IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : CODE OF CIVIL PROCEDURE IA No. 16809/2010 (u/o 7 R 10 & 11 r/w Sec. 151 CPC) in CS(OS) No. 1830/2010 IA No. 16756/2010 (u/o 7 R 10 & 11 r/w Sec. 151 CPC) CS(OS) No. 1831/2010 AND IA No. 16755/2010 (u/o 7 R 10 & 11 r/w Sec. 151 CPC) in CS(OS) 1832/2010 Reserved on 17th February, 2012 Decided on 8th May, 2012 TATA MOTORS LIMITED... Plaintiff Through :Mr. Rajiv Nayar, Sr. Advocate with Mr. Darpan Wadhwa, Ms. Abhiruchi Arora, Mr. Akhil Sachar and Ms. Jaishree Shukla, Advs. versus JSC VTB BANK LTD... Defendant Through : Mr. A.B. Dial, Sr. Advocate with Mr. Rajiv Nanda, Adv. Coram: HON BLE MR. JUSTICE A.K. PATHAK A.K. PATHAK, J. 1. By this order, I shall dispose of applications under Order 7 Rules 10 and 11 read with Section 151 CPC filed by the defendant in the above referred three matters, as the same are in similar facts, inasmuch as, question of law involved therein is also same. 2. Whether Delhi Courts have territorial jurisdiction to entertain and try the suit? is the question involved in the above matters.
3. Plaintiff has filed above suits under Order 37 of the Code of Civil Procedure, 1908 ( CPC, for short) for recovery of the amounts mentioned therein, regarding unpaid Letters of Credit issued by JSC VTB Bank, Mantaznikov Street 2B, Ekaterinburg, Sverdlovsk Region, Russia 620050 (for short hereinafter referred to as Russian Bank ). 4. It is alleged that the plaintiff had supplied truck chassis units to a Joint-Stock Company, Cars And engines Of Ural, a body incorporated under the laws of Russia, having its registered office at 1, Avtomotornaya Street, Novouralsk, Sverdlovsk Region, Russia ( CJSC Amur, for short), pursuant to the three Agreements entered into between them. 5. Clause 3 of the Agreements reads as under:- Clause 3 payment conditions: 3.1 Payments for the SKD Kits of every consignment will be made by the buyer to the Seller by way of irrevocable and without recourse letter of credit open for the full value of pro-forma Invoice. 3.2 The terms and conditions of the letter of credit should be in accordance with ICC Unified Customs and Practices No. 500 for documentary credit (issued in 1993). 6. In terms of the Clause 3 of Agreements, payment was to be made by way of irrevocable letters of credit. Accordingly, at the instance of CJSC Amur, Russian Bank opened irrevocable letters of credit involved in the above suits. Standard Chartered Bank at Mumbai was the Advising Bank. Case of the plaintiff is that the letters of credit, on presentation, were returned unpaid on flimsy grounds, which need not to be reiterated here being irrelevant for the disposal of present applications. Despite service of legal notice amounts, involved in the Letters of Credit have not been paid, hence the suit. 7. From the facts narrated in the plaint, it is clear that no cause of action has arisen at New Delhi. It is not the case of plaintiff that any cause of action and for that matter part cause of action has arisen at New Delhi, within the territorial jurisdiction of this Court. Plaintiff exported the truck chassis units to Russia, pursuant to the contracts entered into between the plaintiff and CJSC Amur, which is not a party to the suits. Letters of credit have been opened by the Russian Bank at Russia, on the instructions of CJSC Amur based in Russia. Letters of credit were presented by the
Advising Bank, namely, Standard Chartered Bank, Mumbai on the Russian Bank, for payment. The sole ground, on which jurisdiction of this Court has been invoked, is that Russian Bank has a branch at New Delhi. Para 41 of the plaint deals with the territorial jurisdiction in the following manner:- 41. That this Hon ble Court has the territorial jurisdiction to adjudicate the present suit as the sole or the principal place of business of the defendant in India is at New Delhi and the defendant carries on business in India through its office in New Delhi. The defendant bank is also included in the Second Schedule to the Reserve Bank of India Act, 1934 and is believed to be registered under Section 592 of the Companies Act, 1956 and is authorized to accept service at the address of its sole place of business (at the aforesaid address). Hence, this Hon ble Court has the territorial jurisdiction to entertain and dispose of the present suit. 8. Relevant it would be to quote with advantage Section 20 of CPC, which reads as under:- 20. Other suits to be instituted where defendants 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 defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, 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 or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place. 9. Plaintiff has filed these suits at New Delhi taking aid of Section 20(a) read with explanation thereto, on the allegations that the Russian Bank has
