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PETITIONER: PATEL ROADWAYS LIMITED, BOMBAY

       Vs.

RESPONDENT: PRASAD TRADING COMPANY.

DATE OF JUDGMENT06/08/1991

BENCH: OJHA, N.D. (J) BENCH: OJHA, N.D. (J) RANGNATHAN, S. FATHIMA BEEVI, M. (J)

CITATION:  1992 AIR 1514            1991 SCR  (3) 391  1991 SCC  (4) 270        JT 1991 (3)   337  1991 SCALE  (2)257

ACT:     Civil      Procedure      Code,      1908:       Section 20--Explanation--Suits-Institution    of--Whether    parties entitled  to  agree  that only a certain  court  would  have jurisdiction.

HEADNOTE:     The  appellant in both the appeals carried on the  busi- ness of a carrier and transported goods on hire. It had  its principal  office  at Bombay and branch offices  at  various other places.     The respondent in the first appeal a dealer in  cardamom entrusted a consignment of cardamom to the appellant at  its branch office at Bodinayakanur in Tamilnadu to be  delivered at Delhi. After the goods had been transported by the appel- lant  and kept in a godown at Delhi the same  got  destroyed and  damaged  in a fire as a result  whereof  the  consignee refused  to take delivery. The respondent instituted a  suit in  the sub-court within whose territorial jurisdiction  the branch  office  of the appellant was  situated  for  damages alleging  that the fire was due to the negligence and  care- lessness on the part of the staff of the appellant.     Respondent No. 4 in the second appeal entrusted  certain packets  of  pesticides insured with the  second  respondent Insurance  Company to the appellant at its branch office  at Madras  for being carried to Delhi. The  respondent  alleged that  the  goods were delivered at New Delhi  in  a  damaged condition  resulting in loss and a suit was  instituted  for recovery of the loss in the City Civil Court at Madras.     In both the aforesaid civil suits the appellant  pleaded in  defence that in the contract entered into between  them, the  parties  had  agreed that jurisdiction  to  decide  any dispute  between them would be only with the courts at  Bom- bay,  and consequently the courts in Madras ’ where the  two suits had been instituted had no jurisdiction. This plea was repelled by the Trial Court in each of the suits. The aforesaid orders were challenged by the appellant in the High 392 Court under Section 115 C.P.C. and having failed, the appel-

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lant appealed to this Court.     In the appeal, it was contended on behalf of the  appel- lant  that since the courts at two places namely Madras  and Bombay  had jurisdiction in the matter, the jurisdiction  of the  courts in Madras was ousted by the clause in  the  con- tract whereunder the parties had agreed that jurisdiction to decide  any dispute under the contract would be only in  the courts at Bombay.     On the question: whether in view of the relevant  clause in  the  contract between the parties the courts  at  Bombay alone had jurisdiction and the jurisdiction of the courts at Madras where the two suits were instituted was barred. Dismissing the appeals, this Court,     HELD: 1. The courts at Bombay in these two cases did not at  all  have jurisdiction and  consequently  the  agreement between  the  parties conferring exclusive  jurisdiction  on courts at Bombay is of no avail. [401D]     2.  Clauses (a) and (b) of Section 20 refer to  a  court within the local limits of whose jurisdiction the  defendant "carries  on business". Clause (c) on the other hand  refers to a court within the local limits of whose jurisdiction the cause of action wholly or in part arises. [397H-398A]     3.  Section 20 of the Code before its amendment  by  the Code of Civil Procedure (Amendment) Act, 1976 had two Expla- nations  being  Explanation I and II. By the  Amendment  Act Explanation I was omitted and Explanation II was  renumbered as the present Explanation. [398G]     4. The Explanation is in two parts, one before the  word "or"  occurring between the wOrds "office in India" and  the words "in respect of" and the other thereafter. The Explana- tion  applies  to a defendant which is a  corporation  which term, would include even a company such as the appellant  in the instant case. The first part of the Explanation  applies only  to such a corporation which has its sole or  principal office  at  a  particular place. In that  event  the  courts within  whose jurisdiction the sole or principal  office  of the  defendant is situate will also have jurisdiction  inas- much  as even if the defendant may not be actually  carrying on  business at that place, it will "be deemed  to carry  on business"  at that place because of the fiction  created  by the Explanation. [398C-F] 393    5.  The  latter part of the Explanation takes care  of  a case where the defendant does not have a sole office but has a  principal office at one place and has also a  subordinate office at another place. The words "at such place" occurring at the end of the Explanation and the word "or" referred  to above which is disjunctive clearly suggest that if the  case fails  within the latter part of the Explanation it  is  not the court within whose jurisdiction the principal office  of the  defendant is situate but the court within whose  juris- diction  it has a subordinate office which alone shall  have jurisdiction  "in respect of any cause of action arising  at any place where it has also a subordinate office".  [398E-F]     6.  The Explanation is really an explanation  to  clause (a). It is in the nature of a clarification on the scope  of clause  (a) viz. as to where the corporation can be said  to carry on business. This, it is clarified, will be the  place where  the principal office is situated (whether or not  any business actually is carried on there) or the place where  a business  is  carried on giving rise to a  cause  of  action (even though the principal office of the corporation is  not located  there) so long as there is a subordinate office  of the corporation situated at such place. The linking together of the place where the cause of action arises with the place

