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Judgment
Chandra Reddy, C.J.—This is the plaintiff''s appeal against the decree of the Subordinate Judge, Kakinada, directing the return of plaint in O. S. No. 16 of 1957 for presentation to proper Court.
The appellant laid an action for recovery of a sum of Rs. 51, 944/- from the respondents. The appellant-plaintiff is a registered firm carrying on business at Vijayawada and other places in iron ore and other materials. The first defendant is a partnership firm doing import and export business having its office at Bombay, defendants 2 to 4 being the partners thereof. The basis of the claim is two contracts for the supply of certain quantities of iron ore to the defendants who were acting as selling agents of the plaintiffs. A sum of Rs. 5,382/- was claimed as being due in regard to the contract entered into between them on 10-8-1956 under Ex. A-5 and the balance as arising out al the second contract entered into between the parties on 30-8-1956. These two contracts contain a clause to the effect that the contracts are subject to Bombay jurisdiction. The suit amounts are said to be the balance of the unpaid purchase-money which has not been paid by the defendants in spite of the repeated requests of the plaintiff.
One of the answers to the suit was that one Kakinada Court could not entertain the suit because of the agreement between the parties that the disputes arising under both the contracts should be adjudicated upon in the Bombay Courts. The plaintiff sought to get over this objection on the two pleas, namely, (i) that the second contract, which had given rise to the major portion of the claim was rescinded on 17-10-1956 and a fresh contract without the term bearing on the jurisdiction of Courts came into being under Ex. A-1 and (ii) that the clause relating to jurisdiction did not affect the right of the plaintiff to have recourse to any of the competent Courts.
The Subordinate Judge found against the plaintiff on both the aspects of the matter and passed the order which is impeached before us.
In this appeal filed by the aggrieved plaintiff, the conclusion of the Subordinate Judge is assailed on two grounds, namely (i) that the term as to the forum for the settlement of disputes could not have the effect attributed to it by the lower Court, that it did not deprive either of the parties to choose one of the jurisdictions and the intention of the parties in inserting that clause was merely to emphasise that Bombay Courts also had jurisdiction to take cognisance of suits for enforcement of the rights and obligations flowing from the two contracts. It is also urged on behalf of the appellant that the construction placed by the lower Court would offend against the provisions of Section 28 of the Indian Contract Act. Another ground of attack is that the Subordinate Judge did not appreciate the full implications of the substitution of the second contract by a fresh contract dated 17-9-1956.
We will first dispose of the contention that there was a novation of the contract dated 10-8-1956 under Ex. A-5. In order to appreciate the respective contentions of the parties, it is necessary to notice the terms of the original agreement embodied in Ex. B-1, which is said to have been discharged and a fresh contract is alleged to have replaced it. It is in these words :
With reference to the personal discussions your Mr. Raja Ram Gopalrao had this morning in our office with the writer, we hereby confirm having agreed to act as your selling agents for the shipment of the above material on the following terms and conditions :
Subject to an export quota being granted to us we shall arrange to ship the above quantity of 7000 tons from Kakinada port during second half of October 1956 to one of our buyers in Japan.
2(a) Guaranteed Chemical composition :
b) Guaranteed physical composition:
Hard, Lump ore maximum size 8" about 80" comprising between 2" x 8" and fines below 1/4" not exceeding 10%.
The price shall be Sh. 80/- F. O. B. and trimmed per long ton, dry basis, for 65% Fe. Scale unitage Sh. 2/Ue or Sh. 3/- down upto 63% Fe. Fractions pro rata.
We shall charge a commission of 6% on the full value.
Despatch /demurrage shall be to your account calculated on the basis of L. 300 and L. 150/- respectively. You will load at an average rate of 150 tons per hatch, per weather working day, Sundays and holidays excepted. This account shall be settled by us on completion of our corresponding settlement with our buyers.
The Port Trust weight certificate issued by the Port Officer at Kakinada and the analysis report issued by M/s. Ltalab Ltd., Bombay or any other Analysts of our choice shall form the basis for provisional payment of 95% invoice value. The balance 5% shall be paid to you on the basis of the final weight ascertained at the Port of Discharge in Japan by the Japan Marine Surveyors and Shore Measurers Association or any other, independent organisation in Japan and a final analysis Report issued by the consuming Steel Mills in Japan. In every case, we shall deduct the commission amount due to us before making the payments.
All charges in connection with our shipment, sampling analysts etc., shall be to your account.
