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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (C) No.10184 of 2008

A.V.M. SALES CORPORATION … PETITIONER

VS.

M/S. ANURADHA CHEMICALS PVT. LTD. … RESPONDENT

J U D G M E N T

ALTAMAS KABIR, J.

1.On 23

rd

December, 1988, the parties to the Special

Leave Petition entered into an Agreement at Calcutta

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for supply of chemicals manufactured by the Respondent

to the Petitioner. In continuation of the aforesaid

Agreement, the parties arrived at a Mutual

Understanding on 15

th

May, 1989, whereby the Respondent

would adjust the advance lying with it and would

exclusively supply to the Petitioner its two products,

namely, Sodium Chromate and Sodium Dichromate in West

Bengal, Bihar, Orissa and Assam. The Understanding

between the parties included other terms and conditions

as well. The terms of the Understanding entered into

between the parties were reduced into writing in an

agreement and the same was executed at Calcutta on 5

th

August, 1989, reiterating the terms of the

Understanding and containing an additional clause

indicating that “Any dispute arising out of this

agreement will be subject to Calcutta jurisdiction

only.” [Emphasis supplied].

2.Since certain differences arose between the parties

relating to the supply of goods in question, the

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Petitioner herein filed Original Suit No.588 of 1991 in

the Calcutta High Court on 27

th

August, 1991, for

recovery of its alleged dues from the Respondent, after

giving due adjustment of the amount of the Invoices

raised by the Respondent and filed its claim only for

the balance amount, along with penalties etc. Upon

receiving summons of the suit filed by the Petitioner,

the Respondent on 12

th

September, 1991, filed a separate

suit against the Petitioner at Vijayawada for recovery

of a sum of 3,86,453.05, treating the Purchase Order

dated 12

th

February, 1990, to be independent of the

Agreement and also sought recovery of supplies made

under the Invoices raised by the Respondent upon the

Petitioner.

3.The Petitioner duly contested the Suit filed by the

Respondent by filing Written Statement, along with

relevant documents, in support of its case. Out of the

several issues raised by the Petitioner, one was the

issue relating to the jurisdiction of the Vijayawada

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Court to entertain the Suit on account of the exclusion

clause by which all actions arising out of the

Agreement and the Memorandum of Understanding were to

be subject to the Calcutta jurisdiction only. The

other issue of importance was with regard to

adjustment, inasmuch as, the Purchase Order dated 12

th

February, 1990, was treated as independent of the

Understanding and Agreement arrived at between the

parties. Rejecting the objection relating to

jurisdiction, the Principal Senior Civil Judge,

Vijayawada, by his judgment and decree dated 5

th

March,

1999, decreed the Respondent’s Suit (Original Suit

No.519 of 1991) with costs for a sum of 3,86,453.05,

together with interest at the rate of 12% per annum,

from the date of the Suit till realisation of the

principal amount of 2,98,267.50. The Petitioner filed

First Appeal No.1352 of 1999 before the Andhra Pradesh

High Court against the aforesaid judgment and decree

dated 5

th

March, 1999. By judgment and order dated 18

th

January, 2007, the learned Single Judge of the High

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Court dismissed the Appeal filed by the Petitioner. It

is against the aforesaid judgment of the learned Single

Judge of the Andhra Pradesh High Court in the First

Appeal preferred by the Petitioner that the present

Special Leave Petition has been filed.

4.Apart from the other grounds taken with regard to

factual aspect of the matter, grounds have also been

taken regarding the exclusive jurisdiction of the

Courts at Calcutta agreed to by the parties in the

Agreement and whether the same was not binding upon the

parties. A further ground has also been taken as to

whether in breach of the Agreement, the Respondent was

entitled to invoke the jurisdiction of a Court at

Vijayawada, whose jurisdiction stood ousted by the

Agreement entered into between the parties.

5.On the strength of the pleadings of the parties,

five issues were framed by the Trial Court, of which

the first issue was whether the Court at Vijayawada had

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territorial jurisdiction to entertain the suit. By his

judgment and decree dated 5

th

March, 1999, in O.S.

No.519 of 1991, the learned Principal Senior Civil

Judge, Vijayawada, held that the Court at Vijayawada

had jurisdiction to entertain the Suit as part of the

cause of action for the suit arose within its

jurisdiction. The learned Trial Judge, accordingly,

decreed the Suit, as indicated hereinabove. In the

First Appeal, being F.A. No.1352 of 1992, the learned

Single Judge of the Andhra Pradesh High Court observed

that the main contention of the Appellant before the

High Court, who is the Petitioner herein, was that the

Principal Senior Civil Judge, Vijayawada, had no

jurisdiction to entertain the Suit as no part of the

cause of action had arisen at Vijayawada. According to

the Petitioner, its place of business was at Calcutta

and the Agreement for the supply of the goods in

question was also entered into at Calcutta. The goods

were to be delivered at Calcutta and payment in respect

thereof was to be made at Calcutta and, accordingly,

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the Court at Vijayawada had no territorial jurisdiction

to entertain the Suit under Section 20 of the Code of

Civil Procedure as no part of the cause of action had

arisen within its jurisdiction. It was also emphasised

that in the Agreement which was made Exh.D-5, it has

been stipulated in Column 13 that any dispute arising

out of the Agreement would be subject to the Calcutta

jurisdiction only.

