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CASE NO.: Appeal (civil)  5751 of 2007

PETITIONER: LAXMAN PRASAD

RESPONDENT: PRODIGY ELECTRONICS LTD. & ANR

DATE OF JUDGMENT: 10/12/2007

BENCH: C.K. THAKKER & ALTAMAS KABIR

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO. 5751 OF 2007 ARISING OUT OF SPECIAL LEAVE PETITION (C) NO. 12405 OF 2006

C.K. THAKKER, J.

1.              Leave granted. 2.              The present appeal is directed against  the judgment and order passed by the High Court  of Delhi on April 26, 2006 in I.A. No. 9562 of  2005 in Civil Suit (OS) No. 819 of 2005. By the  said order, the High Court dismissed an  application filed by the appellant herein under  Order VII, Rules 10 and 11 of the Code of Civil  Procedure, 1908 (hereafter referred to as ’the  Code’). 3.              Shortly stated the facts are that  ’Prodigy Electronics Ltd.’-plaintiff  (respondent No.1 herein) (’the Company’ for  short) was formed and incorporated under the  laws of Hong Kong and is engaged in the  business of trading electronic goods under the  name and style ’Prodigy Electronics’, Hong  Kong. The main area of business of the Company  is Printed Circuit Board (PCB). The business  carried on by the Company involves keen  understanding of the requirements of the  customers in order that the products may be  manufactured to the specific needs of the  customers and they may be made available at  competitive prices. The Company is, therefore,  required to take care of the consumer- complaints, if any. It also involves a reach  into the market identifying the potential  consumers of the products which involves  substantial investment of time, effort and  finance. According to the Company, it has  developed solid reputation in India under the  trade name and trade mark ’Prodigy Electronics’  in the field of electronics generally and PCBs  particularly. 4.              According to the plaintiff-Company, on  July 22, 2002, the defendant (appellant herein)  joined Prodigy Electronics in India as a  representative for marketing PCB products of  the Company in India. An employment contract

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was entered into on October 2, 2003 between the  defendant-employee and the plaintiff-Company.  Under the said contract, the defendant was  given full-time employment in the Company at  Hong Kong in the capacity of ’International  Business Development Manager’. He was given job  profile of conducting all business of the  Company in India. Subsequently, at the request  of the defendant who put forward personal  reasons, he was relocated to India and a new  employment agreement dated September 13, 2004  was signed by the parties. It was agreed that  the job location of the appellant would be  India. The defendant’s tenure in India started  from October 1, 2004. The Company was to bear  all expenditure, including travel-expenses of  the defendant. According to the Company,  however, after relocation to India in October,  2004, the defendant tendered his resignation by  e-mail on the ground of personal problems. It  was also stated that he would decide his next  course of action later on. Though the Company  gave assurance to the defendant to support in  his personal problems, the defendant did not  withdraw the resignation and thus his  employment came to be terminated on December  20, 2004. According to the Company, the  defendant sent another e-mail on December 20,  2004 giving assurance to the Company that  though he would continue to be involved in  marketing of PCB products, he would be  associating himself with manufacturers other  than the customers and suppliers of the  Company. 5.              It is the allegation of the Company  that the defendant contacted potential  customers of the Company and informed them that  he was representing ’Prodigy’. He also  submitted quotes for PCB products. It was also  the case of the Company that the defendant  participated in the Trade Fair in Delhi  (Componex/Electronic India, 2005) which was  held between February 1, 2005 to February 4,  2005 at Pragati Maidan, New Delhi. In the said  Trade Fair, the defendant used the goodwill and  passed on the trade name of the plaintiff- Company. In the course of inquiries about the  data generated about PCB customers, the  organizers of the Trade Fair informed the  Company that Multi Circuit Board (CHINA) Ltd.,  Hong Kong had participated in the fair and  information could be obtained from them. It was  averred that the Company was shocked to receive  the said information since Multi Circuit Board  (CHINA) Ltd. was the manufacturer from whom the  Company used to source its products for its  Indian customers. The further inquiry by the  Company revealed that the said Multi Circuit  Board (CHINA) Ltd. had a representative in  India and he was none else but the defendant  who operated under the name and style of  "Prodigy Circuit Boards". On being contacted,  Multi Circuit Board (CHINA) Ltd. also confirmed  that it had executed a contract with the  defendant. It also came to the notice of the

