Korba Super Thermal Power Project vs Radha Madhav Engineering ...
1995 Latest Caselaw 588 Del

JUDGMENT

M. Jagannadha Rao, C.J.

1. M/s Korba Super Thermal Power Project, Bilaspur is the appellant. The respondent is M/s Radha Madhav Engineering Enterprises, Hyderabad. The appellant preferred this appeal against the order of the learned Single Judge dated 8th December,1994 in Suit No. 2227- A/86 holding that the Delhi High Court has got jurisdiction to entertain the suit under the Arbitration Act for making the award a rule of the Court.

2. The following are the facts:

3. A contract was awarded by the appellant to the respondent for the Mill Project Handling System at Korba(M.P.). The notice inviting tenders was floated from the appellant's office at Korba and in response to that the respondent submitted its tender dated 30th July, 1980. The same was accepted by the appellant at Korba. The acceptance was conveyed through telegram dated 14th October, 1980 followed by a letter dated 20/24th November, 1980. The formal deed of contract was executed and signed by the parties on 27th April, 1981. Certain claims were raised by the respondent/contractor by letter dated 31st September, 1984. As per the terms of the contract dated 27th April, 1981, claims were referred to the Sole Arbitrator for adjudication by letter dated 20th February, 1985. The claims and counter claims were filed by the parties and the award was made by the Arbitrator on 16th September, 1986 directing the appellant to pay a sum of Rs. 8,45,250/- to the respondent/firm and costs of Rs. 10,000/- were also awarded to the respondent. The counter claim of the appellant was rejected. The Award was filed by the Arbitrator on 18th November, 1986 in the Delhi High Court on the original side with an application under Section 14(2) of the Arbitration Act.

4. After receiving notice for filing the award the appellant filed objections. Reply thereto was filed by the respondent on 28th October, 1987. Three issues were framed. Among them the first one was whether the Courts at Delhi had no territorial jurisdiction to entertain the suit. This issue was treated as a preliminary issue. The learned Single Judge on 8th December, 1994 held that Delhi High Court had jurisdiction. Against that order this appeal has been preferred by the Korba Super Thermal Project.

5. It appears that the tenders were floated and the contract was executed between the parties at Korba. Payments in respect of the works were made at Korba and all other related works were done at Korba. No cause of action ever accrued at Delhi. However, as a matter of convenience, the Arbitrator held the sittings at Delhi. The Korba Super Thermal Project is a project of the National Thermal Power Corporation (hereinafter referred to as the NTPC) and the NTPC is having its registered/principal office at Delhi. However, no part of the cause of action arose in Delhi according to the appellant. NTPC has its subordinate office at Korba for the purposes of carrying on the activities of Korba Super Thermal Power Project.

6. The appellant strongly relied upon the judgment of the Supreme Court made in Patel Roadways Limited, Bombay v. Prasad Trading Company bearing Civil Appeal No. 3050/91 wherein the Supreme Court had occasion to deal with Section 20 of the Code of Civil Procedure as amended in 1976. It was argued that if the NTPC had its sole office alone in Delhi and no subordinate/branch offices at all, then the suit could be filed at Delhi. But where it had a principal office at Delhi and also a subordinate office at Korba and the entire cause of action arose at Korba, the Arbitrators could not have filed the award at Delhi.

7. On the other hand, the learned counsel for the respondent wanted to rely on the judgment of the Full Bench of this Court in Shri Ram Rattan Bhartia v. Food Corporation of India and Anr. ; Mrs. Gupta Sanitary Stores v. Union of India and Anr. ; Sh. Kuldeep Singh v. Union of India and Ors. . The learned counsel also referred to Hakam Singh v. Gammon (India) Ltd. . Reliance was also placed on Globe Transport Corporations v. Triveni Engineering Works and Anr. ; Bakhtawar Singh Balkrishan v. Union of India and Ors. and Morgan Stanley Mutual Fund v. Kartick Das .

8. The question for consideration is whether the learned Single Judge was right in holding that the Delhi High Court had territorial jurisdiction in the matter and whether in view of the judgment of the Supreme Court in Patel Roadways Limited, Bombay v. Prasad Trading Company(supra), judgment of the learned Single Judge is liable to be set aside.

