Delhi High Court
Ansal Buildwell Ltd. vs North Eastern Indira Gandhi Institute ... on 2 March, 2005
Equivalent citations: 2005(1)ARBLR431(DELHI), 118(2005)DLT274, 2005(81)DRJ147
Author: Pradeep Nandrajog
Bench: Pradeep Nandrajog
JUDGMENT Pradeep Nandrajog, J.
1. Present order disposes of the preliminary objection raised by the respondent to the maintainability of the present petition in this court. Objection is that this court would have no territorial jurisdiction to entertain the present petition.
2. Petitioner M/s. Ansal Buildwell Ltd. (referred to as ABL) had entered into a works contract with the respondent M/s. North Eastern Indira Gandhi Regional Institute of Health and Medical Sciences, Shilong (referred to as NEIGRIHMS) pertaining to construction of dwelling units, Guest House Road and External Service of Housing Complex at Shillong. M/s. Hospital Services Consultancy Corporation (India) Ltd. (referred to as HSCCI) was the nominated consultant of NEIGRIHMS. The agreement was executed on 17.5.2000. HSCCI has signed the agreement on behalf of NEIGRIHMS, being its consultant. Said agreement was novated by an agreement dated 31.12.2003.
3. ABL received certain advance payments from NEIGRIHMS towards mobilization and equipment, shuttering etc. These payments received by ABL from NEIGRIHMS were to be secured, as per contract, by furnishing bank guarantees in favor of NEIGRIHMS. ABL was also to furnish a performance guarantee. Numerous guarantees were issued by the bankers of ABL in favor of NEIGRIHMS. All the bank guarantees were issued by the bankers of ABL from Delhi.
4. Since the petition did not state as to how, courts in Delhi would have territorial jurisdiction, vide order dated 13.1.2005, ABL was directed to file an affidavit disclosing as to in what manner, courts in Delhi would have territorial jurisdiction to entertain the present petition. NEIGRIHMS was permitted to respond to the said affidavit. In compliance with the order dated 13.1.2005, requisite affidavits have been filed.
5. As per the affidavit filed by ABL, agreement dated 17.5.2000 was executed at the registered office of HSCCI at New Delhi. Prior thereto, letter of award dated 4.4.2000 was received by ABL at New Delhi. Supplementary agreement dated 31.12.2003 novating the agreement dated 17.5.2000 was executed between ABL and HSCCI at New Delhi. The stamp paper on which the supplementary agreement dated 31.12.2003 has been executed was purchased at Delhi. Clause 60.4 of the tender documents which form part of the contract between the parties stipulated that payment to the contractor by the consultant shall be made in Indian rupees into a bank account or accounts nominated by the contractor or by account payee cheque. In terms of the said clause, vide letter dated 10.4.2000, petitioner intimated that payments under the contract would be effected by deposit with the nominated banks, in the account of ABL; nominated banks were:- (i) Lord Krishna Bank, New Delhi; (ii) UTI Bank Ltd. Barakhamba Road, New Delhi; (iii) Punjab National Bank, Main Corporate Branch, Barakhamba Road, New Delhi. Said letter, further indicated that if payment was made through account payee cheque, would be payable at New Delhi. The affidavit of ABL furthher records, in reference to forwarding letter of HSCCI that payments were tendered, under the contract at Delhi. Apart from the facts affronted, it is additionally pleaded that all banks guarantees were executed and issued by ABL's bankers from New Delhi and the letters of invocation, invoking the bank guarantees were received at New Delhi.
6. In response, affidavit filed by the NEIGRIHMS in reply to the affidavit filed by ABL states that the original contract dated 17.5.2000 as well as the supplementary agreement dated 31.12.2003 were executed at the corporate office of HSCCI at Noida, U.P. It is further averred that all pre contract correspondence was exchanged between ABL and HSCCI at Noida. Bids under the NIT were received by HSCCI at Noida. Bids were opened at Noida. It is further asserted that the works in question were to be expected at Shillong.
7. Present petition under Section 9 of the Arbitration and Conciliation Act, 1996 is a consequence of NEIGRIHMS invoking the bank guarantees. ABL seeks stay against encashment of the bank guarantees.
8. As is usual at every court hearing, even disputes of a futuristic import are resolved by looking backwards. Precedents were cited by respective parties. How, in the past, the courts have adjudicated on the issue of territorial jurisdiction was shown to this court in reference to various authorities.
9. Let me start with the basic law. Residual section of the Code of Civil Procedure, Section 20, was the fulcrum on which arguments revolved. Not the whole section. Only Clause 'c' thereof was relied upon by the parties. Clause 'c' of Section 20 reads as under:
20. Subject to the limitations aforesaid, every suit shall be instituted in a court within the local limits of whose jurisdiction :-
(a)......