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Company that the defendant had registered a  deceptively similar domain name  ’www.prodigycircuits.com’ as far back as on  October 5, 2004 while he was still in the  employment of the Company. The Company was thus  convinced that the defendant had not resigned  on account of personal reasons or family  problems but he wanted to misuse confidential  information which he had received from the  Company and he wanted to take undue advantage  in spite of the agreement entered into with the  Company. The Company also discovered that the  defendant had incorporated a Company under the  name and style of ’Canton Treasure Corporation  Ltd.’ on July 16, 2004 when he was stationed in  Hong Kong and was still serving with the  Company. Thus, obvious breach of employment  contract was committed by the appellant. 6.              In view of the above facts and breach  of contract by the defendant, the plaintiff- Company on May 28, 2005, filed a suit being  Civil Suit (OS) No. 819 of 2005 in the High  Court of Delhi at New Delhi (Original  Jurisdiction) for permanent and mandatory  injunction against the defendant as also for  damages by ordering rendition of accounts.  Alongwith the plaint, the Company filed an  application under Order XXXIX, Rules 1 and 2  read with Section 151 of the Code for interim  injunction restraining the defendant from using  the name ’Prodigy’, ’Prodigy Circuit’ or any  other identical or deceptively similar name or  from passing off any such identical or  deceptively similar trade mark or trade name. 7.              Notice was issued to defendant. He  filed his written statement on November 10,  2005. The defendant also filed an application  under Order VII, Rules 10 and 11 of the Code  praying for rejection/return of plaint for  presentation to proper Court. It was contended  by the defendant that the plaint disclosed no  cause of action and was liable to be rejected.  It was further stated that no requisite Court  fee had been paid within the time granted by  the Court and on that ground also, the plaint  deserved to be rejected. It was also asserted  that there was an agreement between the  plaintiff-Company and the defendant by which  exclusive jurisdiction was granted to Courts in  Hong Kong and jurisdiction of all other Courts  had been ousted and on that ground also Delhi  Court had no jurisdiction in the matter. 8.              The High Court, as observed earlier,  considered the application of the defendant and  by the impugned order, dismissed it holding  that the agreement did not take away  jurisdiction of the Court as contended by the  defendant and the application had been filed  only with a view to delay the progress of the  suit which was liable to be dismissed and it  was accordingly dismissed with costs of  Rs.4,000/-. 9.              The appellant-defendant has challenged  the said order by filing the present appeal. On  August 7, 2006, notice was issued by this Court

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and in the meantime further proceedings in the  suit were stayed. 10.             We have heard learned counsel for the  parties. 11.                     The learned counsel for the  appellant contended that the High Court was  wholly wrong in holding that Courts in India  could entertain a Civil Suit and the  application filed by the defendant-appellant  was liable to be rejected. According to the  learned counsel, the agreement entered into  between the parties made it expressly clear  that the law applicable, in case of dispute  between the parties would be law of Hong Kong  Special Administrative Region and, hence,  Indian Courts have no jurisdiction to  entertain, deal with and decide such question.  It was also submitted by the learned counsel  that in the light of the agreement between the  parties, only remedy available to the  plaintiff-Company was to take appropriate  proceedings in accordance with law in a  competent Court in Hong Kong and no Indian  Court could have jurisdiction inasmuch as  jurisdiction of all Courts in India is barred  by necessary implication. The counsel also  contended that the High Court committed an  error in holding that Delhi High Court had  jurisdiction as the defendant was residing in  Delhi. In the plaint itself, the plaintiff gave  the address of the defendant of Ghaziabad which  is not in Delhi but in Uttar Pradesh (U.P.).  The counsel also made grievance that the High  Court was not right in observing that the  defendant wanted to delay the proceedings and  was not justified in imposing costs of  Rs.4,000/-. It was, therefore, submitted that  the appeal deserves to be allowed by setting  aside the order passed by the High Court. 12.             The learned counsel for the  respondent-Company, on the other hand,  supported the order passed by the High Court.  He submitted that the only thing which was  relevant in the agreement was as to  applicability of laws. As per settled legal  position, a suit could be instituted in Delhi  as part of cause of action had arisen within  the territorial jurisdiction of that Court. The  High Court was right in observing that  applicability of law had nothing to do with  situs of a suit and since the defendant had  used the trade mark/trade name of the plaintiff  in Delhi in Trade Fair, it was open to the  plaintiff Company to institute a suit in Delhi.  It was submitted that it is really surprising  that though Hong Kong based Company institutes  a suit in Delhi where the defendant had used  the trade mark/trade name, where he resides and  thus it is much more convenient to him to  defend the suit, yet he objects to the  proceedings which clearly goes to show that the  only intention on the part of the defendant is  to delay the proceedings. The High Court was,  therefore, right in dismissing the application  and in ordering payment of costs by him. It