sole place of business at New Delhi, which fact is evident from para 41 of the plaint. 10. Plaintiff has admitted that letters of credit are subject to Uniform Customs Practice for Documentary Credits (2007 Revision), I.C.C. publication ( UCP 600, for short ). In para 40 of the plaint, plaintiff has alleged that suit of the plaintiff is based on the written contract evidenced by the letters of credit incorporating UCP 600, duly acknowledged by the defendant. 11. Article 3 of the UCP 600, inter alia, provides that branches of a bank in different countries are considered to be separate banks; meaning thereby the defendant is an independent and separate bank and is not a branch of Russian bank. In United Commercial Bank vs. Bank of India & Ors. 1981 (2) SCC 766, in the context of similar UCP, Apex Court held that General Provisions, Definitions and the Articles are to be applied to all documentary credit and binding upon all parties thereto unless expressly agreed". 12. Plaintiff has relied on the UCP 600 as it is the case of plaintiff itself that the Letters of credit were subject to terms of UCP 600. Thus, both the parties are bound by the terms of UCP 600. As the general provisions, definitions and articles as contained in UCP are binding upon all the parties thereto the plaintiff cannot be allowed to contend that the defendant is not an independent entity but is a branch of Russian bank. It is not a question of ouster of jurisdiction of a court by Article 3 of UCP 600. The said Article only defines status of a branch of the bank, situated in a foreign country and provides that the same will be a separate bank thus, the reliance placed by the plaintiff on A.B.C.Laminart Pvt. Ltd. and Anr. Vs. A.P.Agencies, Salem, 1989(2) SC 163 is misplaced. In the said case, it was held that if one or more courts have territorial jurisdiction to entertain and try a suit, parties can confine to the jurisdiction of one court, by an agreement. However, to oust the jurisdiction of a court, clause should be specific in indicating that parties had confined to the jurisdiction of a particular court to the exclusion of other court. Agreement involved in the said case was any dispute arising out of this sale shall be subject to Kaira jurisdiction. It may be noted that in the said case Salem Court as well as Kaira Court had jurisdiction to deal with the matter. it was held that clause cannot be construed to have excluded the jurisdiction of the court at Salem since words like exclusive, alone, only and the like were not used in the clause and for ousting the jurisdiction of Salem Court and confining it to Kaira Court, such words should have
been used. In this case, perusal of Article 3 of UCP 600 does not disclose that jurisdiction of any court has been ousted. The clause in UCP 600 only defines the status of the branches of a bank in different countries as separate entity. Accordingly, I do not find Article 3 of UCP 600 to be in conflict with Section 20 (a) of CPC. In my view, defendant being a separate and independent bank and not being branch of Russian bank in terms of UCP 600, jurisdiction of this court is not attracted within the meaning of Section 20 (a) CPC, since plaintiff has had no dealing with the defendant at any stage, neither Letters of Credit were opened by the plaintiff nor any payment was to be made by it. 13. Even if the contention of plaintiff that defendant is a branch of Russian bank is accepted then also Section 20 (a) CPC read with Explanation thereto is not attracted in the facts of this case. In Patel Roadways Limited, Bombay vs. Prasad Trading Company, (1991) 4 SCC 270 explanation to Section 20 (a) came to be scrutinized threadbare. In the said case appellant M/s Patel Roadways was carrying on its business of a carrier and transporter of goods on hire with its principal office at Bombay and branch offices at various other places. Respondent M/s Prasad Trading Company entrusted consignments of cardamom to appellant at its branch office/subordinate office at Bodinayakanur in Tamil Nadu, to be delivered at Delhi. In the godown of the appellant at Delhi goods got destroyed in a fire as a result whereof consignee refused to take delivery. Respondent instituted a suit in the court of subordinate Judge, Periakulam within whose territorial jurisdiction the subordinate office of the appellant was situated, inasmuch as, goods were entrusted to the appellant for transporting them to Delhi. Appellant relied on a clause in the agreement whereby parties had restricted jurisdiction to the courts at Bombay. In this context, it was scrutinized as to whether Bombay court also had jurisdiction to entertain the suit, arising out of the contract between the parties, in view of the explanation to Section 20 of the Code, since principal office of the appellant was situated at Bombay. In paras 9, 12 and 15 it has been held as under:- 9. Clauses (a) and (b) of Section 20 inter alia refer to a court within 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 jurisdiction 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. Consequently 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 situated 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 principal office at one place and also has 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 falls within the latter part of the Explanation it is not the Court within whose jurisdiction the principal office of the defendant is situated but the court within whose jurisdiction it has a subordinate office which alone shall have jurisdiction "in respect of any cause of action arising at any place where it also has a subordinate office". 12. 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 corporation 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. This, it is clarified, will be the place where the
