Jasmine & Company vs State Of Nagaland
2009 Latest Caselaw 188 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                     CS(OS)No.3773A/1990


%20.01.2009                   Date of decision: January 20, 2009

JASMINE & COMPANY                               ....... Plaintiff
                             Through: Mr. R.P. Bansal, Sr. Advocate with
                                      Mr. Vijay Kumar, Mr. Sheetesh
                                      Khanna, Mr. Promod Tyagi & Ms.
                                      Rajni Singh, Advocates.

                                Versus

 STATE OF NAGALAND                                 ....... Defendant
                              Through: Mr. Kapil Kher, Advocate.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?   Yes

2.    To be referred to the reporter or not? Yes

3.    Whether the judgment should be reported
      in the Digest?                        Yes


RAJIV SAHAI ENDLAW, J.

1. This petition under Section 20 r/w Section 8 of the Indian

Arbitration Act, 1940 was filed in relation to an agreement dated 6th

September, 1988 between the Governor of Nagaland on the one

hand and the petitioner on the other hand and which is not disputed

between the parties. The said agreement provides for arbitration as

under:-

"In case of any differences or dispute between the government and the organizing agent on any matter pertaining to or arising out of the agreement, the issue of dispute will be referred to arbitration in Nagaland to a sole arbitrator to be appointed by the government whose decision shall be final and binding on both the parties".

2. It is the case in the petition that the Government of Nagaland

had under the agreement aforesaid appointed the petitioner as a

sole organizing agent for the Nagaland State Lotteries in the name

and style of Sri Lakshmi Lottery; that the agreement was for

three years; the lottery was to be freely sold all over India; that the

respondent State will place orders with the printers for printing of

lottery tickets and the petitioner will pay the cost of the paper and

printing charges for the same; that the prize money up to Rs.5,000/-

to the winner, will be distributed directly by the petitioner as the

organizing agent but the prize amounts exceeding Rs.5,000/- shall

be deposited by the petitioner with the respondent government in

advance for being distributed amongst the winners. It is further the

case of the petitioner that the petitioner in the pursuance to the

aforesaid agreement invested monies in printing, posters, banners,

advertisement throughout the country; that the major markets for

the sale of such lotteries were the State of Tamil Nadu and the State

of Kerala. Under the said agreement, the petitioner was to furnish a

guarantee of Rs.15 lac to the respondent government for the due

performance of the agreement and for compensating the respondent

government for any loss or damage that may be caused or suffered

by the government on account of any breach by the petitioner. The

petitioner claims to have furnished a bank guarantee of UCO Bank,

Connaught Place, New Delhi in favour of the Governor/Director of

Nagaland Lotteries, Kohima. It is further the case of the petitioner

that the petitioner organized from Delhi the sale of lottery tickets in

different part of the country; that out of the total agreed 156 weekly

draws, the lottery continued till the 65th draw but thereafter the

Governments of Tamil Nadu and Kerala banned the sale of the

tickets of the lottery assuming it to be a private lottery; that in spite

of representations of the petitioner the respondent did not render

the necessary clarification to the Governments of Tamil Nadu and

Kerala claiming lottery to be the lottery of the respondent State;

consequently the petitioner could not make payments for the draws

already scheduled; that the petitioner moved the Madras High Court

against the said illegal ban and in the said writ petition the

respondent State was also made a party but the respondent State

failed also to file an affidavit in those proceedings; that the

respondent thereafter cancelled the contract with the petitioner.

The disputes that had arisen between the parties have been listed in

para 11 of the petition. The respondent State had also invoked the

bank guarantee for Rs.15 lac and with respect whereto not only a

dispute was raised but an application being I.A.No.11299/1990

under Order 41 r/w II Schedule of the 1940 Act was also filed.

3. The petitioner invoked the territorial jurisdiction of this court

pleading that the entire business was transacted from Delhi; orders

for printing of tickets were placed at Delhi; office of the respondent

is also located at Delhi; that the petitioner works for gain and

resides at Delhi; the expenses were to be defrayed at Delhi; that the

accounts were maintained at Delhi and the bank guarantee was

issued at Delhi.

