. 1 in India. The actual agency agreement was contained in the fax message dated 29th November, 1994. Even defendants had accepted plaintiff as their sole agents in India as is evident from the facts pleaded in the plaint and the various affidavits. It is submitted that in circumstances such as this conduct of the parties prior to the termination of the agreement is very relevant. The whole conduct of defendant No. 1 leads to the irresistible conclusion that the defendants have treated the contract as concluded. The amendment suggested by the plaintiff was never rejected by defendant No. 1. Therefore, the same is deemed to have been accepted. Even if it is assumed that the suggested amendment was not accepted the agency agreement still stood concluded. The original agreement including the clause contained in paragraph 4.2 is binding on both the parties. Thus either way it cannot be stated by the defendants that there is no concluded contract. Counsel for the plaintiff has further submitted that if the agreement had not treated as concluded there was no question of terminating the said agreement. There was no need to inform all the potential customers that the plaintiffs are the sole agents for the defendants No. 1 in India and the other countries. On the other hand, Counsel for the defendants has vehemently argued that there is no concluded contract between the parties. The whole of the pleadings and the documents merely disclose that there were negotiations between the parties. Counsel has relied on Section 7 of the Indian Contract Act, 1872. According to the Counsel letter dated 29th November, 1994 was merely a proposal sent to the plaintiffs. Indeed, reading of Exhibit-O would show that it was only aproposal of agency agreement. This agreement was to be accepted by the plaintiffs by 30th November, 1994. It was only in the case of acceptance of the proposal that the defendants were to send the original by Federal Express. Proposal contained in Exhibit-O has to be read in conjunction with the letter dated 9th March, 1995 written by the plaintiffs to the defendants. In this letter it is clearly stated that the entire agreement is acceptable but for Clause 4.2. Thereafter an amendment was suggested. Thus it becomes obvious that there was no concluded contract and the parties are still at a negotiating stage. This letter was followed by another letter dated 27th March, 1995 written by the plaintiffs to defendants No. 1 asking for confirmation as to whether the amendment suggested was acceptable to the defendants. Thus it becomes obvious that there was no concluded contract, Section 7 of the Indian Contract Act reads as under:
7 Acceptance must be absolute-
In order to convert a proposal into a promise the acceptance must -
(1) be absolute and unqualified, (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance.
A perusal of the said section shows that in order to convert a proposal into a promise the acceptance must be absolute and unqualified. If the proposal prescribes the manner in which it is to be accepted, and the acceptance is not made in such manner, proposer may, within a reasonable time after the acceptance is communicated to him insist that his proposal shall be accepted in the prescribed manner, and not otherwise, but if he fails to do so, he accepts the acceptance. According to the counsel for the Defendants, the proposal was to be accepted within one day. The same not having been done the conditional acceptance on 9th March, 1995 is no acceptance in the eye of law. The so called acceptance dated 9th March, 1995 was in fact only a counter proposal. This counter proposal was not accepted by the defendants. Thus there was no concluded contract between the parties. To support the aforesaid argument. Counsel has relied upon the commentary by Pollock & Mulla, 11th Edition, Vol. 1 on the Indian Contract and Specific Relief Acts. Particular reference has been made to the observations made on page 125 of the said treatise with reference to Section 7. Therein it is stated by the author that "the fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in more formal shape does not prevent the existence of a binding contract. But there may be cases where the signing of a further formal agreement is made a condition or term of the bargain and if the formal agreement is not approved and signed there is no concluded contract." Further on page 126 it is observed as under "Where there has been no concluded contract, the question could no be whether there is an enforceable contract but whether there is a valid contract in law. Thus where there was valid non-compliance of Article 299(1) of the Constitution, it was held that the contract was void and therefore there was no contract in the eye of law." Replying to the aforesaid submissions, counsel for the plaintiffs has submitted that the facts of this case fall squarely within the provisions of Section 7 of the Contract Act and thus there is a concluded contract between the parties.
