B.B. Verma vs National Projects Construction ...
1999 Latest Caselaw 506 Del

ORDER

S.K. Mahajan, J.

1. After hearing arguments of the parties on July 6, 1999 we had announced our order in court and had dismissed the appeal. We are now giving our reasons for dismissal of appeal.

2. The short point involved in the Appeal is whether the Court within whose jurisdiction the Principal/registered office of the company is situate, will have the jurisdiction to try the suit even if no part of the cause of action has arisen within its jurisdiction and the cause of action has accrued at a place where the company has its subordinate office. The facts in short are :

3. That the respondent has its registered and head office in Delhi and the agreement was executed between it and the appellant for execution of certain works for Rihand Super Thermal Power Station, Stage I Rihand, District Sonbhadra, Uttar Pradesh, Certain disputes having arisen between the parties, the same were referred for arbitration to the arbitrator. The award of the arbitrator was filed in this Court and one of the objections raised by the respondent to the award was that this Court has no territorial jurisdiction inasmuch as the work site was at Rihand (U.P.); the work was allocated and executed at Rihand; the agreement was executed at Rihand; and breach, if any, of the said agreement was also committed at Rihand. It was, therefore, contended that as no part of the cause of action has arisen within the territorial jurisdiction of this Court. this Court will have no territorial jurisdiction to entertain the award made and published by the arbitrator and filed in this Court.

4. The learned Single Judge having held that no part of the cause of action had arisen within the territorial jurisdiction of the Court so as to confer jurisdiction to the Courts at Delhi, objections of the respondent on that score were upheld and the petition under Sections 14 and 17 of the Arbitration Act was held not to be maintainable for want of territorial jurisdiction.

5. Being aggrieved by this order, the appellant has preferred this appeal. The only contention of the appellant is that since the principal/corporate office of the respondent is situate in New Delhi, this Court, in view of the provisions of Section 20 of the Code of Civil Procedure, will have the territorial jurisdiction to entertain the petition under Sections 14 and 17 of the Arbitration Act filed by the appellant.

6. It is urged by Mr. Aggarwal, learned counsel for the appellant, that in view of the explanation to Section 20 of the Code of Civil Procedure, the Courts where the principal office of the respondent is situate, shall have the jurisdiction to decide a suit against the said corporation. For the sake of convenience, Section 20 of the Code of Civil Procedure may be reproduced as under:-

      "20.  Subject to the limitations aforesaid, every suit  shall  be      instituted in a Court within the local limits of whose  jurisdic     tion:- 
 

      (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 carries on business, or personally works  for  gain,      provided  that  in such cases 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." 
 
 

 7.   In  support of his contention, Mr. Aggarwal has placed  reliance  upon the judgments reported as Hakam Singh Vs. M/s. Gammon (India) Limited,  ; Ram Rattan Bhartia Vs. Food Corporation of India and  Another, AIR 1978 SC 183 (Full Bench); and Hindustan Metal Works Vs. Union of India, 1987(1) Arbitration Law Reporter 6. 
 

8. In Hakim Singh Vs. Gammon (India) Limited (Supra), it was held that "Corporation" referred to in Section 20 of the Code mean not only a statutory corporation but also a company registered under the Companies Act. The Court in this case was mainly concerned as to whether parties could by agreement confer jurisdiction upon a Court not possessed by it under the Code. On the facts of the case, it was held that since the respondent had its head office at Bombay, they were liable in respect of a cause of action arising under the terms of the agreement to be sued in the Courts at Bombay and it was, therefore, open to the parties to agree that Bombay Courts alone will have jurisdiction. This agreement according to the Supreme Court was not against public policy. In the other two judgments referred to by learned Counsel for the appellant. Full Bench of this Court has held that apart from the Court having jurisdiction to entertain the proceedings under the Act within whose jurisdiction the cause of action to sue arises, the Court within the local limits of whose jurisdiction the defendant or each of the defendants at the time of the suit actually and voluntarily resides or carries on business or personally work for gain, will also have jurisdiction to entertain the proceedings under the Act in terms of clauses (a) and (b) of Section 20 of the Code of Civil Procedure. Mr. Aggarwal, therefore, contends that as in terms of the explanation to Section 20 of the Code, the corporation shall be deemed to carry on business at its sole or principal office in India, this Court will have jurisdiction to entertain the petition against the respondent as its principal office was in Delhi.

