Telangana High Court

Kakulamarri Kalyan Srinivasa Rao vs The Deputy Director And Another on 23 August, 2022

Bench: G.Radha Rani

           THE HON'BLE Dr. JUSTICE G. RADHA RANI

                  WRIT PETITION No.11378 OF 2021

ORDER:

This writ petition is filed to issue a writ of Certiorari, order or

direction, calling for the records of the present case and to quash and set

aside the impugned complaint in CC No.1 of 2021 in ECIR Case No.EC

18/CEZO/5/2016 filed under Section 45 of the Prevention of Money

Laundering Act, 2002 (for short 'PML Act') against the petitioner before

the Principal Sessions Judge, Chennai by the respondent - Enforcement

Directorate as it is contrary to law and violates the fundamental rights of

the petitioner under Article 21 of the Constitution of India and to quash the

cognizance order taken by the Principal Sessions Judge, Chennai in CC

No.1 of 2021 against the petitioner.

2. Heard Sri S. Nagamuthu, learned Senior Counsel representing

M/s. Anaveni Mogili, counsel on record for the petitioner and Smt. Anjali

Agarwal, learned Standing Counsel for the Central Government and the

learned Special Public Prosecutor for Enforcement Directorate

representing the 1st respondent.

3. The facts of the case leading to filing of the present case are:

Dr.GRR,J

In the year 2010, M/s.Best & Crompton Engineering Projects Ltd.

(BCEPL) had availed credit facilities from a consortium of Banks led by

the Central Bank of India. The Central Bank of India sanctioned Rs.120.00

Crores for fund based and non-fund based working capital limit to BCEPL

on 21.10.2010 secured by immovable property as well as corporate

guarantee. The Andhra Bank had sanctioned credit limit to a tune of Rs.60

Crores and the Corporation Bank sanctioned credit limit to a tune of

Rs.120.00 Crores to BCEPL meeting a total requirement of Rs.300 Crores.

The Central Bureau of Investigation (CBI), Bangalore office registered an

FIR on 01.02.2016 against BCEPL under Section 120-B read with Sections

420, 468 and 471 IPC. The petitioner, who was the Managing Director of

BCEPL, was arrayed as an accused. Pursuant to the aforesaid FIR, the

ECIR (in question) was registered on 27.04.2016 by the Enforcement

Directorate - 1st respondent. After two years of investigation, CBI filed

charge sheet on 08.05.2018, wherein the petitioner was arrayed as A1.

The petitioner was summoned for appearance by the respondents under

Section 50 of the PML Act. The petitioner appeared before the respondent

on 06.06.2017, 03.07.2017 and 13.11.2018. Subsequently, CC No.1 of

2021 dated 08.09.2020 was filed under Section 45 of the PML Act by the

1st respondent in Enforcement Case Information Report (ECIR) Dr.GRR,J

No.ECIR/CEZO/05/2016. The petitioner was arrayed as Accused No.2 in

the said complaint. The Principal Sessions Judge, Chennai had taken

cognizance of the aforesaid complaint. The CBI registered a case in RC

No.04/E/2016-CBI/BS&FC/BLR on 01.02.2016 basically against

M/s.BCEPL (A1 Company) and other accused in furtherance of a

complaint dated 28.01.2016. Thereafter, the respondents contended that all

the accused were party to a criminal conspiracy hatched among themselves

in Hyderabad and Chennai and other places during the years 2010-13 in

defrauding and cheating the Consortium of Banks led by the Central Bank

of India and in furtherance of the criminal conspiracy induced the Central

Bank of India, Corporate Finance Branch, Chennai by submitting

fraudulent Letter of Credit documents without any physical movement of

goods and unlawfully availed credit facilities for which they were not

eligible and diverted the said loan amount for the purposes other than

which it was sanctioned. The case of the respondent was that the accused

had caused a wrongful loss to a tune of Rs.133.31 Crores to the Consortium

of Banks and corresponding unlawful gains to themselves.

3.1. The learned counsel for the petitioner contended that the

respondents, based on surmises, charged the A1 company with criminal

culpability purely on the basis of a business difficulty to repay monies due Dr.GRR,J

to the bank. It was settled law that a mere failure to pay a debt could not be

a crime. At the time of sanction of loan, the petitioner was not an

employee of the A1 company, therefore, the question of the petitioner

being a party to the conspiracy would not arise. The petitioner occupied

the seat of the Managing Director of A1 company in February 2012,

whereas the loan was sanctioned in 2010. Therefore, none of the charging

provisions in the charge sheet or in the complaint would apply to the

petitioner. The allegations in the FIR and charge sheet were civil in nature

and the same would not attract the ingredients of a criminal offence. The

case of the bank with respect to the FIR dated 01.02.2016 would only relate

to commercial dispute for recovery of debt and grant of credit facility. The

case was civil in nature and no criminal offence was made out against the

petitioner. The grant of credit facility was purely for business purposes and

the recovery of the same could only be related to dispute of civil nature and

not otherwise and non-payment of credit facility ipso facto was not an

offence under IPC or the PML Act. The respondents malafidely given

colour of a criminal offence to a civil dispute. The complaint under PML

Act was an abuse of process of law.

