Calcutta High Court (Appellete Side)
Mahanadi Coalfields Ltd vs M/S. Shyam Metallics & Energy Ltd. & Ors on 26 September, 2011
Author: Soumen Sen
Bench: Pinaki Chandra Ghose, Soumen Sen
1
In the High Court at Calcutta
Civil Appellate Jurisdiction
APPELLATE SIDE
M.A.T.No.731 of 2011
C.A.N. No. 5109 of 2011
W.P.No.6197 (W) of 2011
MAHANADI COALFIELDS LTD.
Vs.
M/S. SHYAM METALLICS & ENERGY LTD. & ORS.
BEFORE:
THE HON'BLE JUSTICE PINAKI CHANDRA GHOSE, J.
AND THE HON'BLE JUSTICE SOUMEN SEN, J.
For the Appellant :Mr.Kalyan Kumar Bandopadhyay,Sr.Adv., Mr. Aniruddha Mitra, Adv., Mr. Partha Basu, Adv., Mr. Nikhil Kumar Ray, Adv., For the Respondent :Mr. Anindya Mitra, Ld. Adv. General., Mr. Samaraditya Pal, Sr. Adv., Mr. Pratap Chatterjee, Sr. Adv., Mr. Saptangshu Basu, Sr. Adv., Mr. Abhrajit Mitra, Adv., Mr. Debanjan Mondal, Adv., Ms. Sarvapriya Mukherjee, Adv., Mr. Dwip Raj Basu,Adv., Ms. Swati Agarwal, Adv., Mr. Jishnu Chowdhury, Adv., For the Respondent Nos.3, 4 & 5 :Mr.Shibdas Banerjee, Sr. Adv., Mr. Rajiv Lall, Adv., For the Respondent No.10 :Mr. Kishore Dutta, Adv., Mr. Praitosh Sinha, Adv., Mr. Amitava Mitra, Adv., Mr. Dolon Das Gupta,Adv., 2 Heard on :13.06.11, 15.06.11, 11.07.11, 26.07.11, 11.08.11, 12.09.11.
Judgment on : 26th September, 2011 Soumen Sen, J.: An apparent conflict between the two groups of shareholders has been brought to the arena of this Hon'ble Court in its writ jurisdiction. What possibly could have been a case of oppression and mismanagement of a minority shareholder, namely, M/s. Shyam Metallics & Energy Ltd. & Ors. holding 9% shares against the majority, namely, Mahanadi Coalfields Ltd. holding 60% shares and JSW holding 22% shares has been made the subject-matter of the writ petition in which the Coal Controller has been put in the array of parties ostensibly to create a jurisdiction of this Court.
A brief summary of facts appearing from the writ petition would clearly indicate that the writ petition is not maintainable in this Hon'ble Court for lack of territorial jurisdiction since no part of the cause of action could be said to have arisen within the jurisdiction of this Hon'ble Court. The fact would further reveal that the contract, apparent breach and performance had taken place outside the jurisdiction of this Hon'ble Court and facts overwhelmingly are indicative of lack of territorial jurisdiction of this Hon'ble Court.
The instant appeal is arising out of an order dated 26th April, 2011 in W.P. No.6197(W) of 2011(Shyam Metallics and Anr. Vs. Union of India and Ors.) by 3 which the learned single Judge while admitting the writ petition rejected the objection as to the jurisdiction of this Hon'ble Court to entertain the said petition.
Mahanadi Coalfield Limited being aggrieved by the said order preferred the instant appeal.
Although an interim order was also passed in favour of the writ petition but the appellant before us confined its challenge to the order on the ground that no part of the cause of action has arisen within the jurisdiction of this Hon'ble Court and accordingly, this Hon'ble Court would not have entertained the said writ petition on the ground of lack of territorial jurisdiction.
The learned Counsels appearing on behalf of the parties have extensively argued before us on the scope of Article 226(2) of the Constitution of India and cited various authorities in support of their respective case.
Before we analyze Article 226 (2) of the Constitution of India and the decisions that have been cited, we feel it necessary to scrutinize the facts for better appreciation of the decisions that were relied upon before us.
The writ petitioner is a manufacturer of steel and allied products. It has its manufacturing unit of captive power plant situated at Rengali, Sambalpur, Orissa. Mahanadi Coalfield Limited has several coal blocks from which coal is 4 sold directly in the open market as well as through linkage agreements to different industries. The writ petitioner for its sponge iron cum steel plant at Sambalpur require regular supply of coal.
The writ petitioner set up an integrated steel and power plant at Sambalpur sometimes in May, 2006. For the purpose of ensuring regular supply of coal to its plant, the petitioner on 14th August, 2002 made an application to the Secretary, Ministry of Coal (hereinafter referred to as 'MOC') for allotment of coal block for its integrated steel captive power plant at Talcher, Orissa.
Since it would take several years to make a coal block operational, during the intervening period, it was decided to obtain such supply through a coal supply agreement. The writ petitioner made an application for allotment of coal block and on the basis thereof, the Ministry of Coal proposed allotment of coal block which is a combination of two coal blocks i.e. Utkal-A and Gopal Prasad West (West) in Orissa jointly to the writ petitioner along with several other companies and/or concerns. Such allocation of coal blocks jointly to the writ petitioner along with other companies was made on 29th November, 2005. In the said communication it was made clear that the success of the intention contained in the offer is dependent on formation of a joint venture company. Since the appellant is a public sector undertaking, formation of a joint venture would require cabinet clearance.
5
Subsequently, after compliance of all formalities, a Memorandum of Understanding (MOU) was entered into on 13th October, 2007 followed by a Joint Venture Agreement (JVA) dated 12th November, 2007.
The MOU is between five parties of which the first party was Mahanadi Coalfields Limited (MCL). The Joint Venture Agreement (JVA) was preceded by this MOU for the purpose of carrying out coal mining activity jointly at Utkal-A & Gopalprasad West (West) as a single Mine for deployment of optimum technology and conservation of coal. All the said parties have proposed to form a JVC to develop/build, own, operate and produce coal by outsourcing for which it was agreed that Global Tenders would be invited.
The coal produced from the said Utkal-Gopalprasad Mine is to be distributed in terms of the direction of the Ministry of Coal (MOC) which is mentioned below:
"i) The JVC shall hand over 60% (sixty per cent) of coal produced to MCL which shall be disposed by MCL as it chooses.
ii) The JVC shall be utilized for their captive consumption by their end use plant.
iii) The JVC shall hand over 9% (nine per cent) of coal produced to JSL which shall be utilized for JSL's captive consumption by their end use plant.6
iv) The JVC shall hand over 9% (nine per cent) of coal produced to SDRIPL which shall be utilized for SDRIPL's captive consumption by their end use plant.
The equity holding of MCL, JSW, JSL and SDRIPL in the JVC shall be 60%, 22%, 9% & 9% respectively."
Under the said JVC it was mentioned that parties intend to promote a JVC, subject to the approval of their respective Boards and MOC with the object of establishing, operating and maintaining the Utkal-Gopalprasad Mine in Talcher at Orissa.
The JVC to be formed and incorporated under the Companies Act, 1956 would be an integrated company for establishing, operating and maintenance of Coal Mine at Utkal-Gopalprasad Mine. The name of the JVC would be "MJS Coal Limited". The registered office of the JVC shall be at Bhubaneswar in the State of Orissa.
The JVC will have Board of Directors which would consist of nine Directors, five from MCL, two from JSW, one from JSL and one from SDRIPL. Till the Project achieves its rated capacity, the Project would be financed by equity participation of the members of JVC and the paid up capital ratio of MCL was 60% and Shyam DRI Power Ltd. was 9%. Upon commissioning of the said Mine 7 coal excavated would be made available to the MCL, JSW, JSL & SDRIPL in the proportion of 60%, 22%, 9% & 9% respectively as allocated by the MOC.
It was agreed in the MOU that in case any dispute arises, a Committee composed of five Senior Executives, one each of the said five signatories to the MOU would, at the first instance, consider such dispute and if the Committee is unable to resolve such dispute within 30 days of the same, the parties may seek redressal through Court of Law only at Bhubaneswar. The MOU was to be effective upon execution and would have a validity of six months from the date of signing of the MOU. The same was followed by JVC dated 12th November, 2007 between the same parties.
The JVC records that JSW, JSL and Shyam DRI Power Ltd. had requested for allocation of coal block in the Mahanadi Coalfields Limited Area which is considered by Govt. of India and it was decided to allocate the combined block of Utkal A-Gopalprasad West (West) jointly to MCL, JSW Energy Limited, JSL Steel Limited, Jindal Stainless Limited, and Shyam DRI Power Limited for working through a Joint Venture Company (subject to clearance/approval of the CCEA) and thereafter the Govt. of India had granted permission to the formation of JVC for the purpose of carrying out coal mining activity at the said mine as a single mine and the equity participation of the said five signatories are the same as that of MOU.