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was, therefore, submitted that the appeal  deserves to be dismissed. 13.             Having heard the learned counsel for  the parties, in our opinion, no case has been  made out by the appellant from which it can be  said that Delhi Court had no jurisdiction. Both  the learned counsel referred to the agreement  dated September 13, 2004 entered into between  the parties. Clause 10 of the agreement relates  to "Resignation and Termination of Service". In  accordance with the said clause, the appellant  herein left the plaintiff-Company. Clause 10  stipulates that in the event of resignation or  termination for any reason, the employee would  not engage himself in a similar or competitive  business for a period of two years, nor he  would contact or solicit any customer or  supplier with whom the employer conducted  business during the employment. Clause 14  provides for ’Conflict of Interest’. Clause 15  deals with ’Confidentiality’. It recites that  upon accepting employment with Prodigy, the  defendant would maintain confidentiality which  would mean that he would not disclose any  ’Prodigy confidential information’ either  during or after his employment to anyone  outside the Company, nor would use it for  personal benefit. Clause 18 is material for the  purpose of controversy and may be reproduced: 18. The terms and conditions as  stipulated above shall be interpreted  in accordance to the laws of the Hong  Kong Special Administrative Region.                               (emphasis supplied)

14.             It is this Clause (Clause 18), which  requires interpretation. According to the  appellant, since the terms and conditions in  the agreement have to be interpreted in  accordance with the laws of Hong Kong, no Court  in any country other than a Court in Hong Kong  shall have jurisdiction to entertain a suit,  petition, application or any other proceeding.  The submission of the respondent-Company, on  the other hand, is that what is agreed upon is  not territorial jurisdiction of a Court but  applicability of laws. Clause 18 deals with the  second eventuality and declares that terms and  conditions of the agreement would be  interpreted in accordance with the laws of Hong  Kong. 15.             We find considerable force in the  submission of the learned counsel for the  respondent Company. In our view, ’cause of  action’ and ’applicability of law’ are two  distinct, different and independent things and  one cannot be confused with the other. The  expression ’cause of action’ has not been  defined in the Code. It is however settled law  that every suit presupposes the existence of a  cause of action. If there is no cause of  action, the plaint has to be rejected [Rule  11(a) of Order VII). Stated simply, ’cause of  action’ means a right to sue. It consists of  material facts which are imperative for the

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plaintiff to allege and prove to succeed in the  suit. The classic definition of the expression  (’cause of action’) is found in the  observations of Lord Brett in Cooke v. Gill,  (1873) 8 CP 107 : 42 LJ CP 98. 16.             His Lordship stated; "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".