3.2. He further contended that the proceedings initiated under ECIR

under PML Act were per se unwarranted and illegal. The investigation was Dr.GRR,J

done against the petitioner on the ipse dixit of the officers of the respondent

and in complete defiance of the statute. Even as per the impugned

complaint, the receivable position of the A2 company would amount to

Rs.348.00 Crores with the trade receivable alone amounting to Rs.313

Crores out of which a sum of Rs.43.00 Crores was realizable from the

Government agencies and other parties and an amount of Rs.270.00 Crores

was receivable from a public limited company known as M/s.Ganga

Industrial Corporation Ltd. In the Corporate Insolvency Resolution

Process of M/s. Viceroy Hotels Ltd., under the provisions of Insolvency

and Bankruptcy Code, 2016, a claim of Rs.370.00 Crores was admitted

towards Ganga Industrial Corporation Limited. The said amount was

reflected in the balance sheet of the aforesaid companies and thus, there

was no question of unearthing any money trail or proceeds of crime in the

present case. Admittedly, as per the complaint, the petitioner was not a

beneficiary directly or indirectly in the crime being investigated. The

petitioner was in no manner linked to money laundering as contemplated

under the Act. The statement made under Section 50 of the PML Act by a

person against himself was self incriminatory and therefore, inadmissible in

evidence. An Investigating Officer in the penal statute of PML Act would

exercise all police powers and thus a police officer for all purposes Dr.GRR,J

including for the purpose of Sections 25 and 26 of the Evidence Act.

Apart from the statements recorded under Section 50 of the PML Act, the

respondents had no other material whatsoever against the petitioner to

sustain its case. None of the ingredients mentioned in Section 3 of the

PML Act were attracted. The offence of cheating was not made out as the

petitioner was not an employee of BCEPL at the time of sanction of loan.

Therefore, the question of petitioner being a party to the conspiracy also

would not arise. No irregularity was reported in the tax audits and stock

audits regularly submitted by the company to the banks.

3.3. He further contended that there were allegations in the

complaint that criminal conspiracy to commit the offence was hatched in

Hyderabad and Chennai. The Head Quarter branch of the Andhra Bank

which forwarded the credit facility to BCEPL was in Hyderabad. The

investigation of some of the transactions took place in Hyderabad. Further,

in connection with the investigation in FIR No.4(E) of 2017 lodged by

CBI, WP No.9590 of 2019 was filed before this Court challenging issuance

of summons and vide order dated 13.04.2019, this Court protected the

petitioner therein from arrest. In terms of Article 226(2) of the Constitution

of India, the territorial jurisdiction of the High Court would be determined

if cause of action, wholly or partly, arose within its territorial jurisdiction.

Dr.GRR,J

The Hon'ble Apex Court in Navinchandra N. Majithia v. State of

Maharashtra1 held that mere fact that FIR was registered in a particular

state would not be a sole criteria to decide whether any cause of action had

arisen even partly within the territorial limits of jurisdiction of another

State. The aforesaid view was subsequently reiterated by the Hon'ble Apex

Court in Rajendra Ramachandra Kavalekar v. State of Maharashtra2.

In view of the law laid down by the Hon'ble Apex Court, this Court had

got jurisdiction to entertain the writ petition and prayed to allow the same

by quashing the cognizance taken by the Principal Sessions Judge, Chennai

in CC No.1 of 2021 against the petitioner.

4. The learned Special Public Prosecutor for Directorate of

Enforcement, on the other hand, raised a preliminary objection of

maintainability of the writ petition on account of territorial jurisdiction.

4.1. He contended that the entire cause of action in the present case

had arisen in the State of Tamil Nadu and within the jurisdiction of the

High Court of Madras. The investigation by the predicate agency (CBI)

was carried out in Bangalore but the final report was filed before the

Additional Chief Metropolitan Magistrate Court, Egmore, Chennai (which

(2000) 7 SCC 640

(2009) 11 SCC 286 Dr.GRR,J

was the jurisdiction0al court in so far as the predicate offence is

concerned). In so far as the ECIR was concerned, it was registered by the

Chennai Zonal-1 office of the respondent. The company which was

involved in money laundering i.e. BCEPL had its registered office at

Chennai and all its operations were carried out from Chennai; the Directors

of the said company were mostly residing in Chennai, the entire criminal

activity including conspiracy, sanctioning of loans by the banks etc.,

happened in the State of Tamil Nadu within the jurisdiction of the Madras

High Court and no part of cause of action had arisen within the State of

Telangana. Even according to the petitioner, the only claim for seeking

indulgence of this Court was that the Andhra Bank, one among the

consortium of Banks that sanctioned the loan had its Headquarters at

Hyderabad and therefore, cause of action partly arose in Hyderabad.