6.The question involved in this Special Leave

Petition has several dimensions, including the question

as to whether the parties to an agreement can contract

in violation of Sections 23 and 28 of the Indian

Contract Act, 1872. Obviously, the parties cannot

contract against the statutory provisions. A connected

question would arise as to whether the parties to an

agreement can confer jurisdiction on a Court which has

no territorial or pecuniary jurisdiction to entertain a

matter? The answer to the second question is also in

the negative. However, in this case a slightly

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different question arises, namely, as to whether if two

Courts have jurisdiction to try a suit, can the parties

to an agreement mutually agree to exclude the

jurisdiction of one Court in preference to the other

and as to whether the same would amount to violation of

the provisions of Sections 23 and 28 of the Indian

Contract Act? The said question has been answered in

the affirmative by the Trial Court and has been upheld

by the High Court.

7.The question which has been raised in this Special

Leave Petition is not new and has been considered by

this Court earlier in several decisions. We are,

therefore, required to consider as to whether the cause

of action for the Suit filed by the Respondent in

Vijayawada arose within the jurisdiction of the Court

of the Principal Senior Civil Judge at Vijayawada,

exclusively, or whether such cause of action arose both

in Vijayawada and also in Calcutta? As has been

mentioned hereinbefore on behalf of the Petitioner, it

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had been urged that the entire cause of action for the

Suit had arisen within the jurisdiction of the Calcutta

Courts and the Courts at Vijayawada had no jurisdiction

whatsoever to entertain a suit pertaining to the

Understanding and Agreement arrived at between the

parties. However, it was contended on behalf of the

Respondent that its Registered Office was situate at

Vijayawada, the Invoices for the goods were raised at

Vijayawada, the goods were dispatched from Vijayawada

and the money was payable to the Plaintiff or its

nominee at Vijayawada, by way of Demand Drafts and,

accordingly, the Courts at Vijayawada had jurisdiction

to entertain the Suit.

8.It has often been stated by this Court that cause

of action comprises a bundle of facts which are

relevant for the determination of the lis between the

parties. In the instant case, since the invoices for

the goods in question were raised at Vijayawada, the

goods were dispatched from Vijayawada and the money was

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payable to the Respondent or its nominee at Vijayawada,

in our view, the same comprised part of the bundle of

facts giving rise to the cause of action for the Suit.

At the same time, since the Petitioner/ Defendant in

the Suit had its place of business at Calcutta and the

Agreement for supply of the goods was entered into at

Calcutta and the goods were to be delivered at

Calcutta, a part of the cause of action also arose

within the jurisdiction of the Courts at Calcutta for

the purposes of the suit. Accordingly, both the Courts

within the jurisdiction of Calcutta and Vijayawada had

jurisdiction under Section 20 of the Code of Civil

Procedure to try the Suit, as part of the cause of

action of the Suit had arisen within the jurisdiction

of both the said Courts.

9.This leads us to the next question as to whether,

if two Courts have jurisdiction to entertain a Suit,

whether the parties may by mutual agreement exclude the

jurisdiction of one of the Courts, having regard to the

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provisions of Sections 23 and 28 of the Indian Contract

Act, 1872. Section 23 of the aforesaid Act indicates

what considerations and objects are lawful and what are

not, including the considerations or objects of an

agreement, if forbidden by law. Section 28 of the Act,

which has a direct bearing on the facts of this case,

clearly spells out that any agreement in restraint of

legal proceedings is void. For the sake of reference,

the same is extracted hereinbelow :

“28. Agreements in restrain of legal

proceedings, void – [Every agreement,

(a)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, or

(b)which extinguishes the rights of any party

thereto, or discharges any party thereto

from any liability, under or in respect of

any contract on the expiry of a specified

period so as to restrict any party from

enforcing his rights, is void to the

extent.]

Exception 1 : Saving of contract to refer to

arbitration dispute that may arise.- This

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section shall not render illegal contract, by

which two or more persons agree that any

dispute which may arise between them in respect

of any subject or class of subjects shall be

referred to arbitration, and that only the

amount awarded in such arbitration shall be

recoverable in respect of the dispute so

referred.

