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TMI Blog2010 (8) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... ocedure, 1908 (hereinafter referred to as 'CPC'). As a measure of abundant caution, the court treated the issue pertaining to jurisdiction as a preliminary issue. Since arguments were already being heard on the question of jurisdiction, the learned Counsel for the plaintiff fairly conceded that application can be allowed. Accordingly, I directed that the issue pertaining to jurisdiction may be treated as a preliminary issue. On the said issue, the arguments were heard both on the 2nd and 3rd June, 2010. Mr. Nayyar appearing for the plaintiff required more time to address the arguments. The matter was posted for hearing post lunch on 09th July, 2010, with the consent of the parties. Formally, the following issue was framed: Whether the court had jurisdiction to entertain and try the instant suit? OPP 1.1 Both counsels have stated before me that the said preliminary issue can be decided based on the documents already on record. Accordingly, I proceed to decide the said issue. 2. In order to adjudicate upon the said issue, the following facts required to be noticed. 2.1 The plaintiff entered into a distributorship agreement dated 01.03.2007 (hereinafter referred to as dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law; and that Article XIII (10) of the distributorship agreement, which ousts jurisdiction of Indian Courts is illegal, arbitrary, null and void and, contrary to public policy. In addition, the plaintiff has sought the following injunctions: a mandatory injunction against the defendant to specifically perform its obligation under the distributorship agreement; injunction against the defendant against appointment of another distributor in respect of diagnostic products in India; and lastly, a restraint against the defendant to act in breach of a negative covenant, preventing thereby the defendant from appointing or entering into any business within the territory of India, in respect of matter, which is the subject matter of the distributorship in India. 2.6 Defendant, on the other hand, refuted the allegations made in the plaint. It is averred in the written statement that the plaintiff is aware of the fact that even prior to the filing of the suit (as a matter of fact, before issuance of termination notice) another distributor has been appointed for the territory of India. Defendant on merits, has given its own version of breaches committed by the plaintiff. As regards the issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was related or connected with arrangement obtaining between the parties, which is reflected in the distributorship agreement, occurred in India - the provision in the distributorship agreement dealing with the jurisdiction would have to be ignored by the court. It was, therefore, the submission of Mr. Nayyar that in line with the well settled principles of law, parties by contract cannot confer jurisdiction on a court if, otherwise none exists in law. This Court would have to examine the issue of jurisdiction by taking recourse to provisions of Section 20 of the Code of Civil Procedure, 1908 (hereinafter referred to as CPC). According to Mr. Nayyar, since Article XIII (10) of the distributorship agreement was contrary to public policy (as reflected in the CPC), the said provision could not impede the court in exercise of its jurisdiction over the defendant. In support of his submissions, Mr. Nayyar also took recourse to, what he claimed was intrinsic evidence in the distributorship agreement, which diluted, according to him, the exclusive jurisdiction clause provided in the distributorship agreement. For this purpose reference was made to Article XIII (13) of the distributorship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court were called upon to decide as to which was the more convenient forum. In the instant case, the parties by contract have ousted the jurisdiction of courts in India and vested the same in a Italian court in Milan; which is permissible in law. 3.3 Apart from above, Mr. Kaul also laid stress with respect to the provisions contained in Article XIII (9) of the distributorship agreements; as regards the governing law obtaining between the parties being the laws of Italy. Mr. Kaul submits that there is neither any challenge to the Article XIII (9) of the distributorship agreement, nor are there any pleadings to that effect. The suit, according to him was thus not maintainable in view of the fact that the defendant failed to file an affidavit in respect what is the Italian law. In support of this submission the reliance was placed, specifically, on the judgment of Supreme Court in Hari Shankar Jain v. Sonia Gandhi 2001(8) SCC 233. In addition, in support of the submissions made above, the following judgments were relied upon: Modi Entertainment Network v. W.S.G. Cricket (2003) 4 SCC 341; Max India Limited v. General Binding Corporation FAO(OS) No. 193/2009; Man Rolan Druckmachinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (11).... (12).... (13) Without prejudice of what expressly provided by this Agreement, the rights and remedies provided by this Agreement shall be in addition to any other right or remedy provided by law or directly in the activities of sales and promotion of the Products in the Territory in co-operation with Distributor. 