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where a subordinate office is located clearly shows that the intention  of  the legislature was that, in the  case  of  a corporation, for the purposes of clause (a), the location of the  subordinate office, within the local limits of which  a cause of action arises, is to be the relevant place for  the filing  of a suit and not the principal place  of  business. [399G-400B]     7. If the intention was that the location of the sole or principal office as well as the location of the  subordinate office (within the limits of which a cause of action arises) are  to  be  deemed to be places where  the  corporation  is deemed to be carrying or business, the disjunctive "or" will not  he there. Instead, the second part of  the  explanation would  have  read "and, in respect of any  cause  of  action arising at any place where it has a subordinate office, also at such place’ ’. [400C]     8. The clear intendment of the Explanation, however,  is that, where the corporation has a subordinate office in  the place  where the cause of action arises, it cannot be  heard to  say  that it cannot be sued there because  it  does  not carry  on business at that place. It would be a great  hard- ship  if, in spite of the corporation having  a  subordinate office  at the place where the cause of action arises  (with which  in all probability the plaintiff has  had  dealings), such  plaintiff  is to be compelled to travel to  the  place where  the corporation has its principal place.  That  place should be convenient to the plaintiff; and since the  corpo- ration 394 has an office at such place, it will also be under no disad- vantage. Thus the Explanation provides an alternative  locus for  the corporation’s place of business, not an  additional one. [400F-G] 9. In the instant two cases since clause (c) is not attract- ed to confer jurisdiction on courts at Bombay and the appel- lant  has admittedly its subordinate offices at the  respec- tive  places where the goods in these two cases were  deliv- ered  to it for purposes of transport, the courts at  Bombay had  no jurisdiction at all to entertain the suits filed  by the  respondents and the parties could not confer  jurisdic- tion  on the courts at Bombay by an agreement.  Accordingly, no  exception  can be taken to the findings in  this  behalf recorded by the trial court and the High Court. [401C-D]       Hakam Singh v. M/s. Gammon (India) Ltd., [1971] 3  SCR page 314, referred to.

JUDGMENT:       CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.  3050- 305 1 of 199 1.       From the Judgment and Orders dated 23.8.90 & 13.6.1990 of  the  Madras High Court in Civil Revision  Petition  Nos. 1236/85 and 2758 of 1988.         T.S.K.  lyer,  Rajiv Datta and Shahid  Azad  for  the Appellant.       M.S. Nargolkar, D.M. Nargolkar and A.T.M. Sampath  for the Respondents.     The Judgment of the Court was delivered by     OJHA, J. Special leave granted.       Since  in both these appeals an identical question  of law  arises  they are being decided by  a  common  judgment. Facts in a nutshell necessary for appreciating the  question involved may be stated. M/s Patel Roadways (P) Limited,  the appellant in both these appeals carries on the business of a