Further, some of the properties which formed the subject matter of money

laundering had also been bought in and around Hyderabad. But it was trite

law that it was not mere cause of action but essential cause of action which

was the test to determine whether the Court has jurisdiction to entertain the

writ petition or not. The dictum of the Hon'ble Apex Court in Oil and

Natural Gas Commission v. Utpal Kumar Basu and others3 was a

1994 (4) SCC 711 Dr.GRR,J

landmark decision on the issue of territorial jurisdiction and had been

followed in subsequent cases including the recent decision in Alchemist

Ltd. v. State Bank of Sikkim4. The respondents had filed a writ petition

challenging the order of the National Company Law Tribunal, Hyderabad

(NCLT) as it lacked jurisdiction and the High Court of Madras allowed the

writ petition holding that the NCLT, Hyderabad could not have jurisdiction

to entertain the application. Similarly, the contention of the petitioner that

because of the petition preferred by Mr. Y.S. Chowdary against Union of

India before this Court and summons were challenged and the interim

orders were granted would not cloth this Court with jurisdiction as in the

said case jurisdiction was never decided and no finding was ever rendered

that in the facts of that case jurisdiction rested with this court and prayed to

treat the issue of jurisdiction as preliminary issue before proceeding with

the merits of the matter.

4.2. Even on the merits, learned Special Public Prosecutor

submitted that 3 criminal cases vide RC No.4(E)/2016/CBI/BS&FC/BLR,

dated 01.02.2016; FIR vide RC No.4/2017 dated 03.02.2017 and RC

No.14/2018 dated 16.07.2018 were registered by CBI, BS & FC, Bangalore

against BCEPL and their key officials based on the complaints preferred by

2007 (11) SCC 335 Dr.GRR,J

the consortium of banks for the offences punishable under Sections 420,

468 and 471 IPC and other substantive offences. The allegation in the

complaints were that the officials of BCEPL along with other persons

hatched a criminal conspiracy amongst themselves at Chennai and

Hyderabad and other places during the period from 2010 to 2013 in order

to defraud/cheat consortium of Banks led by the Central Bank of India and

obtained loan to a tune of Rs.364 Crores from the said consortium of

bankers i.e. Rs.133.00 Crores from the Central Bank of India, Rs.71.00

Crores from the Andhra Bank, Chennai and Rs.159.00 Crores from the

Corporation Bank, Chennai. In furtherance to the criminal conspiracy, the

conspirators induced the Central Bank of India, Corporate Finance Branch,

Chennai by submitting fraudulent Letter of Credit documents without any

physical movement of goods and unlawfully availed the credit facilities/

enhancement for which they were otherwise not eligible and diverted the

said loan amounts for the purposes other than for which it was sanctioned

and defrauded the consortium of Bankers and committed offences

punishable under Section 120-B read with 420, 468 and 471 IPC and

substantive offences thereof. The CBI, BS & FC, Bangalore upon

completion of its investigation in FIR RC No.4(E) 2016/CBI/BS&FC/BLR,

dated 01.02.2016 filed a final report in the Court of Additional Chief Dr.GRR,J

Metropolitan Magistrate, Egmore, Chennai on 16.06.2017 against BCEPL

and others.

4.3 Based on the FIR registered by CBI and since a prima facie

case for having committed an offence of money laundering under Section 3

of the PML Act punishable under Section 4 of the Act appeared to have

been made out, a case was registered vide ECIR No.CEZO/05/2016, on

27.04.2016 and was taken up for investigation. The Central Bank of India,

Corporate Finance Branch, Chennai appointed M/s. J. Singh & Associates,

Chartered Accountants for conducting Forensic Audit with the books of

accounts of BCEPL, their transactions, fund flow etc., and the Forensic

Audit was done between 03.03.2014 to 10.03.2014. The Chartered

Accountants observed in their report that the funds were diverted through

fictitious purchases and sales, which were mere book entries, that while

payments were made for fictitious purchases, most of the creditors and

debtors were friendly entities, through which money had been siphoned off.

The Forensic Audit report further concluded that legal measures had to be

initiated to trace the amounts paid towards fictitious purchases, that the LCs

were also opened in favour of friendly entities and when they devolved,

money was transferred from the banking system to such entities

fraudulently. On verification of the Bank Accounts of BCEPL, it resulted Dr.GRR,J

in identification of payments made to the friendly entities specifically to the

following group of companies:

a) Global Forgings Ltd. (presently Cosmos Forgings Ltd.)

b) Tejaswini Engineering Pvt. Ltd.

c) Ganga Exim Pvt. Ltd. (presently Icon Commodities Pvt.

Ltd.)

d) Godawari Exports & Imports Pvt. Ltd. (BP Ferrium Industries Pvt. Ltd.)

