Pantaloon Retail (India) Ltd. vs Amer Sports Malaysia Sdn Bhd & Anr
2012 Latest Caselaw 3068 Del

*            HIGH COURT OF DELHI: NEW DELHI

+            I.A. Nos.820/2012 & 3347/2012 in CS(OS) No.115/2012

%                                     Judgment decided on: 09.05.2012


PANTALOON RETAIL (INDIA) LTD.                  ..... Plaintiff
              Through Mr. Neeraj Kishan Kaul, Sr. Adv. with
                       Mr. Rishi Agrawala, Ms. Malavika Lal
                       and Mr. Nikhil Rohtagi, Advs.

                        Versus


AMER SPORTS MALAYSIA SDN BHD & ANR            ..... Defendants
              Through Mr. Sudhir Chandra, Sr. Adv with
                      Mr. Sanjeev K. Kapoor, Mr. Rajat
                      Jariwal and Ms. Saman Ahsan, Advs. for
                      D-1.

CORAM:
HON'BLE MR. JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.

1. Two interim applications being I.A. No.820/2012, under Order XXXIX, Rules 1 & 2 read with Section 151 CPC, and I.A. No.3347/2012, under Order VII, Rule 10 CPC filed by defendant No.1 are pending. However, both parties have made their submissions in I.A. No.3347/2012 for return of plaint for lack of territorial jurisdiction.

2. The plaintiff filed the suit for declaration and permanent injunction against two defendants, namely, Amer Sports Malaysia SDN BHD, Kuala Lumpur and Wilson Sporting Goods Co., USA.

3. The main prayer in the suit as well as in the interim application is that the plaintiff is seeking a stay on the letter dated 23.12.2011 of the

defendant No.1 and further restrain defendant No.2 from entering into the Indian Territory either through their franchise or by themselves in violation of the Agreement dated 01.04.2010 between plaintiff and defendants inter se.

4. By order dated 13.01.2012, an interim order was passed, directing the defendants to maintain status-quo in regard to giving any effect to the letter dated 23.12.2011 issued by defendant No.1.

5. The brief facts of the matter are that:-

(a) Defendant No.1 had entered into a "Distributor Agreement", on 01.04.2010 with effect from 01.01.2010, with the plaintiff being the exclusive licensee to market and distribute the products of defendant No. 2 in the territory of India bearing the trademark "WILSON" or "W" in block letter/stylized formats on an exclusive basis. It is stated by the plaintiff that it was agreed that the defendant would not establish their business directly or indirectly other than the agreement with the plaintiff.

(b) As per the agreement the following products of the defendant were obtained by the plaintiff for marketing/sale:-

a. Foot wear basic and mid range as determined by defendant

b. Backpack basic and mid range as determined by defendant

c. Foot wear and backpack premium range as determined by defendant.

(c) The plaintiff states that certain terms were amended in the Distributor Agreement vide letter dated 26.04.2010. The defendant also entered into a Supplementary Agreement dated 26.04.2010, amending

certain commercial terms relating to the advertisement and promotional expenses.

(d) It is submitted by the plaintiff that as per the agreements (Distributor Agreement, License Agreement and Supplementary Agreement) the plaintiff has goods of defendant worth Rs.42 crores and plaintiff has paid the consideration to defendant No. 1 and the plaintiff is in possession of the goods.

(e) It is further submitted by the plaintiff that defendant No. 1 and plaintiff had a meeting on 15.12.2011. In that meeting the representative of defendant No. 1 Mr. Rajiv Narayanswamy, Director Finance and Operations, informed the plaintiff that defendant was willing to expand and explore the business operations in India directly and hence, wanted to terminate the Distributor Agreement and the License Agreement. The plaintiff further submits that defendant No. 1 had planned to set up business in India directly in September 2010 and this fact was concealed and suppressed and the plaintiff kept purchasing goods from defendant No. 1 even after 30.09.2010.

(f) The plaintiff stated that termination would not be possible as there are substantial stock lying with the plaintiff and the same has to be disposed. The plaintiff further states that the plaintiff offered defendant No. 1 to buy back the products.

g) Through the letter dated 23.12.2011, the defendant No. 1 unilaterally and illegally rescinded the contract. The plaintiff submits that defendant No. 1 has no right to do so, as the plaintiff is fully protected under the agreement, and the defendants cannot cause monetary damage to the plaintiff. The defendant also cannot direct the plaintiff to sell the goods

within 6 months, which is not possible. It is submitted that plaintiff is willing to adhere to the terms and conditions of the contract till all the goods are sold in the market. It was also agreed that defendants No. 1 and 2 would provide warranties to such goods to the consumers.

(h) The goods purchased by plaintiff will be of no use if the defendants do not provide any warranty from their end and that will cause a huge financial loss to the plaintiff company. The said agreements are valid 3 years from the date of the execution and hence, still continuing, the plaintiff apprehended that the defendants have entered into further agreements with some 3rd party thereby depriving the rights of the plaintiff.