9. I am inclined to agree with the submissions made by the Counsel for the Plaintiff. Case of the Plaintiffs clearly fall within the last sentence of Section 7 which is "but if he fails to do so, he accepts the acceptance," From a perusal of all the pleadings it is evident that the proposed agency agreement was sent to the plaintiffs for approval on 29th November, 1994. This was to be accepted by 30th November, 1994. Plaintiffs did not intimate the acceptance of the said proposal on 30th November, 1994. Yet the plaintiffs and defendants were in continuous close association as is obvious from the facts narrated above till the agency agreement came to be terminated on 28th March, 1995. What has transpired between 29th November, 1994 and 28th March, 1995 is of significant relevance. The dealings between the plaintiffs and the defendants started on 27th July, 1994. The plea of the plaintiffs that the agency agreement had already been finalised can be supported from the voluminous correspondence which has been attached by the plaintiffs with the plaint. A perusal of Exhibit-F would show that a list of 1 3 customers was handed over to the plaintiffs to whom the letters had been written intimating the exclusive agency agreement between plaintiffs and defendants. Perusal of Exhibit-G shows that the defendants had written to another customer in which it is clearly stated that the plaintiffs will represent the defendants products in India. The address of the plaintiffs has been given in the letter. It was further stated that the plaintiff is a leader in product identification an ink jet coding/marking systems, that the Company is well known as agents for Beta Instruments Ltd., that they will now extend their activities by representing the products of the defendants. Therefore, the customer is invited to contact Mr. Joshi for any further enquiry. Even the visit of the defendant No. 2 to India in October, 1994 was organised to coincide with the availability of plaintiffs. There is abundant documentary evidence on the record to show that the plaintiffs and the defendants were conducting themselves as it the agency agreement had been concluded. Whilst all the efforts for procuring orders were progressing, defendant No. 1 had again visited India in March. 1995. It is the pleaded case of the plaintiffs that defendant No. 2 had assured that the modification as sought by the plaintiffs in paragraph 4.2 is minor and is acceptable to the defendants. Therefore, to complete the formality it was requested by fax message dated 9th March, 1995 to modify the existing Clause 4.2. This modification merely related to the number of visits the plaintiff was to pay to the clients in the other foreign countries. Thus at this stage it would not be possible to hold that by suggesting this modification the agency agreement have not been accepted. As narrated above, the initial agency proposal was to be accepted by 30th November, 1994. This having not been accepted the defendants ought to have had no further association with the plaintiffs. But the conduct of the- parties shows to the contrary. The plaintiffs were encouraged to develop the market in India at a tremendous pace. Eve target was set to be achieved in the year 1995, The plaintiffs had in fact reached the target set for the whole year of 1995 within the first three months of 1995. This conduct is not that of a party which has not accepted the contract as final and binding. Apart from this, when the defendants had received the fax message dated 9th March, 1995 suggesting the modification the same ought to have been rejected there and then. As provided under Section 7 the defendants ought to have insisted that the contract should be accepted as it was given in the proposal dated 29th November, 1994, 1 find substance in the submission of the counsel for the plaintiff that the two fax messages dated 9th March, 1995 and 27th March, 1995 were sent merely to remind defendant No. 2 of the assurances which had been verbally given to the effect that the said modification suggested by the plaintiff is only minor. In fact a perusal of the pleadings would show that a number of things happened between 9th March and 28th March, 1995. On 9th March, 1995 a fax was sent by the plaintiff to the defendant No. 1 suggesting the modification in Clause 4.2. On 18th March, 1995 the plaintiffs received enquiries and order for supply of complete CAB Solid PE Insulation Line from Gujarat Optical Communication Ltd. as also from GTCL Mobile-Corn Technology Ltd. On 20lh March, 1995 the plaintiffs received a response from defendant No. 1. Defendant No. 2 again visited India between 20th and 23rd March, 1995 when he expressed satisfaction about the progress achieved by the plaintiffs in respect of the sales promotion of the equipments manufactured by defendant No. 1. An assurance was held out to the plaintiffs that the modification is minor and to treat the agreement as final. Second defendant was to sign he agreement at Bombay before his departure but he went back to Switzerland without