For every lot of 500 tons delivered at Kakinada to your C and F. agents and reported to us by the said C and F. agents in writing, we shall pay you an advance of Rs. 25/- per ton. It is to be clearly understood that your clearing agents should be on the approved lists of our Bankers.
We have no objection to your Clearing agents handling the above shipment under our supervision. It must be, however, clearly understood that we shall not advance you any more funds either to you or your C. and F. agents.
You will be responsible for losses, if any due to non-delivery, supplies not conforming to guaranteed specifications etc.
This contract is subject to Bombay jurisdiction.
We shall charge you interest at 6% p. a. for the amounts advanced in terms of clause (8) above.
Kindly return one copy of this contract duly accepted and signed.
x x x
Ex. A-1 is in these words :
This is to confirm our telephonic conversation at 16-50 hrs, from the phone of 42 Kakinada that in cancellation of agreement dated 30-8-1956 about the F.O.B. of 7000 tons per ss. "LANTAO", we supply you from our ready stocks at Kakinada and finish our loading by Sunday next in co-operation of our C and C. agents a quantity of 3000 tons, that you should remit by T. T. or otherwise so as to make for us available Rs. 22,500/- if possible or Rs. 20,000/- positively before Bank hours on the 18th that after despatch Mr. Ramrao and Mr. Rajaramgopalrao from our end shall go over to Bombay and you will immediately settle our account and give a draft immediately. This conversation was in the presence of Mr. V. Pathy, your local agent and Mr. K. Dayanandaraji our charge agent and Mr. K. Venkateswararao and Mr. K. Veera Raghavayya a third party.
Please confirm the contents are correct.
x x x
The argument based upon Ex. A-1 is that it cancelled the previous agreement totally and is substituted completely by Ex. A-1. The question for consideration is whether Ex. B-1 is wholly superseded by Ex. A-1. We find it difficult to accede to the submission of the learned counsel for the plaintiff that the first contract was extinguished and was substituted by Ex. A-1. A perusal of Ex. A-1 would establish that the parties did not agree to substitute a new contract for Ex. B-1 or to rescind or alter it and as such there is really no novation as contended for by the appellant. A comparison, of both the documents would clearly prove that what the parties contemplated was an alteration of the term relating to the quantify to be supplied by the plaintiff. There is no mention in Ex. A-1 about the guaranteed chemical composition, the guaranteed physical composition, the price, or commission etc. which are found in Ex. B-1. That being the position, it is difficult to agree with the proposition that there was a fresh contract between the parties in substitution of the original contract. The only effect of Ex. A-1 was to reduce the quantity of iron ore to be supplied by the plaintiff. This is clearly denoted by the expression "in cancellation of agreement dated 30-8-1956 about the F. O. B. 7000 tons as per S. S. "Lantao". On the language of Ex. A-1, there can be no room for doubt that by Ex. A-1 the parties, have varied one of the terms of Ex. B-1. These two documents differ only in regard to one term and in other respects the original contract was ratified by Ex. A-1. If that were the real position, clause 11 relating to Bombay jurisdiction remains unchanged and effect must be given to it. For these reasons, this submission fails and is rejected.
We will next proceed to consider the scope and meaning of clause 11 namely, "This contract is subject to Bombay jurisdiction". The point presented by Sri Suryanarayana, learned counsel for the appellant, is that this clause is a innocuous factual statement and it does not abrogate the right of the plaintiff to resort to any of the two competent forums to agitate the rights of the parties flowing from the two contracts. This in no wav detracts from the right of either of the two parties to choose any one of the ordinary tribunals which are competent to entertain the suits. It is also contended that the interpretation given by the trial Court would contravene the provisions of Section 28 of the Indian Contract Act.
At this stage, it is convenient to look at the terms of that Section. It is in these words :
Every agreement by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent".
Do the provisions of the Act warrant the submission that agreements of this description would in any way violate that Section? We do not think that this argument is well founded. It is manifest that the object of the section is to render illegal, agreements which absolutely restrict the enforcement of rights arising under the Contract in ordinary courts. A contract which curtails the choice which a party has under the ordinary law and confines such a right to one or other of the competent Courts is not vitiated by reason of Section 28. Consequently, Section 28 does not cause any impediment in the way of the parties agreeing to limit recourse to one of several competent Courts. The agreement merely amounts to selection of one of the several jurisdictions and it does not deprive any Court of its inherent jurisdiction. Surely, it is open to the parties to agree to such a course and it is not hit by Section 28. There is abundant authority for this proposition. (Vide Hoosen Kasam Dada (India) Ltd. Vs. Motilal Padampat Sugar Mills Co. Ltd., . Achratlal Kesavlal Mehta and Co., by Proprietor Achratlal and Kesavlal Vs. Vijayam and Co., and AIR 1946 57 (Lahore) . It is too late now to contend that Section 28 of the Indian Contract Act stands in the way of the parties entering into an agreement providing; for a forum for the determination of disputes arising under the Contract.