4. Vide ex parte order dated 18th December, 1990, finding the

letter of invocation of the bank guarantee to be not in accordance

with the terms of the guarantee, the respondent was restrained

from recovering the amounts under the bank guarantee. The said

order has remained in force for the last 18 years. Though there was

no direction for the petitioner to keep the bank guarantee alive but

during the hearing, on inquiry the senior counsel for the petitioner

stated that the bank guarantee had been kept alive. Even

otherwise, it is the admitted position that the bank guarantee had

been invoked within the period of its validity. If such invocation is

stayed by an interim order of the court, the petitioner which has

sought said interim order from the court is expected and required to

keep the bank guarantee alive and the liability of the bank to make

payment thereunder remains subject to the final order in the legal

proceedings.

5. The respondent on being served with the notice of the

petitioner filed a reply contesting the territorial jurisdiction of this

court to entertain the petition. It was stated that the agreement

between the parties was executed at Kohima, the bank under the

guarantee had agreed to make payment to the respondent

government at Kohima; that the agreement was entered into in

pursuance to the petitioner approaching the respondent at Kohima

and the arbitration was to be at Kohima. It was further contended

that no cause of action had accrued to the petitioner against the

respondent at Delhi and even if the Delhi courts had jurisdiction, the

said jurisdiction was excluded vide the following clause 33 in the

agreement:

"33. The legal jurisdiction of this agreement will be in

Kohima"

6. The Respondent denied that there was any office of the

Directorate of lotteries of the State of Nagaland at Delhi and it was

stated that there was a general guest house of the State of

Nagaland, as of other States at Delhi. It was denied that any monies

had been received by the respondent State at Delhi. On merits, it

was stated that in fact the petitioner was a defaulter and had not

deposited the dues in time and the respondent was left with no

other alternative but to suspend the holding of the draws because

the government was liable to make the payments to the prize

winners and which could only be done from the amount required to

be deposited by the petitioner and which the petitioner had failed to

do.

7. The petitioner filed a replication to the reply/written statement

aforesaid of the respondent. The petitioner reiterated the stand in

the petition and denying that of the respondent. It was stated that

under the agreement the petitioner was required to get the tickets

printed and the same were got printed at New Delhi.

8. The petitioner has filed an affidavit of its proprietor Smt.

Jasmine Madan and the respondent has filed the affidavit of its

Assistant Resident Commissioner, New Delhi Mr. K.K. Sarkar.

Pursuant to directions, the parties have also filed synopsis of their

submissions.

9. From the aforesaid, it will be apparent that the existence of

the arbitration agreement the disputes and the arbitrability thereof

is not controverted. The opposition is to the territorial jurisdiction of

this court and to the stay of encashment of bank guarantee by this

court. As far as the territorial jurisdiction is concerned, the

emphasis of the senior counsel for the petitioner was on the matter

having remained pending in this court for the last 18 years, the

proprietor of the petitioner being of advance age, of inconvenience

to the petitioner in going to Nagaland if the arbitration proceedings

were at Nagaland owing to insurgency therein and even otherwise;

of the petitioner having become entitled to reference to arbitration

at Delhi owing to the mere long pendency of the matter before this

court. In law, it was contended that notwithstanding the aforesaid

clause as to the jurisdiction of Kohima, it was argued that it did not

oust the territorial jurisdiction of courts at Delhi in as much as the

words ONLY, ALONE, EXCLUSIVE were not used therein.

10. Per contra, the counsel for the respondent with reference to

clauses 9,22,29 & 33 of the agreement and paragraph 15 of the

reply on merits of the respondent has argued that the parties had

agreed to the territorial jurisdiction of the courts at Kohima only.

11. The respondent having set up the plea of territorial jurisdiction

at the first available instance, the said plea has to be adjudicated.

There are two limbs of the same. Firstly, whether the courts at Delhi

have any territorial jurisdiction and secondly if so, whether the

territorial jurisdiction of the courts at Delhi has been ousted by

agreement.

