MANU/SC/0001/1989

Equivalent Citation: AIR1989SC 1239, 1989(2)APLJ (SC ) 15, 1989(2)ARBLR340(SC ), (1989)2GLR735, JT1989(2)SC 38, 1989-1-LW449,
1989(1)SC ALE633, (1989)2SC C 163, [1989]2SC R1a, [1989]44TAXMAN442(SC ), 1989(2)UJ80

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 2682 of 1982

Decided On: 13.03.1989

Appellants:A.B.C. Laminart Pvt. Ltd. and Ors.
vs.
Respondent:A.P. Agencies, Salem
Hon'ble Judges/Coram:
G.L. Oza and K.N. Saikia, JJ.
Case Note:
Civil - Jurisdiction - High Court allowed Respondent's Appeal and set aside
judgment of Trial Court with direction to take plaint on file and dispose of
suit filed by Respondent for recovery of a sum - Hence, this Appeal -
Whether, order passed by High Court was erroneous - Held, connecting
factor with Kaira jurisdiction was ensured by fixing situs of contract within
Kaira - However, delivery of goods at address of Respondent at Salem
provided connecting factor for Court at Salem to have jurisdiction - Clause
11 was included in general terms and conditions of sale - In clause
exclusive words like 'exclusive', 'alone, 'only' and like were not used -
Hence, jurisdiction of Court at Salem was not expressly excluded - Further,
other general terms and conditions were not indicative of exclusion of other
jurisdictions - Thus, there was no error infirmity in impugned judgment of
High Court - Appeal dismissed.
JUDGMENT
K.N. Saikia, J.
1. This is an appeal by special leave from the judgment and order of the High Court
at Madras dated 4th November, 1980 in C M.A. No. 218 of 1978 allowing the appeal
and setting aside the judgment of the subordinate judge at Salem in original suit No.
302 of 1975 on the preliminary question of jurisdiction.
2. The first appellant is a manufacturer and supplier of metallic yarn under the name
and style 'Rupalon Metallic Yarn' having its registered office at Udyognagar,
Mohamadabad, Gujarat within the jurisdiction of the civil Court of Kaira, The second
appellant is a sister concern of the first appellant doing business with it. The
respondent is a registered partnership firm doing business in metallic yarn and other
allied products at Salem.
3 . The first petitioner entered into an agreement with the respondent on 2.10.1974
whereunder the appellants were to supply 5000 bobbins of Rupalon Metallic Yarn to
the respondent at the rate of Rs. 35/- per bobbin as stipulated in different clauses of
the agreement. Clause 11 of the agreement provided as follows:

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 Any dispute arising out of this sale shall be subject to Kaira jurisdiction.
4 . Disputes having arisen out of the contract the respondent filed a suit, being
original suit No. 302 of 1975, against the appellants in the Court of Subordinate
Judge at Salem for the recovery of a sum of Rs. 1,63,240, claiming to be the balance
of the advance remaining in the hands of the appellants and also a sum of Rs.
2,40.000 towards damages. The appellants took a number of defences and also took
a preliminary objection that the Subordinate Judge at Salem had no jurisdiction to
entertain the suit as parties by express contract had agreed to confer exclusive
jurisdiction in regard to all disputes arising out of the contract on the civil Court at
Kaira.
5. The Trial Court, inter alia, framed issue No. 2 as follows:
Issue No. 2. Has the court no jurisdiction to entertain or try this suit ?
The learned Court treating it as a preliminary issue in its judgment dated 18.4.1978
found that it had no jurisdiction to entertain the suit in view of Clause 11 and
accordingly it returned the Plaint for presentation in the proper court. The respondent
appealed therefrom, in C.M.A. No. 218 of 1978, to the High Court of Madras which by
the impugned Judgment and Order dated 4.11.1980 allowed the appeal, setting aside
the judgment of the trial court with a direction to take the plaint on file and dispose
of the suit on merits on other issues. Hence this appeal.
6. Mr. Pinki Misra, the learned Counsel for the appellants, submits. that Clause 11 of
the agreement having provided that any dispute arising out of this sale shall be
subject to Kaira jurisdiction, the parties are bound by it and the suit could therefore
have been filed only within Kaira jurisdiction and not at Salem, and as such, the High
Court committed error of law in setting aside the Trial Court judgment and in
directing the Court at Salem to entertain the suit. Mr. S.S. Javali, the learned Counsel
for the respondent, submits that what is being called Clause 11 of the agreement was
only one of the general terms and conditions of the sale and not a clause in the
agreement, and that even if it was construed as a clause in the agreement itself it
was not exclusive so as to take away all jurisdictions except that of Kaira,
7 . The first question to be decided, therefore, is whether Clause 11 as aforesaid
formed part of the agreement. Mr. Javali submits that Ext B-1 is an order of
confirmation No. 68/59 dated 2.10.1974 from the Sales Executive for the first
appellant to the respondent acknowledging the receipt of their order and registering
the same subject to the terms and conditions 'overleaf. The general terms and
conditions printed overleaf included the aforesaid Clause 11. We are unable to agree.
Admittedly the parties have transacted the business on inter alia basis of Clause 11.
There is, therefore, no escape from the conclusion that Clause 11 formed part of the
agreement and the parties would be bound by it so long as they would be bound by
the contract itself, It is not open to the respondent to deny existence of Clause 11,
The submission of Mr. Javali has, therefore, to be rejected.
8. The next question is whether Clause 11 is valid, and if so, what would be its effect
? As Clause 11 formed part of the agreement it would be valid only if the parties
could have validly agreed to it. It is common knowledge that the law of contract only
prescribes certain limiting principles within which parties are free to make their own
contracts. An agreement enforceable at law is a contract. An agreement which
purports to oust the jurisdiction of the Court absolutely is contrary to public policy
and hence void. Each of the citizens has the right to have his legal position