Therefore, the present suit has been filed by the plaintiff along with the interim application.

Case of the defendant No.1 in I.A. No.3347/2012

6. The defendants did not file the written statement and reply to the interim application, rather defendant No.1 has chosen to file an application under Order VII, Rule 10 CPC for return of plaint by raising the question of jurisdiction. The objection has also been raised that defendant No.2 is a stranger to the contract and the suit is liable to be dismissed for mis-joinder of party and its question of jurisdiction be taken into consideration, as a mere reading of plaint as well as Clause-22 of the License Agreement, Section 26 of the Distributor Agreement, and Side Letters dated 22.04.2010 and 26.04.2010, the plaint is liable to be returned for want of territorial jurisdiction.

7. However, it is not disputed by defendant No.1 that there was a License Agreement, Distributor Agreement between the plaintiff and

defendant No. 1 whereby, the plaintiff was appointed as the exclusive licensee of defendant No. 1 for the trademark and for manufacture, sale and distribution of licensed products for duration of the agreements i.e. till 31.12.2012.

8. The defendant No.1 strongly relied upon Side Letters dated 22.04.2010, containing a clause wherein the jurisdiction was mentioned. It was mutually agreed between the parties inter se that in case any dispute arises, the same shall be settled in accordance with the Malaysian Laws. The Courts of Malaysia shall vest the exclusive jurisdiction to settle any dispute. Hence, the "forum of choice" between the parties is Malaysia and Malaysian Laws.

9. In reply, it is alleged by the plaintiff that the issue of jurisdiction is a question of mixed issue of law and fact; the goods in question belong to defendant No. 2, hence defendant No. 2 is correctly arrayed in the party to the suit. The plaintiff referred Clause-22 of the License Agreement which provides for non-exclusive jurisdiction to the Malaysian Courts and hence, Indian Courts can apply Malaysian Laws in the present dispute. Clause No. 22 is reproduced below for perusal:-

"22. Governing Law This Agreement shall be governed by the laws of Malaysia and the parties hereby submit to the non-exclusive jurisdiction of Courts of Malaysia residing at Kualalampur."

10. The submission of the plaintiff is that the jurisdiction has to be in the Indian Territory, as the goods were supplied to be sold in India, an effect of termination of the Agreement also took place within India. Therefore, the application is liable to be rejected.

11. Mr. Sudhir Chandra appearing on behalf of the defendants has made his submissions which can be outlined as under:

a) Mr. Chandra, learned senior counsel argued that the mere reading of the clause 22 of the agreement would reveal that the parties have themselves agreed to the jurisdiction of Malaysian court though a non exclusive one. He argued that in such cases, the courts should leave the parties to exercise their choice of forum as agreed between the parties and normally should not interfere. Mr. Chandra relied upon the judgment passed in the case of Modi Entertainment Network and Another v. W.S.G. Cricket Pte Ltd, (2003) 4 SCC 341, wherein, the Supreme Court in relation to similar clause relating to non exclusive jurisdiction of the foreign court has held that the courts in such cases are relieved from interpreting such clauses and should normally call upon the parties to invoke the agreed forum of their choice. Mr. Chandra also relied upon the judgment of Piramal Healthcare Limited vs Diasorin S.P.A. decided by Delhi High Court on 26 August, 2010, reported in 172(2010) DLT, 131.

Mr. Chandra submitted that in view of the clear exposition of the law, this court should return the plaint so that the parties may approach the appropriate forum of their choice. The question of convenience or non convenience does not arise as in such a case, the provisions of the contract will come into play.

(b) Mr. Chandra therefore submitted that this court should return the plaint to be presented before the court of appropriate forum which is the agreed forum by the parties.

12. Per contra, Mr. Neeraj Kishan Kaul, Sr. Advocate appearing on behalf of the plaintiff has made his submissions, which can be enlisted in the following manner:

a) Mr. Kaul submitted that the clause 22 in the agreement relates to choice of forum in Malaysian courts on non exclusive basis. The said words non exclusive must be given proper effect so as to enable the parties to have the liberty to approach the court wherein the part of cause of action arises. Thus, the parties should not be compelled to go to the court which is not convenient to the parties. Only then, the clause relating to non exclusive jurisdiction will become meaningful or else the use of the words exclusive or non exclusive will be just the same and the clause is meaningless in the agreement.

b) Mr. Kaul argued that the judgment of Modi Entertainment (Supra) shall not be applicable as the same was rendered in the context of Anti Suit Judgment. Therefore, the observations made in the case of Modi (supra) will have no bearing in the facts and circumstances of the case. Mr. Kaul has made following distinguishable features of Modi Entertainment (supra) with that of the present case:

(i) The said judgment is in a case where a suit had been filed in England by the respondent and the petitioner before the Supreme Court was seeking an anti suit injunction through a suit before the Bombay High Court, despite there being a non- exclusive jurisdiction clause of England. Thus, the suit in England could not be stopped due to the petitioner‟s agreement of having conferred non-exclusive jurisdiction in English Courts.