12. The plaintiff has stated that agreement was entered into at

Delhi. The witness of the defendant has deposed that it was

executed at Kohima. Neither called the witness of the either for

cross examination in spite of the matter having remained pending

for 18 long years. The encashment of the bank guarantee having

been stayed, the petitioner appears to have been in no hurry to have

the petition disposed of.

13. One has to thus fall back on the documents only to determine

the aforesaid two aspects. The agreement does not specify the

place of its execution. The agreement is signed by Smt. Jasmine

Madan the then partner of the petitioner and by the then Joint

Secretary (Budget) and Ex-officio Director of Nagaland State

Lotteries, Kohima. The agreement is witnessed by two persons. One

of them has given his address of Kohima and the other of New

Delhi. In the circumstances, it appears that the agreement was

executed on behalf of the petitioner at New Delhi and on behalf of

the respondent at Kohima and so witnessed.

14. The agreement is of assistance to be rendered by the petitioner

to the Government of Nagaland in running Nagaland State Lottery.

The agreement guarantees profit at 3.3% of the gross face value of

tickets printed. The guaranteed profit money and the conducting

expenses for a month were agreed to be paid to the Government only

through demand draft payable at Kohima. Prize money for all the

draws was also agreed to be similarly paid by the petitioner at

Kohima. The petitioner was to arrange to get the tickets printed

from a press as approved by the respondent government and the

petitioner was to bear the entire expenditure for printing of tickets

including the cost of paper and other connected expenditure and

settle the accounts directly with the printing press for lifting the

tickets directly from the press and the government was not to bear

any responsibility for the same. All the other payments due from the

petitioner to the respondent were also payable at Kohima. The

petitioner was to arrange to make the necessary publicity of the

lottery outside the State of Nagaland at its own expenses. The prize

money in excess of Rs.5,000/- was to be disbursed by the Directorate

of Nagaland State after deduction of income tax at source. The

government was also entitled to disburse prizes of Rs.5,000/- or less

if any claim was received directly from the prize winner by debiting

such amount to the petitioner. The draw of the lottery was to be

held at any place in Nagaland as to be decided by the respondent for

each draw and under the strict supervision of the Nagaland

Government.

15. The petitioner has relied upon letters dated 27th June, 1990 &

16th September, 1990 to the respondent and the letter dated 29 th

June, 1990 and order dated 6th January,1982 of the respondent. All

are to/from Kohima, Nagaland and not from any office of the

respondent at New Delhi. Similarly, the respondent has also relied

upon and referred to the letters dated 21st December, 1987 of the

petitioner to the respondent and the letters dated 25th May, 1989,

26th September, 1989, 19th April, 1990, 29th June, 1990 and telegrams

dated 8th February, 1990 & 28th June, 1990 of the respondent to the

petitioner and which are all also from Kohima, Nagaland. There is

not a single document to show any office of the respondent at Delhi

or of anything having transacted between the petitioner and the

respondent at Delhi. The plea of the petitioner of the respondent

having office at Delhi is not borne out. Delhi being the capital of the

country, all states have their state guest houses and resident

commissioners in Delhi. To that extent, all states have presence in

Delhi. But that cannot give freedom to a party to sue the State

Government in Delhi for the reason of the states guest houses and

resident commissioners being at Delhi. In spite of express pleading

of the respondent of the Director of lotteries of the Nagaland

Government having no office at Delhi, nothing was brought on

record to show that the said Directorate was having any presence at

Delhi.

16. With respect to the execution of the agreement also, as

aforesaid, the proprietor of the petitioner has in her affidavit not

stated that the persons singing the agreement on behalf of the

respondent were at Delhi and similarly the witness of the respondent

has also not stated that the petitioner signed the agreement at

Kohima. Both have deposed with respect to their signatures only.

Even if the statements of both are to be believed, in normal course

for human conduct, it would be the petitioner who would be signing

the agreement at Delhi and sending to Kohima for signatures on

behalf of the respondent. It is highly unbelievable that the officer of

the respondent would sign both copies of the agreement first without

even the signatures of the petitioner and send the same for

signatures of the petitioner. An entrepreneur is willing to take such

risk of signing before the other party but a government official is

rarely known to be doing so. On this premise also the contract

would be concluded only on the official of the respondent affixing the

signature at Kohima.

