Case Note & Summary
Background: The dispute arose out of a hire purchase agreement dated 26 April 1989 and a supplemental agreement dated 1 June 1989 between Cholamandalam Investments & Finance Co. Pvt. Ltd., a financier with its registered office at Madras, and Radhika Synthetics Ltd. The machinery was to be supplied by Primatex Machinery Private Limited, Dombivli, Thane. Radhika Synthetics had complaints about the machinery, but Cholamandalam contended it was only a financier and not concerned with defects in machinery supplied by the manufacturer. Facts: Cholamandalam filed C.S. No.1161 of 1991 in the High Court of Madras seeking a decree for Rs.65,82,850 with interest of Rs.62,75,778, alleging default in payment of instalments from November 1990. It had earlier filed C.S. No.716 of 1990 for seizure of machinery, but after negotiations, two further supplemental agreements dated 19 October 1990 were executed and the earlier suit was withdrawn. In the Madras suit, Cholamandalam filed interim applications under Order 38 Rule 5 of the Code of Civil Procedure for attachment before judgment; Radhika Synthetics filed a counter affidavit raising contentions about defective machinery but did not object to jurisdiction. Radhika Synthetics then filed Suit No.692 of 1992 in the High Court of Bombay seeking recovery of Rs.2,56,00,000 with interest, alleging that Cholamandalam was responsible for failure to commence production and that the agreement was executed at Bombay, machinery was supplied at Bombay, and loss was suffered at Bombay; it obtained leave under Clause 12 of the Letters Patent. Legal Issues: The core questions were whether the exclusive jurisdiction clause in the hire purchase agreement bound the parties, whether the Bombay High Court's leave under Clause 12 could exclude Madras jurisdiction, and whether the Bombay suit should be transferred to Madras or stayed under Section 10 CPC. Arguments: Cholamandalam submitted that the agreement was executed at Madras, that clause 20 gave exclusive jurisdiction to Madras courts, that its Bombay office was only a forwarding office, that some instalments were paid at Madras, and that the Bombay suit was filed six months later as a counterblast. Radhika Synthetics argued that Cholamandalam had an office in Bombay, that all documentation and payments were made at Bombay, that the entire cause of action arose at Bombay, and that leave under Clause 12 had been obtained. Court's Analysis: The Supreme Court noted settled law that where two courts have jurisdiction, parties can by contract submit to the jurisdiction of one and exclude the other. The hire purchase agreement opened with 'Memorandum of Agreement made at Madras' and clause 20 explicitly conferred exclusive jurisdiction on Madras courts. The supplemental agreements did not supersede the original agreement and contained a continuation clause. Therefore, leave under Clause 12 of the Letters Patent could not exclude the jurisdiction of the Madras High Court. Both High Courts might have jurisdiction, but the Madras suit was first in point of time and the issues were common. The Court considered two courses: transfer or stay under Section 10; transfer was preferred to avoid multiplicity and protracted litigation. Decision: The Supreme Court allowed Transfer Petition No.870 of 1993 and rejected Transfer Petition No.196 of 1994. It transferred Suit No.6920 of 1992 pending in the Bombay High Court to the High Court of Madras to be tried along with C.S. No.1161 of 1991, with no order as to costs.
Headnote
A) Civil Procedure - Transfer of Cases - Supreme Court's Power under Article 139A(2) - Constitution of India, Article 139A(2) - The Supreme Court has power to transfer any case pending before any High Court to any other High Court. In a dispute arising from a hire purchase agreement, two suits between the same parties were pending in Madras and Bombay High Courts involving common issues and facts. The Madras suit was first in point of time and the Bombay suit was filed six months later, described as a counterblast. The Court preferred transfer of the Bombay suit to the Madras High Court over staying the later suit to finally resolve all issues and avoid protracted litigation. Held that it is a fit case to exercise power under Article 139A(2). B) Contract Law - Jurisdiction - Exclusive Forum Selection Clause - Clause 20 of Hire Purchase Agreement - Where two courts have jurisdiction over a dispute, parties can by contract submit to the jurisdiction of one and exclude the other. Clause 20 of the hire purchase agreement made at Madras conferred exclusive jurisdiction on Madras courts for all legal proceedings arising from the agreement. The supplemental agreements did not totally supersede the original agreement and contained a clause that all original terms and conditions continue in force. Therefore, leave obtained under Clause 12 of the Letters Patent from the Bombay High Court cannot exclude the jurisdiction of the Madras High Court. Held that the parties are bound to submit to the jurisdiction of the Madras High Court; the exclusive jurisdiction clause is valid and enforceable. C) Civil Procedure - Stay of Suit - Section 10 Code of Civil Procedure, 1908 - Section 10 CPC permits stay of a later suit when the matter in issue is pending in a previously instituted suit between the same parties. In this case, two courses were open: transfer of the Bombay suit to Madras or stay of the Bombay suit under Section 10. The Court found that transfer would ensure all issues are thrashed out and litigation not unnecessarily protracted. Held that transfer under Article 139A(2) is the appropriate course, and the Bombay suit is transferred to the Madras High Court to be tried along with the Madras suit; the alternative of stay is not adopted.
Issue of Consideration
Whether the exclusive jurisdiction clause in the hire purchase agreement was binding; whether the Bombay High Court's leave under Clause 12 of the Letters Patent could exclude the jurisdiction of the Madras High Court; and whether the Bombay suit should be transferred to Madras or stayed under Section 10 CPC.
Final Decision
Transfer Petition No.870 of 1993 allowed; Suit No.6920 of 1992 pending in the Bombay High Court transferred to the High Court of Madras to be tried along with C.S. No.1161 of 1991; Transfer Petition No.196 of 1994 rejected; no order as to costs.
Law Points
- Parties by contract can submit to jurisdiction of one competent court and exclude other
- exclusive jurisdiction clause in agreement is binding
- supplemental agreements do not supersede original agreement
- leave under Clause 12 of Letters Patent does not exclude jurisdiction of Madras High Court
- transfer of suit under Article 139A(2) of Constitution is appropriate to avoid multiplicity of proceedings
- Section 10 CPC provides stay but transfer preferred