(ii) The English Courts were a neutral forum chosen by the parties.

In the present case, Malaysia is not a neutral forum. The Court leaned towards the English Courts due to their neutrality. In the present case that situation does not exist.

(iii) The Supreme Court has not commented on a Court of natural jurisdiction being excluded from exerting the jurisdiction due to "a non-exclusive jurisdiction clause". The Supreme Court was only concerned with an anti-suit jurisdiction which has a totally separate and a distinct consideration in law.

(iv) The Supreme Court in the facts of that case was not required to draw the distinction between exclusive jurisdiction of foreign Court and non-exclusive jurisdiction of foreign Court because the suit in Bombay was not on the natural cause of action but was an anti-suit injunction suit for which consideration is as to whether the suit already pending in the foreign jurisdiction is either without jurisdiction or is oppressive. In the present case, none of these factors are required to be assessed because there is no suit in Malaysia by either parties.

c) Mr. Kaul argued that the agreement of the parties could not foreclose the right of the plaintiff to approach the court wherein the part of cause of action has actually arisen, which is the Indian court. Thus, the Clause-22 of the agreement would have no bearing on the maintainability of the present suit as the plaintiff is still at liberty to approach this Court who has jurisdiction to deal with the present dispute for the following reasons as substantial part of cause of action has happened within the territory of India. The following facts would show that this Court/the Courts in India have jurisdiction to deal with the present dispute:-

a. The plaintiff is a company registered in India. b. The plaintiff was appointed as the "exclusive distributor" for the goods of the defendants for the territory of India. c. The goods once imported into India are sold through outlets of the plaintiff all across the Territory of India including New Delhi.

d. The plaintiff has appointed various sub-distributors in various territories in India by executing the agreements in order to sell the goods of the defendants in India including New Delhi. e. The consumers of the goods are in India and the warranty on the goods is also enforceable in India.

f. The plaintiff has been selling the defendants‟ goods in India including Delhi since the year 2010.

g. Though the defendants do not have any office in India, they are themselves seeking to enter the Indian market either directly or through another agent.

h. The agreement was signed by the plaintiff in India.

In order to support this submission, Mr. Kaul relied upon the judgment passed in the case of Laxman Prasad v. Prodigy Electronics Ltd and Another, (2008) 1 SCC 618 wherein, the Supreme Court has entertained the action in the Indian despite having the clause relating to choice of law by the parties. The said paras-38, 45, 46 & 47 read as under:-

"38. In our considered opinion, therefore, the contention of the appellant-defendant that the agreement was executed in a foreign country or the defendant was a resident of Ghaziabad (Uttar Pradesh) cannot take away, exclude or oust the jurisdiction of Delhi Court in view of the averment made in the plaint that a part of cause of action had arisen within the local limits of Delhi.

45. In the case on hand, we have referred to the relevant clauses of the agreement. Clause 18 provides for applicability of law and it specifically declares that the terms and conditions of the agreement shall be interpreted in accordance with 'the laws of Hong Kong Special Administrative Region'. That, in

our judgment, does not mean that a suit can be instituted only in Hong Kong and not in any other country.

46. Territorial jurisdiction of a Court, when the plaintiff intends to invoke jurisdiction of any Court in India, has to be ascertained on the basis of the principles laid down in the Code of Civil Procedure. Since a part of 'cause of action' has arisen within the local limits of Delhi as averred in the plaint by the plaintiff Company, the question has to be considered on the basis of such averment. Since it is alleged that the appellant- defendant had committed breach of agreement by using trade mark/trade name in Trade Fair, 2005 in Delhi, a part of cause of action has arisen in Delhi. The plaintiff-Company, in the circumstances, could have filed a suit in Delhi. So far as applicability of law is concerned, obviously as and when the suit will come up for hearing, the Court will interpret the clause and take an appropriate decision in accordance with law. It has, however, nothing to do with the local limits of the jurisdiction of the Court.

47. The High Court, in our opinion, was right in rejecting the application and in overruling preliminary objection. Since prima facie the plaint disclosed a cause of action as also territorial jurisdiction of the Court, the High Court rightly rejected both the contentions and no error was committed by it in not rejecting plaint, nor returning it for presentation to proper Court. 'Applicability of Hong Kong Law', 'entering into an agreement in Hong Kong' or 'defendant residing in Ghaziabad (Uttar Pradesh)' or any of them does not take away the jurisdiction of Delhi Court since a 'cause of action' at least in part, can be said to have arisen in Delhi. We, therefore, see no substance in the contention of the defendant- appellant.

d) Mr. Kaul, thereafter, argued that if this court returns the plaint, it would make the Malaysian court, as an exclusive court when there was no such intention between the parties to make Malaysian court as an exclusive court. This will lead to conversion of non exclusive

clause into exclusive one. This court should not allow the same to happen by not agreeing to the submissions of the defendant.

e) Mr. Kaul then cited some decisions of the courts in several countries wherein, the prevalent view is that the court should give the liberty to the parties to sue at other places, at least in cases where the parties submit to non exclusive jurisdiction of the courts. He relied upon the following judgments:-