17. As far as the other grounds urged by the petitioner to show the

Delhi courts having jurisdiction or to show that the cause of action,

had the claims/disputes been the subject matter of the suit, had

accrued at Delhi, it would be seen that the same relate to the affairs

which under the agreement were the responsibility of the petitioner

and with respect to which the petitioner had agreed to keep the

respondent indemnified. The lottery as per the agreement was to

have a pan India presence. The petitioner had absolute freedom to

perform its part of the agreement of managing the lottery from any

place. The petitioner was not even required to seek the approval of

the respondent of such place. The courts of a place where a party

required to perform certain acts leading to performance of its

obligations under the agreement performs such act, do not get

territorial jurisdiction to adjudicate disputes between the parties. An

architect employed at Delhi for preparation of drawings for a project

at Delhi, merely if goes to Bombay and prepares the drawings at

Bombay, would not give the courts at Bombay the territorial

jurisdiction over the disputes, if any. Similarly, in the present case,

from the agreement aforesaid it is clear that the material

performance of the obligations was to be at Kohima. All payments

including guaranteed payments were to be made by the petitioner to

the respondent by bank draft payable at Kohima. The prize monies

were to be deposited in Kohima, the draws were be held in Kohima

and the prize monies were to be disbursed from Kohima. Merely

because for the purposes of the said draws the petitioner managed

its business from Delhi or got the tickets and other publicity material

printed at Delhi, as it could have got done from anywhere else in

India, would not give the courts at Delhi territorial jurisdiction.

Thus, it cannot be said that owing to the signing of the agreement or

anything done by the petitioner at Delhi as pleaded, any part of the

cause of action has accrued at Delhi.

18. The courts at Delhi having not been found to have jurisdiction,

the plea of the respondent has to be accepted and notwithstanding

the long lapse of time, this court, even on compassionate grounds as

pleaded cannot vest jurisdiction in discharge. The apex court in

Harshad Chiman Lal Modi Vs. DLF Universal AIR 2005 SC 4446

has laid down that where the court has no territorial jurisdiction,

such jurisdiction cannot be vested by consent or acquiescence or

waiver and any order of that court would be a nullity.

19. On the second limb also, I find that inspite of the words such as

ONLY, ALONE, EXCLUSIVE having not been used in the

jurisdiction clause in the agreement, on a reading of the entire

agreement, the intent of the parties thereto was of ousting/excluding

the territorial jurisdiction of all other courts and of reserving the

jurisdiction of the courts at Kohima, Nagaland only, which otherwise

had jurisdiction, as aforesaid. Though neither parties has filed the

sample lottery ticket got printed but it was common for such lottery

tickets also to have a term that all disputes were subject to the

exclusive jurisdiction of the courts of the capital of the state running

the lottery. I have no doubt in my mind that the lottery tickets

printed in pursuance to the agreement between the parties in the

present case also would have a term thereon of the jurisdiction of the

courts at Nagaland only.

20. The apex court in Hanil Era Textiles Ltd. Vs. Puromatic

Filters (P) Ltd. AIR 2004 SC 2432 has held that where 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 absence of ad idem can be shown the other courts should

avoid exercising jurisdiction. It was held that even without such

words as ALONE, ONLY or EXCLUSIVE, in appropriate cases the

maxim Expressio Unius Est Exclusio Alterious i.e. expression of one

is the exclusion of another may be applied.

21. In the present case, the petitioner while entering into the

agreement was aware that the respondent was wanting the

jurisdiction in legal matters to be at Nagaland only and had agreed

to make the payments at Nagaland to the draw of lotteries at

Nagaland and to the disbursement of prizes from Nagaland and

perhaps as aforesaid also to disputes with customers of lottery being

subject to the jurisdiction of courts at Nagaland. The petitioner was

thus fully aware that notwithstanding the petitioner being at Delhi

the Delhi courts would not have jurisdiction. As aforesaid, the

dealing also was throughout with the respondent at Nagaland. In

the circumstances, I find that the parties had agreed to oust the

jurisdiction of the courts at Delhi.