8
The Coal produced from Utkal-Gopalprasad Mine would be distributed in the same ratio as that of the equity participation. The JVC was to come into existence on the date of execution by the parties and would continue till the exhaustion of coal reserves and closure of the Utkal-Gopalprasad Mine.
The evacuation of coal would be distributed in the same ratio as that of the equity participation on pro rata basis when the coal is available for distribution. It is mentioned that the Courts at Bhubaneswar would have the exclusive jurisdiction in all matters relating to or arising out of the Joint Venture Agreement (JVA). It also contemplates resolution of disputes in the same manner as was mentioned in the MOU. The MOU was signed at Bhubaneswar and JVA was executed at Puri. After the approval was received in respect of the said JVA, the JVC, namely, MJSJ Coal Ltd., was formed.
Thereafter on 15th June, 2009, an agreement was entered into between MCL and Shyam DRI Power Ltd. which is described as "Coal Supply Agreement".
The Shyam DRI Power Ltd. was described as a "Purchaser". It records that the Purchaser was issued a Letter of Assurance (LOA) dated 7th of August, 2008 and the Purchaser had achieved the milestones as set out in the Annexure 1 of the LOA and fulfilled other conditions as stipulated therein. The Shyam DRI Power Ltd. had requested the MCL for supply of coal to Sponge Iron Unit at Vill. 9 Pandloi, Dist. Sambalpur, Orissa which the MCL had agreed to supply on certain terms and conditions.
The said agreement would continue till the end of five years from the first delivery date, which should be not later than five days from Effective Date and both parties should mutually agree on a three-month period within a time period of twelve months from the Effective Date for commencement of coal supplies.
The Annual Contracted Quantity of Coal agreed to be supplied by the Seller would be 2,52,000 tonnes from the Seller's mine in any of the coalfield and/or from international sources. The said agreement contains a clause for settlement of dispute. It also contains a jurisdiction clause, namely, the Court of Sambalpur was given exclusive jurisdiction in all matters under the said agreement and schedule to the agreement gives particulars of the plant owned by the purchaser which is situated at Sambalpur.
This was followed by two separate Coal Supply Agreements dated 8th August 2009 and 10th December, 2009, an MOU dated 2nd November, 2010 between MCL and Shyam DRI Power Ltd., and lastly an amendment of Fuel Supply Agreement dated 10th of December, 2009 which was executed on 2nd November, 2010.
10
The said MOU dated 2nd November, 2010 records that the Purchaser declares and warrants that the condition precedent (CP) of the Purchaser have been achieved and/or fulfilled whereas the Seller's CP was yet to be achieved and/or fulfilled in respect of supply of imported coal. However, notwithstanding the same Shyam was desirous of commencement of indigenous coal supplies under the same agreement quantum of which would be at the absolute discretion of the Seller from time to time but shall not exceed 50% of ACQ (Annual Contracted Quantity) in any case.
By the said amendment to Fuel Supply Agreement dated 10th December, 2009, various clauses in relation to security deposit and quantity of coal supply had been amended. The said amendment agreement was executed at Sambalpur.
The pre-requisites for commencement of coal production from a coal mine is acquisition of land and it is especially so in the case of an open cast mine. The land which is required to be acquired is a forest land situated at Sambalpur. The land has to be acquired under Coal Bearing Area (Acquiring and Development) Act, 1957 (in short CBA Act). The land is situated in Orissa and the forest clearance certificate has to be obtained as per the requirement of the State of Orissa. The forest clearance has to be obtained and it was after obtaining such clearance that the mining work could be carried.
11
The writ petitioner in this writ application alleged that unless writ petition prayed for a writ of mandamus commanding supply of full quantity of coal against the coal supply agreements dated 15th January, 2009, 8th August, 2009, 10th December, 2009 as amended on 24th July, 2010 and/or 2nd November, 2010 without any reduction. The writ petitioner has also prayed for a writ in the nature of mandamus commanding the respondents to forthwith return the bank guarantee for Rs.111.24 crores already furnished to the coal controller, Calcutta. In support of the jurisdiction of this Hon'ble Court, the petitioner in Paragraph 86 of the writ petition made the following averments:
"86. In the circumstances, the petitioners' valuable properties being the said coal block allotted by the Ministry of Coal is being taken away and/or infringed by the State without any authority of law. Even otherwise, the petitioner is affected by infringement of its rights under the Coal Supply Agreements. The impugned action is being taken by the respondent concerned through the office of the Coal Controller at Kolkata within the aforesaid jurisdiction. The curtailment in supply of coal to the petitioner No.1 is as per the directions of the office of the Coal Controller, Kolkata. This is directly linked with the alleged non-fulfilment of activities in connection with production of coal from the said coal block. The conditions as per the said allocation letter of 29th November, 2005 have been fulfilled and/or required to be fulfilled at Kolkata. The bank guarantee of Rs.111.24 crores has been furnished to the Coal Controller at 1, Councilor House, Street, Kolkata as is 12 recorded in the letter of MJSJ to the Coal Controller of 18th November, 2010 which is already annexed."
Mr. Anindya Mitra, the learned Advocate General appearing on behalf of the respondent, Shyam Metallics and Energy Limited, submitted that the ground of challenge to the ad interim order dated 26th April, 2011 was confined to the issue relating to territorial jurisdiction and the said order has not been challenged on merits. It was submitted that the appellant did not file its affidavit in opposition to the writ petition although the learned Trial Judge gave direction for filing affidavits. The appellant also did not file any application before the Trial Judge for dismissal of the writ petition on the ground of lack of territorial jurisdiction. It was submitted that for the purpose of deciding the issue as to territorial jurisdiction, the statements averred in the writ petition should be assumed to be correct and on that basis, the present issue is required to be decided, it is more in the nature of demurrer.
While referring to the nature of the ad interim order, it was submitted that no prejudice, far from irreparable prejudice, could be established by the appellant in respect of the interim order already passed. Moreover it was not argued that the appellant is unable to supply the full quantity of coal for the fuel supply agreement. In substance it is being argued that without suffering any prejudice to the interim order that has been passed, the appeal has been preferred solely on the technical ground of lack of territorial jurisdiction. 13
The learned Advocate General has taken a preliminary plea as to the maintainability of the said appeal on the ground that the appellant did not raise the point of territorial jurisdiction before the Trial Court. The contention of the appellant before the learned single Judge was that in view of forum selection clause, the Hon'ble Court would not have any jurisdiction. It was submitted that the forum selection clause is applicable when more than one court have territorial jurisdiction. Raising the plea of forum selection clause clearly implies admission of the territorial jurisdiction of the Hon'ble Court and our attention was drawn to Section 21 of the Code of Civil Procedure. On the basis of the Section 21 of the Code of Civil Procedure it was argued that this plea of lack of territorial jurisdiction is not available to the appellant in this appeal.
It was argued that lack of territorial jurisdiction is not same as lack of inherent jurisdiction. Territorial jurisdiction can be waived by the parties. By not raising the plea of territorial jurisdiction before the Hon'ble First Court, this point cannot be raised in the appeal for the first time. The appellant may, however, file affidavit in opposition to the writ petition denying the allegations in the writ petition and can raise the plea that this Hon'ble Court has no territorial jurisdiction at the hearing of the writ petition.
It is submitted that the appellant may, at best, obtain liberty from the Hon'ble Division Bench to file affidavit-in-opposition to the writ petition and raise 14 the plea of lack of territorial jurisdiction therein which, if raised, should be decided by the Hon'ble First Court on affidavits.
On the aspect of the nature of the application filed before us regarding non-maintainability of the writ petition in this Hon'ble Court it was argued that this plea of lack of territorial jurisdiction raised before the Appellate Court is in the nature of demurrer. This plea of demurrer cannot succeed because of clear averment made in the writ petition in paragraph 86 thereof and there is no denial of this statement made in paragraph 86 by any affidavit.
Under Article 226(2) of the Constitution of India, the High Court can exercise its power to issue orders or directions under the writ jurisdiction if the cause of action, wholly or in part, has arisen in the State of West Bengal notwithstanding the fact that the seat of the respondent is outside the jurisdiction of this Hon'ble Court. The Court will determine the objection of lack of territorial jurisdiction without embarking upon an enquiry as to the correctness or otherwise of the facts pleaded in the petition.