4.4. He further submitted that the petitioner who was the Managing

Director of BCEPL was also a Director in M/s.Velugu Power Solutions

Pvt. Ltd. as well as in M/s.Mahal Hotel Pvt. Ltd., and vide his statement

given under Section 50 of the PML Act stated that the investments made by

M/s. Velugu Power Solutions into BCEPL were out of funds that came

from various Sujana Group of Companies and the said investment was

done to clear and regularize the Bank accounts of BCEPL, that the amount

invested in BCEPL was Rs.32.33 lakhs, that he was the Managing Director

of Mahal Hotel Pvt. Ltd., and the company was started with the purpose of

purchasing an under construction Marriot Hotel at Chennai belonging to

Viceroy Hotels Pvt. Ltd., Hyderabad, that the entire investment into Mahal

Hotel Pvt. Ltd., was through Sujana Group of Companies. The investment

of purchase of Marriot Hotel, Chennai from Viceroy Hotels Pvt. Ltd., was Dr.GRR,J

approximately Rs.130 Crores as per his remembrance, the purchase of

Marriot Hotel, Chennai by Mahal Hotel Pvt. Ltd., did not go through as the

financial feasibility was not working out and the deal was cancelled by

mutual agreement made between Mahal Hotels Pvt. Ltd., and M/s. Viceroy

Hotels Pvt. Ltd.

4.5. He further submitted that the investigation under the Act

revealed that BCEPL was also a company managed and administered by

Sujana Group of Companies operated from Chennai and Hyderabad. The

BCEPL derived several crores of rupees by availing various credit facilities

from the banks in consortium by fraudulent means and diverted the money

into the bank accounts of the paper/shell companies. The money so diverted

by BCEPL was circulated through various paper/shell companies' bank

accounts without any underlying material transactions. An amount of

Rs.124.52 Crores was routed through the paper/shell companies and other

Sujana Group companies, such as Bhagyanagar Investments & Trading Pvt.

Ltd., M/s. Infotech Infin & Trading Pvt. LTd., M/s. Mahal Hotels Pvt. Ltd.

and finally paid to M/s. Viceroy Hotels Limited by entering business

transaction agreement which was later terminated vide "Deed of

Confirmation of Termination" dated 16.09.2013. The amount to a tune of

Rs.78.00 Crores was paid to M/s. Viceroy Hotels Ltd., even before entering Dr.GRR,J

into the business transaction agreement. The facts would make it amply

clear that the funds raised by BCEPL from the banks in consortium by

fraud and cheating were routed through multiple circular transactions made

into bank accounts of the paper/shell companies which were floated by

Sujana Group. The funds raised by BCEPL from the banks in consortium

were nothing but crime proceeds which had been laundered and projected

as untainted and had been integrated and invested into the business

activities of M/s. Viceroy Hotels Ltd.

4.6. After identifying part of the crime proceeds derived from

commission of Scheduled offences by BCEPL and others valued at

Rs.315.50 Crores (approximately), the Deputy Director, Directorate of

Enforcement, Chennai, provisionally attached the properties under sub-

Section (1) of Section 5 of the PML Act. In continuation of the above, in

terms of Section 5 (5) of the Act, a complaint was filed on 12.04.2019,

before adjudicating authority, PMLA, New Delhi seeking confirmation of

the attachment. The adjudicating authority in OC No.1118 of 2019

confirmed the provisional attachment order (PAO) No.04/2019 vide its

order dated 11.09.2019. The Directorate of Enforcement had taken

possession of attached properties on 15.09.2019.

Dr.GRR,J

4.7. The petitioner was the Managing Director of M/s. BCEPL from

2012 onwards. He was also the Managing Director of M/s. Mahal Hotels

Pvt. Ltd., the company which was used as conduit to place part of the

proceeds of crime after layering through various fictitious companies which

was finally integrated with M/s. Viceroy Hotels Ltd., in order to project the

same as untainted. The investigation conducted under PML Act revealed

that the proceeds of crime that were routed to M/s. Viceroy Hotels Ltd.,

through Mahal Hotel Pvt. Ltd., was originated from the diversion of bank

loans obtained by BCEPL by cheating the consortium of banks. The

petitioner herein executed Business Transfer Agreement on behalf of M/s.

Mahal Hotels in the capacity of Managing Director with M/s. Viceroy

Hotels. The petitioner herein had directly indulged and knowingly was a

party and actually involved in the process or activity connected with the

proceeds of crime. Even though loans were sanctioned in the year 2010,

the utilization, diversion and laundering of bank loans happened during

crime period from 2010 to 2013. The evidence gathered in the course of

investigation under PML Act pointed towards the petitioner in playing a

major role in perpetrating and commission of the offence of money

laundering. The evidence and documents gathered during investigation

pointed to the culpability of the petitioner and the same could be proved Dr.GRR,J

during the trial before the Court of Sessions and prayed to dismiss the

petition.

