DOCTRINE OF FORUM CONVENIENS

[Mr. M. GOVINDARAJAN]

Any suit may be filed in the appropriate court having jurisdiction. Jurisdiction is of various types viz., territorial jurisdiction, pecuniary jurisdiction, original jurisdiction, appellate jurisdiction etc., Any suit filed will have the combination of original jurisdiction, territorial jurisdiction and pecuniary jurisdiction. In Original jurisdiction the suit should be filed in the court which is the lowest in the hierarchy. In pecuniary jurisdiction the jurisdiction of the court is decided on the amount involved in the suit.  The territorial jurisdiction of the court is considered on the basis of the place where the cause of action arises either wholly or partly. In some cases one or more courts will have territorial jurisdiction. In such cases the doctrine of forum conveniens is invoked. The forum conveniens is that which is having the jurisdiction convenient to all to decide the case.

The doctrine of forum conveniens is well explained by the Delhi High Court in 'India TV Independent News Service (P) Ltd., V. India Broadcast Live LLC and others' - (2008) 22 CLA BL Supp 37 (Del).  It was held that the legal position as regards forum non conveniens is that a stay on the ground of forum non conveniens would be granted where a court is satisfied that there is another available forum having jurisdiction. Also the plaintiff's choice of forum is usually not disturbed unless the balance of convenience is strongly in favor of the defendant. In determining whether a more appropriate forum exists, connecting factors, such as those effecting the convenience of parties, expenses involved and the law governing relevant transactions are to be looked into. The mere fact that a part of the cause of action has arisen within the jurisdiction of the court may itself not be considered to be a determinative factor conflicting the court to decide the matter on merits. In determining which of the available forums is the forum conveniens in a given matter, the convenience of all the parties had to be seen.

The territorial jurisdiction of a High Court exercising its power under Article 226 of the Constitution of India is determined by Article 226(2). Article 226(2) of the Constitution reads thus:

"(2) 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"

In 'Ex.Rect. A. Madurai Veeran (M.P.) V. Union of India - 2006 (1) CTC 732 the Madurai Bench of Madras High Court which also dealt with the issue held as follows:

"Thus, the power conferred on the High Courts under Article 226 could as well be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part arises and it is no matter that the seat of the authority concerned is outside the territorial limits of the jurisdiction of that High Court. The amendment is thus aimed at widening the width of the area for reaching the writs issued by different High Courts".

 In 'Kusum Ingots & Alloys Ltd., V. Union of India (2004) 61 CLA 136 (SC) the Supreme Court held that even if a small part of the cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merits. In appropriate cases, the court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens.

In 'Oil & Natural Gas Commission V. Utpal Kumar Basu & Others' (1994) 4 SCC 711, it was held that the question as to whether the court has a territorial jurisdiction to entertain a writ petition must be arrived at on the basis of averments made in the petition, the truth or otherwise thereof being immaterial.

 When an order, however, is passed by a Court or Tribunal or an executive authority whether under provisions of a statute or otherwise, a part of cause of action arises at that place. Even in a given case, when the original authority is constituted at one place and the appellate authority is constituted at another, a writ petition would be maintainable at both the places. In other words, as order of the appellate authority constitutes a part of cause of action, a writ petition would be maintainable in the High Court within whose jurisdiction it is situate having regard to the fact that the order of the appellate authority is also required to be set aside and as the order of the original authority merges with that of the appellate authority.

        In the present case it was held that mere fact that the petitioner company which had its registered office at Calcutta and read in a Calcutta newspaper ONGC's advertisement inviting tenders at Delhi for works to be executed in Gujarat and in response thereto the petitioner sent its tenders to the Delhi address from Calcutta and made representation from Calcutta against non consideration of its offer would not constitute the integral part of the cause of action. In determining the objection of the lack of jurisdiction, the court must take into consideration all the facts pleaded in support of the cause of action albeit without embarking upon an enquiry as to the correctness or otherwise of the said fact. In other words the question of territorial jurisdiction must be decided on the facts pleaded in the petition.