In this regard reliance was placed on a judgment reported in AIR 1982 Calcutta 333 (Ritu Sachdev Vs. Anita Jindal & Ors.) for the proposition without disputed questions of fact cannot be decided as plea of demurrer. In the same vein reliance was placed on 2006(5) SCC 638 (Ramesh B. Desai & Ors. v. 15 Bipin Vadilal Mehta & Ors.). It was argued that mixed questions of fact cannot be decided on a plea of demurrer.
On the basis of the aforesaid decisions it was argued that the plea of the appellant as to lack of territorial jurisdiction should not be entertained in view of the averments made in the writ petition that the cause of action had arisen partly within the jurisdiction of this Hon'ble Court. The learned Advocate General also made an alternative submission that a part of the cause of action had arisen partly within the jurisdiction of this Hon'ble Court.
It was argued that it was a case of joint cause of action against the respondents which is interlinked. Reliefs have been claimed on the basis of interlinked joint cause of action against the respondents in the writ petition. Relief regarding supply of full quantity of coal without reducing the quantity has been claimed against the respondents in the writ petition and not against the appellant alone.
It was argued that the petitioner represents a case of joint cause of action against the respondents which are interlinked. The reliefs have been claimed on the basis of interlinking joint cause of action against the respondents in the writ petition. The relief regarding supply of full quantity of coal without reducing the quantity, has been claimed against the respondents in the writ petition and not 16 against the appellant alone. It was further argued that the first "bundle of facts"
relating to the cause of action is allotment of coal block to the respondent No.1.
Reliance was also placed on Prayer (b) of the writ petition which is reproduced hereinbelow:
"(b) A writ of or in the nature of mandamus do issue commanding the respondents to supply and/or cause to be supplied full quantity of coal against the Coal Supply Agreements dated 15th January, 2009 and 8th August, 2009, and 10th December, 2009 as amended on 24th July, 2010, and on 2nd November, 2010 without any reduction; and do the following:-
i) Resume full supply of coal under the aforesaid Coal supply Agreements;
ii) Refund all extra amounts realized against the supply of coal i.e. the extra 40% above the notified rate as has been wrongly charged by them since January, 2011;
iii) Make up the short fall quantity supplied against each of the Coal Supply Agreements;
iv) Discharge all the obligations referred to in Paragraph 72 above in connection with the coal block allocations;
v) Formal recording of withdrawal of the show cause notice dated 6th October, 2010;17
vi) Financially compensate the petitioner No.1 for the short fall in production due to reduced supply of coal since September, 2010;"
It was submitted that a joint venture company is to be formed for allotment of coal block. The joint venture agreement was entered into by the joint venture partners, namely, the appellant being the lead member and JSW Steel Ltd., Jindal Stainless Steel Ltd., M/s Jindal Thermal Power and the respondent no.1 herein. A copy of the joint venture agreement was forwarded by the Ministry of Coal to Coal India Ltd. at 10, Netaji Subhas Road, Kolkata - 700
001. This was followed by the letter dated February 27, 2008, addressed by the Ministry of Coal to the partners of the joint venture including the respondent no.1 herein at its Kolkata address by which the copy of the minutes of the meeting held on January 11, 2008 was forwarded.
The allotment of coal block involved furnishing of bank guarantee which was submitted to the Coal Controller at its Kolkata Office.
The fuel supply agreement is a corollary to the allotment of coal block. Until the coal block becomes ready for operation, the coal would be supplied by Coal India Ltd. or its subsidiary. Supply of the quantity of coal initially fixed would be tapered off gradually as and when the coal block becomes operable (commences production). The coal supply agreement is interlinked with the Government's policy on coal block.
18
Three fuel supply agreements were executed on January 15, 2009, August 8, 2009 and December 10, 2009.
The appellant being a wholly owned subsidiary of Coal India Ltd., was to supply coal under these coal supply agreements.
The fuel supply agreement it is submitted is also substantially performable at Kolkata:
"(i) The price of the coal is to be fixed by Coal India Ltd. as per the Notification.
(ii) The bills for the price of the coal are payable by bank drafts/cheques encashable at Kolkata.
(iii) The quantity of coal to be supplied under the fuel supply agreement and the variation thereof according to the coal block allotment conditions would be made at the instance of Coal India Ltd./Coal Controller/Ministry of Coal.
(iv) The financial coverage Bank Guarantee has been made by the writ petitioner for the purpose of the Fuel Supply Agreements which are en-
cashable in Kolkata.
(v) May 26, 2010 Coal Controller's Study/Report on tapering of supply of coal was forwarded to the Ministry of Coal (with copy to CIL)." 19 The learned Advocate General further submitted that the office of the Coal Controller is situated at 1, Council House Street, Calcutta 700001 and it was in that office, the study was conducted and the report was sent. The learned Advocate General had relied upon the chronology of events to show that this Hon'ble Court has jurisdiction which would appear from the following events:
23.06.2010 : On the basis of Coal Controller's study/report, the Ministry of Coal directed CIL to regulate the supply of coal to the end use buyers (who are coal block allotment holders) till the commencement of coal production at the allotted coal blocks.
This letter is sent to CIL at 15, Park Street, Calcutta-
700016.
28.12.2010 : Ministry of Coal writes to CIL quantifying the coal supply to the petitioner no.1. This is on the basis of the quantification details as received from "office of the Coal Controller in respect of Shyam Metallics Energy Ltd. & Ors". Copy forwarded to Coal Controller as well as petitioner no.1, both within the aforesaid jurisdiction.
This letter is sent to CIL at 15, Park Street, Calcutta
- 700016.
2028.12.2010 : CIL in turn directs its wholly owned subsidiary MCL to regulate supply of coal to the petitioner No.1 in the manner as indicated in the aforesaid letter dated 28th December, 2010.
This letter is sent from CIL's office at 15, Park Street, Calcutta - 700016. A copy is forwarded to Coal Controller at 1, Council House Street, Calcutta."
It was argued that the guidelines of the Ministry of Coal dated 26th February, 2010 in respect of tapering of supply of coal under the coal supply agreement is linked with the allotment of coal block. It also provides for the Coal Controller to be responsible for regularization of the tapering with the Coal India Ltd.
It was submitted on behalf of the said respondent that the Coal India Ltd. and Coal Controller issued directions upon the appellant herein to reduce the supply of coal and the appellant simply acted accordingly. It was alleged that the coal block could not be made operational due to no fault on the part of the respondent no.1 but due to the inability of the respondents in the writ petition to get the necessary forest clearance and other clearances from the appropriate authorities. It was further alleged that there is no scope for the appellant to take 21 an independent decision in the matter of tapering/reduction of supply of quantity of coal under the coal supply agreement. It was further contended that the appellant is acting at the direction and dictates of Coal India Ltd./Coal Controller.
It was further argued that the formation of the joint venture company was delayed by reason of mistake and misunderstanding on the part of the appellant and it was because of such misunderstanding, the formation of the joint venture company got unduly delayed and the same was signed by the parties including the appellant and the Respondent No.1 only on November 27, 2007 and the joint venture company, MJSJ Limited, was incorporated on August 13, 2008.
The zero date is to be counted from this date and upto 42 months from the zero date, there cannot be any tapering of supply under the fuel supply agreement. This is the cause of action and ground pleaded in the writ petition.
The direction given by the Coal Controller and the Coal India Ltd. to taper off supply of coal under the coal supply agreement is totally arbitrary and without application of mind to the facts of the case and is void and, therefore, the decision to taper off the supply of coal on the basis of such wrong decision of the Coal Controller and Coal India Ltd. is void and there cannot be reduction in quantity of coal to be supplied under the coal supply agreement. This is the cause of action pleaded in the writ petition.
22
The directions issued by the Coal Controller upon the Coal India Ltd. and the Coal India Ltd. consequently issuing direction upon the appellant herein from Kolkata through letters. Those letters were also received by the respondent no.1 herein at Kolkata. Thus, this coal block allotment and the coal supply agreement are totally interlinked and cause of action arose at least partly in Kolkata.
The show cause notice dated October 6, 2010, issued by the Ministry of Coal to all the partners of the joint venture company including the respondent no.1 herein, was issued on October 6, 2010. The show cause notice was received by the respondent no.1 at its corporate office at Topsia, Kolkata. The show cause notice has been specifically challenged in the writ petition.
Thus, it is submitted that substantial part of the cause of action in this matter has arisen within the jurisdiction of this Hon'ble Court.
The appellant herein is trying to severe this interlinked cause of action and trying to confine its case only to the coal supply agreement by stating that the coal supply agreement was signed outside West Bengal and the supply was made there under to the respondent no.1 herein at its steel plant outside the State of West Bengal. The appellant herein is forgetting that this cause of action in respect of the coal supply agreement has also arisen partly within the jurisdiction of this Hon'ble Court because it was performable at Kolkata, the prices were 23 payable at Kolkata and the quantities to be supplied were also to be controlled by the Coal Controller and Coal India Ltd. from Kolkata.