(i) In the case of Gary Sugar v. Megawheel Technologies Inc,, reported in 2006 Can L J 37880 (SC) the Supreme Court of Ontario has held as follows:

"22. 472900 B.C. Ltd. V. Thrifty Canada Ltd., supra, the British Columbia Court of Appeal signaled that a court must give some weight to a non-exclusive jurisdiction clause. In PWA Corp. V. Gemini Group Automated Distribution Systems Inc. (1992), 136 A.R. 73 (Q.B.), the Alberta Court of Queen‟s Bench stated that such a clause is an "important consideration" in the analysis. Virtue J. stated:

"In interpret the term „non-exclusive jurisdiction‟ - in the context of the agreements in which I expression is used - to mean that the parties attorn to the jurisdiction of the Ontario courts except in matters were some extraordinary or reason would require that the matter be determined elsewhere."

27. In her reasons Gloster J. did not refer to the English Court of Appeal decision in Ace Insurance, perhaps because the facts in Antec involved a motion for forum non conveniens whereas Ace Insurance dealt with a motion for leave to serve process ex juris. Notwithstanding this procedural difference, Gloster J.‟s analysis of the impact of the clause is not reconcilable with the conclusion of the English Court of Appeal that under a non-exclusive jurisdiction clause

"either party may sue the other wherever it has the right to do so" unless a proceeding is underway in the jurisdiction named in the choice of forum clause.

28. Non-exclusive jurisdiction clauses fall between the two endpoints of (i) no forum selection clause and (ii) the use of an exclusive choice of forum clause. By their language, non-exclusive jurisdiction clauses are not the same as exclusive jurisdiction clauses; their operation is more limited in scope. The approach of non-exclusive clauses taken by the English Court of Appeal in the Ace Insurance decision makes sense. It gives meaning to the contractual language which is not exclusive in nature : "either party may sue the other wherever it has the right to do so", but when a suit arises in the named jurisdiction, the part must keep its bargain by attorning to that jurisdiction : Ace Insurance, paragraphs 59 and 63. If such an interpretation of non- exclusive clauses is not taken, then in my view no practical difference would exist between exclusive and non-exclusive jurisdiction clauses, rendering meaningless the "non- exclusive" language chosen by the parties.

29. In this case, Clause 12 of the Subscription Agreement states: "The Purchaser....irrevocably attorns to the non-exclusive jurisdiction of the courts of the Province of Alberta." This is not language of exclusive jurisdiction. It leaves the purchaser free to start a suit before another competent court, but requires the purchaser to attorn to a suit brought in Alberta. While the parties turned their minds to the issue of forum selection by agreeing to Clauses 12, they did not do so in a way that would give the clause determinative weight in a forum non conveniens analysis. Consequently, Clause 12 does not overcome the cumulative effect of the other factors I have examined above; it does not point clearly to Alberta as a more appropriate jurisdiction.

(ii) Further, the case of Orchard Capital I Ltd v. Ravindra Kumar Jhunjhunwala (2012) SGCAA 16 of Singapore court of appeal is relied upon wherein the Court has held as under:

"22. As already mentioned, the first part of call is the article by Prof. Yeo (cited above at [3]). However, it discusses a great many issues, not all of which are germane to the present appeal. In so far as the issues discussed are concerned, the analysis is complex - in the main because the issues themselves are complex (many of which have not been the subject of direct legal precedent as well) we hope that we will not be doing a disservice to the article by distilling what is relevant in the context of the present appeal. One reason for doing so is because, as we shall elaborate upon in a moment, one of the central stands, whilst posing many hitherto unresolved legal questions (and even conundrums), can (as alluded to at the outset of this judgment) be addressed relatively easily on the facts of the present appeal; hence, there is no need to canvas the various issues arising from this particular strand in the detail that we might otherwise have had to.

28. However, even assuming that this is not the case (and, hence, taking the Respondent‟s case at this highest), it is clear, in our view, that there is simply no evidence whatsoever that demonstrates that the Clause was intended by the parties to have a significant effect. In the circumstances, it is very clear, in our view, that the substance of the parties intention was not, inter alia, to accord to the Clause the effect of an exclusive jurisdiction clause. Neither is there, as just stated, any evidence to suggest that the parties had intended the Clause to have - from a contractual perspective - a significant legal effect.

29. In this regard, we should address an argument that the respondent has made by relying on the reference in the Clause to the parties waiving their right to a jury trial (see above at [8]). In our view, this particular aspect of the Clause is, at best, neutral. It would only suggest that the parties intended to exclusively select Hong Kong is Hong Kong was the only

jurisdiction in the world with a jury system. This is most certainly not the case.