visiting the office of the plaintiff and without signing the document, It was for this reason that another fax was despatced on 27th March, 1995. On the same day another letter was addressed by the plaintiff to defendant No. 1 as regards supply of equipments of Gujarat Optical Communications Ltd. But on 28th March, 1995 certain differences of opinion appear to have arisen between defendant No. 2 and Beta. Thus on 28th March, 1995 the fax letter of termination of the agreement seems to have been issued. I am inclined to accept the submission of the Counsel for the plaintiff that by virtue of Section 7 of the defendants having not rejected the acceptance dated 9th March, 1995 are deemed to have accepted the said acceptance. The proposal dated 29th November, 1994 had to be accepted by the Plaintiff by 30th November, 1994. This was not done, Yet the parties continued to conduct transactions on the basis of the proposed agreement dated 29th November, 1994. The proposed agreement was accepted on 9th March, 1 995 by the plaintiff with the suggested modification. Defendant No. 1 ought to have within a reasonable time after the acceptance was communicated to him insisted that, the original proposal shall be accepted in the prescribed manner. Defendant No. 2 utterly failed to do so and rather vigorously continued the commercial transactions with the aid of the plaintiffs. Having done so I do not find any substance in the submission of the learned Counsel for the Defendants that the acceptance dated 9th march, 1995 was no acceptance in the eye of law. In a contract such as this, conduct of the parlies is very important, The court is dealing herewith two highly sophisticated and prominent firms in their field. Their actions are expected to be well informed about the commercial works. It cannot be envisaged that a company like defendant No, I would continue transactions on a huge financial scale without knowing the implications of the same. Similarly it cannot be easily accepted that the plaintiffs would continue working for defendant No. 1 in procuring huge orders for his equipment without there being assurances to the effect that there was a concluded contract. In fact Section 8 of the Indian Contract Act would also come to the aid of the plaintiffs. The plaintiffs case fits in with the provisions contained in Section 8 to the effect that performance of the conditions of a proposal is an acceptance of the proposal. One has only to glance through the various pleadings and the documents to see that the plaintiffs has performed each and every condition set out in the proposal of the agency agreement. Thus even if strictly legally it could be held that there was no acceptance of the proposal as envisaged by the proposal dated 29th November, 1994, the conduct of the parties would clearly show that said proposal had been, in fact, accepted and that there existed a concluded contract between the parties. The submissions made on the basis of observations made in Pollock & Mulla to my mind support the submissions of the Plaintiff. The learned author has clearly stated that the fact that the parlies refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. The fact that the defendants treated the proposal as a concluded contract is also apparent from the action taken by them in terminating the said contract. If there is no contract there is no need to terminate the said contract. If there is no contract there is no need to make any payment of the commission under the said contract. Yet a perusal of the letter dated 28th March, 1995 clearly shows that it was terminating an exclusive agency agreement between India, Pakistan, Nepal, Bangladesh and Sri Lanka. The letter acknowledges that defendant No. 2 had visited India 3 times. It also acknowledges that the prices in the Indian market are approximately 30 per cent lower than other markets and that the potential for the products of the defendants in Indian market is very important. Consequently the defendants have decided to open their own office in India. Thus the contract with the plaintiff is terminated. But then it is stated that one per cent commission shall be paid on all written orders received prior to 31st March, 1995 and for which letter of credit is opened by April 30, 1995. Merely because the word "contact" has been used instead of the word "contract" does not mean that there was no concluded contract. The word contact could easily be a misprint for the word contract. If there had been no contract there was no question of payment of any commission even if the orders have been obtained by the plaintiffs. Keeping these facts and circumstances in view I am prima facie satisfied that there is a concluded contract between the parties which can be specifically performed. Having come to the prima facie conclusion that there is a concluded contract between the parties. I am of the opinion that termination of the agreement is contrary to Clause 6 of the agreement 3 months notice not having been given the termination of agreement is apparently illegal.
