Calcutta High Court
Rlj Ferro Alloys Pvt. Ltd vs Steel Authority Of India Ltd. & Anr on 21 February, 2011
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
GA NO.2347 OF 2009
GA NO.2348 OF 2009
GA NO.3134 OF 2010
GA NO.3210 OF 2010
GA NO.3732 OF 2010
CS No. 143 of 2009
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
RLJ FERRO ALLOYS PVT. LTD.
Versus
STEEL AUTHORITY OF INDIA LTD. & ANR.
BEFORE:
The Hon'ble JUSTICE SANJIB BANERJEE
Date : 21st February, 2011.
Mr.Ranjan Deb, Sr. Adv., Mr.S.N. Mitra, Sr. Adv., Mr.Dhruba Ghosh, Adv., Mr.D.N. Sharma, Adv., for the plaintiff.
Mr.Utpal Bose, Adv., Mr.A. Gangapadhyay, Adv., for the defendant no.1.
The Court : The claim in the suit is for restraining the first defendant from realising the amount claimed by it from the plaintiff on 2 account of risk purchase effected by the first defendant following the admitted failure on the plaintiff's part to supply the goods under a purchase order. The plaintiff's principal interlocutory application was dismissed by an order of December 7, 2009 and affirmed in appeal.
GA No.2347 of 2009 is the first defendant's application for revocation of leave granted under Clause 12 of the Letters Patent. The thrust of the application is, really, to enforce a forum selection clause. GA No.3134 of 2009 is the plaintiff's second application in the suit seeking interlocutory orders in aid of the reliefs claimed. GA No.3210 of 2010 is the plaintiff's application for amendment of the plaint to incorporate a claim in damages. GA No.3732 of 2010 is the first defendant's application seeking recalling of an order dated November 24, 2010 passed by the Master requiring the first defendant to file its affidavit of documents.
The first defendant says that its written statement has already been filed. The opening paragraph of the written statement refers to the first defendant having applied, prior to the filing of its written statement, for rejection of the plant on the ground that the suit could not have been instituted in this Court. The first defendant says that though consent was given on its part at the time that the Master made an order on November 24, 2010 for documents to be discovered, again such consent has to be seen to be without prejudice to the first defendant's contention in GA 3 No.2347 of 2010. It is submitted that, in any event, at the highest the consent on the first defendant's behalf may be seen to be a mistake and an application has been made for recalling the order of November 24, 2010 before GA No.2347 of 2009 has been taken up for adjudication.
The tender papers appended to the plaint indicate that sometime in the year 2007 the first defendant had requested for quotations to be furnished for supply of ferro silicon at its several steel plants. Clause 2 of the first section of the tender papers specified that the supply was for the period of January to June, 2008 and referred to several steel plants, including the IISCO Steel Plant at Burnpur. The tender documents also stipulated at Clause 2.17 that all suits and legal proceedings by or against the steel plants in any matter arising out of the tender would be triable by the appropriate civil court at the place where the steel plants were located.
By a purchase order of December 21, 2007, the plaintiff was awarded the work of supply of a specified quantity of ferro silicon to the Burnpur plant. The said purchase order stipulated, at clause 26 thereof, as follows :
"26.0 LEGAL JURISDICTION All suits and legal proceedings by or against steel plants in any matter arising out of the contract shall be triable only by the appropriate civil court at the place where the steel plants are located."4
There was a subsequent back-up order placed on the plaintiff by the Burnpur plant directly on December 31, 2007 which contained an identical forum selection clause. The first defendant has now sought to enforce such forum selection clause and says that the words of exclusivity as built into such clause would entitle the first defendant to claim that only the court answering to the description specified in the forum selection clause would be empowered to receive an action governing the subject matter of the purchase order.
In support of such contention, the first defendant has referred to the celebrated judgment of ABC Laminart reported at (1989) 2 SCC 163 and has placed paragraphs 20 and 21 of the report. The Hanil Era judgment reported at (2004) 4 SCC 671 has also been placed and paragraphs 7 to 9 have been relied upon. The first defendant has also cited a judgment reported at (1995) 4 SCC 153 (Angeli Insulations) and has read paragraph 5 thereof.
The plaintiff says that the forum selection clause is utterly vague and paragraph 38 of the plaint records the plaintiff's contention in such regard. At paragraph 38 of the plaint, it has been averred that the "purported jurisdiction exclusion clause contained in the purchase order issued by the defendant no.1 is non-est and null and void and impossible of being given any effect inasmuch as the said clause is vague and 5 uncertain and the supply relates to several steel plants situated at Durgapur, Bhilai, Chattishgarh, Bhadravati, Bokaro, Rourkera (sic, Rourkella), Burnpur spread over various court over different States." The paragraph closes with the plaintiff's assertion that the parties had by consent given a go-bye to the jurisdiction clause. This last assertion has neither been amplified in the plaint nor referred to in course of the plaintiff's submission at the hearing.
The plaintiff says that at the time that the tender papers were circulated and quotations were sought from eligible parties, it was not clear as to which of the steel plaints would require the goods from a particular offerer. The plaintiff contends that the forum selection clause in the tender documents cannot be invoked.
The plaintiff's misgiving is misplaced. The forum selection clause in the tender documents has not been invoked since that related to the tender process. The forum selection clause that has been invoked is the one found in the purchase order of December 21, 2007 and is repeated in the back-up order of December 31, 2007.