The only point that survives is whether the agreement in question merely states the position in law, namely, that the Kakinada Court also has jurisdiction either by reason of the part of the cause of action arising there or the defendants residing or carrying on business within the limits of that Court.
We will begin the discussion on this topic with the citation of the leading case on the subject, Achratlal Kesavlal Mehta and Co., by Proprietor Achratlal and Kesavlal Vs. Vijayam and Co., , this being the first of the reported cases of the Madras High Court which was since followed by several of the Benches of that Court and accepted by almost all the High Courts. There, a firm was doing business at Ahmedabad and the plaintiff appointed that firm as its agent for purchasing some bales of dhoties and sending them to Madras. The contract contained a clause that "in all legal disputes arising out of the contract, Ahmedabad will be understood as the place where the cause of action arose". In a suit brought Madras for the recovery of money said to be due in respect of dealings between the parties, one of the defences was that the Madras Court had no jurisdiction to entertain the suit. Upholding this plea, Madhavan Nair J. observed thus;
Where there are two Courts, both of which would normally have jurisdiction to try the suit, I do not see why the parties should not be allowed to agree among themselves that a suit should be brought in one of those Courts and not in the other".
In this view of the matter, he directed the return of plaint for presentation to the proper Court. This principle was affirmed in Kondepu Raghavayya Vs. Elukooru Vasudevayya Chetty, which had a similar term, namely, that all suits arising out of the contracts should be filed in one of the competent Courts. King J. who decided the matter adverted to Achratlal Kesavlal Mehta and Co., by Proprietor Achratlal and Kesavlal Vs. Vijayam and Co., and observed that that ruling had been followed by other High Courts e. g. Hoosen Kasam Dada (India) Ltd. Vs. Motilal Padampat Sugar Mills Co. Ltd., decided by a Bench of the Madras High Court consisting of Rajamannar C. J. and Venkatarama Ayyar J. is in consonance with the above view. The agreement relating to jurisdiction ran thus:
All disputes in respect of this contract shall be settled by arbitration failing which shall be settled in the Court of seller''s jurisdiction where this contract shall be deemed to have been entered into.
Rajamannar C. J. after an exhaustive review of the cases on this topic, ruled that the Madras High Court had no jurisdiction to entertain the suit for recovery of damages for breach of the contract entered into between the plaintiffs and defendants, the latter being the sellers and that the suit should be instituted only in the Court within whose jurisdiction the sellers resided.
To the same effect is the judgment of the Lahore High Court in JLLR (1945) Lah 281: (AIR 1945 LH 57) (FB). The agreement relating to jurisdiction, which fell to be considered by the Full Bench of the Lahore High Court, was in these words :
If however, it be deemed necessary to apply to the Court of Law, the suit can only be filed in the Court at Karachi and through no other Court".
This case also contains an elaborate discussion on such agreements. Their Lordships held that an agreement did not fall within the mischief of Section 28, that the only Court that was competent to take cognizance of the suit was the Court at Karachi and that the suit founded upon a contract with a clause like that Court not be instituted at Lahore. The principle adumbrated in A. K. Kaliyappa Chettiar and Sons v. Currimbhoy Laliee and Co., AIR 1954 Tra-Co. 461 is in accord with the above-mentioned cases. While not disputing the correctness of the proposition enunciated in the above cases, Sri Suryanarayana sought to distinguish them on the ground that while in those cases the parties intended to give exclusive jurisdiction to one of the two competent Courts, in the instant case, such a course was not within the contemplation of the parties. We do not think that we can assent to this proposition. Though the phraseology in the present case is different from that adopted in the cases under citation, in our opinion, the import is the same. The clause clearly denotes that the parties agreed to have the disputes arising out of the contract settled by the Courts in Bombay. The absence of the word ''only'' cannot form the ground of distinction. If we should accept the interpretation sought to be placed upon this clause by the learned counsel for the appellant, that term is otiose and unmeaning. Without the existence of such an agreement, the Bombay Court has jurisdiction to take cognisance of suits for the enforcement of rights arising under the contract for the reason that these agreements were entered into at Bombay. Having regard to the context in which it occurs, there can be little doubt that that clause constitutes contracting out of the right to bring actions in other competent courts. We are not persuaded that the connotation of this clause is different from those embodied in the cases referred to above.