(b)......
(c) The cause of action, wholly or in part, arises.
10. Since counsel for ABL referred to Article 226 of the Constitution of India, in the context of territorial jurisdiction, I may note the language of Article 226(2) of the Constitution of India. It reads as under:-
226(2). The power conferred by clause (I) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seal of such Government or authority or the residence of such person is not within those territories.
11. At the outset, it has to be noted that Article 226(2), in relation to the territorial jurisdiction of a High Court uses the pari materia expression:- within which the cause of action, wholly or in part, arises. Thus, territorial jurisdiction under Section 20 of the Code of Civil Procedure and under Article 226(2) of the Constitution of India, in relation to cause of action would be, where the cause of action arises, wholly or in part.
12. What constitutes a cause of action? The Hon'ble Supreme Court explained the phrase in the decision reported as (1989) 44 Taxman 443 Laminart Pvt. Ltd. Vs. A.P. Agencies it was noted as under:-
That the jurisdiction of the Court in the matter of a contract will depend on the sit us of the contract and the cause of action arising through connecting factors. A cause of action means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to judgment of the Court, in other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded.
13. Mr. Rajiv Nayyar, learned senior counsel for NEIGRIHMS placing reliance upon a decision of a learned Single Judge of this court reported as EPI Vs. GNIDA urged that evidenced by para 4 and para 8 of said decision, issue of jurisdiction had to be determined in the context of a cause of action by placing primacy to the place where the cause of action has substantially arisen. In para 4 and para 8 of the decision in EPI's case learned Single Judge has observed as under:-
4. There is no quarrel with the proposition articulated in these decisions and I shall assume for the present that a part of the cause of action has arisen in New Delhi. However, in my view this is of no avail to the Petitioner since the fundamental inquiry is now to be directed towards determining the place where the substantial or predominant part of the cause of action has arisen. My observation in Cement Corporation of India v. M/s. S. Sultan and Anr., bearing Suit No. 2357-A/1997 is not in context for the reason that I had to consider in that case the legality and legitimacy of the ouster/restrictive clause reserving jurisdiction to Courts in New Delhi. There can be no gain saying today that parties cannot agree to have disputes adjudicated a place which does not otherwise enjoy jurisdiction.
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8. Primacy has been given to the place where the cause of action has substantially arisen, as is evident from the decision of the Hon'ble Supreme Court in South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd., . The admitted position was that performance of the obligations and liabilities under the contract was to be carried out in Bombay. The Court found it wholly irrelevant that the subject Bank Guarantee had been executed at Delhi and transmitted for performance to Bombay and held that Delhi Courts did not possess jurisdiction to decide the disputes. Therefore, assuming for the sake of arguments that the contract in the present case had actually been executed in Delhi, Courts in Hyderabad would be the only proper Courts for purposes of invocation of jurisdiction since the contract was to be performed there, the parties there and the other party has a subordinate office fully equipped and competent to prosecute the litigation.
14. A perusal of the two paragraphs in the decision in EPIs case would reveal that the learned Single Judge has held that primacy has been given to the place where the cause of action has substantially arisen, evidence by the decision of the Hon'ble Supreme Court in South East Asia Shipping Company Ltd. Vs. Nav Bharat Enterprises Pvt. Ltd. .
15. A perusal of the decision of the Hon'ble Supreme Court in South East Asia Shipping Company Ltd. would reveal that their lordships have nowhere used the words substantially arisen. On the contrary, in para 3 of the report, their lordships of the Supreme Court have observed as under:-
3. It is settled law that cause of action consists of bundle of facts which give cause to enforce the legal injury for redress in a court of law. The cause of action means, therefore, every fact, which if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is a bundle of fact, which taken with the law applicable to them, gives the plaintiff a right to claim relief against the defendant. It must include some act don by the defendant since in the absence of such an act no cause of action would possibly accrue or would arise.
16. On facts, their lordships of the Supreme Court noted that the contract was executed at Bombay and performance of the contract was at Bombay. Only act at Delhi was the execution of the bank guarantee which was transmitted for performance to Bombay. It was also held that execution of the bank guarantee did not constitute a cause of action and, therefore, courts at Delhi would not have jurisdiction to entertain a suit for injunction restraining against invocation of the bank guarantee.
17. In the context of the same phrase wholly or in part, deciding on territorial jurisdiction under Article 226(2) of the Constitution of India, their Lordships of the Supreme Court in the decision reported as Kusum Ingots and Alloys Vs. U.O.I., in para 10, dealing with the issue of cause of action held:-
10. Keeping in view the expressions used in clause (2) of Article 226 of the Constitution of India, indisputably even if a small fraction of cause of action accrues within the jurisdiction of the court, the court will have jurisdiction in the matter.
