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CASE NO.: Appeal (civil)  1426 of 2007

PETITIONER: Alchemist Limited and Another

RESPONDENT: State Bank of Sikkim and Others

DATE OF JUDGMENT: 16/03/2007

BENCH: C.K. THAKKER & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T @ Special Leave Petition (Civil) No. 9698/2006

C.K. THAKKER, J.

       Leave granted. A simple issue before this Court in the present  appeal is as to whether a part of the cause of action had  arisen within the territorial jurisdiction of the High Court  of Punjab & Haryana so as to entertain a writ petition  under Article 226 of the Constitution filed by the  appellant-Company against the respondents. Brief facts of the case are that the Appellant is a  company having its Registered and Corporate Office at  Chandigarh. Respondent No. 1 is the State Bank of  Sikkim, and Respondent No. 2 is the State of Sikkim. The  second respondent-State of Sikkim was desirous of  disinvesting 49% of its equity capital in the first  respondent-State Bank of Sikkim to a strategic partner  with transfer of management in the first respondent  Bank. For that purpose, the second respondent issued an  advertisement in "Economic Times" on January 21, 2004  and invited offers for strategic partnership. Interested  parties, firms and companies having management  expertise were asked to apply with detailed bio-data  profiles to the State Bank of Sikkim at its Head Office at  Gangtok on or before February 7, 2004. It was stipulated  in the advertisement that the offers made by the parties  would be subject to scrutiny by the Board of Directors of  the first respondent-Bank. It was also clarified that the  right to accept or reject the offer without assigning any  reason was reserved by the Board of Directors.  The Appellant Company submitted its formal  proposal for the strategic business partnership vide its  offer dated February 3, 2004. Several proposals were  received from various entities, and the Board of Directors  in its 143rd meeting short-listed two entities, viz. the  Appellant Company and another company based in  Calcutta. Negotiations took place between the Appellant  Company and the first respondent-Bank. The Chairman  and Managing Director of the first respondent-Bank  visited Chandigarh for further negotiations. The first  respondent-Bank asked the Appellant to deposit a sum of  Rs. 4.50 crores with the State Bank of India in a fixed  deposit to show its bona fides and utilization by the first  respondent-Bank for its revival. The Appellant deposited  the said amount with the State Bank of India,  Chandigarh on March 16, 2005, and the photocopies of  the receipt were handed over to the executives of the first

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respondent-Bank at Chandigarh. Through a letter dated  February 20, 2004, the first respondent-Bank informed  the Appellant Company that its proposal was accepted in  principle subject to consideration and approval of the  Government of Sikkim. On February 23, 2006, the  Appellant Company received a communication at  Chandigarh by which the first respondent-Bank informed  the Appellant-Company that the Government of Sikkim  had not approved the proposal submitted by the  Appellant Company and sought to withdraw the  communication dated February 20, 2004. The Appellant  Company, therefore, filed a writ petition before the High  Court of Punjab & Haryana under Article 226 of the  Constitution challenging the letter-cum-order dated  February 23, 2006. The High Court dismissed the writ petition only on  the ground that it did not have territorial jurisdiction to  entertain the writ petition as no cause of action had  arisen within the territorial jurisdiction of the Court. The  High Court did not enter into merits of the matter and  granted liberty to the Appellant-Company to seek  appropriate remedy before an appropriate Court. The said decision of the High Court is challenged by  the Appellant-Company in this appeal. We have heard  the learned counsel for the parties.  The Appellant Company contended that a part of  cause of action had arisen within 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 the per the request of the  first respondent; v)      The Chairman and Managing Director of the first  respondent visited Chadigarh 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. It was, therefore, submitted that at least a part of  cause of action had certainly arisen within the territorial  jurisdiction of the High Court of Punjab & Haryana and  hence it had jurisdiction to entertain the petition. It was,  therefore, submitted that the impugned order passed by  the High Court deserves to be set aside by directing the  Court to decide the writ petition on merits. The respondents, on the other hand, submitted that  neither of the above facts nor circumstances can be said  to be a part of cause of action investing jurisdiction in the  High Court of Punjab & Haryana. According to the  respondents, all substantial, material and integral facts  constituting a cause of action were within the territory of