5. In view of the above contentions the following questions arise for

consideration:

1. Whether this court is having territorial jurisdiction to entertain the writ petition under Article 226 (2) of the Constitution of India?

2. Whether taking cognizance of the offence under PMLA by the Principle Session Judge, Chennai in CC 1 of 2021 against the petitioner is in accordance with law?

6. Question No 1:-

To consider this question it is necessary to examine the legal position

and the history behind enactment of Article 226(2) of the Constitution of

India.

"226. Power of High Courts to issue certain writs:

(1) Notwithstanding anything in Article 32 every High Court shall have powers, throughout the territories in relation to which it exercise jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibitions, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose.

(2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories."

Dr.GRR,J

6.1 The Hon'ble Apex Court in ONGC Vs. Utpal Kumar Basu's

case (3 supra) observed that,

"5. Clause (1) of Article 226 begins with a non obstante clause notwithstanding anything in Article 32 - and provides that every High Court shall have power "throughout the territories in relation to which it exercises jurisdiction", to issue to any person or authority, including in appropriate cases, any Government, "within those territories" directions, orders or writs, for the enforcement of any of the rights conferred by Part III or for any other purpose.

Under clause (2) of Article 226 the High Court may exercise its power conferred by clause (1) if the cause of action, wholly or in part, had arisen within the territory over which it exercises Jurisdiction, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories.

On a plain reading of the aforesaid two clauses of Article 226 of the Constitution it becomes clear that a High Court can exercise the power to issue directions, orders or writs for the enforcement of any of the fundamental rights conferred by Part III of the Constitution or for any other purpose if the cause of action, wholly or impart, had arisen within the territories in relation to which it exercises jurisdiction, notwithstanding that the seat of the Government or authority or the residence of the person against whom the direction, order or writ 'is issued is not within the said territories.

6. It is well settled that the expression "cause of action" means that bundle of facts which the petitioner must prove, if traversed, to entitle him to a judgment in his favour by the Court. In Chand Kour v. Partab Singh' Lord Watson said:

"... the cause of action has no relation whatever to the defence which may be set up by the defendant, nor does it depend upon the character of the relief prayed for by the plaintiff. It refers entirely to the ground set forth in the plaint as the cause of action, or, in other words, to the media upon which the plaintiff asks the Court to arrive at a conclusion in his favour."

Therefore, in determining the objection of lack of territorial jurisdiction the court must take all the facts pleaded in support of the cause of action into consideration albeit without Dr.GRR,J

embarking upon an enquiry as to the correctness or otherwise of the said facts. In other words the question whether a High Court has territorial jurisdiction to entertain a writ petition must be answered on the basis of the averments made in the petition, the truth or otherwise whereof being immaterial. To put it differently, the question of territorial jurisdiction must be decided on the facts pleaded in the petition.

The Supreme Court in Saka Venkata Subba Rao case while interpreting Article 226 as it then stood observed as under:

"The rule that cause of action attracts Jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under Article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories' in relation to which the High Court exercises jurisdiction."

Thus, this Court ruled that in the absence of a specific provision in Article 226 on the lines of the Code of Civil Procedure, the High Court cannot exercise jurisdiction on the plea that the whole or part of the cause of action had arisen within its jurisdiction. This view was followed in subsequent cases. The consequence was that only the High Court of Punjab could exercise jurisdiction under Article 226 of the Constitution against the Union of India and other bodies located in Delhi. To remedy this situation, clause (1-A) was inserted by the 15th Amendment Act, 1963, to confer on the High Courts jurisdiction to entertain a petition under Article 226 against the Union of India or any other body or authority located in Delhi if the cause of action has arisen, wholly or in part, within its Jurisdiction. Clause (1-A) was later renumbered as clause (2) of Article 226. Therefore, the learned counsel for NICCO is right that this amendment was introduced to supersede the view taken by this Court in the aforesaid case. But as stated earlier, on a plain reading of clause (2) of Article 226, it is clear that the power conferred by clause (1) can be exercised by the High Court provided the cause of action, wholly or in part, had arisen within its territorial limits."

6.2 In Alchemist's case (4 supra), the Hon'ble Apex Court held

that:

Dr.GRR,J

"12. Before entering into the controversy in the present appeal, let the legal position be examined: Article 226 of the Constitution as it originally enacted had two-fold limitations on the jurisdiction of High Courts with regard to their territorial jurisdiction. Firstly, the power could be exercised by the High Court "throughout the territories in relation to which it exercises jurisdiction", i.e. the writs issued by the court cannot run beyond the territories subject to its jurisdiction. Secondly, the person or authority to whom the High Court is empowered to issue such writs must be "within those territories", which clearly implied that they must be amenable to its jurisdiction either by residence or location within those territories.