17.             In A.B.C. Laminart Pvt. Ltd. v. A.P.  Agencies, (1989) 2 SCC 163, this Court said;

"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".                                             (emphasis supplied) 18.             Now, Sections 16 to 20 of the Code  deal with territorial jurisdiction of a Court  (place of suing). Whereas Sections 16 to 18  relate to immovable property, suits for  compensation for wrongs to persons or movables  have been dealt with under Section 19. Section  20 of the Code is a residuary provision and  covers all cases not falling under Sections 16  to 19. 19.             The relevant part of Section 20 reads  thus; 20 - Other suits to be instituted  where defendants reside or cause of  action arises.\027Subject to the  limitations aforesaid, every suit  shall be instituted in a Court within  the local limits of whose  jurisdiction\027  (a) the defendant, or each of the  defendants where there are more  than one, at the time of the

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commencement of the suit,  actually and voluntarily resides,  or carries on business, or  personally works for gain; or (b) any of the defendants, where there  are more than one, at the time of  the commencement of the suit,  actually and voluntarily resides,  or carries on business, or  personally works for gain,  provided that in such case either  the leave of the Court is given,  or the defendants who do not  reside, or carry or business, or  personally work for gain, as  aforesaid, acquiesce in such  institution ; or (c) the cause of action, wholly or in  part, arises. \005\005\005\005\005\005\005\005\005                  (emphasis supplied) 20.             Bare reading of Clause (c) leaves no  room for doubt that a suit would lie in a court  within the local limits of whose jurisdiction  the cause of action has arisen, wholly or  partly. 21.             Section 20 has been designed to secure  that justice might be brought as near as  possible to every man’s hearthstone and that  the defendant should not be put to the trouble  and expense of traveling long distances in  order to defend himself. 22.             According to the plaintiff-Company, a  suit instituted on the Original Side of the  High Court of Delhi is maintainable since a  part of cause of action had accrued within the  territorial jurisdiction of Delhi Court (breach  of agreement by defendant). The argument of the  defendant that the agreement was executed in  Hong Kong and hence suit could have been  instituted only in that country is, in our  opinion, not well founded. It is no doubt true  that the suit could have been instituted in  Hong Kong as well. That, however, does not take  away the jurisdiction of Delhi Court where a  part of cause of action has arisen. In the  plaint, it was specifically alleged by the  plaintiff Company that the defendant committed  breach of terms and conditions of agreement  during the Trade Fair in February, 2005 held in  Pragati Maidan, Delhi. It was, therefore, open  to the plaintiff Company to institute a suit in  a competent Court within the jurisdiction of  Delhi and that is how the suit is filed in the  High Court on its Original Side. In our  considered opinion, therefore, the contention  of the appellant-defendant that the agreement  was executed in a foreign country or the  defendant was a resident of Ghaziabad (Uttar  Pradesh) cannot take away, exclude or oust the  jurisdiction of Delhi Court in view of the  averment made in the plaint that a part of  cause of action had arisen within the local  limits of Delhi. 23.             It was submitted by the learned  counsel for the appellant that once there is an

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agreement as to choice of Court or forum, the  parties are bound by it. For the said  proposition, our attention has been invited to  several decisions rendered by this Court. We do  not intend to burden our judgment on that point  as the law is well settled and the learned  counsel for the respondent-Company has not  disputed the proposition. What was contended  was that Clause 18 does not take away the  jurisdiction of a competent Court and the  agreement did not exclude territorial  jurisdiction of any Court. 24.             Learned counsel for the appellant  relied on a decision of this Court in British  India Steam Navigation Co. Ltd. v.  Shanmughavilas Cashew Industries & Ors., (1990)  3 SCC 481. In that case, the plaintiff  purchased from the defendant-Company raw cashew  nuts which were shipped in a vessel chartered  by the Company incorporated in England. Clause  3 of the Bill of Lading dealt with jurisdiction  of the Court. The said clause read as under: 3. JURISDICTION: The contract  evidenced by this bill of lading shall  be governed by English law and  disputes determined in England or, at  the option of the Carrier, at the port  of destination according to English  law to the exclusion of the  jurisdiction of the Courts of any  other country.  