Alternatively if cause of action relating to some of the reliefs falls within the jurisdiction of the Hon'ble Court partly or even fractionally, there cannot be rejection of the writ petition in piecemeal manner on the ground of the point of demurrer like this. There is no case for holding that this Ho'ble Court has no territorial jurisdiction over the claims made in the writ petition.
Even a fraction of the cause of action, if arises within the territorial jurisdiction of the Hon'ble Court, the High Court will have jurisdiction.
The Government Notification having the effect throughout India, can be challenged in any High Court in India.
Losses felt at the corporate office and registered office are also part of the cause of action.
The appellant herein is a wholly owned subsidiary of Coal India Ltd. and under the full control of Coal India Ltd. The corporate veil has to be lifted.
The forum selection clause contained in the fuel supply agreement provides for jurisdiction of the District Court at Sambalpur. The District Court at 24 Sambalpur has no jurisdiction to entertain the writ petition filed under Article 226 of the Constitution of India. The forum selection clause is not applicable to this case. Reliance was placed on the judgment reported in 2007 (3) CHN 533, paras 11 & 12. Forum selection clause of this agreement is not applicable to this writ petition filed under Article 226 of the Constitution of India.
For the purpose of ascertaining the jurisdiction, the statements made in the petition is required to be looked into and in certain circumstances even the documents that were filed along with this writ petition since it forms the part of the petition. There cannot be any doubt that in deciding such question, the Court is not required to embark upon a detailed enquiry. The plea of dismissal of the petition for the lack of territorial jurisdiction is in the nature of demurrer.
The appellant, on the other hand, argued that the first prayer of the writ petitioner which relates to the completion of statutory formalities to make clearance for operation of the coal block is covered by two agreements, namely, Memorandum of Understanding (MOU) dated 13th October, 2007 and Joint Venture Agreement (JVA) dated 12th November, 2007. It was argued that the reliefs claimed in the writ petition are in the nature of specific performance of the agreements entered into between the parties. The said agreements were also executed outside the jurisdiction of this Hon'ble Court and are required to be implemented at Sambalpur which is also outside the jurisdiction of this Hon'ble Court. It was argued that the furnishing of Bank Guarantee at the office of the 25 Coal Controller is no part of the cause of action and does not constitute integral and material facts.
It was further urged that the Coal India Ltd. is not a party either to the Fuel Supply Agreement or in the Joint Venture Agreement and there is no allegation of any nature against Coal India in the writ petition. Not a single correspondence was relied and/or annexed to the writ petition between Coal India and the writ petitioner and the Coal India has no role to play in the MOU and Joint Venture Agreement and signing of any other agreement between the parties. Coal India is not a necessary party and has been mischievously added in the array of the respondents solely with the object to attract the territorial jurisdiction of this Hon'ble Court.
On the basis of the aforesaid submission, the scope of Article 226(2) of the Constitution of India and the decisions relied upon by the parties are required to be considered.
The appellant relied upon a decision reported in AIR 1961 SC 532 (Lt. Col. Khajoor Singh v. Union of India) for the proposition that the writs issued by the court cannot run beyond the territories subject to its jurisdiction and person or authority to whom the High Court empowered to issue writs must be within his territories which clearly implies that they must be amenable to its jurisdiction either by residents or location within his territories. It was argued on 26 behalf of the appellant that it is not permissible to read under Article 226 that the residents or location of the person affected by the order passed in order to determine the jurisdiction of the High Court. The said decision, however, was considered at least by two later decisions reported in AIR 2006 SC 1288 (Munsaraf Hossain Khan v. Bhageeratha Engg. Ltd. & Ors.) and 2004 (6) SCC 254 (Kusum Ingots & Alloys Ltd. v. Union of Indian and Anr.) It was explained in the said decisions that such decision was rendered at a point of time when Clause (2) of Article 226 had not been inserted.
The respondents have also relied upon the following decisions:
i) AIR 2006 SC 1288 ii) AIR 2006 Cal 39 iii) 2004 (6) SCC 254 iv) AIR 2007 SC 1812 v) 2007 6 SCC 769 vi) AIR 2003 Cal 80 Para-40 vii) 2010 (1) SCC 135
On a reading of the said decisions, it appears to us that following facts are required to be taken into consideration for the purpose of invoking the jurisdiction under Article 226 (2) of the Constitution of India. 27
(i) The question of territorial jurisdiction to entertain a writ petition must be arrived at solely on the basis of the averments made in the petition, the truth or otherwise thereof are totally immaterial.
(ii) The facts pleaded in the writ petition must have a nexus on the basis whereof a prayer can be granted. Those facts which have nothing to do with the prayer made therein cannot be said to give rise to a cause of action which would confer jurisdiction the court. In view of the insertion of Article 226(2) of the Constitution of India indisputably even if a small fraction on cause of action accrues within the jurisdiction of the Court, the Court will have the jurisdiction in the matter. However, even if a small part of the cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a conclusive factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may exercise its discretion of jurisdiction by invoking the "doctrine of forum conveniens".
The expression "cause of action" within the meaning of Clause (2) of Article 226 shall have the same meaning as is ordinarily understood. The expression "cause of action" has a definite connotation. It means a bundle of facts which would be required to be proved.
28
The facts pleaded should be the material facts which are imperative for the petitioner to allege and must constitute an integral part of the cause of action for the purpose of invoking the jurisdiction under Article 226 (2) of the Constitution of India.
The Hon'ble Supreme Court in the judgement reported in AIR 2007 SC 1812 (Alchemist Limited & Anr. v. State Bank of Sikkim & Ors.) in Paragraph 41 indicates the circumstances under which the Court may exercise its power which is reproduced hereinbelow:
"41. From the aforesaid discussion and keeping in view the ratio laid down in catena of decisions by this Court. It is clear that for the purpose of deciding whether facts averred by the petitioner-appellant, would or would not constitute a part of cause of action, one has to consider whether such fact constitutes a material, essential, or integral part of the cause of action. It is no doubt true that even if a small fraction of the cause of action arises within the jurisdiction of the Court, the Court would have territorial jurisdiction to entertain the said petition. Nevertheless it must be a 'part of cause action', nothing less than that."
The Hon'ble Supreme Court in the said case was considering the following facts for the purpose of determining as to whether the Appellant Company could have filed a writ petition before the High Court of Punjab and Haryana. The Appellant Company contended that a part of cause of action had arisen within 29 the territorial jurisdiction of the High Court of Punjab & Haryana. The Appellant Company, for such submission, relied on the following facts:
"i) The Appellant-Company has its Registered and Corporate Office at Chandigarh;
ii) The Appellant-Company carries on business at Chandigarh;
iii) The offer of the Appellant-Company was accepted on February 20, 2004 and the acceptance was communicated to it at Chandigarh;
iv) Part performance of the contract took place at Chandigarh inasmuch as Rs.4.50 crores had been deposited by the Appellant-Company in a fixed deposit at Chandigarh as per the request of the first respondent;
v) The Chairman and Managing Director of the First respondent visited Chandigarh to ascertain the bona fides of the Appellant-Company;
vi) Negotiations were held between the parties in the third week of March, 2005 at Chandigarh;
vii) Letter of revocation dated February 23, 2006 was received by the Appellant-Company at Chandigarh. Consequences of the revocation ensued at Chandigarh by which the Appellant-Company is aggrieved."
Upon conspectus and analysis of the decision, the Hon'ble Supreme Court held that such facts cannot be said to be essential, integral or material so as to constitute a part of cause within the meaning of Article 226(2) of the Constitution of India.
30
The respondents have also relied upon 2007 (6) SC 769 (Ambica Industries v. Commissioner of Central Excise) and 2010 (1) SCC 135 (Sonic Surgical v. National Insurance Company Ltd.) for the purpose of drawing our attention to the interpretation of "cause of action", "material facts" and "integral facts". It was submitted that it would appear from the analysis of the said decisions that such facts which are essential, integral or material must form the basis of a "cause of action" within the meaning of Article 226 (2) of the Constitution of India. The Hon'ble Supreme Court in the decision reported in 2007 (6) SC 769 (Ambica Industries v. Commissioner of Central Excise) also considered the doctrine of "forum convenience" while applying the principle of "cause of action" as would appear from the Paragraphs 40 and 41 of the said report which is reproduced hereinbelow:
"40. Although in view of Section 141 of the Code of Civil Procedure the provisions thereof would not apply to writ proceedings, the phraseology used in Section 20(c) of the Code of Civil Procedure and Clause (2) of Article 226, being in pari materia, the decisions of this Court rendered on interpretation of Section 20(c) CPC shall apply to the writ proceedings also. Before proceeding to discuss the matter further it may be pointed out that the entire bundle of facts pleaded need not constitute a cause of action, as what is necessary to be proved, before the petitioner the petitioner can obtain a decree, is material facts. The expression material facts is also known as integral facts."31
"41. Keeping in view the expression "cause of action" used in Clause (2) of Article 226 of the Constitution of India, indisputably even if a small fraction thereof accrues within the jurisdiction of the Court, the Court will have jurisdiction in the matter though the doctrine of forum conveniens may also have to be considered."