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determined by the ordinary Tribunal except, of course, in a contract (a) when there is
an arbitration clause which is valid and binding under the law, and (b) when parties
to a contract agree as to the jurisdiction to which disputes in respect of the contract
shall be subject. "It has long been established", say Cheshire and Fifoot, "that a
contract which purports to destroy the right of one or both of the parties to submit
questions of law to the court is contrary to public policy and is void pro tanto."
However, arbitration is a statutory mode of settlement; and as a matter of
commercial law and practice parties to a contract may agree as to the jurisdiction to
which all or any disputes on or arising out of the contract shall be subject.
9 . Section 28 of the Indian Contract Act, 1872 provides that every agreement by
which any party thereto is restricted absolutely from enforcing his rights under or in
respect of any contract, by the usual legal proceedings in the ordinary tribunal, or
which limits the time within which he may thus enforce his rights, is void to that
extent. This is subject to exceptions, namely, (i) contract to refer to arbitration and
to abide by its award, (2) as a matter of commercial law and practice to submit
disputes on or in respect of the contract to agreed proper jurisdiction and not other
jurisdictions though proper. The principle, of Private International Law that the
parties should be bound by the jurisdiction clause to which they have agreed unless
there is some reason to contrary is being applied to municipal contracts. In Lee v.
Showmen's Guild (1952) 1 All E.R. 1175 Lord Denning said:
parties cannot by contract oust the ordinary courts from their jurisdiction
They can, of course, agree to leave questions of law, as well as questions of
fact, to the decision of the domestic tribunal. They can, indeed, make the
tribunal the final arbiter on questions of fact, but they cannot make it the
final arbiter on questions of law. They cannot prevent its decisions being
examined by the courts. If parties should seek, by agreement, to take the law
out of the hands of the courts and put it into the hands of a private tribunal,
without any recourse at all to the courts in cases of error of law then the
agreement is to that extent contrary to public policy and void.
10. Under Section 23 of the Indian Contract Act the consideration or object of an
agreement is lawful, unless it is opposed to public policy. Every agreement of which
the object or consideration is unlawful is void. Hence there can be no doubt that an
agreement to oust absolutely the jurisdiction of the Court will be unlawful and void
being against the public policy. Ex dolo malo non oritur actio. If therefore it is found
in this case that Clause 11 has absolutely ousted the jurisdiction of the Court it would
be against public policy. However, such will be the result only if it can be shown that
the jurisdiction to which the parties have agreed to submit had nothing to do with the
contract. If on the other hand it is found that the jurisdiction agreed would also be a
proper jurisdiction in the matter of the contract it could not be said that it ousted the
jurisdiction of the Court. This leads to the question in the facts of this case as to
whether Kaira would be proper jurisdiction in the matter of this contract. It would
also be relevant to examine if some other courts than that of Kaira would also have
had jurisdiction in the absence of Clause 11 and whether that would amount to ouster
of jurisdiction of those courts and would thereby affect the validity of the clause.
11. The jurisdiction of the Court in matter of a contract will depend on the situs of
the contract and the cause of action arising through connecting factors.
12. A cause of action means every fact, which, if traversed, it would be necessary for
the plaintiff to prove in order to support his right to a judgment of the Court. In other