10. This brings us to be preliminary issues framed by this Court as to whether (a) this Court has jurisdiction to entertain the suit and (b) whether the jurisdiction clause is void and of no legal consequence. Learned Counsel for the defendants has submitted that in view of Clause 5 of the agreement, any dispute arising from this contract is triable exclusively by the Courts of the Canton of Vaud. In view of the explicit exclusion of the jurisdiction of all other Courts, this Court will have no jurisdiction to entertain the suit. It is submitted that the exclusive jurisdiction of the Courts in Switzerland has been -accepted by the Plaintiff also. This fact is evident that in the counter proposal dated 9th March, 1995 no amendment of Clause 5 of the proposal was sought. Only Clause 4.2 was sought to be modified. In view of the unequivocal acceptance of Clause 5 by the plaintiff, the Courts in Switzerland have exclusive jurisdiction to entertain any dispute arising from this Contract. Further more the clause would be void and contrary to the provisions of Section 23 of the Contract Act only if the jurisdiction of all the Courts is sought to be ousted by the exclusion clause. Thus the Plaintiffs would have to show 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 e a proper jurisdiction in the matter of the contract it could not be said ousted the jurisdiction of this Court. Here the parties had agreed to submit the disputes arising from the contract to the jurisdiction of the Swiss Courts which would otherwise also be a proper jurisdiction under the law. Thus the exclusion clause cannot be said to be a void as being against public policy. Learned Counsel for the defendant has placed reliance on certain judgments of the Supreme Court for making good his submissions. These are (i) A.B.C. Laminart Pvt. Ltd. and Anr. v. A.P. Agencies Salem (ii) British India Steam Navigation Co. Ltd. v. Shanmughav lias Cashew Industries and Ors. and (iii) Angile Insulations v. Davy Aslunore India Ltd. . In support of his submissions, the learned Counsel for the Plaintiffs has relied upon the judgments reported (i) Owners of Cargo Lately Laden an Board ship or vessel Eleftheria v. Owners of ship or vessel Eleftheria (1969) 2 All ER page 641 (ii) Evans Marshall v. Bertola SA (1973) 1 All ER page 992 and (iii) on Halsbury's Law of England Vol. 8 paragraphs 792 and 793 at page 509.
11. I have carefully considered the submissions made by the learned Counsel. In the case of A.B.C. Laminart the Supreme Court was dealing with the jurisdiction clause which was to the effect that "any dispute arising out of the sale shall be subject to Kaira jurisdiction". In this case the manufacturer was carrying on business within the jurisdiction of the Civil Court at Kaira (Gujarat). The purchaser was doing business in metallic yarn and other allied products at Salem (Tamil Nadu). Dispute having arisen, inspite of the aforesaid exclusion clause the buyer filed a suit against the seller at Salem. The seller took preliminary objection that the subordinate Judge at Salem had no jurisdiction to entertain the suit. Preliminary issue was framed by the trial Court. The trial Court found that it has no jurisdiction to entertain the suit in view of Clause 1 I and accordingly it returned the same for presentation in the proper Court. The buyer (plaintiff) took the matter in appeal to the High Court of Madras which allowed the appeal and set aside the judgment of the trial Court with a direction to take the plaint on file and dispose of the suit on merits on other issues, The matter was taken to the Supreme Court in appeal by Special Leave from the judgment and order of the Madras High Court by the seller (defendant in the suit). It was submitted before the Supreme Court by the appellants that Clause 11 of the agreement having provided that any disputes arising out of the sale shall be subject to Kaira jurisdiction, the parlies are bound by it and the suit could therefore have been filed only within Kaira jurisdiction and not at Salem as such the High Court committed error of law in setting aside the trial Court judgment and in directing the Court at Salem to entertain the suit. The Supreme Court held that Clause 11 forms part of the agreement and the parties would be bound by it so long as they would be bound by the contract itself. It was further held by the Supreme Court that clause I 1 was valid and was not contrary to the provisions of Sections 23 and 28 of the Contract Act. It was held that under Section 23 of the Contract Act. The consideration or object of an agreement is lawful, unless it is opposed to public policy. Every agreement of which the object or consideration is unlawful Is void. Thus agreement to oust absolutely the jurisdiction of the Court will be unlawful and void being against public policy. However, such will be the result only if it can be shown that the jurisdiction to which the parties have 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 mailer of contract it could not be said that it ousted the jurisdiction of the Court. The Supreme Court further observed that in a suit for damages for breach of contract the cause of action consists of the making of the contract, and of its breach, so that the suit may be filed either at the place where the contract was made or at place where it should have been performed and the breach occured. It is specifically held in paragraph 15 of the judgment" in suits for agency actions the cause of action arises at the place where the contract of agency was made or the place where actions are to be rendered and payment is to be made by the agent. Part of cause of action arises where money is expressly or impliedly payable under a contract. In cases of repudiation of a contract, the place were repudiation is received is the place where the suit would lie. Thereafter in paragraph 16 it is held as under:
16. So long as the parties to contract do not oust the jurisdiction of all the Courts which would otherwise have jurisdiction to decide the cause of action under the law it cannot be said that the parties have by their contract ousted the jurisdiction of the Court. II under the law several Courts would have jurisdiction and the parties have agreed to submit to one of these jurisdictions and not to other or others of them it cannot be said that there is total ouster of jurisdiction. In other words, where the parties to a contract agreed to submit the disputes arising from it to a particular jurisdiction which would otherwise also be a proper jurisdiction under the law (heir agreement to the extent the agreed not lo submit to other jurisdictions cannot be said lobe void as against public policy. If on the other hand the jurisdiction they agreed to submit to would not otherwise be proper jurisdiction lo decide disputes arising out of the contract it must be declared void being against public policy.