An unreported judgment (Heiza Boilers (I) Pvt. Ltd. & Anr. Vs. Union of India, Ministry of Commerce & Industry, New Delhi & Ors.) of a learned single Judge (Mr. Justice Jayanta Kumar Biswas) delivered on 16th & 20th July, 2009 was cited for the same proposition. In the said petition the writ petitioner sought a writ of mandamus quashing the arbitral proceedings pending before the arbitral tribunal appointed by the Director General of Supplies & Disposals (Litigation Branch), Government of India, New Delhi.
It appears that a dispute arose in terms of a contract entered into between the said writ petitioner and the respondent. The agreement contains a forum selection clause giving an exclusive right to the Courts of the place from where the acceptance of tender has been issued. The said contract also contends an arbitration clause.
It appears that various judgments were cited on the expression "cause of action" and after consideration of the said authorities, the learned Judge held as follows:
32
"The principles are these. Facts which have no bearing on the lis or the dispute involved in the case do not give rise to a cause of action so as to confer territorial jurisdiction on a Court. What is to be seen is whether a particular fact is of substance and can be said to be material, integral or essential part of the list between the parties. If it is, forms a part of the cause of action. If it is not, it does not form a part of the cause of action. In determining the question the substance of the matter, and not the form thereof, is to be considered. The answer to the question whether the service of a notice is an integral part of the cause of action within the meaning of Article 226(2) must depend upon the nature of the impugned order or action giving rise to the cause of action, and the test to ascertain this is whether for questioning the order or action it is necessary to plead the fact of service of the notice in the writ petition and prove it. Only those facts without the proof of which the action must fail are material and essential facts in the bundle of facts constituting the cause of action. Hence a fact without the proof of which a writ petition will not fail is not an integral part of the cause of action, and, accordingly, it cannot be said that a part of the cause of action has arisen at the place where the event concerning the fact has happened."
The Hon'ble Supreme Court in a judgment reported in 2006 (5) SCC 638 (Ramesh B. Desai & Ors. v. Bipin Vadilal Mehta & Ors.), considered the plea of demurrer and held as follows:
33
"14. The plea raised by the contesting respondents is in fact a plea of demurrer. Demurrer is an act of objecting or taking exception or a protest. It is a pleading by a party to a legal action that assumes the truth of the matter alleged by the opposite party and sets up that it is insufficient in law to sustain his claim or that there is some other defect on the face of the pleadings constituting a legal reason why the opposite party should not be allowed to proceed further. In O.N. Bhatnagar v. Rukibai Narsindas (1982) 2 SCC 244 (SCC para 9) it was held that the appellant having raised a plea in the nature of demurrer, the question of jurisdiction had to be determined with advertence to the allegations contained in the statement of claim made by Respondent 1 under Section 91(1) of the Act and those allegations must be taken to be true. In Roop Lal Sathi v. Nachhattar Singh Gill (1982) 3 SCC 487 (SCC para 24) it was observed that a preliminary objection that the election petition is not in conformity with Section 83(1)(a) of the Act i.e. it does not contain the concise statement of the material facts on which the petitioner relies, is but a plea in the nature of demurrer and in deciding the question of the Court has to assume for this purpose that the averments contained in the election petition are true.
Reiterating the same principle in Abdulla Bin Ali v. Galappa (1985)2 SCC 54 it was said that there is no denying the fact that the allegations made in the plaint decide the forum and the jurisdiction does not depend upon the defence taken by the defendants in the written statement. In Exphar SA v. 34 Eupharma Laboratories Ltd. (2004) 3 SCC 688 (SCC para 9) it was ruled that where an objection to the jurisdictiion is raised by way of demurrer and not at the trial, the objection must proceed on the basis that the facts as pleaded by the initiator of the impugned proceedings are true. The submission in order to succeed must show that granted those facts the court does not have jurisdiction as a matter of law. In this case the decision of the High Court on the point of the jurisdiction was set aside as the High Court had examined the written statement filed by the respondents in which it was claimed that the goods were not at all sold within the territorial jurisdiction of the Delhi High Court and also that Respondent No.2 did not carry out business within the jurisdiction of the said High Court. Following the same principle in Indian Mineral & Chemicals Co. v. Deutsche Bank (2004) 12 SCC 376 (SCC paras 10 and 11), it was observed that the assertions in a plaint must be assumed to be true for the purpose of determining whether leave is liable to be revoked on the point of demurrer."
"15. The principle underlying clause (d) of Order 7 Rule 11 is no different. We will refer here to a recent decision of this Court rendered in Popat and Kotecha Property v. State Bank of India Staff Assn. (2005) 7 SCC 510 where it was held as under in para 10 of the report: (SCC p.515) "10. Clause (d) of Order 7 Rule 7 speaks of suit, as appears from the statement in the plaint to be barred by any law. Disputed questions 35 cannot be decided at the time of considering an application filed under Order 7 Rule 11 CPC. Clause (d) of Rule 11 of Order 7 applies in those cases only where the statement made by the plaintiff in the plaint, without any doubt or dispute shows that the suit is barred by any law in force."
"16. It was emphasized in para 25 of the report that the statement in the plaint without addition or subtraction must show that it is barred by any law to attract application of Order 7 Rule 11 CPC. The principle is, therefore, well settled that in order to examine whether the plaint is barred by any law, as contemplated by clause (d) of Order 7 Rule 11 CPC, the averments made in the plaint alone have to be seen and they have to be assumed to be correct. It is not permissible to look into the pleas raised in the written statement or to any piece of evidence. Applying the said principle, the plea raised by the contesting respondents that the company petition was barred by limitation has to be examined by looking into the averments made in the company petition alone and any affidavit filed in reply to the company petition or the contents of the affidavit filed in support of Company application No.113 of 1995 filed by the respondents seeking dismissal of the company petition cannot at all be looked into."
The Division Bench judgment of the Hon'ble Supreme Court reported in 1982 Cal 333 (Ritu Sachdev v. Anita Jindal & Ors.) was considering a plea of 36 revocation of leave under Clause 12 of the Letters Patent on the ground of absence of territorial jurisdiction. Their Lordships have held that the question of jurisdiction must be decided on the allegation in the pleadings and it must be decided before the case begins whether or not there is a jurisdiction. It was further held while leave has been granted under Clause 12 and the application by defendant for revocation may raise questions far too difficult to determine upon affidavit evidence and in such case the question should not be decided on affidavit evidence and the question of difficulty and importance should not be dealt with by an application to revoke the leave under Clause 12 of the Letters Patent.
The objection as to the maintainability of a plaint under the provisions of Order 7 Rule 11 can be exercised by the Trial Court at any stage of the suit. It is well-settled that for the purpose of deciding an application under Order 7 Rule 11
(a) & (d) the averments in the plaint are germane. At the same time, the Hon'ble Supreme Court has sounded a note of caution in 2004 (3) SCC 137 (Sopan Sukhdeo Sable & Ors. v. Assistant Charity Commissioner & Ors.) that even a plaint can be dismissed, if it appears to the Court that illusion of a cause of action has been created and if on a meaningful and not formal reading of the plaint, it is manifestly vexatious and meritless in the sense of not disclosing a clear right to sue, it should exercise a power under Order 7 Rule 11 of the Code, taking care to see that the ground mentioned therein is fulfilled. The relevant paragraphs from the said report are reproduced hereinbelow: 37
"10. In Saleem Bhai v. State of Maharashtra reported in 2003 (1) SCC 557 it was held with reference to Order 7 Rule 11 of the Code that the relevant facts which need to be looked into for deciding an application thereunder are the averments in the plaint. The trial court can exercise the power at any stage of the suit - before registering the plaint or after issuing summons to the defendant at any time before the conclusion of the trial. For the purposes of deciding an application under Clause (a) and (d) of Order 7 Rule 11 of the Code, the averments in the plaint are germane; the pleas taken by the defendant in the written statement would be wholly irrelevant at that stage."
"11. In I.T.C. Ltd. v. Debts Recovery Appellate Tribunal reported in 1998 (2) SCC 70 it was held that the basic question to be decided while dealing with an application filed under Order 7 Rule 11 of the Code is whether a real cause of action has been set out in the plaint or something purely illusory has been stated with a view to get out of Order 7 Rule 11 of the Code."