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words, it is a bundle of facts which taken with the law applicable to them gives the
plaintiff a right to relief against the defendant. It must include some act done by the
defendant since in the absence of such an act no cause of action can possibly accrue.
It is not limited to the actual infringement of the right sued on but includes all the
material facts on which it is founded It does not comprise evidence necessary to
prove such facts, but every fact necessary for the plaintiff to prove to enable him to
obtain a decree. Everything which if not proved would give the defendant a right to
immediate judgment must be part of the cause of action. But it has no relation
whatever to the defence which may be set up by the defendant nor does it depend
upon the character of the relief prayed for by the plaintiff.
13. Under Section 20(c) of the CPC subject to the limitation stated theretofore, every
suit shall be instituted in a court within the local limits of whose jurisdiction the
cause of action, wholly or in part arises. It may be remembered that earlier Section 7
of Act 7 of 1888 added Explanation III as under:
Explanation III. In suits arising out of contract the cause of action arises
within the meaning of this section at any of the following places, namely:
1. the place where the contract was made ;
2. the place where the contract was to be performed or performance
thereof completed ;
3 . the place where in performance of the contract any money to
which the suit relates was expressly or impliedly payable.
14. The above Explanation III has now been omitted but nevertheless it may serve a
guide. There must be a connecting factor.
15. In the matter of a contract there may arise causes of action of various kinds. In a
suit for damages for breach of contract the cause of action consists of the making of
the contract, and of its breach, so that the suit may be filed either at the place where
the contract was made or at the place where it should have been performed and the
breach occurred. The making of the contract is part of the cause of action. A suit on a
contract, therefore, can be filed at the place where it was made. The determination of
the place where the contract was made is part of the law of contract. But making of
an offer on a particular place does not form cause of action in a suit for damages for
breach of contract. Ordinarily, acceptance of an offer and its intimation result in a
contract and hence a suit can be filed in a court within whose jurisdiction the
acceptance was communicated. The performance of a contract is part of cause of
action and a suit in respect of the breach can always be filed at the place where the
contract should have performed or its performance completed. If the contract is to be
performed at the place where it is made, the suit on the contract is to be filed there
and nowhere else In suits for agency actions the cause of action arises at the place
where the contract of agency was made or the place where actions are to be rendered
and payment is to be made by the agent. Part of cause of action arises where money
is expressly or impliedly payable under a contract. In cases of repudiation of a
contract, the place where repudiation is received is the place where the suit would
lie. If a contract is pleaded as part of the cause of action giving jurisdiction to the
Court where the suit is filed and that contract is found to be invalid, such part of
cause of the action disappears. The above are some of the connecting factors.
16. So long as the parties to a contract do not oust the jurisdiction of all the Courts

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which would otherwise have jurisdiction to decide the cause of action under the law
it cannot be said that the parties have by their contract ousted the jurisdiction of the
Court. If under the law several Courts would have jurisdiction and the parties have
agreed to submit to one of these jurisdictions and not to other or others of them it
cannot be said that there is total ouster of jurisdiction. In other words, where the
parties to a contract agreed to submit the disputes arising from it to a particular
jurisdiction which would otherwise also be a proper jurisdiction under the law their
agreement to the extent they agreed not to submit to other jurisdictions cannot be
said to be void as against public policy. If on the other hand the jurisdiction they
agreed to submit to would not otherwise be proper jurisdiction to decide disputes
arising out of the contract it must be declared void being against public policy.
Would this be the position in the instant case ?
1 7 . In S. Manuel Raj & Co. v. J. Manilal & Co. MANU/GJ/0069/1963 :
AIR1963Guj148 where one of the parties to the contract signed an order form printed
by the other party containing the words "subject to Madras jurisdiction" and sent the
order form to the other party it was held that the party must be assumed to have
agreed that Madras was the place for settlement of the dispute and it was not open to
that person who signed the order form of the opposite party containing the printed
words to show that printed words were not part of the contract and that those words
in the contract was to exclude the jurisdiction of other Courts and to keep sole
jurisdiction to one Court, It was observed that the object of printing such words as
"subject to Madras jurisdiction" in the contract was to exclude the jurisdiction of
other Courts and to give sole jurisdiction to one Court and it was in consonance with
the commercial practice in India. Similarly in Sri Rajendra Mills v. Haji Hassan
MANU/WB/0064/1970 : AIR1970Cal342 where there was a contract between the
plaintiff and defendant No. 1 under which the parties agreed that all suits arising on
or out of the contract, would be instituted in the Court at Salem, the Division Bench
held that it was true that the suit could have been instituted either at Salem or at
Howrah under Section 20(c) of the CPC, as the cause of action, admittedly arose in
part in both the places and it was therefore a case where two Courts had concurrent
jurisdiction and in such a case it was open to the parties to make a choice restricting
the Court in which the suit under or upon the contract could be instituted. In other
words, both the Courts having territorial jurisdiction the parties by their agreement
waived their right, to institute any action, as aforesaid except at Salem. It was
observed that under those circumstances it was not open to the plaintiff to object to
the order for return of the plaint for presentation to the Court at Salem as the choice
of forum in case of alternative forums lies with the plaintiff and the plaintiff having
debarred or precluded itself from doing to any other Court except at Salem which
would be a proper Court as against the defendants it would not be just to allow the
plaintiff at the instance of any other party or under cover of its objection to institute
the suit except in the Court at Salem.
18. In Hakam Singh v. Gammon (India) Ltd. MANU/SC/0001/1971 : [1971]3SCR314
where the appellant agreed to do certain construction work for the respondent who
had its principal place of business at Bombay on the terms and conditions of a
written tender. Clause 12 of the tender provided for arbitration in case of dispute.
Clause 13 provided that not withstanding the place where the work under the contract
was to be executed the contract shall be deemed to have been entered into by the
parties at Bombay, and the Court in Bombay alone shall have jurisdiction to
adjudicate upon. On dispute arising between the parties the appellant submitted a
petition to the Court at Varanasi for an order under Section 20 of the Arbitration Act,