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carrier  and transports goods on hire. It has its  principal office at Bombay and branch offices at various other  places which  shall hereinafter be referred to as  subordinate  of- fices.       M/s  Prasad  Trading Company, the  respondent  in  the Civil Appeal arising out of SLP (C) No. 14660 of 1990 who is a dealer in 395 cardamom entrusted a consignment of 851) kilograms of carda- mora to the appellant at its subordinate office at Bodinaya- kanur  in  Tamil Nadu to be delivered at  Delhi.  After  the goods  had been transported by the appellant and kept  in  a godown at Delhi the same got destroyed and damaged in a fire as a result whereof the consignee refused to take  delivery. The respondent instituted a suit in the Court of Subordinate Judge, Periakulam within whose territorial jurisdiction  the subordinate  office  of the appellant where the  goods  were entrusted for transport is situate for damages alleging that the  fire was due to the negligence and carelessness on  the part of the staff of the appellant.     M/s Tropical Agro Systems Private Limited, the  respond- ent  1 in the Civil Appeal arising out of SLP (C) No.  14692 of  1990  on  the other hand entrusted  certain  packets  of pesticides insured with the second respondent, M/s  Oriental Insurance  Company Limited to the appellant at its  subordi- nate  office at Madras for being carried to New  Delhi.  Ac- cording  to the respondents the goods aforesaid were  deliv- ered  at New Delhi in a damaged condition resulting in  loss to the first respondent and a suit was instituted for recov- ery of the loss so sustained by the respondents in the Court of  the Third Assistant Judge, City Civil Court, Madras.  In both the suits the appellant inter alia took the plea in its defence. that in the contract entered into between them  the parties  had agreed that jurisdiction to decide any  dispute between  them  would be only with the courts at  Bombay  and consequently  the courts in Madras where the two  suits  re- ferred  to  above had been instituted had  no  jurisdiction. This plea was repelled in both the suits by the trial court. The  order of the trial court in each of the two  suits  was challenged by the appellant before the High Court of Judica- ture at Madras under Section 115 of the Code of Civil Proce- dure  (hereinafter referred to as the Code). This  challenge having failed in each of the civil revisions, the  appellant has preferred these civil appeals. The question which arises in both these civil appeals, therefore, is as to whether  in view  of  the relevant clause in the  contract  between  the parties the courts at Bombay alone had jurisdiction and  the jurisdiction  of  the courts at Madras where the  two  suits were instituted was barred.     It has been urged by the learned counsel for the  appel- lant  that  apart from the courts within  whose  territorial jurisdiction  the goods were delivered to the appellant  for transport,  the  courts at Bombay also had  jurisdiction  to entertain  a  suit arising out of the contract  between  the parties in view of the Explanation to Section 20 of the Code inasmuch as the principal office of the appellant was  situ- ate in 396 Bombay. According to learned counsel for the appellant since courts at two places namely Madras and Bombay had  jurisdic- tion in the matter, the jurisdiction of the courts in Madras was  ousted  by the clause in the  contract  whereunder  the parties  had agreed that jurisdiction to decide any  dispute under  the contract would be only in the courts  at  Bombay. Consequently the courts where the two suits were  instituted

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had no jurisdiction to entertain them and the trial court in each of the two cases as well as the High Court erred in law in taking a contrary view.     Having heard learned counsel for the parties we find  it difficult  to  agree with this submission. For the  sake  of convenience Section 20 of the Code except the  illustrations is reproduced hereunder:               "20.  Other suits to be instituted  where  de-               fendants  reside or cause of  action  arises:-               Subject  to the limitations  aforesaid,  every               suit shall be instituted in a Court within the               local limits of whose jurisdiction :--               (a)  the defendant, or each 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; 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  de-               fendants who do not reside, or carry on  busi-               ness,  or personally work for gain, as  afore-               said, acquiesce in such institution; or               (c)  the cause of action, wholly or  in  part,               arises.                        Explanation:- A corporation shall  be               deemed  to  carry on business at its  sole  or               principal  office in India or, in  respect  of               any cause of action arising at any place where               it  has  also a subordinate  office,  at  such               place."     In Hakam Singh v. M/s. Gammon (India) Ltd., [1971] 3 SCR Page  314  it  was held that "corporation"  referred  to  in Section 20 397 meant  not only a statutory corporation but also  a  company registered under the Indian Companies Act. It was also  held that  it is not open to the parties by agreement  to  confer jurisdiction on any court which it did not otherwise possess under the Code. But where two courts have jurisdiction under the  Code to try a suit or proceeding an  agreement  between the parties that the dispute between them shall be tried  in one of such courts is not contrary to public policy nor does such an agreement contravene Section 28 of the Contract Act. In that case also there was a clause in the agreement  being clause No. 13 which provided that notwithstanding the  place where  the  work under the contract was to be  executed  the contract  shall be deemed to have been entered into  between the  parties at Bombay and the court in Bombay  alone  shall have jurisdiction to adjudicate thereon. The trial court had held that the entire cause of action had arisen at  Varanasi and  the parties could not by agreement confer  jurisdiction on  the courts at Bombay which they did not  otherwise  pos- sess. In a civil revision filed by the respondent the  Alla- habad  High  Court held that the courts at Bombay  had  also jurisdiction  and in view of clause 13 of the agreement  the jurisdiction  of the courts at Varanasi stood ousted. It  is in  the appeal against the said judgment of the  High  Court that  the  propositions of law referred to above  were  laid down  by this Court. It was held that since  the  respondent had its head office at Bombay the courts at Bombay also  had ’jurisdiction by virtue of Section 20 of the Code read  with