"12. The trial court must remember that if on a meaningful and not formal reading of the plaint it is manifestly vexatious and meritless in the sense of not disclosing a clear right to sue, it should exercise the power under Order 7 Rule 11 of the Code taking care to see that the ground mentioned therein is 38 fulfilled. If clever drafting has created the illusion of a cause of action, it has to be nipped in the bud at the first hearing by examining the party searchingly under Order 10 of the Code reported in 1997 (4) SCC 467 (T.Arivandandam v. T.V. Satyapal)."
"13. It is trite law that not any particular plea has to be considered, and the whole plaint has to be read. As was observed by this Court in Roop Lal Sathi v. Nachhattar Singh Gill reported in 1982(3) SCC 487 only a part of the plaint cannot be rejected and if no cause of action is disclosed, the plaint as a whole must be rejected."
"14. In Raptokos Brett & Co. Ltd. v. Ganesh Property reported in 1998 (7) SCC 184 it was observed that the averments in the plaint as a whole have to be seen to find out whether clause (d) of Rule 11 of Order 7 was applicable."
"15. There cannot be any compartmentalization, dissection, segregation and inversions of the language of various paragraphs in the plaint. If such a course is adopted it would run counter to the cardinal canon of interpretation according to which a pleading has to be read as a whole to ascertain its true import. It is not permissible to cull out a sentence or a passage and to read it out of the context in isolation. Although it is the substance and not merely the form that has to be looked into, the pleading has to be construed as it 39 stands without addition or subtraction or words or change of its apparent grammatical sense. The intention of the party concerned is to be gathered primarily from the tenor and terms of his pleadings taken as a whole. At the same time it should be borne in mind that no pedantic approach should be adopted to defeat justice on hair-splitting technicalities."
It is no doubt that even if a fraction of cause of action had accrued within the territories of a State, High Court of that State will have the jurisdiction. On this aspect reliance was placed on 2010 (1) SCC 457 (Rajendran Chingaravelu v. R.K. Mishra). In that case, while interpreting Article 226 (2) of the Constitution of India, the Hon'ble Supreme Court after taking into consideration that genesis of entire dispute was the initiation of action of search, seizure and detention by the security/intelligence officials at Hyderabad Airport (in Andhra Pradesh) who had inspected the cash carried by the appellant and thereafter the said officials alerted their counterparts at Chennai Airport that the appellant was carrying a sum of money which required to be intercepted and questioned. It was held that a part of the cause of action, therefore, arose in Hyderabad. The other factor that was taken into consideration that the consequential income tax proceedings against the appellant which he challenged in the writ petition, were also initiated at Hyderabad. The relevant paragraphs being paragraph 9 and 10 of the said report are reproduced hereinbelow:
40
"9. The first question that arises for consideration is whether the Andhra Pradesh High Court was justified in holding that as the seizure took place at Chennai (Tamil Nadu), the appellant could not maintain the writ petition before it. The High Court did not examine whether any part of cause of action arose in Andhra Pradesh. Clause (2) of Article 226 makes it clear that the High Court exercising jurisdiction in relation to the territories within which the cause of action arises wholly or in part, will have jurisdiction. This would mean that even if a small fraction of the cause of action (that bundle of facts which gives a petitioner, a right to sue) accrued within the territories of Andhra Pradesh, the High Court of that State will have jurisdiction."
"10. In this case, the genesis for the entire episode of search, seizure and detention was the action of the security/intelligence officials at Hyderabad Airport (in Andhra Pradesh) who having inspected the cash carried by him, alerted their counterparts at Chennai Airport that the appellant was carrying a large sum of money, and required to be intercepted and questioned. A part of cause of action, therefore, clearly arose in Hyderabad. It is also to be noticed that the consequential income tax proceedings against him, which he challenged in the writ petition, were also initiated at Hyderabad. Therefore, the writ petition ought not to have been rejected on the ground of want of jurisdiction."41
It was argued that in fact the decision relied upon by the respondent reported in 2007 (6) SCC 769 (Ambica Industries v. Commissioner of Central Excise) supports the contention of the respondent that even a fraction of the cause of action if arises within the territorial jurisdiction of this Hon'ble Court, the High Court will have the jurisdiction.
It is further contended that it is also not in dispute that the Government notification having the effect throughout India, could be challenged in the High Court in India as held in 1998 (1) CLJ 425 (Raichand & Co. & Anr. v. Director General of Foreign Trade & Ors.). However, the tests that are laid down by His Lordship (Mrs. Ruma Pal) who was subsequently elevated to the Hon'ble Supreme Court, are of paramount importance even in deciding the present appeal.
In paragraph 7 to the said report the law on this point was summarized which is reproduced hereinbelow:
"7. On a consideration of the cases cited and the language of Article 226 (1) would venture to lay down the following broad propositions:-
(i) If the respondents are all within the jurisdiction of the Court the writ application will lie under Article 226 (1) 42
(ii) Even if all the respondents are not within the jurisdiction of the Court, the presence of the concerned respondent against whom the primary relief is claimed within the jurisdiction of a Court would be sufficient to clothe such Court with the territorial jurisdiction to entertain the writ application. Thus, in Industrial Fuel Marketing Co. v. Union of India AIR 1983 Cal 253 the jurisdiction of this Court was affirmed under Article 226(1) as it was found that the office of the concerned Officer was in Calcutta.
(iii) If none of the respondents are within the Court's jurisdiction, but if the cause of action wholly or in part arises within its territorial limits, the writ application may be entertained under Article 226(2). The issue has to be decided on facts established on the entire pleadings and the Court is not limited to the statements contained in the petition reported in 1994 (4) SCC 711 (Oil & Natural Gas Commission v. Utpal Kumar Basu & Ors.)
(iv) In determining whether the cause of action has arisen within the jurisdiction of the Court, the nature of the impugned action or order is relevant.
(a) If the impugned order action is personal in the sense that it affects the writ petitioner alone the citus of cause of action will depend upon the relief claimed and would arise where the order becomes effective or the action effected."43
In the aforesaid case, the impugned notification was held to be statutory which had been issued in terms of under Section 5 of the Foreign Trade (Development and Regulations) Act, 1992. The constitutional validity of the said statutory notification issued under the Central Statute having application throughout the country was challenged by a writ petition in the High Court at Calcutta. In view of the law laid down in Hindustan Sugar Mills case as mentioned above and having regard to the fact that the petitioner has its place of business in Calcutta, the said preliminary objection was overruled.
The decision reported in AIR 1983 Cal 307 (Union of India v. Hindustan Aluminium Corpn. Ltd.) was relied upon for the proposition that if the petitioner suffered loss of business at its corporate office and registered office then that should be a factor for taking into consideration for holding in favour of the petitioner in terms of Article 226(2) of the Constitution of India.
It was argued that since the appellant is wholly owned subsidiary of Coal India Limited, it is under the full control of Coal India Ltd., the doctrine of corporate veil is to be applied for the purpose of finding out whose action the respondent is really challenging and who is the real authority behind such impugned action. Reliance was placed on 2005 (11) SCC 314 and AIR 1986 SC 1370 (Paragraph 90).
44
In the judgment reported in 2005 (11) SCC 314 (Sangramsingh P. Gaekwad & Ors. v. Shantadevi P. Gaekwad & Ors.), the Hon'ble Supreme Court was considering a case of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956 and the application of the principles of Code of Civil Procedure in the proceeding arising out of company court rules. The jurisdiction of the company vis-a-vis Civil Court was also one of the issues.
In paragraphs 225-228 and 230-231, the principle of quasi partnership and the doctrine of lifting of corporate veil was discussed. The decision of Kapila Hingorani Vs. State of Bihar was referred to in the said decision on this aspect. The situations that were contemplated for lifting of corporate veil in the Kapila Hingorani Vs. State of Bihar case reported in 2003 (6) SCC1 are:
"25. It is now well settled that the corporate veil can in certain situations be pierced or lifted. The principle behind the doctrine is a changing concept and it is expanding its horizon as was held in State of U.P. v. Renusagar Power Co. reported in 1988 (4) SCC59. The ratio of the said decision clearly suggests that whenever a corporate entity is abused for an unjust and inequitable purpose, the court would not hesitate to lift the veil and look into the realities so as to identify the persons who are guilty and liable therefor."45
"26. The proposition that a company although may have only one shareholder will be a distinct juristic person as adumbrated in salomon v. Salomon and Co. reported in 1897 AC 22: (1895-99) All ER Rep 33: 66 LJ Ch 35 (HL), has time and again been visited by the application of doctrine of lifting the corporate veil in revenue and taxation matters."
"27. The corporate veil indisputably can be pierced when the corporate personality is found to be opposed to justice, convenience and interest of the revenue or workman or against public interest."
