Acme Chem Limited vs Ravindra Kumar Tiwari & Ors
2023 Latest Caselaw 3388 Cal/2

Calcutta High Court

Acme Chem Limited vs Ravindra Kumar Tiwari & Ors on 12 December, 2023

                 IN THE HIGH COURT AT CALCUTTA
                 (Ordinary Original Civil Jurisdiction)
                       COMMERCIAL DIVISION


Present:

The Hon'ble Justice Krishna Rao



                         IA No: GA 2 of 2023
                                  With
                              GA 3 of 2023
                                  With
                              GA 5 of 2023
                                  With
                              GA 6 of 2023

                             In CS 5 of 2020


                         ACME CHEM Limited
                                 Versus
                    Ravindra Kumar Tiwari & Ors.



           Mr. Aritra Basu
           Mr. Patita Paban Bishwal
           Ms. Suranjana Chatterjee
                                          ... For the plaintiff.

           Mr. Rajendra Solani
           Ms. Archana Chowdhury
           Mr. Pradip Kumar
                                   ... For the defendant nos. 1, 4, 6 & 8.
                                         2


Hearing Concluded On : 29.11.2023

Judgment on              : 12.12.2023

Krishna Rao, J.:

1. The defendant nos. 1, 4, 6 & 8 have filed their respective application

under Order VII Rule 10 of the Code of Civil Procedure, 1908 praying

for return of the plaint for lack of jurisdiction of this Court.

2. Mr. Rajendra Solani, Leaned Counsel appearing for the defendants

submits that the defendants have never come to Kolkata during their

engagement with the plaintiff. He further submits that all the meetings,

agreements and communications made between the plaintiff and the

defendants before the appointments of the defendants were taken place

at NCR, Delhi. He further submits that the WhatsApp conversation

between the representative of the plaintiff, namely, Narain Holani and

the defendant no. 1 took place at Andaz (Hyatt), Delhi on 24th August,

2018.

3. Mr. Solani further submits that the defendant no. 1 had been

appointed as Group President of the plaintiff with effect from 1st

November, 2018 and was asked to report for work at Panoli, Bharuch

District, Gujarat. He further submits that none of the cause of action

between either of the defendants with the plaintiff was occurred at

Kolkata within the jurisdiction of this Hon'ble Court.

4. Mr. Solani submits that admittedly the manufacturing facilities are

situated at Panoli, District-Bharuch, Gujarat, outside of the jurisdiction

of this Court. He submits that mere the office of the plaintiff is situated

at Kolkata but no cause of action has occurred at Kolkata as neither

the defendants came to Kolkata nor any agreement signed between the

defendants and the plaintiff was entered at Kolkata.

5. Mr. Solani submits that the plaintiff has filed the suit for grant of

compensation. The place of work where the alleged cause of action

arose is Panoli, District-Bharuch, Gujarat and thus, as per Section 19

of the Code of Civil Procedure, 1908, the local limits of the jurisdiction

to file the suit against the defendants arose at Panoli, District-Bharuch,

Gujrat not at Kolkata.

6. Mr. Solani submitted that the plaintiff has filed the suit in the

Commercial Division of this Court though the suit filed by the plaintiff

is not commercial in nature and not coming under any of the provisions

of Section 2(1)(c) of the Commercial Courts Act, 2015. He further

submits that as per the case made out by the plaintiff, the relation

between the plaintiff and the defendants are of workmen and employer

and thus the suit is not maintainable before the Commercial Court.

7. Mr. Aritra Basu, Learned Advocate representing the plaintiff submits

that the applications filed by the defendants are not maintainable

under law. He submits that the appointment letter issued by the

plaintiff to the defendant no. 1 was executed at Kolkata and as such

this Court is having jurisdiction to entertain the suit.

8. Mr. Basu submits that along with the appointment letter, the details of

the salary of the defendant no. 1 has been prescribed and the said

details of the salary was also issued from the Head Office of the plaintiff

at Kolkata and the defendant no. 1 had signed the said details in the

office of the plaintiff at Kolkata and thus it cannot be said that no

cause of action arose at Kolkata.

9. Mr. Basu submitted that after the appointment of the defendant no. 1

as Group President, the defendant nos. 2 to 14 were appointed on the

request of the defendant no. 1 and the appointment orders of the

defendant nos. 2 to 14 were also issued from the registered office of the

plaintiff at Kolkata.

10. Mr. Basu submitted that the Company, namely, Merchem Limited

which was a manufacturing plant and is engaged in the same line of

business were closed for about 2-3 years and in terms of the Resolution

Plan approved by the National Company Law Tribunal in January,

2019, the Merchem Limited has subsequently became a wholly owned

subsidiary of the plaintiff company.