25.             Though the above clause made it clear  that the dispute should be determined in  England, this Court held that the objection as  to territorial jurisdiction had been waived by  the defendant. So far as the law is concerned,  it was held that proper law to govern the  contract was English law. 26.             The learned counsel for the appellant  submitted that the ratio laid down in British  India Steam Navigation Co. applies to the case  on hand and the High Court of Delhi committed  an error of law in not upholding the objection  of the defendant that Indian Court had no  jurisdiction to deal with the matter. 27.             We are unable to agree. Clause 3, as  extracted hereinabove, clearly provided that  the contract would be governed by English law.  The High Court was, therefore, right in  observing that the case is not relevant so far  as the question raised in the present matter. 28.             The counsel also referred to National  Thermal Power Corporation v. Singer Company &  Ors., (1992) 3 SCC 551. The parties in that  case by an agreement had chosen the  jurisdiction of one Court to the exclusion of  the other. Likewise, they also agreed as to the  applicability of law. In the light of the fact  situation, the Court held that the parties are  bound by such Agreement and it has to approach  a Court in consonance with the agreement. This  judgment also does not help the appellant in  the instant case. 29.             Our attention was also invited to

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Technip S.A. v. S.M.S. Holding (P) Ltd. & Ors.,  (2005) 5 SCC 465. Even that case also does not  help the appellant. What was held there was as  to the law applicable to the dispute and not  the territorial jurisdiction of the Court. On  the contrary, para 23 of the said decision goes  to show that territorial jurisdiction of the  Court and applicability of law are two  different things and even if a matter is  decided in the country other than the country  where the agreement has been executed, the law  which would apply would be the law agreed by  the parties. 30.             The Court stated; "23. The relationship of Technip to  Coflexip whether one of control or not  is really a question of their status.  The applicable law would therefore be  the law of their domicil, namely,  French law. Having determined their  status according to French Law, the  next question as to their obligation  under the Indian Law vis a vis SEAMEC  would have to be governed exclusively  by Indian law (in this case the Act  and the Regulations). SATs error lay  in not differentiating between the two  issues of status and the obligation by  reason of the status and in seeking to  cover both under a single system of  law".                                 (emphasis supplied)

31.             In the case on hand, we have referred  to the relevant clauses of the agreement.  Clause 18 provides for applicability of law and  it specifically declares that the terms and  conditions of the agreement shall be  interpreted in accordance with ’the laws of  Hong Kong Special Administrative Region’. That,  in our judgment, does not mean that a suit can  be instituted only in Hong Kong and not in any  other country. Territorial jurisdiction of a  Court, when the plaintiff intends to invoke  jurisdiction of any Court in India, has to be  ascertained on the basis of the principles laid  down in the Code of Civil Procedure. Since a  part of ’cause of action’ has arisen within the  local limits of Delhi as averred in the plaint  by the plaintiff Company, the question has to  be considered on the basis of such averment.  Since it is alleged that the appellant- defendant had committed breach of agreement by  using trade mark/trade name in Trade Fair, 2005  in Delhi, a part of cause of action has arisen  in Delhi. The plaintiff-Company, in the  circumstances, could have filed a suit in  Delhi. So far as applicability of law is  concerned, obviously as and when the suit will  come up for hearing, the Court will interpret  the clause and take an appropriate decision in  accordance with law. It has, however, nothing  to do with the local limits of the jurisdiction  of the Court. The High Court, in our opinion,  was right in rejecting the application and in

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overruling preliminary objection. Since prima  facie the plaint disclosed a cause of action as  also territorial jurisdiction of the Court, the  High Court rightly rejected both the  contentions and no error was committed by it in  not rejecting plaint, nor returning it for  presentation to proper Court. ’Applicability of  Hong Kong Law’, ’entering into an agreement in  Hong Kong’ or ’defendant residing in Ghaziabad  (Uttar Pradesh)’ or any of them does not take  away the jurisdiction of Delhi Court since a  ’cause of action’ at least in part, can be said  to have arisen in Delhi. We, therefore, see no  substance in the contention of the defendant-  appellant. 32.             So far as imposition of costs is  concerned, normally it is in the discretion of  the Court. When the Court, in the light of the  facts before it, satisfied that the defendant  wanted to delay the proceedings and ordered him  to pay costs of Rs.4,000/-, it would not be  appropriate to interfere with that part of the  order.  33.             For the foregoing reasons, the appeal  deserves to be dismissed and is accordingly  dismissed. However, in the facts and  circumstance of the case, there shall be no  order as to costs.