5. A perusal of Clause 10 of Article XIII unambiguously demonstrates that the parties had intended to agree to the exclusive jurisdiction of the Italian Court in Milan with regard to any dispute, claim or controversy arising with respect to the distributorship agreement. What is made express is also that such dispute, claim or controversy would not only include issues concerning validity, interpretation and performance but would also include those which relate to the "termination" of the distributorship agreement. Since the provision is unambiguous, there is no scope for interpretation. The intention of parties is determined by the words and expression used in the agreement. If the provision is clear and unambiguous the courts cannot arrive at a conclusion contrary to that. 5.1 Mr. Nayyar has, however, contended that despite the expression in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., a "court of choice" or a "neutral court" which had no nexus whatsoever either with the parties or the subject matter. Therefore, in this context, it would be important to straight way refer to the pertinent portions of the judgment which would belie any doubt whatsoever as to what was the issue raised before the Supreme Court, and the manner in which it was dealt by the court. In this context, the following portions of the judgment are extracted below for the sake of convenience: ISSUE INVOLVED 4. ...It involves examination of the principles governing grant of an anti-suit injunction by a court of natural jurisdiction against a party to a suit before it restraining him from instituting and/or prosecuting the suit, between the same parties, if instituted, in a foreign court of choice of the parties..... (emphasis is mine) SUBMISSIONS MADE BY COUNSELS 8. Mr. Ashok H. Desai, learned senior counsel appearing for the appellants, contended that the Indian Court was a natural and appropriate forum; the principle for granting anti-suit injunction was correctly noticed by the learned Single Judge who recorded the finding that the action initiated by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties to approach the court of their choice, namely, the English Court. He pointed out that the parties had clearly stipulated in the contract for resolution of their disputes in accordance with the English law and in the English Court, therefore, the appropriate forum would be the English Court. In any event, it being the court of choice of the parties no injunction could be granted against the respondent from prosecuting the case before that court. It was submitted that the respondent continued the feed during the stipulated period; the appellants had the advantage of telecasting the Event and receiving the benefit of the advertisement slots fully; they made payments till the end of February; and, therefore, they could not be allowed to evade the liability under the contract by seeking injunction. It was also submitted that the foreseeability test pleaded by the appellants was not relevant; the parties had chosen a neutral forum in preference to natural forums - Indian courts and Singapore courts. In any event, submitted the learned Counsel, when a party had approached an agreed jurisdiction under a contract, whether exclusive or non-exclusive, the other party could not be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonal jurisdiction not to institute, or to discontinue, proceedings in a foreign court have been examined above [clause (5) of Rule 31]. But where the basis for the exercise of the court's discretion is that the defendant has bound himself by contract not to bring the proceedings which he threatens to bring, or has brought, in the foreign court, the principles which guide the exercise of discretion of the court are distinct from those which were examined under Clause (5) of Rule 31. (emphasis is mine) Thus, it is clear that the principles governing the exercise of discretion by the court to grant anti-suit injunction against a person amenable to the jurisdiction where by contract the defendant has bound himself not to bring the proceedings which he threatens to bring or has brought in the foreign court, are different from the principles laid down in Rule 31(5) which deals with cases in general where an English court may restrain a party over whom the court has personal jurisdiction from the institution or continuance of the proceedings in a foreign court.... ... However, in a case where a jurisdiction agreement exists it is not necessary, in all cases, to show that foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs in the court of choice, save in an exceptional case for good and sufficient reasons, with a view to prevent injustice in circumstances such as which permit a contracting party to be relieved of the burden of the contract; or since the date of the contract the circumstances or subsequent events have made it impossible for the party seeking injunction to prosecute the case in the court of choice because the essence of the jurisdiction of the court does not exist or because of a vis major or force majeure and the like. (5) Where parties have agreed, under a non-exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum conveniens and favoured forum as it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non-exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum. (6) A party to the contract containing jurisdiction clause cannot normally be prevented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to articulate as to how the presence of such a clause in a contract would be against public policy merely because each and every aspect pertaining to the arrangement between the parties (assuming it to be correct) had its genesis and occurrence in India, and that despite such a situation obtaining, parties had agreed to adjudication of disputes by a forum outside India. I have not been shown any authority which has taken a view as espoused by the learned senior counsel. 