The plaintiff says that the forum selection clause in the purchase order is unenforceable since, notwithstanding the words denoting exclusivity that may otherwise be found in the clause, the operative part of the clause is contained in the expression, "appropriate 6 civil court at the place where the steel plaints are located." The plaintiff submits that the clause does not authorise the competent civil court exercising jurisdiction over the Burnpur steel plant to be empowered to receive an action, but the clause specifies that the Court "at the place"
where the steel plaints are located would only have jurisdiction. It is the plaintiff's contention that since there is no Civil Court in Burnpur and it is Burnpur which is relatable to the expression "at the place," the forum selection clause in this case is ineffective.
For such purpose, the plaintiff says that a forum selection clause has to be strictly construed as will be evident from the ABC Laminart dictum. The plaintiff also relies on a judgment of this Court reported at (2008) 2 CHN 28 (Tata Iron & Steel Company Limited vs. Himani Alloys Ltd.). The following two paragraphs from the report have been placed:
"18. The body of law that either side has put on display on the enforceability of a forum selection clause, may be overlooked on a more fundamental score. There are two conflicting forum selection clauses. Even if such clauses had express words of exclusivity, the defendant's case would not have gone much further. For in such case, either clause would have been found to be exclusive with no consensus between the parties as to which would apply. This would rob the point of all of its sheen. The defendant's argument is that the plaintiff 7 could choose either but the plaintiff could not have chosen a forum other than the two mentioned in the conflicting clauses in its several invoices. Such argument cannot be accepted.
"19. A forum selection clause acts as an ouster upon conferment of authority to a chosen forum. The ouster is merely a consequence. The ouster is not the cause but only the effect. The cause is the identification of a forum that the parties had agreed to go to. If the identification is not possible, then there is no cause and, consequently, no effect. Loosely speaking, the ouster of a Court by a forum selection clause is by specific performance of the parties' bargain. Vagueness or conflict as to the import of a clause is anathema to specific performance."
The facts in that case need to be noticed. The defendant in that action applied for enforcement of a forum selection clause. In fact, there were two forum selection clauses of varying import in that case and the Court held that the ouster of the forum of the plaintiff's choice consequent upon an agreement between the parties is the effect of an enforceable forum selection clause and not the cause thereof. In other words, the Court held that when an agreed forum had been identified, the logical corollary would be that all other fora would be excluded. The ratio in that case was that since the defendant, who had sought to implement contradictory forum selection clauses, had, on its showing, demonstrated 8 the lack of clarity as to the choice of forum, there was no consensus between the parties as to any exclusive forum to entertain the disputes covered by the agreement. Clearly, in the facts of the present case, such dictum is inapposite.
Much of the grief in the length of the arguments in the present case has been brought about by the first defendant itself as is the wont of public sector undertakings in this country which are prone to, deliberately or otherwise, confusing matters. It was thoughtless of the signatory to the letter of December 21, 2007 to sign the document with the two lines immediately preceding his signature reading as it did. It is evident that the forum selection clause in the purchase order was physically lifted from the tender documents with only a word or two changed. It is also evident from the agreement that it contained an arbitration clause. If the agreement provided for arbitration to be the agreed form of action covering the subject-matter of the disputes, it flies in the face of logic that the opening words of the forum selection clause would refer to suits and other proceedings. But such mindless action on the part of the officers of the first defendant would not have the effect of altogether wiping out the forum selection clause.
The clause begins with the word "all" and also includes the word "only." That would imply that all actions of the kind described in the 9 clause had only to be instituted in the forum specified in the clause. To this there is no disagreement between the parties. The plaintiff merely says that it is the minor matter of the agreed forum which does not appear to be clear from the clause. The plaintiff's construction in such regard appears to be strained and slightly over-stretched. If a clause says that the court at a particular place would have jurisdiction and, in connection with the place an office or the like of one of the parties is specified, such clause has to be meaningfully read to imply that it is the civil court of appropriate pecuniary jurisdiction covering the value of the action and exercising jurisdiction over the specified office of the relevant party that would have the exclusive authority to receive the kind of action indicated in the clause.
There is no dispute between the parties here that the plaintiff's supplies were in respect of the first defendant's steel plaint at Burnpur; the cause title indicates as such when it records the address of the defendant. The body of the plaint also repeats the same.
In the present case, the first defendant issued its purchase order on the plaintiff for supply of specified goods to a specified steel plant. The forum selection clause governing the parties recorded that the Court "at the place where the steel plants are located" would have the jurisdiction to entertain a claim in respect of the subject-matter of the agreement. 10 Clearly, the forum selection clause has to be understood to have stipulated that the civil court exercising jurisdiction over the first defendant's steel plaint in Burnpur, subject to the pecuniary considerations, would be the only appropriate forum for entertaining an action relating to the purchase order.
In view of the above, it is found that the plaintiff has carried this claim in derogation of the forum selection clause that governed it. Accordingly, the suit cannot continue in this Court and the present action is arrested by giving liberty to the plaintiff to renew the claim before the appropriate forum in accordance with law and subject to the terms of the agreement between the parties.
In the light of the view taken on the question of this Court's authority to receive the action, the plaintiff's second application for interlocutory orders and the plaintiff's application for amendment of the plaint can no longer be taken forward. The defendant's application for recalling the Master's order of November 24, 2010 also becomes redundant.
CS No.143 of 2009 stands dismissed as far as this Court is concerned with liberty to the plaintiff as recorded above. All interlocutory applications in the suit, including GA No.2347 of 2009, GA No.3134 of 2009, GA No.3210 of 2009 and GA No.3732 of 2010, are disposed of. 11
There will be no order as to costs.
The plaintiff seeks a stay of the operation of this order which is unhesitatingly declined.
Urgent certified photocopies of this order, if applied for, be supplied to the parties upon compliance with all requisite formalities.
(SANJIB BANERJEE, J.) sd./bp.