13. In Election Commission, India v. Saka Venkata Rao [1953 SCR 1144 : AIR 1953 SC 210], , the petitioner applied to the High Court of Madras under Article 226 of the Constitution for a writ of prohibition restraining the Election Commission, (a statutory authority constituted by the President) having its office permanently located at New Delhi, from inquiring into the alleged disqualification of the petitioner from membership of the Madras Legislative Assembly. The High Court of Madras issued a writ. The aggrieved petitioner approached this Court. Allowing the appeal and reversing the decision of the High Court, this Court held that the High Court of Madras had no territorial jurisdiction to entertain the petition.

Speaking for the Court, Patanjali Sastri, C.J. made the following observations:

"The makers of the Constitution, having decided to provide for certain basic safeguards for the people in the new set up, which they called fundamental rights, evidently thought it necessary to provide also a quick and inexpensive remedy for the enforcement of such rights and, finding that the prerogative writs which the Courts in England had developed and used whenever urgent necessity demanded immediate and decisive interposition, were peculiarly suited for the purpose, they conferred, in the States' sphere, new and wide powers on the High Courts of issuing directions, orders, or writs primarily for the enforcement of fundamental rights, the power to issue such directions, etc., "for any other purpose" being also included with a view apparently to place all the High Courts in this country in somewhat the same position as the Court of King's Bench in England. But wide as were the powers thus conferred, a two-fold limitation was placed upon their exercise. In the first place, the power is to be exercised "throughout the territories in relation to which it exercises jurisdiction", that is to say, the writs issued by Dr.GRR,J

the court cannot run beyond the territories subject to its jurisdiction. Secondly, the person or authority to whom the High Court is empowered to issue such writs must be "within those territories", which clearly implies that they must be amenable to its jurisdiction either by residence or location within those territories".

(emphasis supplied)

As to the cause of action, the Court stated: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under Article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories' in relation to which the High Court exercises jurisdiction".

Again, a question arose in Khajoor Singh v. Union of India [(1961) 2 SCR 528 : AIR 1961 SC 532]. A Bench of seven Judges was called upon to consider the correctness or otherwise of Saka Venkata Rao. The majority (Sinha, C.J., Kapoor, Gajendragadkar, Wanchoo, Das Gupta and Shah, JJ.) reaffirmed and approved the view taken by this Court earlier in Saka Venkata Rao and held that the High Court of Jammu & Kashmir was right in not entertaining the writ petition filed by the petitioner on the ground that it had no territorial jurisdiction. Speaking for the majority, Sinha, C.J., stated: "It seems to us therefore that it is not permissible to read in Article 226 the residence or location of the person affected by the order passed in order to determine the jurisdiction of the High Court. That jurisdiction depends on the person or authority passing the order being within those territories and the residence or location of the person affected can have no relevance on the question of the High Court's jurisdiction".

The effect of the above decisions was that no High Court other than the High Court of Punjab (before the establishment of the High Court of Delhi) had jurisdiction to issue any direction, order or writ to the Union of India, because the seat of the Government of India was located in New Delhi. Cause of action was a concept totally irrelevant and alien for conferring jurisdiction on High Courts under Article 226 of the Constitution. An attempt to import such concept was repelled by this Court. In the circumstances, Article 226 was amended by the Constitution (Fifteenth Amendment) Act, 1963 and after Clause 1, new Clause (1-A) was inserted which read as under:

Dr.GRR,J

"(1-A) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories".

It may be stated that by the Constitution (Forty- second Amendment) Act, 1976, Clause (1-A) was renumbered as Clause (2). The underlying object of amendment was expressed in the following words: "Under the existing Article 226 of the Constitution, the only High Court which has jurisdiction with respect to the Central Government is the Punjab High Court. This involves considerable hardship to litigants from distant places. It is, therefore, proposed to amend Article 226. So that when any relief is sought against any Government, authority or person for any action taken, the High Court within whose jurisdiction the cause of action arises may also have jurisdiction to issue appropriate directions, orders or writs".

(emphasis supplied) The effect of the amendment was that the accrual of cause of action was made an additional ground to confer jurisdiction on a High Court under Article 226 of the Constitution.

As Joint Committee observed:

"This clause would enable the High Court within whose jurisdiction the cause of action arises to issue directions, orders or writs to any Government, authority or person, notwithstanding that the seat of such Government or authority or the residence of such person is outside the territorial jurisdiction of the High Court. The Committee feel that the High Court within whose jurisdiction the cause of action arises in part only should also be vested with such jurisdiction".

18. The legislative history of the constitutional provisions, therefore, make it clear that after 1963, cause of action is relevant and germane and a writ petition can be instituted in a High Court within the territorial jurisdiction of which cause of action in whole or in part arises.