18. The observations in the decision of the Hon'ble Supreme Court in South East Asia Shipping Company read in light of the decision of the Hon'ble Supreme Court in Kusum Ingots and Alloys judgment makes the legal position very clear, being that, even a small fraction of cause of action if accruing, within the jurisdiction of a court, vests the court with jurisdiction to entertain the suit. In this context, it may be noted that the words in part in Clause 'c' of Section 20 of the Code of Civil Procedure are not preceded by the word substantially'. In other words it cannot be read that in the context of cause of action, legislative intent is to read the word part' as 'substantial part'.
19.Learned counsel for the respondent also referred to the decision of a Division Bench of this court reported as 87 (2000) DLT 693 DLF Industries Ltd. Vs. ABN Amro Bank and Ors. It has to be noted that cause of action for purposes of invoking jurisdiction of this court as pleaded was the execution of bank guarantees at Delhi. No other fact was asserted for purposes of cause of action.
20. Fry L.J. In Read Vs. Brown (1888) 22 QB 128 defined cause of action as :- everything which, if not proved, gives the defendant an immediate right to judgment must be part of the cause of action.
21. Cause of action does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved is a part of cause of action. As observed in Ujjal Talukdar Vs. Netai Chand Koley:-
Evidence of fact should not be confused with the fact itself. Even an infinitesimal fraction of a cause of action will be part of the cause of action and confer jurisdiction on the court within the territorial limits of which that little occurs.
22. Cause of action pleaded by the petitioner, as per affidavit filed under directions of this court would be of 4 facts:-
(i) Execution of the main contract at the registered office of HSCCI at New Delhi coupled with execution of the supplementary agreement on 31.12.2003 at New Delhi, supplemented with the prima facie evidence of the stamp paper being purchased at Delhi on which the supplementary agreement dated 31.12.2003 has been executed;
(ii) Clause 60.4 of the tender documents as per which ABL nominated banks in Delhi to receive payments and payments were being received pursuant thereto at Delhi.
(iii) Letter of award received at Delhi;
(iv) Bank guarantees being executed at Delhi and letters of invocation received at Delhi.
23. ABL, in its pleadings has referred to the contractual terms and the terms of the bank guarantee and in context of said terms has pleaded that the invocation of the bank guarantee is illegal. To succeed, ABL would have to establish the contractual obligations under the contract as well as the bank guarantee. To put it conversely, if respondent does not traverse or joins issue with ABL on this score, NEIGRIHMS would do so at its peril for the reason ABL would be entitled to immediate judgment. Judgment being on an admission.
24. ABL has not restricted plea of cause of action based only on the issuance of the bank guarantees from Delhi. Bundle of facts pleaded as constituting cause of action are much wider.
25. In the context of forum convenience it may be noted that in an appropriate case, a court may refuse to exercise its discretionary jurisdiction by invoking the said doctrine. While invoking the doctrine of forum convenience a court may refuse to exercise its discretionary jurisdiction notwithstanding that some part of cause of action has arisen within the territorial jurisdiction of the court.
26. In the instant case, it has to be noted that, HSCCI has acted as the consultant and most of the correspondence between the parties is between ABL and HSCCI. Registered office of HSCCI is at New Delhi. The bank guarantees have been addressed to HSCCI, though NEIGRIHMS is the beneficiary. Some of the letters invoking the bank guarantees have been issued by HSCCI.
27.Though NEIGRIHMS has asserted that the original agreement dated 17.5.2000 and the supplementary agreement dated 31.12.2003 were not executed at Delhi and were executed at the corporate office of HSCCI at Noida, it has to be noted that ABL has pleaded to the contrary. Unfortunately, neither agreement records the place where the same has been executed. This issue between the parties would require evidence. This court cannot treat the contract not being executed at New Delhi, more so when the registered office of HSCCI is at New Delhi as also the fact that the stamp paper on which supplementary agreement dated 31.12.2003 has been executed has been purchased at Delhi. A presumption has to be drawn that a document, executed on a stamp paper, has been executed in the state from where the stamp paper has been purchased.
28. I accordingly hold that subject to evidence being led on the issue as to where contract dated 17.5.2000 and the supplementary agreement dated 21.12.2003 was executed, at the moment, this court cannot hold that it has no territorial jurisdiction to entertain the present petition. For the purposes of maintainability of the petition, this court has to proceed ahead on the assertion of ABL that the original agreement as well as the supplementary agreement were executed at Delhi.
29. The preliminary objection by NEIGRIHMS is accordingly rejected, subject to final adjudication after evidence is led. It is held that the petition is maintainable in this court.