In paragraph 18 the Supreme Court observed that:
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 there within, if the parties to a 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 contracting against the statute. Merchantile Law and practice permit such agreements.
In paragraph 21 of the said judgment it was held as under:
21 From the foregoing decisions it can be reasonable deduced that where such an oustei 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 parlies and unless the absence of ml idem can be shown, the other courts should avoid exercising jurisdiction. As regards construction of the ouster clause when words like 'alone', 'only', exclusively' and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim "expressio unius est an exclusion alterius expression of one is the exclusion of another may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may be inferred. It has therefore to be properly construed.
Applying the aforesaid ratio the Supreme Court held that the bobbins of metallic yarn were delivered at the address of the Respondent at Salem which, therefore, would provide the connecting factor for Court at Salem to have the jurisdiction. If out of the two jurisdictions one was excluded by clauses II it would not absolutely oust the jurisdiction of the Court and, therefore, would not be void against public policy and would not violate Sections 23 and 28 of the Contract Act. Thereafter the Supreme Court went on to hold that under the facts and circumstances of the case Clause 1 I did not exclude other jurisdictions having connecting factors as they were not clearly, unambiguously and explicitly excluded. Learned Counsel for the defendants has, however submitted that in Clause 5 it is clearly stated that all disputes arising from this contract shall be submitted exclusively to the competent Courts of the Canton of Vaud. Thus Clause 5 falls squarely within the observations made by the Supreme Court in para 21 reproduced above where it is held that "as regards construction of the ouster clause when words like "alone", "only" "exclusive" and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim" expressio unius est exclusio alterius expression of one is the exclusion of another may be applied, Thus I find force in the submission of the Counsel that in normal circumstances Clause 5 of the proposal would clearly exclude the jurisdiction of any other Court except the Court of Canton of Vaud to adjudicate upon any dispute arising from the contract.
12. The aforesaid judgment has been followed in (1995) 4 SC 153 and reiterates 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.
13. In the B.I.S.N.C. case (supra) the Supreme Court has held in paragraph 30 of the judgment that "in the absence of express choice the question of the proper law ol contract would arise. The parties to a contract should be bound by the jurisdiction clause to which they have agreed unless there is some strong reason to the contrary, (emphasis supplied) Counsel for the plaintiff submits that in view of the judgments of the Supreme Court he does not press the submission that Clause 5 is void. It is also submitted by the Counsel that in view of Clause 5 in normal circumstances the jurisdiction of this Court would betaken to be excluded. Inspiteof the aforesaid submissions Counsel, however, submits that this Court in the facts and circumstances of this case would be justified in exercising the jurisdiction to entertain the suit by virtue of the inherent powers vested in this Court. It is submitted that Court would normally insist on the parties submiting to the jurisdiction provided in the contract but this is not an absolute rule. Provided the plaintiff is in a position to give strong reasons to the Court to show that the ends of justice would be better served, by entertaining the suit, this Court has the discretion to entertain the suit. The use of the expression 'exclusively' would not he an absolute bar to the jurisdiction of this Court. A reading of the aforesaid observations shows that normally the parties to a contract should be bound by the jurisdiction clause to which they had agreed unless there is strong reason to the contrary, It is keeping these observations in view that the submissions of the Counsel for the Plaintiff have to be examined.