30. That having been said, it does not follow that the Clause has no legal effect whatsoever. This is where the second central stand is relevant. In this regard, the following observations by Prof Yeo might be usefully noted (see Yeo at 348-349):

"It is not in doubt that, whatever may be inferred or implied about the parties intentions as to the scope of the agreement embodied in the jurisdiction agreement, the fact that a court has been chosen by the parties, albeit non-exclusively, is relevant in the application of the principles of the natural forum. The fact that the parties thought that the chosen forum was at least an appropriate forum to determine their disputes must surely carry some weight in the court‟s determination. What weight this factor will carry must depend on all the circumstances of the case. In a number of Singapore cases, no particular weight was given to the existence of a non-exclusive forum or foreign jurisdiction agreement, but this could be because the point had not been seriously pressed by counsel.

It goes too far, perhaps, to say that a non-exclusive jurisdiction agreement will never be accorded any more weight than any other connections in the case under consideration. On the other hand, it may also go too far to say that a non-exclusive jurisdiction agreement will always be a strong indicator of the appropriate forum to hear the case. The weight to be attributed to it ought to depend on the circumstances. It may make a difference whether the jurisdiction clause formed part of a closely negotiated contract or is a standard term in a contract of adhesion. Where the parties have clearly put their minds to the consideration of the clause, that will understandably be a very strong factor. On the other hand, if the parties have indicated a list of possible countries for the disputes to be tried, then the choices may not mean very much in terms of comparative

appropriateness, and the court may even by justified in not giving any particular weight to the clause."

(iii) The case of Highland Offshore Partners L.P. v. Deutsche Bank AG, citation not provided, is relied upon wherein the court has held:

105. The starting point for considering the effect of a non- exclusive jurisdiction clause must be the wording of the clause. In terms of contract law, I cannot see how a party could ordinarily be said to be in breach of a contract containing a non-exclusive jurisdiction clause merely by pursuing proceedings in an alternative jurisdiction. It is conceivable that a jurisdiction clause which is not fully exclusive may nevertheless be drafted in such a way as to have the effect of barring parallel proceedings in certain circumstances, but that is a matter of individual contractual interpretation. Looking at the matter in general terms, I agree with Raphael‟s suggestion in The Anti-Suit Injunction at para 9.12 that:-

"Where a non-exclusive jurisdiction clause does not clearly indicate whether prior or subsequent parallel proceedings in a non-selected forum are permitted or prohibited, the best interpretation will usually be that, by contracting for non-exclusive jurisdiction, the parties have anticipated and accepted the possibility of some parallel proceedings, and as a result, only foreign proceedings which are vexatious and oppressive for some reason independent of the mere presence of the non-exclusive clause will be restrained by injunction."

107. In principle, there are a number of reasons why I do not think that it would be right to adopt such a presumption. First, it is equivalent or at least comes close to treating a non- exclusive clause as an exclusive jurisdiction clause once proceedings are commenced under it, whereas there is an important difference. An exclusive jurisdiction clause creates a contractual right not to be sued elsewhere, although the court has discretion whether to enforce it (and may refuse as in Donohue V Armco). In the case of a non-exclusive clause,

either party is prima facie entitled to bring proceedings in a court of competent jurisdiction. Duplication of litigation through parallel proceedings is undesirable, but it is inherent risk where the parties use a non-exclusive jurisdiction clause.

108. Secondly, I see no cogent reason why it should automatically be assumed that nomination of a non-exclusive forum should give priority or dominance to that forum over any other. It ignores all variables. The non-exclusive jurisdiction clause may in one case represent the result of specific negotiations; in another it may result from the use of a standard form of contract. In one case there may be another forum which is obviously appropriate applying the normal factors; in another case there may not be."

13. By placing reliance on the aforementioned judgments, Mr. Kaul argued that this court should also consider that the weight to be given to such non exclusive jurisdiction clause in the agreement in the present case. This court, as per Mr. Kaul, is the natural forum which must remain unaffected by the agreement and thus, this court should not ignore the clause in the agreement being non exclusive choice of forum by the parties. Therefore, the application filed by the defendant warrants dismissal.

14. I have gone through the plaint, documents filed with the plaint, application filed by the defendant and the reply thereof. I have also given my due consideration to the submissions advanced by the parties at the bar. It is for me to first discuss the law on the subject.

15. The present case relates to termination of the Licensing Agreement and also of Distributor Agreement, both dated 01.04.2010, wherein, the parties have submitted to the non exclusive jurisdiction of Malaysian Court. The relevant clause of the contract reads as under:

"22. Governing Law:

This Agreement shall be governed by the laws of Malaysia and the parties hereby submit to the non exclusive jurisdiction of the courts in Malaysia residing at Kuala Lumpur."

16. It is thus clear that the parties have decided to be governed by the Malaysian law and also agreed to submit themselves to the non exclusive jurisdiction of the Malaysian court. Therefore, the parties have already agreed as a matter of choice, the governing law as well as the forum where they intend their disputes should be decided though on the non exclusive basis.