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the State of Sikkim and, hence, the High Court of Punjab  & Haryana was fully justified in holding that it had no  territorial jurisdiction to entertain, deal with and decide  the lis between the parties. The respondents, in this connection, relied upon the  following facts; i)      Registered and Corporate Office of the first- respondent Bank is at Gangtok, i.e. Sikkim; ii)     Secretariate of the second-respondent State is  situated at Gangtok, i.e. Sikkim; iii)    Offers were called for from various parties at  Gangtok; iv)     All offers were scrutinized and a decision to accept  offer of the Appellant-Company was taken by the  first-respondent Bank at Gangtok; v)      The State Government’s decision not to approve the  proposal of the Appellant-Bank was taken at  Gangtok; vi)     The meeting of the Board of Directors of the first- respondent Bank was convened at Gangtok and a  resolution was passed to withdraw the letter dated  February 20, 2004 at Gangtok; vii)    A communication was dispatched by the first- respondent Bank to the Appellant-Company on  February 23, 2004 from Gangtok. The respondents, therefore, submitted that the High  Court was wholly right in dismissing the petition on the  ground of want of territorial jurisdiction and the order  needs no interference by this Court. Before entering into the controversy in the present  appeal, let the legal position be examined: Article 226 of the Constitution as it originally  enacted had two-fold limitations on the jurisdiction of  High Courts with regard to their territorial jurisdiction.  Firstly, the power could be exercised by the High Court  "throughout the territories in relation to which it  exercises jurisdiction", i.e. the writs issued by the court  cannot run beyond the territories subject to its  jurisdiction. Secondly, the person or authority to whom  the High Court is empowered to issue such writs must be  "within those territories", which clearly implied that they  must be amenable to its jurisdiction either by residence  or location within those territories. In Election Commission, India v. Saka Venkata Rao,  1953 SCR 1144 : AIR 1953 SC 210, the petitioner applied  to the High Court of Madras under Article 226 of the  Constitution for a writ of prohibition restraining the  Election Commission, (a statutory authority constituted  by the President) having its office permanently located at  New Delhi, from inquiring into the alleged disqualification  of the petitioner from membership of the Madras  Legislative Assembly. The High Court of Madras issued a  writ. The aggrieved petitioner approached this Court. Allowing the appeal and reversing the decision of  the High Court, this Court held that the High Court of  Madras had no territorial jurisdiction to entertain the  petition. Speaking for the Court, Patanjali Sastri, C.J. made  the following observations: "[T]he makers of the Constitution, having  decided to provide for certain basic  safeguards for the people in the new set up,  which they called fundamental rights,  evidently thought it necessary to provide also  a quick and inexpensive remedy for the

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enforcement of such rights and, finding that  the prerogative writs which the Courts in  England had developed and used whenever  urgent necessity demanded immediate and  decisive interposition, were peculiarly suited  for the purpose, they conferred, in the States’  sphere, new and wide powers on the High  Courts of issuing directions, orders, or writs  primarily for the enforcement of fundamental  rights, the power to issue such directions,  etc., "for any other purpose" being also  included with a view apparently to place all  the High Courts in this country in somewhat  the same position as the Court of King’s  Bench in England. But wide as were the  powers thus conferred, a two-fold limitation  was placed upon their exercise. In the first  place, the power is to be exercised  "throughout the territories in relation to  which it exercises jurisdiction", that is to  say, the writs issued by the court cannot  run beyond the territories subject to its  jurisdiction. Secondly, the person or  authority to whom the High Court is  empowered to issue such writs must be  "within those territories", which clearly  implies that they must be amenable to its  jurisdiction either by residence or  location within those territories".                                        (emphasis supplied)

As to the cause of action, the Court stated: "The  rule that cause of action attracts jurisdiction in suits is  based on statutory enactment and cannot apply to writs  issuable under Article 226 which makes no reference to  any cause of action or where it arises but insists on the  presence of the person or authority ’within the territories’  in relation to which the High Court exercises  jurisdiction". Again, a question arose in Khajoor Singh v. Union of  India, (1961) 2 SCR 528 : AIR 1961 SC 532. A Bench of  seven Judges was called upon to consider the correctness  or otherwise of Saka Venkata Rao. The majority (Sinha,  C.J., Kapoor, Gajendragadkar, Wanchoo, Das Gupta and  Shah, JJ.) reaffirmed and approved the view taken by  this Court earlier in Saka Venkata Rao and held that the  High Court of Jammu & Kashmir was right in not  entertaining the writ petition filed by the petitioner on the  ground that it had no territorial jurisdiction.  Speaking for the majority, Sinha, C.J., stated: "It seems to us therefore that it is not  permissible to read in Article 226 the residence  or location of the person affected by the order  passed in order to determine the jurisdiction of  the High Court. That jurisdiction depends on  the person or authority passing the order  being within those territories and the residence  or location of the person affected can have no  relevance on the question of the High Court’s  jurisdiction".