principal office is situated (whether or not any business is actually 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 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. 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". 15. 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 subordinate offices at the respective places where the goods in these two cases were delivered to it for purpose 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 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. 14. What can be deduced from the above is that the explanation to Section 20(a) is in two parts. First part of the explanation applies only to such corporation or company which has its sole office at a particular place and in such an eventuality Courts, within whose jurisdiction such sole office is situated, will have the jurisdiction, whether the company is actually carrying on business from there or not. Second part of explanation takes care of a case where defendant does not have a sole office but has principal office at one place and has one or more subordinate offices at different places. In that eventuality, in case the cause of action arises at the place, where subordinate office is situated, then the Court, within whose jurisdiction it has a subordinate office where cause of action has also arisen, alone shall have jurisdiction to entertain the matter. If second part is attracted, then first part
would not be applicable. This is irrespective of the right of a plaintiff to initiate an action at a place where cause of action has arisen by taking aid of Clause (c) of Section 20 CPC, even though the Principal office or for that matter Subordinate office of a corporation or company is not situated at that place. The intention of legislature was that in case of a corporation, for the purposes of Clause (a), location of the subordinate office, within the local limits of which a cause of action arises, is to be the relevant place for filing of a suit and not the principal place of business. For example, a company A has its sole office at place B and cause of action has arisen at place C. A can invoke jurisdiction of court at place B, by taking aid of Section 20(a) CPC or at place C by placing reliance on Section 20(c) CPC. In case A has principal office at place B and subordinate offices at place D E and F and cause of action has arisen at D and also at C, in that event, plaintiff can institute a suit at place D by invoking Section 20(a) CPC or at place C by invoking Section 20(c) CPC, but it cannot institute a suit at place B where A has its principal office. I am also of the view that Section 20 does not make any distinction between an Indian company/corporation and a foreign company. Sole and principal offices as per the explanation have distinct meaning in view of the word or used between Sole and principal. If a company/corporation has only one office then the former terminology gets attracted but in case it has one principal office with one or more subordinate offices then later would get attracted. 15. In Sri Ganesh Research Institute vs. Union of India & Ors. 2004 (115) DLT 410, a Division Bench of this Court has held as under:- An analysis of the various pronouncements of the Hon'ble Supreme Court reveals that even though the express terms of Section 20 of the CPC permit the filing of a suit against a Corporation at its principal office, preeminence has been accorded to the place where the cause of action had substantially arisen, from amongst those places where it has incidentally or partially arisen. Whilst the Supreme Court has indubitably enumerated in ABC Laminart v. A.P.Agencies AIR 1989 SC 1239: 1989(2): SCC 163, the several places where the cause of action could be seen to have arisen, this was done primarily to investigate and determine whether the place to which jurisdiction had been restricted by ousting all others itself enjoyed jurisdiction. The position that obtains today is that primacy is accorded to the place where the cause of action substantially arises. (Emphasis supplied)
16. In the light of above discussions, I also do not find any force in the contention of learned senior counsel for the plaintiff that in case cause of action is necessary to invoke the jurisdiction of subordinate office, it will make Section 20(a) CPC redundant since plaintiff can, otherwise, instituted a suit at the place where cause of action has arisen by invoking Section 20(c) CPC. 17. Plaintiff has placed reliance on Pratap Singh vs. The Bank of America (1976) 78 BOM LR 549 and Madan Kukreja vs. Banque Scalbert Dupont S.A. & Anr. 164 (2009) DLT 277 to contend that in a case in involving a foreign company, having its branch office in India, suit can be filed at such place in India where branch office is situated in view of the Explanation to Section 20(a) CPC, since such branch office will be sole office in India of the said foreign company. I have perused the aforenoted judgments and find them to be inapplicable to the present case. Pratap Singh s case (supra) has been rendered in the context of Clause 12 of the Letters Patent, which is not pari materia with Section 20 CPC, though it may be substantially in pari materia. Clause 12 of the Letters Patent reads as under:- 12. Original jurisdiction as to suits. And we do further ordain, that the said