14. The first judgment relied upon by the Counsel for the plaintiff is The Eleftheria (supra). This is a judgment given by the Probate, Divorce and Admiralty Division of the English High Court. An application was made by the shipowners to stay an action brought against them by cargo owners on the grounds that the contracts of carriage sued on contain a Greek jurisdiction clause and are governed by Greek law. The plaintiffs were a number of timber merchants carrying on business in England. The defendants were three Greek Nationals trading in part at least under the firm name of G.K.M. Co. These three persons were joint owners of The Eleftheria, which was a Greek ship registered at the part of Piraeus and they resided in Greece. The principal place of business of the defendants was in Athens. In August, 1968 there were shipped on board the Eleftheria at the Rumanian port of Galatz a large number of parcels of Rumanian beech wood and plywood for carriage to London and Hull. These goods were shipped under bills of lading in the English language according to which the shippers were Exportlemen State Company for Foreign Trade, the show owners were G.K.M. Co. of Athens and the goods were consigned to order. On the reverse side of the bills of lading there were printed a large number of clauses under the heading. "Liner Terms approved by the Baltic and International Maritime Conference Code Name "Conlinebill" amended January 1st, 1950 amended August 1st, 1952. "These clauses were made part of the bill of lading contract by express words on the front of it. Of these clauses, Clause 3 is material.
3. JURISDICTION. Any dispute arising under this Bill of Lading shall be decided in the country where the Carrier has his principal place or business, and the law of such country shall apply except as provided elsewhere herein.
The plaintiffs claim that they were the endorsees of a substantial number of bills of lading relating to parcels intended to be carried to Hull, to whom the property in such parcels passed on or by reason of such endorsement. The defendants having refused to on-carry the goods of which the plaintiffs claim to be the owners from Rotterdam to Hull, the plaintiffs arranged for the on-carriage at their ownexpense. Thus the action was brought to recover the expense so incurred as damages for breach of the contract of carriage contained in the bills of exchange. The Court in that case came to the conclusion that the subject matter of the action is a dispute which, by the terms of the contracts, between the parties, they have agreed should be decided by a Greek Court. It was further observed that the uncontradicted evidence is that the defendants have their principal place of business in Athens and the dispute is clearly one which falls under the bills of lading. It follows that, under Clause 3, the parties have agreed to refer it to a Greek Court. The aforesaid decision has been given inspite of the fact that the word "exclusive' alone was not used in Clause 3 supra.
Having given the aforesaid finding the Court then examined the question as to on what principles of law an application to stay an action on the ground of such an agreement should be decided. Number of authorities were referred to on the subject matter. Thereafter the-following principles were laid down.
(i) where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court and the defendants apply for a stay the English Court, assuming the claim to be otherwise within its jurisdiction is, not bound to grant a stay but has a discretion whether to do so or not. (ii) the discretion should be exercised by granting a stay unless strong cause for not doing so is shown, (iii) the burden of proving such strong cause is on the plaintiff, (iv) In exercising its discretion, the court should take into account all the circumstances of the particular case, (v) In particular, but without prejudice to (iv) the following matters, where they arise, may properly be regarded (a) In what Country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts; (b) Whether the law of the foreign court applies and if so, whether it differs from English law in any material respects; (C) with what Country citherparty is connected, and how closely; (d) whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages; (e) whether the plaintiffs would be prejudiced by having to sue in the foreign Court because they would - (i) be deprived of security for that claim, (ii) be unable to enforce any judgment obtained, (iii) be faced with a time bar not applicable in England, or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial."