17. The judicial opinion on the subject of the choice of forum clauses where the parties agree to be governed by the law of particular country in the international commercial disputes is well settled and consistent which is that normally and invariably the courts must respect the forum which has been agreed to by the parties in the contract. The use of the words "exclusive or non exclusive" in the contract are not determinative or conclusive but, are relevant factors. However, much shall dependent upon the construction of the terms of the contract and if the forum which has been agreed to by the parties in the contract has sufficient nexus or proximity to the cause alongside the governing law agreed to, then the court‟s view must lean in favour of the agreed forum irrespective of the words non exclusive in the contract.

18. This is due to the reason that the underlying policy of law is to respect the terms of the contract as agreed to between the parties. The commercial contracts affecting international trade are signed and agreed to

by the parties after being fully conscious about the relative convenience or inconvenience of the parties and only thereupon the choice of forum and the governing laws are agreed to by the parties. When the courts are called upon to interpret such choice of forum clauses, then the courts must keep in the back of their mind that unless, the forum chosen by the parties is against the public policy which is totally unrelated to the place of the occurrence of dispute or there are other strong factors, which reveal that the parties could not have agreed upon the said forum to get the dispute in question adjudicated by the said forum, the courts must respect the choice of the forum agreed between the parties, be it exclusive or non exclusive.

19. In the case of National Thermal Power Corporation v. Singer Company, reported in (1992) 3 SCC 551, the Supreme Court has held quoting and approving Lord Wright that the express intention of the parties to be governed by the particular law of the country is a decisive factor with very few limitations which are only when the choice of forum is against public policy. The Supreme Court observed thus:

"14. The expressed intention of the parties is generally decisive in determining the proper law of the contract. The only limitation on this rule is that the intention of the parties must be expressed bona fide and it should not be opposed to public policy. In the words of Lord Wright:

.......where there is an express statement by the parties of their intention to select the law of the contract, it is difficult to see what qualifications are possible, provided the intention expressed is bona fide and legal, and provided there is no reason for avoiding the choice on the ground of public policy ...." (Emphasis Supplied)

20. From the reading of the afore-quoted observations of the Supreme Court, it is clear that the expressed intention of the parties to be governed by the law of particular country should be respected unless the

said choice and intention is against public policy. Thus, the expressed intention test is one which determines the governing law as well as choice of the parties.

21. It is equally trite that the recitals of the clauses or the usage of the words exclusive or non exclusive is not conclusive but relevant and it is only upon due construction of the terms of the contract and the application of proper law, the relevant forum shall be determined.

22. In Conflict of Laws by Setelvad, Para 8.13 at page 203, the learned author approves the same very legal position by observing in the following words:

"Where jurisdiction of a court is invoked on the basis of jurisdiction clause in a contract, the recitals therein, in regard to the exclusive or non-exclusive jurisdiction of the court of the choice of the parties, are not determinative but relevant factors, and when a question as to the nature of jurisdiction agreed to between the parties arises, the court has to decide the same on a true interpretation of the contract on the facts and in the circumstances of each case." (Emphasis Supplied).

23. Dicey, Morris and Collins in their treatise The Conflict of Laws, at page 518 state also subscribe to the same opinion. The learned authors observe thus:

"12-092 It is a question of interpretation, governed by the law applicable to the contract, or more accurately, the law governing the jurisdiction agreement, whether a jurisdiction clause is exclusive or non-exclusive, i.e. whether it requires proceedings to be brought in a particular forum, or simply confers jurisdiction on the courts of a particular country without requiring proceedings to be brought there. Some authorities suggest that the clause must provide in terms that the jurisdiction of the chosen court be exclusive, but the true question is whether on its proper construction the clause obliges the parties to resort to the relevant jurisdiction, irrespective of whether the word exclusive is used."

24. From the reading of the afore-quoted authorities, it is clear that the usage of the word "exclusive" or "non-exclusive" in the agreement is not conclusive in order to determine whether other court can exercise the jurisdiction or whether the parties are to be relegated to the chosen forum. It is upon the construction of the terms and conditions of the contract and the due application of proper law, the said fact can be determined.

25. The view that the court will give effect to the agreed forum irrespective of the word non-exclusive, except when there are strong reasons to disregard the contract finds favour of the Supreme Court in the case of Modi Entertainment Network & Anr vs W.S.G.Cricket Pte. Ltd, decided on 21 January, 2003, the Supreme Court observed as under:-

"Normally, the court will give effect to the intention of the parties as expressed in the agreement entered into by them except when strong reasons justify disregard of the contractual obligations of the parties. In Donohue's case (supra) although the parties to the agreement stipulated to submit to the exclusive jurisdiction of the English Courts, the House of Lords found that it would not be in the interests of justice to hold the parties to their contract as in that case strong reasons were shown by the respondent.........."

"But then, the jurisdiction clause indicates that the intention of the parties is to have the disputes resolved in accordance with the principles of English law by an English Court. Unless good and sufficient reasons are shown by the appellants, the intention of the parties as evidenced by their contract must be given effect to." [emphasis laid]

26. The aforesaid observations of the Supreme Court in Modi (Supra) were made in the context of the choice of forum clause where the parties had chosen to be governed by the English Court, on non exclusive basis and the observations of the Supreme Court are therefore noteworthy

and make it manifest that the courts‟ interpretation to those clauses leans in favor of the forum which the parties had chosen in the Contract Act unless, there are strong reasons to the contrary.