The effect of the above decisions was that no High  Court other than the High Court of Punjab (before the  establishment of the High Court of Delhi) had jurisdiction

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to issue any direction, order or writ to the Union of India,  because the seat of the Government of India was located  in New Delhi. Cause of action was a concept totally  irrelevant and alien for conferring jurisdiction on High  Courts under Article 226 of the Constitution. An attempt  to import such concept was repelled by this Court. In the  circumstances, Article 226 was amended by the  Constitution (Fifteenth Amendment) Act, 1963 and after  Clause 1, new Clause (1-A) was inserted which read as  under: "(1-A) The power conferred by clause (1)  to issue directions, orders or writs to any  Government, authority or person may also be  exercised by any High Court exercising  jurisdiction in relation to the territories within  which the cause of action, wholly or in part,  arises for the exercise of such power,  notwithstanding that the seat of such  Government or authority or the residence of  such person is not within those territories".

It may be stated that by the Constitution (Forty- second Amendment) Act, 1976, Clause (1-A) was  renumbered as Clause (2). The underlying object of  amendment was expressed in the following words: "Under the existing Article 226 of the  Constitution, the only High Court which has  jurisdiction with respect to the Central  Government is the Punjab High Court. This  involves considerable hardship to litigants  from distant places. It is, therefore, proposed  to amend Article 226. So that when any relief  is sought against any Government, authority  or person for any action taken, the High  Court within whose jurisdiction the cause  of action arises may also have jurisdiction  to issue appropriate directions, orders or  writs". (emphasis supplied)

The effect of the amendment was that the accrual of  cause of action was made an additional ground to confer  jurisdiction on a High Court under Article 226 of the  Constitution.  As Joint Committee observed: "This clause would enable the High  Court within whose jurisdiction the cause of  action arises to issue directions, orders or  writs to any Government, authority or  person, notwithstanding that the seat of such  Government or authority or the residence of  such person is outside the territorial  jurisdiction of the High Court. The Committee  feel that the High Court within whose  jurisdiction the cause of action arises in part  only should also be vested with such  jurisdiction".

The legislative history of the constitutional  provisions, therefore, make it clear that after 1963, cause  of action is relevant and germane and a writ petition can  be instituted in a High Court within the territorial  jurisdiction of which cause of action in whole or in part  arises. The question for our consideration is as to whether

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the assertion of the appellant is well founded that a part  of cause of action can be said to have arisen within the  territorial jurisdiction of the High Court of Punjab &  Haryana. Whereas, the appellant-Company submits that  a part of cause of action had arisen within the territorial  jurisdiction of that Court, the respondents contend  otherwise. It may be stated that the expression ’cause of  action’ has neither been defined in the Constitution nor  in the Code of Civil Procedure, 1908. It may, however, be  described as a bundle of essential facts necessary for  the plaintiff to prove before he can succeed.  Failure to  prove such facts would give the defendant a right to  judgment in his favour. Cause of action thus gives  occasion for and forms the foundation of the suit.  The classic definition of the expression ’cause of  action’ is found in Cooke v. Gill, (1873) 8 CP 107 : 42 LJ  PC 98, wherein Lord Brett observed: "’Cause of action’ means every fact which  it would be necessary for the plaintiff to prove,  if traversed, in order to support his right to the  judgment of the court".