These principles have been reiterated in paragraphs 792 and 793 of the Halsbury's Law of England (supra). In view of the observations made and the principles laid down in The Eleftheria's case (Supra) and the Halsbury's laws, I find considerable force in the submission of the Counsel for the plaintiff that this Court has the jurisdiction to entertain the present suit in respect of Clause 5 of the contract, in order to do justice between the parties. Mr. Govilkar, Learned Counsel for the Plaintiffs has then referred to the case of Evans Marshall (Supra). In this case the Court of Appeal was considering a very similar matter to the present case. The Plaintiffs, an English Company, were wholesale wine merchants. In 1951 the plaintiffs entered into an agreement with the first defendants (Bertola) a company incorporated in Spain, whereby Bertola granted the plaintiffs sole agency and distribution rights for their products in the United Kingdom and certain Common Wealth territories, specially agreeing not to sell them there except through the Plaintiffs. By Clause 13 Bertola were entitled to determine the agreement if the plaintiffs did not fulfill their duties. Clause 15 provided; "If any law claim arises between the two parties it will be submitted to the Barcelona Court of Justice". In 1954 the agreement originally for five years, was extended to 20 years from 26th September, 1953. In 1961, it was extended until 30th September, 1986. The arrangements between the parties worked satisfactorily until June, 1972. Bertola had been anxious to market a sweet sherry and sales had steadily expanded during that period. No demand had been made by Bertola to market medium or dry sherries and so Berlola had become a name associated with sweet sherry. In June, 1972 Bertola became a wholly owned subsidiary of Rumasa, a public company incorporated in Spain, which operated through subsidiaries in many different spheres including the wine trade. Rumasa had close links with the second defendants (ISI), an English Company, who acted on behalf of Rumasa as agents for another brand of sherry ISI were well aware of the terms of the distributorship agreement between Bertola and the plaintiffs. The new management of Bertola was clearly dissatisfied with the terms of that agreement. At meetings in June and July, 1972 Bertola announced decisions which involved important changes in the way in which the agreement had hitherto been operated, including an unspecified increase in the fob price per case, a demand that the plaintiffs forthwith give an order for 50,000 cases, and the marketing of medium and dry sherries under the Bertola name. In subsequent negotiations with the Plaintiffs, ISI acted as the mouthpiece for Bertola. The plaintiffs took lime to consider the implications of the changes announced by Bertola. Berlola became impatient and, in October gave notice that they were terminating the distributorship agreement, complaining of "lack of performance on your part and your obstructive conduct towards adaptation to the commercial policy established". On 30th October Bertola appointed ISI to be their distributing agency in the United Kingdom. On 10th November, the plaintiffs issued a writ against Bertola and ISI which, as subsequently amended, claimed injunctions against both defendants and against ISI damages for interference with plaintiffs' contracts and conspiracy. On 30th November, Kerr J. refused Bertola's application to discharge an ex parts order granting leave under RSC Ord 11 rl, to serve notice of the first writ on them out of the jurisdiction and gave leave for service of notice of the second writ. He refused, however, the plaintiff's application for interlocutory injunctions (a) taking into account an offer made by Rumasa and announced at the hearing to hold themselves responsible upto Pounds 500,000 for any damages awarded against Bertola in the actions and (b) holding that, since he was not satisfied that the plaintiffs had at least a reasonable, if not a strong, prospect of obtaining a permanent injunction at the trial, he had no choice but to refuse an interlocutory injunction. The plaintiffs appealed against that refusal and bertola cross-appealed against the orders granting leave to serve notice of the writs out of the jurisdiction. On page 1001 of the law Report it is observed as under:
JURISDICTION: I now turn to the first of the main points with which this appeal is concerned. The question is whether the courts in this Country should permit the continuance of these proceeding against Bertola in view of Clause 15 of the agreement, which provides for 'law claims' to be submitted to the Barcelona Court of Justice. It appears likely that at trial there may be contest whether or not that clause is an 'exclusive jurisdiction clause' for the purpose of this appeal, however, it was conceded on behalf of the plaintiffs that it should be so regarded and that accordingly the burden lying on the plaintiffs when asserting that they can successfully claim to continue proceedings here is heavier than it would be if the jurisdiction given to the Barcelona court has not been exclusive.
The authorities relating to this aspect of the case were cited in the first instance judgment. Thereupon the learned judge rightly decided to apply the most stringent of the tests laid down in them, He referred to the judgment of Diplock LJ in Mackender v. Feldia AC where he said" I...should require very strong reasons to induce me to permit one of them (i.e. the parties) to go hack on his word' and of Lord Denning MR in YTC Universal Lid. (in Liquidation) v. Trans Europa Compania de A viacion SA where he said.