27. The reason behind Courts doing their endeavors first to enforce the agreement unless there are strong reasons to depart from the same, this is due to the reason that the Court will normally not assist the party who is in breach of the contract and therefore, secures relief from the court in his favour. If the parties on their own volition had chosen the forum which can otherwise have jurisdiction over the subject matter and the said choice is not opposed to the public policy, then it will be presumed that the parties had taken due note of their relative convenience and non convenience at the time of entering into such a contract. Therefore, the courts role is confined to enforce those clauses to their best endeavors and interfere only when those clauses are against the public policy or there are other strong reasons of similar nature. Thus, the court has only the residual discretion which must be exercised sparingly and circumspectly on the basis of sound judicial principles.

28. The mere fact of use of the word "non exclusive" in the contract will not act as an enabling provision by way of which the court can keep on departing from the agreed forum from time to time. That will lead to agreed clause and the agreed forum redundant. Therefore, the Court has to respect the covenants entered into by the parties and side-by- side invoke the jurisdiction wherever the need be, by exercising residual discretion. In case the covenants speak that there is an agreed forum which can conveniently exercise the jurisdiction along with the governing law, then, the parties must be asked to go before the appropriate forum agreed between the parties.

29. A party who sues in the forum other than the agreed forum of

choice though on non exclusive basis is rather guilty of breaching the

contract and the court will not assist the party who itself is in breach of

the contract and seeks relief from the court which is not the court which he

has himself agreed with the other party to get their disputes adjudicated

unless, the said agreed forum is against the public policy.

30. Similar view has been expressed by a Division Bench of this

Court in the case of Max India Limited vs. General Binding

Corporation; 2009 (3) Arb. LR 162 (Delhi) (DB) wherein, the learned

Judge had emphasized the importance of forum of their choice and their

intentions to enter into such clauses. The learned Single Judge observed

in the following words:-

"We Judges don't create disputes. They get dropped at our doorsteps. While dealing with the issue, we adopt the tools provided to us. Here the tool provided by the parties is the Agreement. They chose the forum, voluntarily. It was their choice, not foisted by the provisions of CPC. They decided to cross the borders so far as choice of forum for settlement of disputes is concerned. The manifest intention of the Agreement is to exclude the jurisdiction of Indian Courts. Now they should not feel epileptic about it."

31. One finds respectful agreement with the view adopted by the

learned Single Judge. I am also fortified by the view taken by the learned

Single Judge of this court in the case of Piramal Healthcare Limited vs

Diasorin S.P.A. (supra) wherein, the learned Single Judge culled out the

principles of law emerging from the authorities in the following manner:-

"Where jurisdiction of a court is invoked on the basis of jurisdiction clause in a contract, the recitals therein in regard to exclusive or non- exclusive jurisdiction of the court of choice of the parties are not determinative but are relevant factors and when a question arises as to the nature of jurisdiction agreed to between the parties the court has to decide the same on a true interpretation of the contract on the facts and in the circumstances of each case......."

"Where parties have agreed, under a non-exclusive `jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum conveniens and favoured forum as it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non-exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum....."

"Where there is a foreign constituent in the contract. For example where the jurisdictional clause confers exclusive or non-exclusive jurisdiction on a foreign court ordinarily parties will be held to their bargain...."

"In determining whether action filed in India (that is courts governed by CPC) is validly instituted, the provisions of CPC would apply but that by itself would not divest the court of its discretion to determine as to whether in a given case it ought to hold parties to their bargain. When a court directs the plaintiff in such circumstances to approach say a foreign/ neutral court; it issues such a direction not because it has no jurisdiction, but in the given circumstances it takes a view that parties should be held to their bargain. In a

given case equally, the court may choose not to hold parties to their bargain."

32. Applying the said principle of law discussed above, which has

found favour of the learned Single Judge of this Court in the present case,

it can safely be said that the parties in the instant case have agreed to get

their disputes resolved by the applicability of Malaysian law as well by

choosing the court of Malaysian jurisdiction though on non exclusive

basis, however, even in those cases, the court must do its endeavors to

respect the bargain between the parties.

33. In the present case, Malaysian court has sufficient nexus and

proximity to the dispute in hand as the defendant carries on business in

Malaysia, the agreement was partly executed in Malaysia and the said

Malaysian court cannot be said to be the one which is forum against the

public policy or arbitrary in nature. Furthermore, as the presumption of

law goes, it cannot be said that the parties were oblivious to their relative

convenience or inconvenience at the time of entering into the contract and

therefore, the mere financial inconvenience or expense is no ground for

the parties to dispense with from their contractual obligations. [This view

has been taken in Modi Entertainment (Supra)].