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1940 that the agreement be filed and an order of reference be made to an arbitrator
or arbitrators appointed by the Court. The respondent contended that in view of the
Clause 13 of the arbitration agreement only the Courts at Bombay had jurisdiction.
The Trial Court also held that the entire cause of action had arisen at Varanasi and
the parties could not by agreement confer jurisdiction on the Courts at Bombay which
they did not otherwise posses. The High Court in revision held that the Courts at
Bombay had jurisdiction under the general law and hence could entertain the petition
and that in view of Clause 13 of the arbitration agreement the petition could not be
entertained at Varanasi and directed the petition to be returned for presentation to
the proper Court, On appeal therefrom one of the questions that fell for consideration
of this Court was whether the Courts at Bombay alone had jurisdiction over the
dispute. It was held that the CPC in its entirety applied to proceedings under the
Arbitration Act by virtue of Section 41 of that Act. The jurisdiction of the Court under
the Arbitration Act to entertain proceedings for filing an award was accordingly
governed by the provisions of the CPC, By the terms of Section 20(a) of the CPC read
with explanation II thereto the respondent company which had its principal place of
business at Bombay was liable to be sued at Bombay. It was held that it was not
open to the parties to agreement to confer by their agreement jurisdiction on a Court
which did not possess under the Code. But where two Courts or more have under the
CPC jurisdiction to try the suit or proceeding an agreement between the parties that
the dispute between them shall be tried one of such Courts was not contrary to public
policy and such an agreement did not contravene Section 28 of the Contract Act.
Though this case arose out of an arbitration agreement there is no reason why the
same rule should not apply to other agreements in so far as jurisdiction is concerned,
Without referring to this decision a Division Bench of the Madras High Court in Nanak
Chand v. T.T. Elect. Supply Co. MANU/TN/0162/1975 : AIR1975Mad103 observed
that competency of a Court to try an action goes to the root of the matter and when
such competency is not found, it has no jurisdiction at all to try the case. But
objection based on jurisdiction is a matter which parties could waive and it is in this
sense if such jurisdiction is exercised by Courts it does not go to the core of it so as
to make the resultant judgment a nullity.
Thus it is now a settled principle that where there may be two or more competent
Courts which can entertain a suit consequent upon a part of the causes action having
arisen there within, if the parties to the contract agree 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 can not be understood as
parties contracting against the Statute
Mercantile Law and practice permit such agreements.
19. In Nazirrudtn v. V.A. Annamalai and Ors. 1978 (2) M.L J. 254 where the question
was whether Rule 35 of U.P. State Lottery Rules, 1969 confined the jurisdiction only
to Lucknow. The Rule said:
35. Legal jurisdiction in all matters concerning the State lottery shall be
Lucknow". The sole question for consideration therefore was whether the
above Rule had the effect of vesting exclusive jurisdiction only in the Courts
in Lucknow and thereby taking away the jurisdiction which the subordinate
judge court at Vellore could have if it was established that the lottery ticket
was stolen within the jurisdiction of that Court from the first respondent.
Held, it was well established that the jurisdiction of a civil Court can be taken
away only by an express provision or by necessary implication and ousting of