9. We have given our thoughtful consideration to the arguments advanced by Mr. Aggarwal, but we find it difficult to agree with him. Under Section 20 of the Code of Civil Procedure, a suit can be instituted in a Court within the local limits of whose jurisdiction the defendant or each of the defendants, where there are more than one, voluntarily resides or carries on business or personally work for gain. Under clause (c) of Section 20, a suit can also be instituted in a Court within the local limits of whose jurisdiction the cause of action in whole or in part arises. It may not be difficult in the case of an individual to find out as to where he carries on business or works for gain. However, as in respect of every corporation it is not very clear as to where it carries on business, the legislature by means of an explanation to Section 20 have incorporated deeming provision about the corporation carrying on its business. In terms of explanation to Section 20 of the Code, a Corporation shall be deemed to carry on its 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. The explanation is in two parts; one before the word "or" occurring between the words "office in India" and the words "in respect of" and the other thereafter. The explanation applies to a defendant which is a corporation. 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, that Court 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 defendant does not have a sole office but principal office at one place and also has 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 the 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". We are fortified in our view by the judgment of the Supreme Court in M/s. Patel Roadways Limited Vs. M/s. Tropical Agro Systems Private Limited, . While dealing with the similar question, the Court after referring to the provisions of the Code of Civil Procedure, held as under :-

      "Here we may point out that view which we take finds support from      a circumstances which, in our opinion, is relevant. Section 20 of      the  Code  before its amendment by the Code  of  Civil  Procedure      (Amendment) Act, 1976 had two Explanations being Explanations I &      II. By the Amendment Act, Explanation I was omitted and  Explana     tion II was renumbered as the present Explanation. Explanation  I      so omitted read as under:- 
 

 
     "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." 
 

      This explanation dealt with the case of place of residence of the      defendant and provided with regard to a person having a permanent      dwelling  at one place and also temporary at another  place  that      such  person 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. The language used in Explanation II on  the      other hand which is the present Explanation was entirely  different. Had the intention been that if a corporation had its principal office at one place and a subordinate office at another place      and  the  cause  of action arose at the place where  it  had  its      subordinate office, it shall be deemed to be carrying on business      at  both  places the language used in Explanation II  would  have      been identical to that of Explanation I which was dealing with  a      case  of  a person having a permanent dwelling at one  place  and      also temporary residence at another place. The marked  difference      in the language of the two Explanations clearly supports the view      which  we have taken regard to the interpretation of the  present      Explanation  to  Sec. 20 of the Code which  was  Explanation  II      earlier as indicated above. 
 

      We  would also like to add that the interpretation sought  to  be      placed by the appellant on the provision in question renders  the      explanation totally eduntant. If the intention of the legislature      was,  as is said on their behalf, that a suit against a  corporation  could  be  instituted either at the place of  its  sole  or      principal  office  (whether  or not the  corporation  carries  on      business at that place) or at any other place where the cause  of      action arises, the provisions of clauses (a), (b) and (c) together  with the first part of the Explanation would have  completely      achieved  the purpose. Indeed the effect would have  been  wider.      The suit could have been instituted at the place of the principal      office  because of the situation of such office (whether  or  not      any actual business was carried on there). Alternatively, a  suit      could have been instituted at the place where the cause of action      arose  under clause (c) (irrespective of whether the  corporation      had a subordinate office in such place or not). This was,  therefore,  not  the purpose of the Explanation.  The  Explanation  is 
     really  an  explanation to clause (a). It is in the nature  of  a      clarification on the scope of the clause (a) viz. as to where the      corporation can be said to carry on business. This, it is  clarified,  will be the place where the principal office  is  situated      (whether or not any business actually is carried on there) or the      place  where a business (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 was that, in the case of  a      corporation,  for the purposes of clause(a), the location of  the      subordinate  office, within the local limits of which a cause  of      action  arises, is to be the relevant place for the filing  of  a      suit  and not the principal place of business. If  the  intention      was that the location of the sole or principal office as well  as      the  location  of the subordinate office (within  the  limits  of      which  a  cause of action arises) are to be deemed to  be  placed      where  the corporation is deemed to be carrying on business,  the      disjunctive  "or" will not be there. Instead, the second part  of      the Explanation would have read "and", in respect of any cause of      action  arising at any place where it has a  subordinate  office,      also at such place."  
 

10. In view of the aforesaid judgment of the Supreme Court, in our view, the judgments cited by Mr. Agarwal, would not be of any assistance to him. In none of these cases, the Courts were concerned with the interpretation of Explanation to Section 20 of the Code. In any case, in view of the judgment of the Supreme Court in Patel Roadways case, the appellant cannot rely upon the judgments of this Court. We, therefore, do not find any infirmity in the order of the learned Single Judge. The appeal has no merits and the same is, accordingly dismissed.

11. Before parting, we may, however, point out that while holding that this Court has no territorial jurisdiction to entertain the petition, the learned Single Judge has held that the petition under Sections 14 and 17 of the Arbitration Act was not maintainable. In our view, after a finding has been given by the Court that it has no jurisdiction to entertain a petition, the proper course would have been to return the petition for presentation in the proper Court. While, therefore, dismissing this appeal, we direct the petition under Sections 14 and 17 of the Arbitration Act to be returned to the petitioner for presentation in proper Court.

12. In the facts and circumstances of the case, we leave the parties to bear their own costs.