34. No further strong reasons exist nor have been brought forward

(except to the extent that the plaintiff carries on business or goods are

being sold in Delhi or the agreement in plaintiffs part was signed in India

which are not the reasons sufficient to avoid the clause in the agreement)

which can be said to be operating as factors which may enable the court to

depart from the view that the parties may hold to their bargain.

Accordingly, the parties must hold their bargain and there are no strong

reasons for exercising any further residual discretion in favour of the

plaintiff.

35. As regards the submissions of the plaintiffs‟ counsel, the same

are dealt with hereinafter in seriatim:

a) Firstly, by calling upon the parties to approach the forum of their choice, the court is not converting the clause of non exclusive jurisdiction into exclusive one but, rather giving effect to the word of the contract as agreed to between the parties. If non exclusive choice would mean normally and invariably a departure from the agreed forum, then, the words and stipulations in the contract shall be reduced to dead letters which is impermissible in law. Therefore, the plaintiff‟s argument is rejected.

b) Secondly, the views taken by the various courts in Gary Sugar of Canada (supra), Orchard Capital (supra) of Singapore or Highland Crusaders of UK are noteworthy. But, this court is bound by the observations of the Supreme Court of India in Modi Entertainment (supra). Also, similar view is taken by the learned Single Judge of this Court in Piramal Healthcare Limited vs Diasorin S.P.A. (supra) wherein, similar non exclusive clauses have

been dealt with by the Courts. Thus, the judicial opinion prevalent in India leans towards giving effect to terms of the contract when it comes to international commercial disputes and not in favour giving the parties unfettered liberties to approach any forum on the counts of non exclusive jurisdiction clauses. Of course, that does not mean that the courts do not have discretion but, that has to be exercised sparingly, circumspectly and on the basis of sound judicial principles. In the present case, no such strong reasons exist for exercise such discretion.

c) The submission that the natural forum remains unaffected in the present case is also without any force, due to the reason that Malaysian court is not only a neutral forum or forum chosen arbitrarily by the parties, rather, Malaysian forum is equally a natural forum, wherein, the defendant is carrying on the business, the agreement was partly executed and signed therein and terminated therefrom. The said court in Malaysia, has sufficient nexus with the cause in hand. Thus, choice of one forum over the other, when both can act as natural forum is not bad. In the present case, the plaintiff had signed the agreement knowing fully well that it is submitting the jurisdiction of Malaysian court, thus, by mere ground of inconvenience, the stipulation in the contract cannot be repudiated. Further, it is also doubtful as to how the Delhi Court is a natural forum. This is due to the reason that the plaintiff has a subordinate office in Gurgaon where this agreement was signed from plaintiff‟s part and the so called part of cause of action had arisen in Gurgaon wherein, the plaintiff has subordinate office. Thus, if at all, the plaintiff could have sued on the basis of his

activities in India, the same could not be Delhi but Gurgaon, by way of clear applicability of explanation appended to section 20 of CPC and the line of authorities existing on the subject. Further, even in Gurgaon, the same question of applicability of contractual obligation or agreed forum of choice will arise.

d) The submission on the basis of non applicability of Modi Entertainment (supra) is without any force, due to the reason that the question is not whether such judgment is rendered in the context of anti suit injunction or not. Rather, one has to see the exposition of the law laid down by the Supreme Court in the case of Modi Entertainment (Supra). Of course, Modi Entertainment (Supra) is an authority on the subject of anti suit injunction. But, the said anti suit injunction was sought, so as to not to give effect to the said non exclusive jurisdiction clause, by seeking stay of suit in the England court. The Supreme Court while negating the said injunction also laid special emphasis on the aspect giving effect to the clauses of choice of forum on non exclusive in the agreement. The Supreme Court has opined that unless, there are special reasons to the contrary, the intentions of the parties in the contract must be given effect to. Thus, the said observations can be conveniently applied to the present case and rather are followed in the cases involving non exclusive jurisdiction clauses on the same strength.

e) The judgment passed in the case of Laxman Prasad (supra) is not applicable in as much as in the said case, the Supreme Court has carved out a fine distinction between the choice of law and choice of forum. It is thus held in case wherein the parties had only agreed to choice of law but not the choice of forum, then the courts should

not be insistent upon the parties to approach the court of jurisdiction as per the law which has been chosen by the parties in the agreement. Thus, it is one thing to say there is a choice of law in which case, the jurisdiction can be somewhere else as per the cause of action but there is another thing of choice of forum. But in the present case, there is both, choice of law as well as choice of forum as per clause 22 of the Agreement. Thus, the dictum of Laxman Prasad (supra) is not applicable and is clearly distinguishable.

36. No submission of the plaintiff remained unanswered.

Resultantly, the application filed by the defendant IA No.3347/2012 is

allowed and the plaint is returned to the plaintiff to be filed before the

court of appropriate forum. In the interest of justice, equity and fair play,

operation of letter dated 23.12.2011 issued by defendant No.1 shall remain

stayed for two weeks as interim order in the matter was continued till

date.

MANMOHAN SINGH, J.

MAY 09, 2012