An identical argument was the subject of scrutiny of a Bench of the Bombay High Court in Ram Bahadur Thakur and Co. Vs. Devidayal (Sales) Ltd., . The relevant provision of the contract there was :
The contract was subject to Bombay jurisdiction". One of the parties to the agreement filed a suit in the Calcutta High Court alleging that the defendants had committed a breach of the contract and claiming damages. The defendants, in their turn laid an action on the basis of the same contract in the Bombay High Court. The plaintiffs in the suit in the Calcutta High Court resorted to Section 10 C. P. C. for stay of proceedings in the Bombay High Court by reason of their suit having been filed earlier. This request was rejected by Coyajee, J. On appeal this was confirmed by Chagla C. J. and Shah J. Their Lordships held that if the parties by their agreement decided to have their disputes adjudicated upon by the Bombay Courts, the institution of a suit in the Calcutta Court was in violation of such an agreement and the Calcutta High Court could not entertain the suit because of the agreement arrived at between the parties. This case is in all fours with the present one and there can be no ground of distinction between the two.
It is for that reason that Sri Suryanarayana attempted to persuade us to differ from that decision and subscribe to the opinion said to have been expressed by Ramachandra Ayyar J. in Patel Bros. Vs. Vadilal Kashidas Ltd., . In that case, the contract in question contained a printed clause that the transaction was subject to Bombay jurisdiction. In spite of this recital on the too of the printed letterhead, a suit was brought in the Small Causes Court at Madras for recovery of a sum Rs. 2814-0 as damages for breach of contract for non-delivery of the goods contracted to be sold by the defendants, a limited liability Company carrying on business at Bombay. The Small Cause Court, Madras, gave effect to the plea of the defendant that it was not competent for the plaintiff to bring a suit in that Court having regard to the fact that the transaction was subject to Bombay jurisdiction and passed appropriate orders in that behalf, in a revision filed in the High Court of Madras against that order Ramachandra Ayyar J. (as he then was) agreed with the contention of the plaintiff that in the absence of express words excluding the jurisdiction of a Court, the plaintiff could not be deprived of a right to bring the suit in the Court within whose jurisdiction part of the cause of action had arisen. The observation which has given rise to the argument of Sri Suryanarayana is that unless and until ouster of jurisdiction is stated in express words want of jurisdiction should not be presumed and on the other hand the presumption that a party could initiate proceedings in a competent Court should prevail. The learned Judge observed thus:
Ex. P-1 says that the transaction is "subject to Bombay jurisdiction". But it does not exclude the jurisdiction of any Court. In my opinion, ouster of jurisdiction of a Court to which a person is entitled to resort to under the CPC or any other statute cannot be a matter of assumption or presumption but one to be proved by express words contained in the contract or at least by necessary or inevitable implication, it cannot be said that this test is satisfied in this case.
In considering these remarks, we have to bear in mind the fact that the term that the transaction was subject to Bombay jurisdiction was printed at the top of the letter-head and it did not form part of the contract. It is in that context that the relevant remarks were made by the learned judge. We do not think that the learned Judge intended to state as a broad proposition that a clause of that description would not amount to contracting out of the jurisdiction. That this is so is made clear from what the learned Judge says referring to M. Sheik Dawood Rowther Vs. South Indian Railway Co. Ltd. and Another,
But that was a case where there was a specific agreement saying that the transhipment was agreed to subject to the tariff rates and that would Incorporate the tariff rates into the contract. But in the instant case there is only a question of a mere recital on the top of the bill and it cannot be incorporated as a term of the contract.
It is plain that what induced the learned Judge to hold that there was no ouster of jurisdiction was the fact that the alleged contract was contained in a mere recital as the top of the bill and. it did not form part of the contract. It looks to us that the learned Judge would have come to a contrary conclusion and held that it would have a different effect if such a term was embodied in the contract itself. The situation is different where it is included in the contract itself. If, however, the learned Judge intended to lay it down as a principle of universal application, we will demur to such a proposition. For all these reasons, we are in agreement with the opinion of the trial Court that the proper Court in which a suit could be brought is the one situated at Bombay and the Court at Kakinada is hot competent to entertain it.
In the result, we affirm the decision of the trial Court and dismiss the appeal. Since the Court-fee paid on the plaint must have already been credited to the account of the Government of Andhra Pradesh, the plaintiff will be entitled to a certificate for refund of the Court fee. Cost of the appeal will abide the result of the litigation.