9. Section 20 of the Code of Civil Procedure as amended in 1976 reads as follows:-

"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 carried 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 India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place."

10. The Supreme Court had occasion to interpret Section 20 in Patel Transport case. It was pointed out that before 1976 amendment, Section 20 had two explanations being Explanation I and II and that by the Amendment Act of 1976, Explanation I was omitted and Explanation No. II was renumbered as the present Explanation set out above. Explanation I so omitted read as hereunder:

"Explanation I - Where a person has a permanent dwelling at one place and also temporary residence at another place, he shall be deemed to reside at both places in respect of any cause of action arising at the place where he has such temporary residence."

11. The Supreme Court pointed out that the earlier Explanation I dealt with the case of place of residence of the defendant at one place and provided that with regard to a person having a permanent dwelling at one place and also temporary at another place, such person should be deemed to reside at both places in respect of any cause of action arising at the place where he had such temporary residence. The present Explanation is the same as Explanation II which was there before 1976. After the amendment the position is that the Explanation is in the nature of an Explanation to Clause (a) of Section 20 and relates to the question as to where the Corporation could be said to carry on business. The Explanation clarifies that this will be at the place where the principal office is situated (whether or not any business actually is 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 is that, in the case of a corporation having subordinate offices for the purposes of Clause (a) of Section 20, the location of the subordinate office is to be the relevant place for the filing of a suit and not the principal place of business. In other words, according to the Supreme Court, if a corporation is having only one principal office of business, then the suit could be filed at that place but where the corporation has not only a principal office but also a subordinate office and the cause of action arose at the place of the subordinate office, the suit should be filed only at the place where the subordinate office is located. This is clear from the following observations of the Supreme Court:

"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 situate 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 defendants does not have a sole office but has a principal office at one place and has also 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 situate 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 has also a subordinate office".

12. In the present case, the appellant does not merely have a sole office at Delhi. It has a principal office at Delhi and a subordinate office at Korba. In that event the question will be whether the entire cause of action has arisen at the place where the subordinate office is located, namely at Korba. On facts, it is clear that the entire cause of action has arisen at Korba in Madhya Pradesh. The Courts at Delhi have therefore no jurisdiction even though the principal office of NTPC is at Delhi. Only the Courts of Korba have jurisdiction as there is a subordinate office of NTPC and the entire cause of action arose there. We, therefore, hold that the Arbitrator was wrong in filing the award in the Delhi High Court.

13. The judgment of the Delhi High Court in Sh. Kuldeep Singh v. Union of India and Ors. AIR 1986 Delhi 86 has been referred by the respondents-plaintiffs. We are unable to follow this judgment because of the recent judgment of the Supreme Court in The Patel Road ways(supra). The judgment of the Supreme Court in Hakam Singh v. Gammon (India) Ltd. was dealing with Section 20 of the Code of Civil Procedure before 1976 amendment and has therefore no relevance. In Globe Transport Corporation v. Triveni Engineering Works and Anr.(supra) the Supreme Court was dealing with the question as to whether the parties could by agreement opt for jurisdiction of courts at one particular place. That judgment does not interpret Section 20. Bakhtawar Singh Balkrishan v. Union of India and Ors. and Morgan Stanley's case(supra) also does not deal with the interpretation of Section 20. The said decisions cannot be applied to the present case. The Full Bench decision in Shri Ram Rattan Bhartia v. Food Corporation of India and Anr. deals with the section as it stood prior to 1976 and is not relevant. We then come to the Full Bench decision in Mrs. Gupta Sanitary Stores v. Union of India and Anr. (supra). That decision relates to the question as to where the State can be said to be carrying on business and therefore is not again relevant.

14. Following the decision in Patel Roadways Limited, Bombay v. Prasad Trading Company(supra), we allow the appeal and set aside the judgment of the learned Single Judge and direct the registry to return the award and other papers to the Arbitrator for filing the same before the appropriate Court within whose jurisdiction, Korba is located. This will be done before 28th August, 1995.

15. Appeal allowed. No costs.