Exception 2 : Saving of contract to refer

question that have already arisen. - Nor shall

this section render illegal any contract in

writing, by which two or more persons agree to

refer to arbitration any question between them

which has already arisen, or affect any

provision of any law in force for the time

being as to reference to arbitration.”

10.Basically, what Section 28 read with Section 23

does, is to make it very clear that if any mutual

agreement is intended to restrict or extinguish the

right of a party from enforcing his/her right under or

in respect of a contract, by the usual legal

proceedings in the ordinary Tribunals, such an

agreement would to that extent be void. In other

words, parties cannot contract against a statute.

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11.One of the earlier cases in which this question had

arisen, was the case of A.B.C. Laminart Pvt. Ltd. &

Anr. Vs. A.P. Agencies, Salem [AIR 1989 SC 1239 =

(1989) 2 SCC 163]. In the said case, the cause of

action for the suit had arisen both within the

jurisdiction of the Civil Court at Salem in Andhra

Pradesh and in the Civil Court of Kaira in the State of

Gujarat. The question arose as to whether since by

mutual agreement the jurisdiction had been confined

only to the Courts within Kaira jurisdiction, the suit

filed at Salem was at all maintainable? This Court,

inter alia, held that there could be no doubt that an

agreement to oust absolutely the jurisdiction of the

Court will be unlawful and void, being against public

policy. However, such a result would ensue if it is

shown that the jurisdiction to which the parties had

agreed to submit had nothing to do with the contract.

If, on the other hand, it is found that the

jurisdiction agreed would also be a proper jurisdiction

in the matter of the contract, it could not be said

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that it ousted the jurisdiction of the Court. After

considering the facts involved in the said case and the

submissions made on behalf of the parties, this Court

observed as follows :

“Thus it is now a settled principle that where

there may be two or more competent Courts which

can entertain a suit consequent upon a part of

the cause of action having arisen therewithin,

if the parties to the contract agreed to vest

jurisdiction in one such Court to try the

dispute which might arise as between

themselves, the agreement would be valid. If

such a contract is clear, unambiguous and

explicit and not vague, it is not hit by

Sections 23 and 28 of the Contract Act and

cannot also be understood as parties

contracting against the statute.”

12.A similar view was taken by this Court in Angile

Insulations vs. Davy Ashmore India Ltd. & Anr. [(1995)

4 SCC 153], wherein the Hon’ble Judges while referring

to the decision of this Court in A.B.C. Laminart Pvt.

Ltd.’s case (supra), inter alia, held that where two

Courts have jurisdiction consequent upon the cause of

action or a part thereof arising therein, if the

parties agree in clear and unambiguous terms to exclude

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the jurisdiction of the other, the said decision could

not offend the provisions of Section 23 of the Contract

Act. In such a case, the suit would lie in the Court

to be agreed upon by the parties.

13.This Court has consistently taken the same view in

several subsequent cases. We may refer to one such

decision of this Court in Hanil Era Textiles Ltd. Vs.

Puromatic Filters (P) Ltd. [AIR 2004 SC 2432 = (2004) 4

SCC 671], where part of the cause of action arose at

both Delhi and Bombay. This Court held that the mutual

agreement to exclude the jurisdiction of the Delhi

Courts to entertain the suit was not opposed to public

policy and was valid.

14.As indicated herein earlier, in this case also the

cause of action for the Original Suit No.519 of 1991,

filed by the Respondent before the Principal Senior

Civil Judge, Vijayawada, arose partly within the

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jurisdiction of the Calcutta Courts and the Courts at

Vijayawada.

15.Having regard to the provisions referred to

hereinabove, though the Courts at Vijayawada would also

have jurisdiction, along with the Courts at Calcutta,

to entertain and try a suit relating to and arising out

of the Agreement dated 23

rd

December, 1988, and the

Mutual Understanding dated 15

th

May, 1989, such

jurisdiction of the Courts at Vijayawada would stand

ousted by virtue of the exclusion clause in the

Agreement.

16.The Special Leave Petition has, therefore, to be

allowed. The decree passed by the Principal Senior

Civil Judge, Vijayawada in O.S. No.519 of 1991, and the

impugned judgment of the High Court dated 18

th

January,

2007, are set aside. The Trial Court at Vijayawada is

directed to return the plaint of the Original Suit

No.519 of 1991 to the Plaintiff to present the same

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before the appropriate Court in Calcutta having

jurisdiction to try the suit.

17.The Special Leave Petition is, accordingly,

allowed, but there will be no order as to costs.

…………………………………………J.

(ALTAMAS KABIR)

New Delhi ………………………………………J.

Dated: 17.01.2012 (CYRIAC JOSEPH)