For every action, there has to be a cause of action. If  there is no cause of action, the plaint or petition has to  be dismissed. Mr. Soli J. Sorabjee, Senior Advocate appearing for  the Appellant-Company placed strong reliance on A.B.C.  Laminart Pvt. Ltd. & Anr. v. A.P. Agencies, Salem, (1989) 2  SCC 163 : AIR 1989 SC 1239 : JT 1989 (2) SC 38 and  submitted that the High Court had committed an error of  law and of jurisdiction in holding that no part of cause of  action could be said to have arisen within the territorial  jurisdiction of the High Court of Punjab & Haryana. He  particularly referred to the following observations: "A cause of action means every fact,  which, if traversed, it would be necessary for  the plaintiff to prove in order to support his  right to a judgment of the Court. In other  words, it is a bundle of facts which taken with  the law applicable to them gives the plaintiff a  right to relief against the defendant. It must  include some act done by the defendant since  in the absence of such an act no cause of  action can possibly accrue. It is not limited to  the actual infringement of the right sued on  but includes all the material facts on which it  is founded. It does not comprise evidence  necessary to prove such facts, but every fact  necessary for the plaintiff to prove to enable  him to obtain a decree. Everything which if not  proved would give the defendant a right to  immediate judgment must be part of the cause  of action. But it has no relation whatever to  the defence which may be set up by the  defendant nor does it depend upon the  character of the relief prayed for by the  plaintiff".

In our opinion, the High Court was wholly justified  in upholding the preliminary objection raised by the  respondents and in dismissing the petition on the ground  of want of territorial jurisdiction. The learned counsel for the respondents referred to  several decisions of this Court and submitted that

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whether a particular fact constitutes a cause of action or  not must be decided on the basis of the facts and  circumstances of each case. In our judgment, the test is  whether a particular fact(s) is (are) of substance and can  be said to be material, integral or essential part of the lis  between the parties. If it is, it forms a part of cause of  action. If it is not, it does not form a part of cause of  action. It is also well settled that in determining the  question, the substance of the matter and not the form  thereof has to be considered. In Union of India & Ors.  v. Oswal Woollen Mills Ltd.  & Ors., (1984) 3 SCR 342 : AIR 1984 SC 1264, the  registered office of the Company was situated at  Ludhiana, but a petition was field in the High Court of  Calcutta on the ground that the Company had its branch  office there. The order was challenged by the Union of  India.  And this Court held that since the registered office  of the Company was at Ludhiana and the principal  respondents against whom primary relief was sought  were at New Delhi, one would have expected the writ  petitioner to approach either the High Court of Punjab &  Haryana or the High Court of Delhi. The forum chosen by  the writ petitioners could not be said to be in accordance  with law and the High Court of Calcutta could not have  entertained the writ petition.  In State of Rajasthan & Ors. v. M/s Swaika  Properties, (1985) 3 SCC 217 : AIR 1985 SC 1289, the  Company whose registered office was at Calcutta filed a  petition in the High Court of Calcutta challenging the  notice issued by the Special Town Planning Officer,  Jaipur for acquisition of immovable property situated in  Jaipur.  Observing that the entire cause of action arose  within the territorial jurisdiction of the High Court of  Rajasthan at Jaipur Bench, the Supreme Court held that  the High Court of Calcutta had no territorial jurisdiction  to entertain the writ petition. This Court held that mere service of notice on the  petitioner at Calcutta under the Rajasthan Urban  Improvement Act, 1959 could not give rise to a cause of  action unless such notice was ’an integral part of the  cause of action’.  In Oil & Natural Gas Commission (ONGC) v. Utpal  Kumar Basu & Ors., (1994) 4 SCC 711 : JT 1994 (6) SC 1,  this Court held that when the Head Office of ONGC was  not located at Calcutta, nor the execution of contract  work to be carried out in West Bengal, territorial  jurisdiction cannot be conferred on the High Court of  Calcutta on the ground that an advertisement had  appeared in a daily (Times of India), published from  Calcutta, or the petitioner submitted his bid from  Calcutta, or subsequent representations were made from  Calcutta, or fax message as to the final decision taken by  ONGC was received at Calcutta inasmuch as neither of  them would constitute an ’integral part’ of the cause of  action so as to confer territorial jurisdiction on the High  Court of Calcutta under Article 226 (2) of the  Constitution.  In C.B.I., Anti-corruption Branch, Mumbai v.  Narayan Diwakar, (1999) 4 SCC 656 : AIR 1999 SC 2362  : JT 1999 (3) SC 635, A was posted in Arunachal  Pradesh. On receiving a wireless message through Chief  Secretary of the State asking him to appear before CBI  Inspector in Bombay, A moved the High Court of  Guwahati for quashing FIR filed against him by the CBI.  An objection was raised by the department that the High