11. Mr. Basu submitted that subsequently the defendant no. 1 was made

an Additional Director of Merchem Limited with effect from 19th April,

2019 and again on 1st May, 2019, the defendant no. 1 was appointed as

whole time Director for the purpose of the business of the plaintiff and

its wholly owned subsidiary, Merchem Limited. The plaintiff has taken

the service of defendant no. 1 and an agreement was entered on 1st

May, 2019. He submits that the agreement between the plaintiff and

the defendants and the defendant no. 1 was entered into at the

registered office of the plaintiff at Kolkata.

12. Mr. Basu submitted that the service between the plaintiff and the

defendant are falling under the purview of Section 2(1)(c)(x) and Section

2(1)(xxi) of the Commercial Courts Act, 2015 as the defendant no. 1 had

entered into an agreement between the plaintiff and the defendants for

management of the Merchem Limited and by issuing such order of

appointment to the defendants, there is a contract between the plaintiff

and the defendants.

13. Mr. Basu submitted that as all the appointments and the negotiations

as well as the agreement and the order of appointments were executed

and issued from Kolkata and that being the Head Office of the plaintiff,

this Court has got the jurisdiction to entertain the suit and the relation

between the plaintiff and the defendants is covered under the

Commercial Courts Act, 2015.

14. Mr. Basu further submitted that the plaintiff has filed the suit before

the Commercial Division and at the time of filing of the suit, the

plaintiff has obtained leave Clause 12 of the Letters Patent, 1865 as

well as Section 12A of the Commercial Courts Act, 2015 but the

defendants have not prayed for revocation of the said leave.

15. The plaintiff has filed the suit against the defendants for decree of Rs.

10 crores as compensation. The plaintiff is engaged in the business of

manufacture and sale of fine and performance chemicals for the rubber

industry. The manufacturing facilities of the plaintiff are situated at

Panoli, District-Bharuch, Gujarat. The Head Office of the plaintiff is

situated at Kolkata. In terms of the Resolution Plan approved by the

NCLT, in the month of January' 2019, the Merchem Limited became a

wholly owned subsidiary of the plaintiff. The plaintiff wanted to have a

person of substantial reputation and experience to look after the

manufacturing plants of the plaintiff and accordingly, a negotiation was

held between the plaintiff and the defendant no. 1 for implementation

of the project of the plaintiff.

16. On 1st November, 2018, the plaintiff had appointed the defendant no. 1

as a Group President. The said order of appointment was issued by the

plaintiff to the defendant from his registered office, 9A Saket

Apartment, 2, Ho Chi Minh Sarani, Kolkata-71. In the said order of

appointment, both the plaintiff and the defendant no. 1 have signed.

On 1st May, 2019, an agreement was entered between the plaintiff and

the defendant no. 1. In the said agreement, it was categorically

mentioned that "this agreement made at Kolkata on this 1st day of May'

2019." The said agreement was signed by the plaintiff and the

defendant no. 1. The witnesses who have signed in the said agreement

have also mentioned their addresses below their signatures as Kolkata.

17. Subsequent to the agreement entered between the plaintiff and the

defendant no. 1, the defendant no. 1 had issued offer of appointment to

the defendant nos. 2 to 14 from the Head Office of the plaintiff.

18. Section 19 of the Code of Civil Procedure, 1908 reads as follows :

"19. Suits for compensation for wrongs to person or movables. - Where a suit is for compensation for wrong done to the person or to movable property, if the wrong was done within the local limits of the jurisdiction of one Court and the defendant resides, or carries on business, or personally works for gain, within the local limits of the jurisdiction of another Court, the suit may be instituted at the option of the plaintiff in either of the said Courts."

As per Section 19, the suit for compensation for wrong done to the

person or to movable property, can be filed if the wrong was done

within the local limits of the jurisdiction of one Court or where

defendant resides or carries on business or personally or works for gain

within the local limits of jurisdiction of another court, the suit may be

instituted at the option of the plaintiff, in either of the said courts.

