Case Note & Summary
The dispute arose from a suit instituted by the plaintiff, a typist clerk employed by the second defendant, the Bahrein Petroleum Co. Ltd., against the company and its recruiting agent in the Court of the Subordinate Judge of Cochin for recovery of gratuity and arrears of salary. The contract of service was signed at Bombay, and the zone of operation was Bahrein Island outside India. The defendants neither resided nor carried on business within the local limits of the Cochin Court, and no part of the cause of action arose there. Both defendants applied to the Cochin Court for stay of the suit under Section 34 of the Indian Arbitration Act, 1940, and in that application they expressly pleaded that the Cochin Court had no jurisdiction to entertain the suit. The Cochin Court refused the stay, and an appeal to the District Court of Ernakulam was dismissed; a revision petition to the High Court was dismissed in limine. While the stay matter was pending, the Cochin Court passed an ex parte order declaring that the suit should proceed ex parte, but on the defendants' application this order was set aside and the defendants were permitted to file their written statement. In the written statement, the defendants pleaded on merits and also disputed the territorial jurisdiction of the Cochin Court. On the defendants' application, the Cochin Court tried the preliminary issue of jurisdiction and held that it had no territorial jurisdiction, directing return of the plaint for presentation to the proper court. An appeal to the District Judge of Ernakulam was dismissed. However, the High Court of Kerala, on revision, held that the defendants had waived their objection as to territorial jurisdiction by filing the application under Section 34 and the appeal under Section 39(1) of the Arbitration Act, 1940, and set aside the orders of the lower courts, directing the Cochin Court to try the suit on merits. The second defendant appealed to the Supreme Court by special leave. The legal issues before the Supreme Court were whether the defendants had waived their objection to territorial jurisdiction by applying for stay under Section 34 and appealing under Section 39(1) of the Arbitration Act, 1940, and whether Section 21 of the Code of Civil Procedure, 1908 precluded the objection in the absence of alleged or proved failure of justice when the suit had not been tried on merits. The appellant contended that the objection was raised at the earliest opportunity and persisted throughout, and that an application under Section 34 could not be treated as recognition of jurisdiction. The respondent argued that the defendants' conduct, particularly filing the stay application and appeal, amounted to waiver and that they had not alleged or proved failure of justice as required by Section 21. The Supreme Court examined the provisions of the Arbitration Act, 1940 and the Code of Civil Procedure, 1908. It held that the general definition of 'Court' in Section 2(c) of the Arbitration Act could not be imported into Section 34, and that an application for stay to the court before which the suit is pending was in no way a recognition that the court had jurisdiction to try the suit, nor could an appeal under Section 39(1) have that effect. The Court further observed that a defendant may waive objection as to place of suing, and waiver could occur independently of Section 21 CPC, but the conduct must clearly indicate abandonment of objection. In this case, the defendants lodged their protest at the earliest opportunity in the stay petition, persisted in their objection in the written statement and throughout proceedings, and thus did not waive the objection. On the applicability of Section 21 CPC, the Court held that the condition 'unless there has been a consequent failure of justice' applies only when the suit has been tried on the merits and judgment rendered; since only the preliminary issue of jurisdiction had been tried and no verdict on merits had been given, the defendants were not required to allege or prove failure of justice at this stage. Citing Kiran Singh v. Chaman Paswan, the Court reiterated that objections to territorial jurisdiction are technical and should not lead to reversal unless there has been prejudice on merits. Accordingly, the Supreme Court allowed the appeal, set aside the judgment of the High Court, and restored the orders of the trial court and the District Court directing return of the plaint for presentation to the proper court. There was no order as to costs.
Headnote
A) Civil Procedure - Territorial Jurisdiction - Waiver of Objection - Code of Civil Procedure, 1908, Section 21 - A defendant may waive objection as to place of suing and may be subsequently precluded from taking it; waiver can occur independently of Section 21, but conduct must clearly indicate abandonment of objection. In this case, defendants protested at earliest opportunity by applying for stay under Section 34 of Arbitration Act, 1940 and expressly pleading lack of jurisdiction in that petition; they persisted in objection through written statement and preliminary issue. Held that defendants did not waive objection as to territorial jurisdiction of Cochin Court. (Paras Not mentioned) B) Arbitration - Stay of Suit - Effect of Application under Section 34 - Arbitration Act, 1940, Sections 2(c), 34, 39(1) - An application for stay of suit under Section 34 must be made to the court before which suit is pending, but such application is not a recognition that the court has jurisdiction to try the suit; general definition of 'Court' in Section 2(c) cannot be imported into Section 34; appeal under Section 39(1) from refusal of stay does not amount to concession of jurisdiction. Held that filing stay application and appeal did not constitute waiver of territorial jurisdiction objection. (Paras Not mentioned) C) Civil Procedure - Objection to Place of Suing - Condition of Failure of Justice - Code of Civil Procedure, 1908, Section 21 - The condition 'unless there has been a consequent failure of justice' implies that at the time objection is taken in appellate or revisional court, the suit has already been tried on merits; Section 21 does not preclude objection as to place of suing if trial court has not given verdict on merits at the time objection is taken. In this case only preliminary issue as to jurisdiction was tried, hence defendants need not allege or prove failure of justice. Held that objection was maintainable before this Court. (Paras Not mentioned)
Issue of Consideration
Whether the defendants waived their objection as to territorial jurisdiction of the trial court by applying for stay under Section 34 of the Arbitration Act, 1940 and appealing under Section 39(1); whether Section 21 of the Code of Civil Procedure, 1908 precludes the objection in the absence of alleged or proved failure of justice when the suit has not been tried on merits.
Final Decision
The Supreme Court allowed the appeal, set aside the judgment of the High Court, and restored the orders of the trial court and the District Court directing return of the plaint for presentation to the proper court. There was no order as to costs.
Law Points
- Waiver of objection to territorial jurisdiction must be based on clear conduct
- application for stay under Section 34 of Arbitration Act
- 1940 is not recognition of court's jurisdiction
- appeal under Section 39(1) of Arbitration Act
- 1940 does not concede jurisdiction
- general definition of 'Court' in Section 2(c) cannot be imported into Section 34
- Section 21 CPC condition of failure of justice applies only after trial on merits
- objection to place of suing can be raised at appellate stage if no verdict on merits yet