High Court of Judicature at Bombay in the exercise of its ordinary original civil jurisdiction, shall be empowered to receive, try and determine suits of every description, if, in the case of suits for land or other immoveable property, such land or property shall be situated, or in all other cases if the cause of action shall have arisen, either wholly, or, in case the leave of the Court shall have been first obtained, in part, within the local limits of the ordinary original jurisdiction of the said High Court, or if the defendant at the time of the commencement of the suit shall dwell, or carry on business, or personally work for gain within such limits; except that the said High Court, shall not have such original jurisdiction in cases falling within the jurisdiction of the Small Cause Court at Bombay, in which the debt or damage, or value of the property sued for, does not exceed one hundred rupees. 18. Explanation to Section 20 CPC, which defines a corporation, is missing in Clause 12 of the Letters Patent. In other words, scope of Clause 12 is wider than Section 20(a) CPC, which fact has been acknowledged in the said judgment in para 24 wherein it has been observed that under Section 20 CPC, the Court would have jurisdiction in case a part of the cause of action has arisen within its jurisdiction; whereas under Clause 12 of the Letters Patent leave of the Court is required to be obtained. Further, judicial
interpretation has established that part of the cause of action within the meaning of Clause 12 of the Letters Patent must be a material part of the cause of action, otherwise leave should ordinarily be refused. Similarly, the further provision Explanation II (Now Explanation as contained in the code), which is found in Section 20 CPC is not found in Clause 12 of the Letters Patent. The other difference is that for exercise of the jurisdiction of the Court, Clause 12 talks of the defendant dwelling within the jurisdiction, whereas Section 20 CPC requires the defendant to actually and voluntarily reside. In absence of the Explanation to Section 20 CPC, scope of clause 12 of Letters Patent is wider and different. 19. In Pratap Singh (supra), Bank of America, a corporation incorporated in the United States of America, was having a branch in Mumbai. Bank of America had issued certain Time Certificates of Deposit to the plaintiff, in America. Plaintiff lost these Certificates in London together with cashier s cheque for interest. Disputes arose between the plaintiff and Bank of America in respect of said Certificates, which led to filing of a suit for recovery of `5,40,000/- for compensation and damages, against the branch of Bank of America in Bombay. Jurisdiction of Courts at Bombay was challenged by the Bank of America. Plaintiff s contention was that since Bank of America was having its sole office in India at Bombay, jurisdiction of Courts at Bombay was attracted. In these facts, in the context of Clause 12 of the Letters Patent, it was held that the Court at Bombay had jurisdiction to deal with the matter. Accordingly, this judgment in no manner supports the plaintiff. 20. In Madan Kukreja (supra), a foreign company was having its liaison office at Delhi. Court found that cause of action also arose in New Delhi since goods were handed over to the carrier within the jurisdiction of the courts at Delhi, for being sent to France. In these facts it was held that courts at Delhi have jurisdiction. In the case in hand, no cause of action has arisen at Delhi. Thus, this judgment is also of no help to the plaintiff. 21. Registration of the defendant under Section 591 of the Companies Act 1956 is not relevant to attract Section 20 (a) of CPC. Section 591 envisages that companies incorporated outside India establishing a place of business within India shall comply such of the provisions of the Companies Act as may be prescribed with regard to the business carried on by it in India, as if it were incorporated in India. Section 592 specifies the documents which a foreign company establishing a place of business within India has to deliver
to Registrar of Companies for registration. The purpose of such registration appears to be to ensure compliance of the Companies Act by such foreign companies establishing office in India and on account of failure, to be amenable to the penal consequences as provided thereunder. Section 596 of the Companies Act envisages the mode and manner of service, process of documents under the Companies Act on the foreign companies having established its office in India. Registration under Section 591 of the Companies Act, at best, may be sufficient to establish existence of such foreign companies in India. Thus, registration of a place of business in India of such foreign companies under Section 591 of the Companies Act would be irrelevant for the purpose of attracting jurisdiction of a particular court, as envisaged under Section 20 CPC, which defines the place of suing the defendant in a civil court. 22. For the foregoing reasons, in my view, Courts at Delhi have no territorial jurisdiction to deal with the above suits. Accordingly, it is ordered that the plaints be returned to plaintiff to present the same in the Court of competent jurisdiction. 23. Applications are disposed of in the above terms. Sd/- A.K. PATHAK, J. MAY 08, 2012