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Court of Guwahati had no territorial jurisdiction to  entertain the writ petition. But it was turned down. The  Supreme Court, however, upheld the objection that  Guwahati High Court could not have entertained the  petition. In Union of India v. Adani Exports Ltd., (2002) 1 SCC  567 : AIR 2002 SC 126 : JT 2001 (9) SC 162, a question  of territorial jurisdiction came up for consideration. A  filed a petition under Article 226 of the Constitution in  the High Court of Gujarat claiming benefit of the  Passport Scheme under the EXIM policy. Passport was  issued by Chennai Office. Entries in the Passport were  made by authorities at Chennai. None of the respondents  was stationed within the State of Gujarat. It was,  therefore, contended that Gujarat High Court had no  territorial jurisdiction to entertain the petition. The  contention, however, was negatived and the petition was  allowed. The respondents approached the Supreme  Court. The judgment of the High Court was sought to be  supported inter alia on the grounds; that (i) A was  carrying on business at Ahmedabad; (ii) orders were  placed from and executed at Ahmedabad; (iii) documents  were sent and payment was made at Ahmedabad; (iv)  credit of duty was claimed for export handled from  Ahmedabad; (v) denial of benefit adversely affected the  petitioner at Ahmedabad; (vi) A had furnished bank  guarantee and executed a bond at Ahmedabad, etc. Allowing the appeal and setting aside the order of  the High Court, the Supreme Court held that none of the  facts pleaded by A constituted a cause of action. "Facts  which have no bearing with the lis or dispute involved in  the case, do not give rise to a cause of action so as to  confer territorial jurisdiction on the court concerned". In Kusum Ingots & Alloys Ltd. v. Union of India (UOI)  & Anr., (2004) 6 SCC 254 : JT 2004 (Supp. 1) 475, the  appellant was a Company registered under the Indian  Companies Act having its Head Office at Mumbai. It  obtained a loan from the Bhopal Branch of the State  Bank of India. The Bank issued a notice for repayment of  loan from Bhopal under the Securitisation and  Reconstruction of Financial Assets and Enforcement of  Security Interest Act, 2002. The appellant Company filed  a writ petition in the High Court of Delhi which was  dismissed on the ground of lack of territorial jurisdiction.  The Company approached this Court and contended that  as the constitutionality of a Parliamentary legislation was  questioned, the High Court of Delhi had the requisite  jurisdiction to entertain the writ petition. Negativing the contention and upholding the order  passed by the High Court, this Court ruled that passing  of a legislation by itself does not confer any such right to  file a writ petition in any Court unless a cause of action  arises therefor. The Court stated; "A distinction between  a legislation and executive action should be borne in  mind while determining the said question". Referring to ONGC, it was held that all necessary  facts must form an ’integral part’ of the cause of action.  The fact which is neither material nor essential nor  integral part of the cause of action would not constitute a  part of cause of action within the meaning of Clause (2) of  Article 226 of the Constitution. In National Textile Corporation. Ltd. & Ors. v.  Haribox Swalram & Ors, (2004) 9 SCC 786 : JT 2004 (4)  SC 508, referring to earlier cases, this Court stated that

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"the mere fact that the writ petitioner  carries on business at Calcutta or that the  reply to the correspondence made by it was  received at Calcutta is not an integral part of  the cause of action and, therefore, the Calcutta  High Court had no jurisdiction to entertain the  writ petition and the view to the contrary taken  by the Division Bench cannot be sustained."

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\027appellant, 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 suit/petition.   Nevertheless it must be a ’part of cause of action’,  nothing less than than.  In the present case, the facts which have been  pleaded by the Appellant Company, in our judgment,  cannot be said to be essential, integral or material facts  so as to constitute a part of ’cause of action’ within the  meaning of Article 226(2) of the Constitution. The High  Court, in our opinion, therefore, was not wrong in  dismissing the petition. For the foregoing reasons, we see no infirmity in the  order passed by the High Court dismissing the petition  on the ground of want of territorial jurisdiction. The  appeal, therefore, deserves to be dismissed and is  accordingly dismissed. In the facts and circumstances of  the case, however, we leave the parties to bear their own  costs.