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 a jurisdiction of civil Court should not and ought not be inferred from an
ambiguous provision. In that particular case it was common case of the
parties that Rule 35 did not expressly take away the jurisdiction of any other
Court and vest the exclusive jurisdiction only in the Court at Lucknow A note
of caution was sounded by M.P. Thakkar, J, as he then was, in Shehali Kumar
Sarabhal v. E.T. Orgn. MANU/GJ/0070/1975 : AIR1975Guj72 observing that
the ouster clause could operate as estoppel against the parties to the
contract, but it could not tie the hands of the Court and denude it of the
powers to do justice. Ordinarily, it was observed: the Courts would respect
the agreement between the parties which was borne out of the meeting of
their minds out of consideration of convenience, but the Courts were not
obliged to do so in every case, and that a new approach to the question
deserved to be made where the ouster clause was 'calculated to operate as
an engine of oppression and as a means to defeat the ends of justice". In
such a case the free consent may be wanting and injustice may be avoided.
20. When the Court has to decide the question of jurisdiction pursuant to an ouster
clause it is necessary to construe the ousting expression or clause properly. Often the
stipulation is that the contract shall be deemed to have been made at a particular
place. This would provide the connecting factor for jurisdiction to the Courts of that
place in the matter of any dispute on or arising out of that contract. It would not,
however, ipso facto take away jurisdiction of other Courts. Thus, in Salem Chemical
Industries v. Bird & Co. MANU/TN/0285/1979 : AIR1979Mad16 where the terms and
conditions attached to the quotation contained an arbitration clause provided that :
"any order placed against this quotation shall be deemed to be a contract made in
Calcutta and any dispute arising therefrom shall be settled by an Arbitrator to be
jointly appointed by us" it was held that it merely fixed the situs of the contract at
Calcutta and it did not mean to confer an exclusive jurisdiction on the Court at
Calcutta, and when a part of the cause of action had arisen at Salem, the Court there
had also jurisdiction to entertain the suit under Section 20(c) of the CPC.
21. From the foregoing decisions 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. When the clause is clear, unambiguous and specific accepted notions of
contract would bind the parties and unless the absence of ad idem can be shown, the
other Courts should avoid exercising jurisdiction, As regards construction of the
ouster clause when words like 'alone', 'only, 'exclusive' and the like have been used
there may be no difficulty. Even without such words in appropriate cases the maxim
'expressio unius est exclusio alterius' expression of one is the exclusion of another
may be applied. What is an appropriate case shall depend on the facts of the case. In
such a case mention of one thing may imply exclusion of another. When certain
jurisdiction is specified in a contract an intention to exclude all others from its
operation may in such cases be inferred. It has therefore to be properly construed.
2 2 . Coming to Clause 11 we already found that this clause was included in the
general terms and conditions of sale and the order of confirmation No. 68/59 dated
2.10.1974 with the general terms and conditions was sent from Udyognagar,
Mohmadabad, Gujarat to the respondent's address at 12 Suramangalam Road Salem,
Tamilnadu. The statement made in the Special Leave Petition that Udyognagar,
Mohamadabad, Gujarat is within the jurisdiction of the civil Court of Kaira has not.
been controverted. We have already seen that making of the contract was a part of
the cause of action and a suit on a contract therefore could be filed at the place
where it was made. Thus Kaira court would even otherwise have had jurisdiction. The

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bobbins of metallic yarn were delivered at the address of the respondent at Salem
which, therefore, would provide the connecting factor for Court at Salem to have
jurisdiction. If out of the two jurisdictions one was excluded by Clause 11 it would
not absolutely oust the jurisdiction of the Court and, therefore, would not he void
against public policy and would not violate Sections 23 and 28 of the Contract Act.
The question then is whether it can construed to have excluded the jurisdiction of the
Court at Salem. In the clause 'any dispute arising out of this sale shall be subject to
Kaira jurisdiction' ex facie we do not find exclusive words like 'exclusive', 'alone,
'only' and the like. Can the maxim 'expressio unius est exclusio alterius' be applied
under the facts and circumstances of the case ? The order of confirmation is of no
assistance. The other general terms and conditions are also not indicative of
exclusion of other jurisdictions. Under the facts and circumstances of the case we
hold that while connecting factor with Kaira jurisdiction was ensured by fixing the
situs of the contract within Kaira other jurisdictions having connecting factors were
not clearly, unambiguously and explicitly excluded. That being the position it could
not be said that the jurisdiction of the Court at Salem which Court otherwise had
jurisdiction under law through connecting factor of delivery of goods thereat was
expressly excluded. We accordingly find no error infirmity in the impugned judgment
of the High Court.
23. In the result, this appeal fails and is dismissed. We, however, leave the parties
to bear their own costs.

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