In 'Musaraf Hossain Khan V. Bhagheeratha Engineering Ltd., JT 2006 (3) SC 80 the question whether the Kerala High Court had jurisdiction to entertain the writ petition came up for the consideration of the Supreme Court. The Supreme Court in this case held as follows:

"In Union of India & Others V. Adani Exports Ltd., & another JT 2001 (9) SC 318 this court observed:

"It is seen from the above that in order to confer jurisdiction on a High Court to entertain a writ petition or a special civil application as in this case, the High Court must be satisfied from the entire facts pleaded in support of the cause of action that those facts to constitute a cause so as to empower the court to decide a dispute which has at least in part, arisen within its jurisdiction. It is clear from the above judgment that each and every fact pleaded by the respondents in their application does not ipso facto lead to the conclusion that those facts give rise to a cause of action within the court's territorial jurisdiction unless those facts pleaded are such which have a nexus or relevance with the lis that is involved in the case. Facts which have no bearing with the lis or the dispute involved in the case do not give rise to a cause of action so as to consider territorial jurisdiction on the court concerned."

In 'Commissioner of Central Excise, Pondicherry V. Sun Pharmaceuticals Ind. Ltd.,' - 2006 -TMI - 47718 - (HIGH COURT OF JUDICATURE AT MADRAS) the question of forum conveniens is decided by Madras High Court.  The facts of the case run as follows:

The Department filed this appeal aggrieved by the order of the Single Judge of Madras High Court dismissing the writ petition on the preliminary ground of territorial jurisdiction.  The fifth respondent company, which has since merged with the first respondent company was issued with a show cause notice under the provisions of Sec. 28(1), 114-A, 28-AB of the Customs Act, 1962 for violation of the statutory provisions in Sections 58, 59, 68, 71, and 72 of the Customs Act to show cause as to why a penalty of Rs.1,71,91,550/- should not be demanded and also the mandatory penalty along with the interest.  The Revenue authorities discovered, while checking with 'Input Output Ratio' that there was a systematic, meticulous and willful evasion of duty by the fifth respondent in collusion with the first respondent. According to the Department, the fifth respondent had inflated the quantity of raw materials required for production of the finished products so that after utilizing the actual quantity of raw materials and final products, the remaining quantity was utilized in the account of the first respondent under the pretext of job work placed by the first respondent.  It is alleged that having taken advantage of the so called job work system, the fifth respondent had started clearing the in-bound materials, namely the raw materials without payment of customs duty for the manufacture of the finished products. It is also alleged that the fifth respondent had fraudulently fabricated bogus records with relation to the mother liquid, 'the mixture of spent solvents'. According to the department the key persons of the fifth respondent company have admitted the evasion of duty and the part played by them. It is in these circumstances that the show cause notice was issued to respondents 1 to 13.

The first respondent, instead of replying to the show cause notice filed writ petition No. 6157/2003 on the ground that the second respondent Department in that writ petition had no jurisdiction to issue the show cause notice. The Court disposed the said writ petition directing the authorities to furnish the copies of the documents required by the respondents herein within a period of 15 days and with a further direction to the respondents to file its objections to the show cause notice. 

Instead of complying with the said direction, the respondent companies directly approached the Settlement Commission at Chennai, the 14^th respondent in the writ petition, by filing an application under Sec. 127-B of the Customs Act for settling the case and for immunity from fine, penalty, payment of interest and prosecution. The appellant department filed counter and prayed for dismissal of the application, inter alia, contending that the respondents instead of complying with the directions given by the Court in WP 6157/2003 have approached the Settlement Commission to scuttle the process of law. 

Pending the proceedings before the 14^th respondent, an interim application was filed by the respondents 1 to 13 for transfer of the proceedings to the 15^th respondent, the Settlement Commission at Mumbai. The appellant department resisted the application on the following grounds:

·  The place of occurrence of the offence of the factory of the applicant located in the present jurisdiction of Pondicherry Commissionerate and hence, it would be natural, logical, legal and more appropriate for the Chennai Bench to deal with the application;

·  If the applications are to be dealt with by the Chennai Bench of the Settlement Commission, the officers would be able to render more assistance easily;

·  The documents seized/obtained to the case are voluminous and available in the office of the Commissioner. These are vital for the quantification of liability and transporting them to Mumbai may jeopardize the interest of Revenue, apart from involving substantial expenditure;

·  Majority of the applicant companies are working in the main applicant's factory at Sattammai Village and reside nearby. Hence it would be easier for them also to pursue the case at Additional Bench, Chennai rather than at Mumbai. It was also submitted that most of the parties are in Tamil Nadu and two more persons, who have since resigned from the main company's services are also in Tamil Nadu; and that the investigation was spread over Tamil Nadu, Gujarat and Maharastra with the main appellant company situated in Tamil Nadu. The transfer was specifically objected to on the ground that it would not be convenient for the Revenue to purse the proceedings before the 15^th respondent at Mumbai.