The said decision was rendered on the basis of an application filed under 32 of the Constitution of India by a public spirited citizen and a Supreme Court lawyer alleging that apart from the plight of the employment of the public sector undertakings or the statutory authorities, even the teaching and non-teaching staff of aided and non-aided Schools, Madrasas and Colleges have been facing a similar fate, namely, non-payment of salary for a long time resulting in starvation, in fact, a newspaper report was relied upon to show that 250 employees died due to starvation or committed suicide owing to acute financial crisis resulting from non-payment of remunerations to them for a long time.
In the Escorts case of all the various points that were decided one of the issues were the right of a shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some directors 46 and appoint others in their places. In dealing with the said issue in Paragraphs 90 & 92, the concept of corporate veil was discussed in the following words:
"Generally and broadly speaking, it may be said that the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected etc. Where under a scheme for investment in shares of Indian companies by non- resident companies it was provided that at least 60 per cent of the shares were held by non-residents of Indian nationality or origin, lifting the veil was necessary to discover the nationality or origin of the shareholders and not to find out the individual identity of each of the shareholders. The corporate veil might be lifted to that extent only and no more. In this view, merely because more than 60 per cent of the shares of the several Foreign Companies who had applied for permission for purchase of shares of Indian Company were held by a trust of which certain individual and the members of his family were the beneficiaries; the companies could not be denied the facility of investing in Indian Companies." 47
The doctrine of lifting of corporate veil is not applicable in the instant case. The petitioner is essentially seeking performance of the several agreements in which appellant is one of the parties. The disputes are arising out of the said agreements.
The learned Advocate General, relied upon 2007 (3) CHN 533 (Ashok K. Sahoo vs. Hindusthan Paper Corpn. Ltd.) for the proposition that forum selection clause is inapplicable where the public law field operates since the power under Article 226 cannot be scuttled down and/or limited on the plea that there is a forum selection clause in the agreement. The said judgment was also relied upon to show that the judgment of the learned single Judge reported in AIR 2006 Cal 39 (Ashoke Kumar Sahoo v. Hindustan Paper Corpn. Ltd (HPCL) & Ors.) has been overruled and set aside. It appears that the Hon'ble Division Bench set aside the order of the learned Trial Judge on that the learned Trial Court did not consider that 'seat' of the Government or authority used in Clause 2 of Article 226 means and connotes registered office or principal office or head office whatever may be the terminology. The relevant paragraph which appears to be the ratio of the said decision is reproduced hereinbelow:
"19. Accordingly, we hold that the word 'seat' of such Government or authority used in Clause (2) of the Article 226 means and connotes registered office or principal office or head office whatever may be 48 terminology or even branch office, irrespective of the fact that these places of office have any relation and/or nexus with the accrual of causes of action. If the nexus and/or connection of the place of business with accrual of causes of action, is conceived as contended by Mr. Chatterjee then the situs of the residence becomes meaningless and in that case Constitution makers could have deleted the theory of situs theory altogether. Rather it could have been provided straightaway that accrual of causes of action either whole or part is the only factor for invocation of jurisdiction, not the place of residence or seat of the respondent. This proposition of law as enunciated by Mr. Chatterjee drawing a reference and/or analogy in the case of a civil matter is wholly misplaced in the public law field."
In the concurring judgment separately said by Justice A.K. Bhattacharya in Paragraph 29, His Lordship held as follows:
"29. Therefore, when the present case comes under the purview of clauses (1), attracting the provision of clause (2) of Article 226 obviously does not arise, and accordingly this Court, needless to mention, has territorial jurisdiction to entertain and dispose of the present writ petition."
It, however, appears that the judgment reported in 2007 (6) SCC 769 (Ambica Industries v. Commissioner of Central Excise) was not considered. In this case, the primary reliefs are claimed against the respondents who are 49 having their offices outside the jurisdiction of this Hon'ble Court. Moreover, from a reading of Paragraph 86 of the writ petition, along with the other paragraphs, it is quite clear that facts constituting a cause of action are overwhelmingly at Orissa and even if a prayer relating to bank guarantee could form a part of the cause of action, the same is not primary relief and such bank guarantee was not formed by the writ petitioner.
The requirement to furnish the bank guarantee arises in terms of the Joint Venture Agreement executed on 12th November, 2007. Under Clause (d) to the said agreement, the proposed JVC was required to submit a bank guarantee equal to one year's royalty amount to Ministry of Coal based on mine capacity of Utkal-Gopal Prasad Mine within three months from the incorporation of JVC. Subsequently, upon approval of the mining plan/project report, the bank guarantee amount would be modified according to the approved mining plan. It appears that on 6th October, 2010 a show cause notice was issued by the Ministry of Coal for inordinate delay in development of Utkal-A Coal Block. The said letter was replied by MJSJ Coal Limited, the JVC having its registered office at Orissa in which the issue of bank guarantee was dealt with. The bank guarantee was furnished by MJSJ, the Joint Venture Company and not by the petitioner. The bank guarantee was submitted on 18th November, 2010 for Rs.111.24 crores in respect of Gopal Prasad West (West) and Utkal-A of MJSJ Ltd. The said bank guarantee was furnished by the State Bank of India, Talcher 50 Branch, Orissa, in favour of the President of India for the said sum of Rs.111.24 crores at the request of the Joint Venture Company.
Learned Advocate General has submitted that the submission of bank guarantee was made pursuant to the Coal Supply Agreement entered into between Mahanadi Coalfields Limited and Shyam DRI Power Ltd. It was submitted that the said Coal Supply Agreement dated 15th January, 2009 contains a clause with regard to furnishing of bank guarantee which is to be kept operative by the Shyam DRI Power Ltd. as purchaser for five years from the first date and for a further period of 180 days thereafter encashable at Calcutta. The seller meaning thereby Mahanadi Coalfields Ltd. in terms of the said agreement is required to coal supply bills and against the raising of such bills, Shyam DRI Power Ltd. would make full payment in respect of the said invoice and the said payment shall be through demand draft/bankers/local cheque payable at Kolkata. It was further submitted that the bank guarantee although was furnished by Joint Venture Company namely MJSJ Coal Limited but the same was arranged by the petitioner. It is submitted that the Mahanadi Coalfields Ltd. (MCL) is not taking any action in its own name against the Ministry of Coal, inasmuch as MCL and Ministry of Coal put together are in control of the Company (JVC) and its Board and would not allow any action to be taken against themselves since any such legal action would also expose MCL's own misdeed. The cause of action of the petitioner is that of a shareholder of MJSJ who is vitally affected by all measures they have been taken and/or proposed to be 51 taken in connection with the said coal blocks allotted to MJSJ. The writ petitioner was constrained to institute this writ proceeding as because MJSJ has not taken any action in its name. In the process it is alleged that the petitioner's valuable shareholding in MJSJ is being eroded. It is also being alleged that the stake of the petitioners in the bank guarantee already furnished by MJSJ with the Ministry of Coal is to the extent of Rs.10,01,16,00 given through the banker of the bank, namely, State Bank of India, Talcher Branch to the Ministry of Coal.
The petitioner who is a part of the said JVC prays for a writ of mandamus commanding the respondents which include the present appellant to forthwith return the bank guarantee for Rs.111.24 crores furnished to the Coal Controller. It was not a case of enforcement of the bank guarantee at Kolkata nor the same is sought to be enforced at Kolkata. The bank guarantee is furnished by the JVC of which the petitioner is one of its arms and the requirement to furnish the bank guarantee was conceived and incorporated in the JVC which was admittedly executed at Sambalpur. The challenge to the said bank guarantee is not maintainable at the instance of the petition in this writ petition. Moreover, in deciding as to whether the writ court would exercise jurisdiction in such a situation and more so having regard to a forum selection clause in the agreements on the basis of which such bank guarantee was furnished and all such agreements contained mode of settlement of dispute as well as exclusive forum selection clause. It is the duty of the Court to give effect to such intention of the parties and to hold the parties to the terms of the said agreement even in 52 exercising a power under Article 226 of the Constitution of India. It is not in doubt that Section 28 of the Contract Act not stand in the way in exercising its jurisdiction under Article 226 of the Constitution of India but the fact remains if the Court at all would have the jurisdiction having regard to the averments made in the writ petition. Mere seat of one of the respondents wholly unconnected with the lis, in our opinion, would not be sufficient and would not be prudent to exercise jurisdiction on that score alone.
We, however, make it clear that the observations we made with regard to the furnishing of the bank guarantee and other issues relating thereto are only for the purpose of determination of the jurisdiction of this Court and limited to that only so far and no far.