5.5 On the contrary, the Supreme Court in Modi Entertainment dealt with an identical argument and repelled the same, as is clear, on a perusal of observations made in paragraph 11 of Modi Entertainment. The Supreme Court drew distinction between a court of "natural jurisdiction" and a "foreign court" i.e., "a neutral forum". The observations of Supreme Court are explicit, in as much it has placed its imprimatur, in consonance with global practice in the field to jurisdictional clause whereby, parties agree to "exclusive" or "non-exclusive" jurisdiction of one of the available courts of natural jurisdiction or to the exclusive or non-exclusive jurisdiction of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjudged in the courts in Russia and not in England. The Judge, of the first Court, held that it had jurisdiction to deal with the matter, and thereupon went to exercise his discretion in favour of the English importers by refusing to stay the action. Against this decision the matter was carried to the Court of Appeal by the defendants. What is important is that the defendants in the appeal did not contend that there was any want of jurisdiction. This is quite apparent from a close scrutiny of the judgments of the three Law Lords. While Lord Denning briefly alluded to the effect that the court of Admiralty had jurisdiction by virtue of the provisions of Section 1(1)(g) of the Administration of Justice Act, 1956, the other Law Lords, i.e., Lord Hodson and Lord Morris did not allude to this aspect of the matter. The Law Lords, however, considered the question as to whether in the given facts and circumstances of the case the action filed in England ought to be stayed in view of the provisions in the bill of lading (clause 26) that all disputes were to be adjudged by Russian Courts. 6.3 What is to be borne in mind in this case, is that the action of the English importers for dama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the respondent for recovery of balance monies paid as advance to the appellants/defendants, and damages, was confronted with Clause 11 of the agreement which provided as follows: Any dispute arising out of this sale shall be subject to Kaira jurisdiction. The respondent/ plaintiff had filed a suit in the district court at Salem. Based on the aforementioned clause, the appellants/defendants contended to the contrary. The Court of First Instance agreed with the appellant's contention, and returned the plaint for presentation in the proper court. In an appeal carried to the High Court of Madras the decision of the trial court was reversed. In a further appeal to the Supreme Court the appeal was dismissed. The Supreme Court was, therefore, confronted with the issue as to whether Clause 11 of the agreement should be construed as an ouster clause which excluded the jurisdiction of all courts except the court in Kaira. While considering this question the court in paragraph 21 observed as follows: 21. From the foregoing decision it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other courts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled 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 there within , 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. This cannot be understood as parties contracting against the statutes. Merchantile law and practice permit such agreements. (emphasis is mine) 6.7 What would have to be borne in mind that the observations in this case were made by the Supreme Court, in the context of disputes which were in the realm of the municipal law obtaining in this country. Therefore, the observations of the Supreme Court in Modi Entertainment Network (supra), when read in conjunction with the observations made in this case (A.B.C.), would necessarily lead one to a conclusion that, once the Supreme Court has placed its imprimatur on the practice obtaining in the commercial world with regard to provision of a foreign or neutral courts, as forum choice i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with an intention to start their own office in Bombay. Given these facts the court was disinclined to stay the action instituted in the Bombay High Court. These crucial but distinguishing features of the case, in my view, would have to be kept in mind while applying the ratio of the case. Rhodia Limited, Rhodia Chemicals India Limited and Rhodia Organique Fine Ltd. v. Neon Laboratories Ltd 2005 (1) All. MR 703: 7.1 The issue which arose for determination was that the defendants, who had challenged the jurisdiction of the trial court; the burden to prove the same lay on them (see paragraph 23 of the judgment). The factual matrix in which issue arose was as follows: The respondent/plaintiff had filed a suit for specific performance and injunction against the petitioners/defendants. The respondent/plaintiff was appointed as a distributor of products manufactured by the petitioners/defendants in terms of Article 15 of the agreement obtaining between them. It was provided that both the governing language as well as the governing law would be English. In addition, it was also provided that disputes with regard to interpretation or performance of the agreement would be settled by E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment would have no applicability to the facts of the present case. What is, however, important is the observations of the Court which reiterated the principle that "parties can agree to accept exclusive or nonexclusive jurisdiction of a foreign court where none exists". Michael Golodetz and Ors. v. Serajuddin & Co. AIR 1963 SC 1044. 7.4 Briefly the facts in this case were as follows: The respondent before the Supreme Court had entered into a contact for supply of manganese ore to the appellant company based in America. The disputes arose between the parties with regard to alleged violation on behalf of the respondents in supplying the balance quantity of manganese ore as agreed to by them with the appellant. The agreement between the two, which was a written agreement, contained an arbitration clause which read as under: Arbitration: Any dispute arising out of the contract is to be settled by arbitration in New York according to the rules of the American Arbitration Association. 