It may be stated that the expression 'cause of action' has neither been defined in the Constitution nor in the Code of Civil Procedure, 1908. It may, however, be described as a bundle of Dr.GRR,J

essential facts necessary for the plaintiff to prove before he can succeed. Failure to prove such facts would give the defendant a right to judgment in his favour. Cause of action thus gives occasion for and forms the foundation of the suit. The classic definition of the expression 'cause of action' is found in Cooke v. Gill, (1873) 8 CP 107:42 LJ PC 98, wherein Lord Brett observed:

"'Cause of action' means every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court".

For every action, there has to be a cause of action. If there is no cause of action, the plaint or petition has to be dismissed.

Mr. Soli J. Sorabjee, Senior Advocate appearing for the Appellant-Company placed strong reliance on A.B.C. Laminart Pvt. Ltd. & Anr. v. A.P. Agencies, Salem, (1989) 2 SCC 163 : AIR 1989 SC 1239 : JT 1989 (2) SC 38 and submitted that the High Court had committed an error of law and of jurisdiction in holding that no part of cause of action could be said to have arisen within the territorial jurisdiction of the High Court of Punjab & Haryana. He particularly referred to the following observations: "A cause of action means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded. It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. Everything which if not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relation whatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff".

In our opinion, the High Court was wholly justified in upholding the preliminary objection raised by the respondents and in dismissing the petition on the ground of want of territorial jurisdiction. The learned counsel for the respondents referred to several decisions of this Court and submitted that whether a particular fact constitutes a cause of action or not must be decided on the basis of the facts and circumstances of each case.

Dr.GRR,J

In our judgment, the test is whether a particular fact(s) is (are) of substance and can be said to be material, integral or essential part of the lis between the parties. If it is, it forms a part of cause of action. If it is not, it does not form a part of cause of action. It is also well settled that in determining the question, the substance of the matter and not the form thereof has to be considered.

26. In Union of India & Ors. v. Oswal Woollen Mills Ltd. & Ors., (1984) 3 SCR 342 : AIR 1984 SC 1264, the registered office of the Company was situated at Ludhiana, but a petition was filed in the High Court of Calcutta on the ground that the Company had its branch office there. The order was challenged by the Union of India. And this Court held that since the registered office of the Company was at Ludhiana and the principal respondents against whom primary relief was sought were at New Delhi, one would have expected the writ petitioner to approach either the High Court of Punjab & Haryana or the High Court of Delhi. The forum chosen by the writ petitioners could not be said to be in accordance with law and the High Court of Calcutta could not have entertained the writ petition.

In Kusum Ingots & Alloys Ltd. v. Union of India (UOI) & Anr., (2004) 6 SCC 254 : JT 2004 (Supp. 1) 475, the appellant was a Company registered under the Indian Companies Act having its Head Office at Mumbai. It obtained a loan from the Bhopal Branch of the State Bank of India. The Bank issued a notice for repayment of loan from Bhopal under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The appellant Company filed a writ petition in the High Court of Delhi which was dismissed on the ground of lack of territorial jurisdiction. The Company approached this Court and contended that as the constitutionality of a Parliamentary legislation was questioned, the High Court of Delhi had the requisite jurisdiction to entertain the writ petition.

37. From the aforesaid discussion and keeping in view the ratio laid down in catena of decisions by this Court, it is clear that for the purpose of deciding whether facts averred by the petitioner appellant, would or would not constitute a part of cause of action, one has to consider whether such fact constitutes a material, essential, or integral part of the cause of action. It is no doubt true that even if a small fraction of the cause of action arises within the jurisdiction of the Court, the Court would have territorial jurisdiction to entertain the suit/petition. Nevertheless it must be a 'part of cause of action', nothing less than."

Dr.GRR,J

6.3 The High Court of Madras in A. John Kennedy and Ors. v.

Joint Director, Directorate of Enforcement, Cochin Zonal Office5

extracting the judgment of the Hon'ble Apex Court in Kusum Ingots and

Alloys Ltd., [AIR 2004 SC 2321] observed that, even if a small part of

cause of action arises within the territorial jurisdiction of the High Court,

the same by itself may not be a determinative factor to decide the matter on

merit. It observed that:

21. Further, the petitioners cannot file the present Writ Petitions even on the ground of "forum-conveniens". In this regard, it is useful to refer a decision in the case of Kusum Ingots and Alloys Ltd. Vs. Union of India and others, reported in AIR 2004 SC 2321, in which, the Apex Court held that a writ petition, questioning the Constitutionality of a Parliamentary Act was not be maintainable in the High Court of Delhi merely because the seat of the Union of India was in Delhi. On the point of "forum- conveniens", the Supreme Court held as follows:

"30. We must, however, remind ourselves that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens. (See Bhagat Singh Bugga Vs. Dewan Jagbir Sawhney (AIR 1941 Cal 670 : ILR (1941) 1 Cal 490), Madanlal Jalan Vs. Madanlal [(1945) 49 CWN 357 : AIR 1949 Cal 495], Bharat Coking Coal Ltd. Vs. Jharia Talkies & Cold Storage (P) Ltd. [(1997) CWN 122], S.S.Jain & Co. Vs. Union of India [(1994) 1 CHN 445] and New Horizons Ltd. Vs. Union of India [AIR 1994 Delhi 126]."