When the parties with their eyes wide open have entered into an agreement and has specifically agreed to a forum selection clause and/or any other manner in which they have agreed to resolve their disputes, normally the discretion is to be exercised against the party who is trying to invoke the jurisdiction of a Court contrary to such agreed procedure and/or the agreed jurisdiction. It is settled- law that once an exclusive jurisdiction is created in favour of a particular court unless such court lacks inherent jurisdiction, the parties are bound to submit their disputes before the court "alone". Such interpretation has been accepted by the Apex Court on the ground that once the parties have agreed to submit their dispute exclusively to a Court which otherwise has the jurisdiction, the parties 53 must be held to such terms. When dispute arose out of such agreement and instead of initiating a civil action a writ petition is filed for enforcement of a legal right and in deciding of such issue the court is required to refer to the agreement which contains a forum selection clause, the writ court in exercising such discretion, in our view, should have due regard to the agreement containing a forum selection clause and the nature of dispute raised in the petition. It is not a case of contracting out in terms of the Section 28 of the Contract Act but it is in exercise of discretion, the writ court would decline to entertain the writ petition having regard to such forum selection clause. Moreover, as noticed earlier, Article 226 has been amended and the Hon'ble Supreme Court in the judgment reported in AIR 2006 SC 1288 (Munsaraf Hossain Khan v. Bhageeratha Engg. Ltd. & Ors.) considered the relevant scope of Article 226 (2) and 20(c) of the Code of Civil Procedure. Here from the facts that we narrated it cannot be said that a part of cause of action had arisen within the jurisdiction of this Hon'ble Court. In fact, the writ petitioner essentially sought a specific performance of the agreements and alleged breach of the said agreement on behalf of the appellant.
An attempt has been made by the respondent to contend that primary reliefs are claimed against the Coal Controller and Coal India Limited and not so much against the Mahanadi Coalfields Limited. Such attempt was obviously made in an attempt to justify its meritless assertion on the territorial jurisdiction of this Hon'ble Court. It is interesting to note that in the reliefs claimed there has 54 been no challenge to the tapering of supply of coal against the Coal Supply Agreement as directed by the Ministry of Coal and the notice by which such tapering was done. The guideline or the policy relating to issue of letter of assurance/allocation of coal on tapering basis was issued by the Ministry of Coal on 26th February, 2010. This policy was circulated to various Ministries including the Director, NIC, and Ministry of Coal. This guideline has not been challenged.
It is also significant to mention that the letter issued by the Ministry of Coal on 28th December, 2010 with regard to continuation of coal supplies under tapering linkage in respect of the writ petition is also not under challenge. The same was followed by another communications dated 15th/16th February, 2011. The said orders are also not under challenge. The argument that is sought to be made is completely contrary to what was actually pleaded and intended and the same would be quite clear and discernible from a meaningful reading of the writ petition.
The emphasis in support of the maintainability of the writ petition is that Mahanadi Coalfields Limited is a subsidiary of Coal India Limited and since Coal India Limited having its office at 10 N.S. Road, Kolkata - 700 001. The writ petitioner would be maintainable against the said respondents. By a circuitous and convoluted process of reasoning an argument sought to be put forward that in fact, Mahanadi's actions are being dictated and promoted by Coal India Ltd. 55 and since Coal India Ltd. having a office within the jurisdiction, the writ petition should be maintainable.
Although the respondent No.10 does not appear to have made any submission before the trial Judge at the time of admission of the said writ petition but in this appeal they filed a short written argument in which they have mentioned that they are adopting the submission made on behalf of the respondent No.1. The understanding of the said respondent No.10 of the cause of action as pleaded by the writ petitioner is the stoppage of supply of coal to the writ petitioner/respondent No.1 by the appellant w.e.f. September 2010 under SLC (LT) Scheme, based on alleged guideline/policy of the Ministry of Coal dated 26th February, 2010. The said supporting proforma respondent also relied upon paragraph 86 of the writ petition and has made a reference to Articles 226(1) and 226(2) of the Constitution of India.
It was submitted that in view of involvement of Coal Controller, Kolkata, a part of the cause of action has arisen within the territorial limits of this Hon'ble Court. The said respondent has also referred to a judgment reported in 2009 (2) CHN 1 (Zafar Khan Vs. Coal India Limited) for the proposition that if the seat of the offending authority (which according to the proforma respondent is the Coal Controller) is within the jurisdiction of this Hon'ble Court then this Hon'ble Court would have jurisdiction under Articles 226(1) and 226(2) irrespective of the 56 place where the offending act has been committed and irrespective of the fact as to where the cause of action has arisen.
On the aspect of Article 226(2) of the Constitution of India reference was made to 2006 (3) SCC 658 (Mosraf Hossain Khan Vs. Bhagheeratha Engineering Ltd.) and it was argued that all High Courts in which the cause of action has arisen would have jurisdiction. It was further argued by referring to ratio of the decision in Kusum Ingots (supra) that even if a small fraction of cause of action accrues within the jurisdiction of Court, the Court will have the jurisdiction in the matter.
We have already considered this aspect of the matter earlier and in view of such discussion we have already made the decisions cited on behalf of the proforma respondent do not come to the aid of the said writ petitioner.
We have analyzed the pleadings and the reliefs of the main writ petition. We have no manner of doubt in our mind that none of the reliefs excepting Prayer
(e) could have any nexus with the jurisdiction of this Hon'ble Court. In fact, Prayer (e) cannot be considered in isolation. The Prayer (e) is only a consequential relief which is dependent upon the success of the other reliefs and in respect whereof it cannot be said that a part of the cause of action has arisen within the jurisdiction of this Hon'ble Court. Even if it is considered that a fraction of a cause of action has arisen within the jurisdiction of this Hon'ble 57 Court no discretion could have been exercised at all for entertaining the writ by this Hon'ble Court and in coming to such conclusion we have taken into consideration the fact that the primary reliefs could not be granted by this Hon'ble Court in exercise of power under Article 226 of the Constitution of India. It is a classic case of creation of an illusion of a cause action for the purpose of invoking the jurisdiction of this Hon'ble Court. We are unable to appreciate as to why the jurisdiction of this Hon'ble Court was invoked under Article 226 of the Constitution of India.
In so far as the argument made in respect of Section 21 of the Code of Civil Procedure, we are unable to accept the said statements since it would be clear from the impugned order that the objection was not limited to the forum selection clause only. The forum selection clause, it appears to us, was referred to for the purpose of persuading the trial Judge not to entertain the petitioner in view of the fact that the disputes are arising out of the agreements which contain a forum selection clause. The issue relating to lack of territorial jurisdiction was not waived. The objection of the appellant as recorded in the order is reproduced hereinbelow:
"Mr. Mitra appearing for Mahanadi Coalfields Limited has submitted as follows. This Court has no jurisdiction to entertain the petition against Mahanadi Coalfields that has its seat outside the territories in relation to which this Court exercises jurisdiction under Article 226. It is evident from the prayer that the 58 petitioners are seeking specific performance of contract. From the terms and conditions of the agreement at p.302 it is evident that the Court of Sambalpur shall have exclusive jurisdiction in all matters under the agreement. Supply quantity has been reduced by Mahanadi in compliance with the directions of the Ministry of Coal at p. 395."
It appears that none of the aforesaid issues have been considered by the learned single Judge and it was only on the ground that Mahanadi Coalfields Limited is not the only respondent and the writ petitioner is seeking relief "also" against Coal India Limited, the writ petition was entertained. It was incumbent upon the learned single Judge to consider the pleading, the primary reliefs and the agreements which were admittedly executed outside the West Bengal and that the factory was operating at Sambalpur. It appears that the learned single Judge has applied the wrong tests and have arrived at wrong conclusion. The learned single Judge, in our respectful opinion, could not have held in favour of the writ petition.
While dismissing the writ petition we, however, make it clear that we have not gone into the merits of the matter and we confined ourselves to the jurisdiction issue only.
In view of the aforesaid, we hold that the writ petition is not maintainable in the High Court at Calcutta and accordingly, the order of the learned single 59 Judge dated 26th April, 2011 is set aside. The appeal, thus, succeeds, however, there shall be no order as to costs.
Since the appeal is dismissed, the connected application for stay (being C.A.N. No. 5109 of 2011) has become infructuous and the same is dismissed accordingly.
Photostat certified copy of this judgment, if applied for, be supplied to the parties.
(Soumen Sen, J.) I agree.
(Pinaki Chandra Ghose, J.) 60 LATER:
Ms. Sarvapriya Mukherjee, learned Advocate appearing on behalf of the respondent prays for stay of operation of the judgment.
Such prayer is allowed till two weeks after the Puja Vacation.
(Soumen Sen, J.) I agree.
(Pinaki Chandra Ghose, J.)