19. In the case of Mallikarjun Transport, Aurangabad and Another -vs-

Dr. Babasaheb Ambedkar Sahakari Sakhar Karkhana Ltd.)

reported in 2010 SCC OnLine Bom 400, the Bombay High Court held

that:

"7. The suit in which the impugned order is passed, and impugned in this AO, according to learned counsel for respondent, the factory of respondent/defendant is at Osmanabad where the trucks of the appellant plaintiff while lifting the molasses, were detained for which initially Rs. 7,00,000/- require to be deposited by the appellants, hence according to respondent, the cause of action in the sense "wrong" about the detention of those trucks at Osmanabad. It is to be noted that in the impugned order, in para No. 7, it is observed by the learned Trial Court that the talks

and negotiation of contract between the parties took place at defendant's Karkhana Keshegaon and the vehicles were detained at Keshegaon. The defendant has specifically submitted that the cause of action arose at Keshegaon, Tal. and Dist. Osmanabad. It is nobody's case that there was contract between appellants and respondent. On the contrary, the appellants are the transport contractor of Gangapur Sahakari Sakhar Karkhana, who had entered into contract with the respondent as they have purchased the molasses for which they have paid the agreed consideration to the respondent, which is not the subject matter of the Special Civil Suit before the learned Trial Court. It is also not under dispute that there is no contract between the parties to the litigation. Then no question arise as to talks and negotiation took place between the parties to the suit at the defendant's Karkhana and in absence of any such privity of contract between the appellants and respondent, it cannot be said that the appellants entered into contract with respondent to lift the molasses at their factory site. A specific case is made out by the appellants in the plaint before the Lower Court that when he had been to the factory site of respondent/defendant at Osmanabad, initially their trucks were detained, but after negotiation with the purchaser Gangapur Sahakari Sakhar Karkhana, those trucks were released. On the second occasion, again the trucks were detained and at that time, the appellants forced to deposit Rs. 7,00,000/- and this compensation is not only for that 7,00,000/- but for the period, for which their trucks were detained at the factory site. The molasses lifted to be transported to Aurangabad, factory site of Gangapur, for the preparation of further products from that molasses, then, as demonstrated in the plaint, whatever the loss caused to the appellants plaintiffs, because of the contract, they have entered into with this Gangapur Sahakari Sakhar Karkhana, while transporting the molasses as per their order and placement with the respondent sugar factory. In the premise, as projected, and as per the ingredients of section 19 of Civil Procedure Code, the cause of action about the loss caused to the appellants cannot be said where the vehicles were detained, but because of non-use of those vehicles at Aurangabad, and if it is so, as per the illustration

given below section 19 of Civil Procedure Code, even though the vehicles were detained at Osmanabad, they have also loss to their business at Aurangabad. In the premise, there is option for the appellant where to file the suit, at the place of their business or where the vehicles detained. In the premise, the option was obtained by the appellants by filing the suit in the Court of Civil Judge, S.D. Aurangabad, which cannot be faulted. The finding recorded by the Court below particularly in para Nos. 11, 12 and 13 of the order impugned that as the vehicles were detained at Osmanabad, the Court at Aurangabad has no territorial jurisdiction to decide and entertain the suit filed by the plaintiffs appellants is wrong and not the clear interpretation of section 19 of Civil Procedure Code and of the scope of section 19 of Civil Procedure Code."

20. In the present case though the place of work of the defendants were

Panoli, District-Bharuch, Gujarat but the defendant no. 1 had executed

agreement with the plaintiff at Kolkata and the orders of appointment

of the defendants were also issued from the head office of the plaintiff.

21. In view of the above, this Court is having jurisdiction to entertain the

suit filed by the plaintiff.

22. Section 2(1)(c)(x) & Section 2(1)(c)(xxi) of the Commercial Courts Act,

2015 reads as follows :

"2(1)(c)(x) - management and consultancy agreements;

2(1)(c)(xxi) - contracts of agency relating to any of the above."

23. In the present case initially the defendant no. 1 was appointed as

Group President by a letter dated 1st November, 2018, thereafter as an

Additional Director with effect from 19th April, 2019 and thereafter

whole time director with effect from 1st May, 2019. When the defendant

no.1 was appointed as whole time Director of the Company, an

agreement was entered by and between the plaintiff and the defendant

no. 1 at Kolkata. Clause 2 of the agreement reads as follows:

"2. The Whole Time Director shall exercise and perform such powers and duties as the Board of Directors of the Company (hereinafter called "the Board") shall, from time to time, determine. Subject to superintendence and control of the Board and further subject to any directions given or restrictions imposed by the Board from time to time the Whole Time Director shall have the general control, management and superintendence of the business of the Company with power to appoint and to dismiss employees and to enter into contracts on behalf of the Company in the ordinary course of business, he may consider necessary or proper or in the interest of the Company, provided however, that nothing shall be done by the Whole Time Director which by resolution or which shall not be effective unless approved or which are not expressly provided."