...effect should usually he given to (the) agreement, though there may be exceptional cases where a case may be allowed to proceed in these courts despite such agreement....
Kerr J. went on to say that, having taken all relevant matters into consideration, he nevertheless concluded-
without hesitation that for a number of reasons this is a proper case for the exercise of jurisdiction under RSC Ord 11 in relation to both writs, because of the special circumstances. In my judgment, too, this is plainly a case which jurisdiction under RSC Ord II should be exercised as regards both concurrent writs in favour of the plaintiffs. The reasons for this course being adopted were fully set out in the judgment of Kerr J. and can be summarised as follows by quoting from the judgment: First: "This is a ease of which the substance is exclusively concerned with this country. It is a battle about the proper marketing of sherry in the United Kingdom.
Secondly: Whatever may he the right view about all the relevant allegations, all the essential witnesses concerning these issues arc here, and all these issues essentially relate lo the marketing conditions o sherry in this country and nowhere else.
A perusal of the above observations clearly shows that the Court of Appeal had treated the jurisdiction clause as an "Exclusive jurisdiction clauses". Having so held still the suit was permitted to continue.
15. Applying the aforesaid principles to the present case I am of the considered view that it will be in the interest of justice to permit the present suit to continue. In my view, the plaintiffs had discharged the very heavy burden to show that grave injustice would be done to them if it is held that jurisdiction of this Court is ousted by virtue of Clause 5 of the proposal/contract. A perusal of the various pleadings would show (a) that the substance of the contract was to appoint the plaintiffs as the exclusive agents for the sale of the equipments of the defendants in India and on case by case basis for sale of equipments in Pakistan, Nepal, Bangladesh and Sri lanka, (b) the contract was to be performed in India, Pakistan, Nepal, Bangladesh and Sri lanka (c) the contract was in substance performed in India, (d) the termination of the agreement was received in India (e) all the essential witnesses were in India (f) The defendants had terminated the agreement with an intention to start their own office in Bombay (g) it has not been shown that the Swiss law would be different on the subject than the Indian law. It would be virtually impossible for the plaintiffs to produce the evidence and the witnesses in Switzerland since all the essential witnesses were residing in India. Thus it would, in all circumstances of this case, be unjust to allow the defendant to terminate the plaintiff's agency in India and at the same time avoid the jurisdiction of this Court. In view of the observations made above it is held that this Court has the jurisdiction to entertain the suit and the issue is decided accordingly.
16. This brings us to the final submission made by the Counsel for the Plaintiff that notice of perjury should be issued to Shri Ruben Fernandes, the Constituted Attorney of the defendants of or having made misleading, and false statements in the affidavit dated 2nd September, 1995. In my view no useful purpose would be served in examining the point as to whether or not the defendants are guilty of supression of any material facts, at this stage. This matter is left open to be decided at the time when the suit is finally decided after recording of the evidence and all the necessary material produced before the Court. It would be inappropriate at this stage to make any comments on that in view of what is stated above. At this stage it would be appropriate to notice that the defendants have already been directed to furnish a Bank Guarantee in the sum of Rs. 30 lakhs. The said Bank guarantee has been furnished. Thereafter the plaintiffs have been permitted to withdraw a sum of Rs. 8,56,000. The Bank guarantee with respect to the remaining amount of Rs. 21,44,000/- is still, available in Court to protect the interest of the Plaintiffs. In view of the above the Notice of Motion is made absolute in terms of prayer Clause (a)(iii) except the bracketed portion. The said prayer clauses read as under:
(a)(iii) furnishing the full and final accounts in this Hon'ble Court for the sales effected in India, Pakistan, Nepal, B angladesh and Srilanka (and deposit the commission in terms of Clause 2 of the Agency Agreement in this Hon'ble Court with liberty to the plaintiffs to withdraw the same.) The Bank Gurantee furnished by the defendants in pursuance of the orders of this Court shall not be withdrawn during the pendency of the suit. The Plaintiffs are at liberty to withdraw the sum of Rs. 8,56,000/- against the Bank Guarantee as per the orders of the Division Bench.
Notice of Motion is made absolute in the aforesaid terms with no order as to costs.