22. The counsel for the respondent has also in this regard rightly

relied upon Engineering Projects (India) Ltd. Vs. Greater Noida

Industrial Development Authority 113 (2004) DLT 465 & M/s

Filmistan Distributor India Pvt. Ltd. Vs. M/s Pooja Movies 1985

Arbitration Law Reporter 227 (Delhi) and Capital Fire Engineers

Vs. State Bank of Patiala 2006 II AD (Delhi) 29 and Rattan Singh

Associates (P) Ltd. Vs. Gill Power Generation Co. Pvt. Ltd.

Manu/DE/0413/2007.

23. Having decided against the petitioner on the aspect of the

territorial jurisdiction, the ex parte order of injunction of encashment

of bank guarantee axiomatically goes. Even, otherwise, I may notice

that the bank guarantee in the present case obliged the bank to,

without any demur demand from the Governor or Director stating

that the amount claimed is due by way of loss or damage caused to

us or would be caused to or suffered by the Governor/Director by

reason of any breach by the petitioner of any of the terms &

conditions contained in the said agreement. Such demand was to be

conclusive as regards the amount due and payable by the bank under

the guarantee. The respondent in its letter of invocation of the bank

guarantee dated 4th August 1990 inter-alia intimated to the bank that

the petitioner had failed to meet the financial obligation in

connection with her organizing of lottery with the Government of

Nagaland and gave notice to the bank that a sum of Rs.15 lac of

which guarantee had been given be paid immediately. The

beneficiary of a bank guarantee cannot be expected to use/repeat

ditto the same language as in the bank guarantee, though it is

advisable to do so to avoid any disputes. What has to be seen is

whether the conditions for invocation of the bank guarantee are

stated to have existed or not. In the present case, the bank

guarantee required the respondent to state that the amount claimed

was due as aforesaid. The language of the invocation letter

substantially complies with the said requirement and or means the

same thing as set out in the bank guarantee. Insistence on the same

language in such commercial transactions would tantamount to this

court interfering in the bank guarantees and which practice has

otherwise been deprecated by the apex court. Thus, even if this

court would have had territorial jurisdiction, the petitioner was not

entitled to restrain the encashment of bank guarantee.

24. Unfortunately, the bank guarantee has remained stayed for

over 15 years. It was invoked on 4th August, 1990 and in spite of

more than 18 years having elapsed the payment has still not reached

to the respondent. The whole purpose of insistence on the bank

guarantee has been lost. Under the scheme of the lottery, the

responsibility for payment of the prize money was of the State

Government. It is not seriously disputed that the prize money has

been disbursed by the Government without the petitioner

reimbursing the same to the Government. Whether the petitioner

was liable to reimburse the same or not is a dispute to be

adjudicated by arbitration. However, the reason for the bank

guarantee was that during the pendency of the said dispute the

money should be in the pocket of the respondent. That purpose has

unfortunately been defeated. Accordingly, while returning this

petition for filing in the court of appropriate jurisdiction if so deemed

appropriate by the petitioner, the petitioner at whose insistence the

payment under the guarantee was stayed is directed to ensure

payment by its banker under the guarantee to the respondent within

30 days of this order. I was inclined to, for the sake of doing

complete justice between parties to also award interest at 12% per

annum for the period for which the payment under the bank

guarantee has been delayed but I am refraining from doing so.

However, if the payment is not made under the bank guarantee

within 30 days aforesaid, the petitioner shall also be liable to pay

interest at 18 % for the delay thereafter on the amount of the bank

guarantee. The bank issuing the guarantee, though not a party to

the present petition be also communicated this order for compliance

thereof.

25. The respondent shall also be entitled to costs of Rs.25,000/-

from the petitioner.

RAJIV SAHAI ENDLAW (JUDGE) January 20, 2009 PP