7.5 The respondent being first of the block filed an action on the original side of the High Court of Calcutta seeking a decree to the effect that a written contract executed with the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te and reprobate, and this consideration may be stronger in cases where there is an agreement to submit the dispute arising under the contract to a foreign arbitral tribunal. A clause in a commercial transaction between merchants residing in different countries to go to arbitration is an integral part of the transaction, on the faith of which the contract is entered into, but that does not preclude the Court having territorial jurisdiction from entertaining a suit at the instance of one of the parties to the contract, even in breach of covenant for arbitration. The Court may in such a case refuse its assistance in a proper case, when the party seeking it is without sufficient reason resiling from the bargain. When the Court refuses to stay the suit it declines to hold a party to his bargain, because of special reasons which make it inequitable to do so. The Court ordinarily requires the parties to resort for resolving disputes arising under a contract to the tribunal contemplated by them at the time of the contract. That is not because the Court regards itself bound to abdicate its jurisdiction in respect of disputes within its cognizance, it merely seeks to promote the sanctity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to note that in this case the court had considered the issues: (a) whether there was a concluded contract between the parties; (b) Whether under Section 34 of the Arbitration Act, 1940 the court could exercise its discretion in favour of the respondent seeking a stay of the suit filed in India? A perusal of the judgment would show that it has considered not only Michael Golodetz (supra) case but also The Fehmarn (supra) case. The Court has explicitly indicated in paragraph 19 at page 94 of the judgment that both under Section 34 of the Arbitration Act, 1940 and under Section 151 of the CPC the stay sought for by an applicant is not a matter of right. The court's discretion in such situation is paramount. This crucial difference will have to be borne in mind. 8. It may also be relevant perhaps to look at the brief facts which obtained in the case. The respondent, a Yugoslavia based company had entered into a sub-contract with the appellant/ plaintiff for supply of labour to the Bihar State Electricity Board for setting up a thermal power station at Barauni. The sub-contract, which was signed by the parties in Belgrade, incorporated an arbitration clause which provided for ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, or exhausting the other side"; and lastly, the cost of arbitration will be disproportionate to the claim involved in the adjudication. Amongst others one of the factors which persuaded the Supreme Court to decline stay of suit in India was that even though the respondents had an office in Calcutta it curiously insisted on arbitration which would force the appellant/plaintiff to proceed to Paris. Looking at the paltry nature of the claim the Supreme Court took the view that it would be unfair to lend its assistance by staying the action, as it would result in hardship and injustice by holding parties to their bargain. Man Roland Druckimachinen AG v. Multicolour Offset Ltd. and Ors. (2004) 7 SCC 447: 8.2 In this case the appellant before the Supreme Court was in the business of manufacturing printing machines. The said printing machines were manufactured in Germany. The appellant was a company incorporated under the German law, and had its registered office in Germany. Respondent No. 2 before the Supreme Court was allegedly appellant's agents in India situated in Bombay. Pursuant to an agreement the printing machines were supplied by appellant to respondent No. 1. The ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi High Court in Rajendra Sethia v. Punjab National Bank AIR 1991 Delhi 285 relied on by the Commission which holds to the contrary is, therefore, clearly erroneous. (emphasis is mine) Laxman Prasad v. Prodigy Electronics Ltd. and Anr. (2008) 1 SCC 618: 8.4 This is a case wherein the appellant/defendant was an employee for the respondent No. 1/ plaintiff. Respondent No. 1/ plaintiff was a company incorporated under the laws of Hong Kong. Respondent No. 1/ plaintiff was engaged in the business of trading electronic goods; the main area of business was Printed Circuit Board. The appellant/defendant was employed as International Business Development Manager. On request the appellant/defendant was relocated to India. The appellant/ defendant after some time sought to be relieved from employment on a personal ground. This resulted in the appellant/ defendant's employment with the respondent No. 1/ plaintiff coming to an end. The respondent No. 1/ plaintiff, however, discovered that the appellant/ defendant had acted in breach of his terms of employment, in as much as, he had not only set up competitive business, while in employment, but also engaged himself with the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r country. 