After considering the relevant facts the Settlement Commission, Chennai rejected the application for transfer. Thereafter the respondent companies moved the Chairman of the Settlement Commission, the 16^th respondent in this case. The companies contended before the Chairman of the Settlement Commission that the Settlement Commission, Chennai ought not to have rejected the application for transfer, since the powers of transfer as vested only with the Chairman of Settlement Commission and ought to have forwarded the request to the Chairman of Settlement Commission. The Chairman of Settlement Commission, after hearing the written and oral submissions observed 'while there can be no doubt that the power to hear and settle the application rests with the Additional Bench at Chennai, it is true and also that it will be very difficult for the Revenue to present their case at Mumbai since it will involve expenditure in transport of documents and also travel of the officers concerned.' But the Chairman ordered for the transfer to Mumbai and observed that the Settlement Commission, Chennai had not confined itself to considering the require for transfer alone, but has also, inter alia, made observations to the effect that the admitted duty liability is a pittance compared to the amount mentioned in the show cause notice. Therefore, to dispel the apprehension in the minds of the companies that they will not receive a fair hearing and in the interest of justice and fair play, the request for transfer was acceded to.

Thereafter, the Settlement Commission, the 15^th respondent at Mumbai considered the admissibility of the application filed by the respondent companies and held that the respondent companies fulfilled all the conditions to be satisfied under Section 127-B of the Customs Act. This order was challenged before the Single Judge, High Court, Madras.

The only ground on which the Single Judge refused to entertain the writ petition was that since the order of transfer passed by the Chairman, Settlement Commission was not challenged, it was not open to the Revenue to now file the present writ petition before the court.

The Department submitted the following:

·  Merely because the order of transfer passed by the Chairman of Settlement Commission was not challenged, it will not deprive the Department of its right to approach the High Court, Madras for the relief sought for, since almost the entire cause of action has fallen with in the jurisdiction of this court;

·  The department is now aggrieved by the order of Settlement Commission, Mumbai admitting the case of respondent companies. It is the specific grievance of the applicant department that the Settlement Commission at Mumbai ought to have rejected the application filed by the companies in limine and ought not have admitted the case at all;

The contention of the respondent companies is that having acquiesced to the earlier order of transfer of the proceedings from Chennai to Mumbai, the appellant department is bound to challenge the impugned order only before the Bombay High Court and not before Madras High Court and the order of the learned single Judge did not deserve interference.

The Court after hearing the submissions of both the parties held as follows:

·  By virtue of Article 226(2) of the Constitution the High Court, Chennai is having jurisdiction to entertain the present petition. The fact that the Settlement Commission, Mumbai has passed the impugned order will not take away the right of this Court to entertain this writ petition if the cause of action, either wholly or in part, has arisen within the territories in relation to which this Court exercises its jurisdiction;

·  The order passed by the Chairman of Settlement Commission makes it abundantly clear that almost the entire cause of action had arisen only within the jurisdiction of Additional Bench of the Settlement Commission at Chennai;

·  The respondents 2,5,6,7,8,11, 12 and 13 either carry on business or reside within the territories subject to the jurisdiction of this court;

·  The show cause notice which form the genesis of these proceedings, was also issued at Chennai;

·  The documents which were seized which relate to this case and which are required for establishing the case of Revenue are all with the office of the appellant;

·  There is no gainsaying the position that this Court has the jurisdiction to entertain the writ petition, since almost the entire cause of action has arisen here;

·  The Supreme Court held that the fact that a small part of the cause of action arise within the territorial jurisdiction of a High Court will by itself may not be the determinative factor compelling the High Court to decide the matter and that in appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens. In the present case, for the reasons set out above, there can be no doubt that the Madras High Court is the 'forum conveniens' as far as this dispute is concerned.

The Court held that the appellants were entitled to file a writ petition in Madras High Court. The order of the learned Single Judge is set aside and the matter is sent back to the learned Single Judge to be dealt with in accordance with the law.