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its  Explanation and in view of clause 13 of  the  agreement between the parties the courts in Bombay alone had jurisdic- tion  in the matter. The appeal was  accordingly  dismissed. This  view was reiterated by this Court in  Globe  Transport Corporation v. Triveni Engineering Works and Another, [1983] 4 SCC Page 707.     Reliance  has  been placed by learned  counsel  for  the appellant on these two decisions and if it can be held  that the courts at Bombay also had jurisdiction in the two  suits referred  to above the judgments appealed against will  have to  be set aside on the basis of these decisions. The  ques- tion,  however, is as to whether in any of these  two  suits the  courts at Bombay also had jurisdiction apart  from  the courts within whose jurisdiction the goods were entrusted to the  appellant for purposes of transport. Having  given  our anxious  consideration to the matter we are of  the  opinion that the courts at Bombay in these two cases did not at  all have jurisdiction and consequently the agreement between the parties  conferring  exclusive  jurisdiction  on  courts  at Bombay is of no avail. Clauses(a) and (b) of Section 20 inter alia refer to a court within 398 the  local limits of whose jurisdiction the defendant  inter alia  "carries  on business". Clause (c) on the  other  hand refers to a court within the local limits of whose jurisdic- tion  the cause of action wholly or in part arises.  It  has not been urged before us on behalf of the appellant that the cause  of action wholly or in part arose in  Bombay.  Conse- quently  clause (c) is not attracted to the facts  of  these cases.  What has been urged with the aid of the  Explanation to  Section 20 of the Code is that since the  appellant  has its  principal office in Bombay it shall be deemed to  carry on business at Bombay and consequently the courts at  Bombay will  also  have  jurisdiction. On a plain  reading  of  the Explanation  to Section 20 of the Code we find  an  apparent fallacy in the aforesaid argument. The Explanation is in two parts, one before the word "or" occurring between the  words "office  in  India" and the words "in respect  of"  and  the other  thereafter.  The Explanation applies to  a  defendant which  is  a corporation which term, as  seen  above,  would include even a company such as the appellant in the  instant case. The first part of the Explanation applies only to such a  corporation which has its sole or principal office  at  a particular  place.  In that event the  courts  within  whose jurisdiction  the sole or principal office of the  defendant is  situate will also have jurisdiction inasmuch as even  if the  defendant may not be actually carrying on  business  at that place, it will "be deemed to carry on business" at that place because of the fiction created by the Explanation. The latter  part of the Explanation takes care of a  case  where the defendant does not have a sole office but has a  princi- pal office at one place and has also a subordinate office at another  place. The words "at such place" occurring  at  the end  of the Explanation and the word "or" referred to  above which is disjunctive clearly suggest that if the ease  falls within  the  latter part of the Explanation it  is  not  the Court within whose jurisdiction the principal office of  the defendant is situate but the court within whose jurisdiction it has a subordinate office which alone shall have jurisdic- tion "in respect of any cause of action arising at any place where it has also a subordinate office".     Here we may point out that the view which we take  finds support from a circumstance which, in our opinion, is  rele- vant.  Section  20 of the Code before its amendment  by  the

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Code of Civil Procedure (Amendment) Act, 2976 had two Expla- nations  being Explanations I and II. By the  Amendment  Act Explanation I was omitted and Explanation II was  renumbered as the present Explanation. Explanation I so omitted read as hereunder:-               "Explanation I: Where a person has a permanent               dwelling               399               at  one place and also temporary residence  at               another place, he shall be deemed to reside at               both places in respect of any cause of  action               arising at the place where he has such  tempo-               rary residence."     This  Explanation dealt with the case of place of  resi- dence of the defendant and provided with regard to a  person having a permanent dwelling at one place and also  temporary at another place that such person shall be deemed to  reside at both places in respect of any cause of action arising  at the  place where he has such temporary residence.  The  lan- guage used in Explanation II on the other hand which is  the present  Explanation was entirely different. Had the  inten- tion been that if a corporation had its principal office  at one place and a subordinate office at another place and  the cause of action arose at the place where it had its subordi- nate office it shall be deemed to be carrying on business at both  places the language used in Explanation II would  have been  identical to that of Explanation I which  was  dealing with  a case of a person having a permanent dwelling at  one place  and  also temporary residence at another  place.  The marked  difference in the language of the  two  Explanations clearly supports the view which we have taken with regard to the interpretation of the present Explanation to Section  20 of  the Code which was Explanation II earlier  as  indicated above.     We would also like to add that the interpretation sought to  be placed by the appellant on the provision in  question renders the explanation totally redundant. If the  intention of  the legislature was, as is said on their behalf, that  a suit against a corporation could be instituted either at the place  of its sole or principal office (whether or  not  the corporation  carries  on business at that place) or  at  any other place where the cause of action arises, the provisions of clauses (a), (b) and (c) together with the first .part of the explanation would have completely achieved the  purpose. Indeed the effect would have been wider. The suit could have been instituted at the place of the principal office because of  the situation of such office (whether or not any  actual business was carried on there). Alternatively, a suit  could have been instituted at the place where the cause of  action arose under clause (c) (irrespective of whether the corpora- tion  had a subordinate office in such place or  not).  This was,  Therefore,  not the purpose of  the  explanation.  The explanation is really an explanation to clause (a). It is in the  nature  of a clarification on the scope of  clause  (a) viz.  as  to where the corporation can be said to  carry  on business.  T’his, it is clarified, will be the  place  where the principal office is ituated (whether or not any business actually is carried on there) or the place where a business 400 is carried on giving rise to a cause of action (even  though the  principal  office  of the corporation  is  not  located there)  so  long  as there is a subordinate  office  of  the corporation situated at such place. The linking together  of the  place where the cause of action arises with  the  place where a subordinate office is located clearly shows that the