8.7 Mr. Nayyar had laid great stress on the observations of the Supreme Court in paragraph 46 of the judgment. In my view a close reading of the observations made by the Supreme Court in paragraph 46 would show that in determining the jurisdiction of the court in India the provisions of the CPC would apply and it is only thereafter that the court would have to determine as to which law is applicable. The observations in paragraph 46 when read with para 44 make it clear that it is not as if the courts in India, in this case High Court of Delhi, could not come to a conclusion after hearing the parties that the applicable law would be the law of Hong Kong. 8.8 Therefore, in my view, the inquiry, as to applicable law, though crucial and relevant is relegated to the second stage, after the issue of jurisdiction is determined. This according to me is a relevant factor in the court coming to the conclusion as to whether or not it should exercise its jurisdiction by retaining the matter within is domain contrary to the bargain arrived at between parties. 9. Having deduced the principles enunciated by various judgments referred to above it may perhaps be relevant to advert to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally, the court may choose not to hold parties to their bargain. (v) The only caveat to what is stated by me in Clause (iv) above is: that when a jurisdictional clause operates qua courts to which CPC applies, the principle applicable would be: that parties by contract cannot confer jurisdiction on a court which otherwise (bearing in mind the provisions of CPC) in law does not have jurisdiction. This principle does not apply to a foreign court, which in a given case could be a neutral court. (vi) If the courts in India (to which CPC applies) choose not to entertain a suit, which is, pivoted on a contract, containing a jurisdictional clause, whereby jurisdiction is vested on a foreign court/ neutral court, it would make a distinction between circumstances which ought to be in the contemplation of parties at the point in time when contract was arrived at between parties and those it had no occasion to foresee. 10. In the background of the discussion above, let me advert to the facts of the present case. The plaintiff's distributorship agreement dated 01.03.2007 with the defendant entailed supply of diagnostic products to the plaintiff for sale within the territory of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (iv) Piramal Diagnostic Services Pvt. Ltd., A-28, Kailash Colony, New Delhi (which is within the jurisdiction of this Hon'ble court). Pursuant thereto the plaintiff sourced reagents from the defendant and supplied the said reagents to these Medical Centers situated at New Delhi. The Defendant's (wrongful) attempt to terminate the Agreement has resulted in the plaintiff not being able to discharge its obligation towards the Medical Centers situated at New Delhi. It is submitted that it is neither conceivable nor practical to file a suit for injunction in Milan, Italy, wherein the effective relief is required to be implemented in India. Furthermore, the entire business is in India, i.e., supply of liaison units to Medical Centers and supply of reagent kits for testing thereon for the benefit of the patients in India. Last but not the least, the entire evidence and the very substratum of the dispute is in India. 10.2 It is pertinent to note that there is no challenge to Article XIII (9) which says that the agreement will be governed and be construed by the laws of Italy. In the application filed by the defendant under Order 14 Rule 2(2) read with Section 151 of the CPC it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations in that regard in Modi Entertainment Network (supra) are as follows: 21. British Aerospace Plc v. Dee Howard Co. deals with stay of English action. In that case a British company (BAe) entered into an agreement with an American company (DHC) to provide assistance and information in connection with a re-engining programme which it was undertaking. It was provided that the agreement should be governed by and be construed according to the English law and that the courts of law in England should have jurisdiction to entertain any action in respect thereof. DHC suspended further work on the re-engining programme claiming that BAe failed to carry out its obligation under the agreement. DHC initiated action in the Texas State Court. After service of notice of that action BAe applied to the American court to dismiss the proceedings in view of the jurisdiction clause in the agreement. BAe also initiated proceedings in the English court duly impleading the parent company (Aliena) of DHC, with the leave of the court. While so, DHC applied to the English court for the following reliefs: (i) to set aside the leave, and (ii) to stay the proceedings against the parent company in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties as evidenced by their contract must be given effect to. Even when the appellants had filed the suit earlier in point of time in the court of natural forum and the respondent brought action in the English Court which is the agreed forum or forum of the choice having regard to the expressed intention of the parties, no good and sufficient reason is made out to grant anti-suit injunction to restrain the respondent from prosecuting the English action, as such an order would clearly be in breach of agreement and the court will not, except when proceedings in a foreign court of choice result in perpetuating injustice aid a party to commit breach of the agreement. To apply the principle in Donohue's case good and sufficient reasons (strong reasons) should be shown to justify departure form the contractual obligations. Here, two contentions have been urged: the first is that the English Court is forum non-conveniens in view of the alleged breach of the agreement by the responde in the manner not foreseen. This, in our view, is far from being a good and sufficient reason to ignore the jurisdiction clause. Even otherwise the fact that the parties had agreed to resolve their di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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