24. In the case of Ram Pershad -vs- The Commissioner of Income-Tax,

New Delhi reported in (1972) 2 SCC 696, the Hon'ble Supreme Court

held that:

"5. On behalf of the assessee, it was contended that in order to assess the income as salary it must be held that there was a relationship of master and servant between the company and the assessee. For such a relationship to exist, it must be shown that the employee must be subject to the supervision and control of the employer in respect of the work that the employee has to do. Where, however, there is no such supervision or control it will be a relationship of principal and agent or an independent contractor. Applying these tests, it is submitted that the appointment of the

assessee as a Managing Director is not that of a servant but as an agent of the company and accordingly the commission payable to him is income from business and not salary. In support of this contention, reference has been made to Halsbury's Laws of England, Bowstead on Agency and treatises on Company Law by Palmer, Gower, Penington and Buckley.

6. There is no doubt that for ascertaining whether a person is a servant or an agent, a rough and ready test is, whether, under the terms of his employment, the employer exercises a supervisory control in respect of the work entrusted to him. A servant acts under the direct control and supervision of his master. An agent, on the other hand, in the exercise of his work is not subject to the direct control or supervision of the principal, though he is bound to exercise his authority in accordance with all lawful orders and instructions which may be given to him from time to time by his principal. But this test is not universal in its application and does not determine in every case, having regard to the nature of employment, that he is a servant. A doctor may be employed as a medical officer and though no control is exercised over him in respect of the manner he should do the work nor in respect of the day to day work, he is required to do, he may nonetheless be a servant if his employment creates a relationship of master and servant. Similar is the case of a chauffeur who is employed to drive the car for his employer. If he is to take the employer or any other person at his request from place 'A' to place 'B' the employer does not supervise the manner in which he drives between those places. Such examples can be multiplied. A person who is engaged to manage a business may be a servant or an agent according to the nature of his service and the authority of his employment. Generally it may be possible to say that the greater the amount of direct control over the person employed, the stronger the conclusion in favour of his being a servant. Similarly the greater the degree of independence the greater the possibility of the services rendered being in the nature of principal and agent. It is not possible to lay down any precise rule of law to distinguish one kind of employment from the other. The nature of the particular business and the nature of the duties

of the employee will require to be considered in each case in order to arrive at a conclusion as to whether the person employed is a servant or an agent. In each case the principle for ascertainment remains the same.

7. Though an agent as such is not a servant, a servant is generally for some purposes his master's implied agent, the extent of the agency depending upon the duties or position of the servant. It is again true that a director of a company is not a servant but an agent inasmuch as the company cannot act in its own person but has only to act through directors who qua the company have the relationship of an agent to its principal. A Managing Director may have a dual capacity. He may both be a Director as well as employee. It is therefore evident that in the capacity of a Managing Director he may be regarded as having not only the capacity as persona of a director but also has the persona of an employee, as an agent depending upon the nature of his work and the terms of his employment. Where he is so employed, the relationship between him as the Managing Director and the Company may be similar to a person who is employed as a servant or an agent for the term "employed" is facile enough to cover any of these relationships. The nature of his employment may be determined by the articles of association of a company and/or the agreement if any, under which a contractual relationship between the Director and the company has been brought about, whereunder the Director is constituted an employee of the company, if such be the case, his remuneration will be assessable as salary under Section 7. In other words, whether or not a Managing Director is a servant of the company apart from his being a Director can only be determined by the article of association and the terms of his employment. A similar view has been expressed by the Scottish Court of Session in Anderson v. James Sutherland (Peterhead) Limited [1941 SC 203 at 218] where Lord Normand at p. 218 said:

"... the managing director has two functions and two capacities. Qua Managing Director he is a party to a contract with the company, and this contract is a contract of employment; more specifically I am of opinion

that it is a contract of service and not a contract for service."

25. In view of the above, the defendant no.1 is not the servant of the

plaintiff but agent of the company for the management of the Company

and thus the case is covered under the Commercial Courts Act, 2015.

26. The defendants have filed an application under Order VII, Rule 10 of

the Code of Civil Procedure, 1908 for return of the plaint on the ground

of territorial jurisdiction of this Court.

27. In the case of Chandra Kishore Chaurasia -vs- R A Perfumery

Works Private Limited reported in (2022) SCC OnLine 3529, the

Delhi High Court held that:

"8. It is trite law that an objection regarding territorial jurisdiction of a court, raised by way of an application under Order VII Rule 10 of the CPC, is to be decided on a demurrer, that is, by accepting all statements made in the plaint to be true. Thus, the examination for the purpose of an application under Order VII Rule 10 of the CPC is limited to the averments made in the plaint and the documents filed by the plaintiff."

28. In view of the above, this Court finds that the applications filed by the

defendants are misconceived and are liable to be dismissed, accordingly

the same are dismissed.

29. G.A. No. 2 of 2023, GA No. 3 of 2023, GA No. 5 of 2023 and GA No.

6 of 2023 are accordingly dismissed.

(Krishna Rao, J.)