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intention  of  the legislature was that, in the  case  of  a corporation, for the purposes of clause (a), the location of the  subordinate office, within the local limits of which  a cause of action arises, is to be the relevant place for  the filing of a suit and not the principal place of business. If the intention was that the location of the sole or principal office  as  well as the location of the  subordinate  office (within the limits of which a cause of action arises) are to be deemed to be places where the corporation is deemed to be carrying  on  business,  the disjunctive "or"  will  not  be there.  Instead,  the second part of the  explanation  would have read "and in respect of any cause of action arising  at any  place where it has a subordinate office, also  at  such place".     As  far as we can see the interpretation which  we  have placed  on  this section does not create  any  practical  or undue  difficulties or disadvantage either to the  plaintiff or a defendant corporation. It is true that, normally, under clauses (a) to (c), the plaintiff has a choice of forum  and cannot  be  compelled  to go to the place  of  residence  or business  of the corporation and can file a suit at a  place where  the cause of action arises. If a corporation  desires to  be protected from being dragged into litigation at  some place  merely because a casue of action arises there it  can save itself from such a situation by an exclusion clause  as has  been done in the present case. The clear intendment  of the Explanation, however, is that, where the corporation has a subordinate office in the place where the cause of  action arises,  it  cannot be heard to say that it cannot  be  sued there  because it does not carry on business at that  place. It would be a great hardship if, in spite of the corporation having a subordinate office at the place where the cause  of action  arises (with which in all probability the  plaintiff has  had  dealings), such plaintiff is to  be  compelled  to travel to the place where the corporation has its  principal place. That place should be convenient to the plaintiff; and since  the corporation has an office at such place, it  will also be under no disadvantage. Thus the Explanation provides an  alternative locus for the corporation’s place  of  busi- ness, not an additional one.     There may be only one extra-ordinary situation in  which this  interpretation may cause an apparent anomaly. This  is where  the plaintiff has also his/its place of  business  at the same place as the 401 corporation but the cause of action has arisen at some other place.  The  above interpretation would  preclude  him  from filing  a  suit  in that place of business  common  to  both parties and compel him to go to a court having  jurisdiction over  the  place where the cause of action has  arisen.  But this  is not really a hardship because such  plaintiff  must have had some nexus or connection with the place since  some part of the cause of action had arisen there; if he can have dealings with the corporation at such a place giving rise to the  cause of action, there is no reason why he should  find it  disadvantageous  or  difficult to file a  suit  at  such place. Equally, the corporation, having a subordinate office at the place, will suffer no disadvantage.     In  this  view of the matter since in  the  instant  two cases clause (c) is not attracted to confer jurisdiction  on courts at Bombay and the appellant has admittedly its subor- dinate  offices at the respective places where the goods  in these  two cases were delivered to it for purpose of  trans- port  the  courts at Bombay had no jurisdiction  at  all  to entertain the suits filed by the respondents and the parties

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could not confer jurisdiction on the courts at Bombay by  an agreement.  Accordingly  no exception can be  taken  to  the findings in this behalf recorded by the trial court and  the High Court in these two cases.     In  the  result, we find no merit in any  of  these  two appeals  and they are accordingly dismissed but in the  cir- cumstances  of  the case the parties shall  bear  their  own costs. N.V.K.                                    Appeals dismissed 402