(emphasis supplied)

22. In the above decision (Kusum Ingots and Alloys Ltd. case) of the Supreme Court, the Apex Court held that a High Court

MANU/TN/7063/2020 Dr.GRR,J

may refuse to exercise its discretionary jurisdiction by invoking the doctrine of "forum conveniens". Thus, there is no question of granting leave to file Writ Petition under Article 226(2) of the Constitution of India in case where a small fraction of cause of action may have arisen. In appropriate cases, the High Court may however refuse to exercise its discretionary jurisdiction by invoking the Doctrine of "Forum-Conveniens".

23. Whether the principle of "Forum-Conveniens" or analogous principles, will apply or not, for consideration of an Application for leave to sue under Clause 12 of the Letters Patent, fell for consideration before a Full Bench of this Court in Duro Flex Pvt. Limited Vs. Duroflex Sittings System, reported in 2014 (6) CTC 577 (FB) : (2014) 5 LW 673 (FB) : AIR 2015 Mad 30 (FB) = (2015) 1 MLJ 774 (FB), wherein it was held as follows:

"55. We may add that a Division Bench of this Court comprising two of us (S.K.K., C.J. and M.S.N., J.) had an occasion to examine the applicability of the Principles of Forum Conveniens in a case of Writ proceedings in Bharat Bhogilal Patel Vs. Union of Page No.71/76 https://www.mhc.tn.gov.in/judis/ W.P.Nos.25177 and 25231 of 2019 India, 2014 (6) CTC 285 (DB) : 2014 (7) MLJ 641. In the context of that judgment, we referred to the decision of a Five- Judges Bench of the Delhi High Court in Sterling Agro Industries Ltd. Vs. Union of India, AIR 2011 Del. 74, which had gone into the Doctrine of Forum Conveniens vis-a-vis the Concept of Cause of Action. In the context of that judgement, it was observed in Sterling Agro Industries Ltd. case (supra) as under: "The Concept of forum conveniens fundamentally means that it is obligatory on the part of the Court to see the convenience of all the parties before it. The convenience in its ambit and sweep would include the existence of more appropriate forum, expenses involved, the law relating to the lis, verification of certain facts which are necessitous for just adjudication of the controversy and such other ancillary aspects. The balance of convenience is also to be taken note of.

The Principle of Forum Conveniens in its ambit and sweep encapsulates the concept that a cause of action arising within the jurisdiction of the Court would not itself constitute Court to entertain the matter. While Dr.GRR,J

exercising jurisdiction under Articles of the Constitution of India, the Court cannot be totally oblivious of the Concept of Forum Conveniens.

The conclusion thus arrived at was that the Principles of Forum Conveniens, though applicable to the International law as a principle of Comity of Nations, would apply to the discretionary remedy under Article 226 of the Constitution of India."

24. Recently, this Court has also held in O.S.A.Nos.38, 40 and 42 of 2020 (Sulphur Mills Limited Vs. M/s.Dayal Fertilizers Pvt. Limited and three others), by judgment dated 11.11.2020 that, even though a part of cause of action arises in one Court and the major part of cause of action had arisen within the jurisdiction of the other Court, the petition is not maintainable before the Court where the small part of cause of action had arisen."

6.4 The High Court of Madras in Karthi P. Chidambaram and

Ors. Vs. Superintendent of Police held that:

"12. Once an FIR is filed, it is mandatory for the Investigation Agency to send the copy of the FIR to the Magistrate/Special Court having jurisdiction. The Court which monitors the actions of the investigating agency and also addresses/redresses the grievances, if any, of either the accused or the investigating agency as per the code of Criminal Procedure. In matters pertaining to all criminal investigations/proceedings arising therefrom, it is the High Court which has the supervisory jurisdiction over the said jurisdictional Court monitoring/supervising the investigation, which would exercise the jurisdiction either under Article 226 or 227 of the Constitution of India and under Section 482 of the Code.

13. As already conclusively held by the Hon'ble Supreme Court in Dasrath Rupsingh Rathod V. State of Maharashtra, reported in (2014) 9 SCC 129, the concept of "part of cause of action", is absolutely irrelevant and has no application in criminal proceedings and only that High Court would entertain a prayer for quashing which has the supervisory jurisdiction over the jurisdictional court which is monitoring the investigation as per Cr.P.C."

Dr.GRR,J

7. Thus all these cases would show how the legal position under

Article 226(2) is evolving, how the concept of cause of action is

incorporated in Article 226, the history behind it and though initially it is

stated that even if a small fraction of the cause of action arises within the

jurisdiction of the Court, that Court would have territorial jurisdiction to

entertain the suit/petition to the extent that the petition is not maintainable

before the Court where a small part of cause of action had arisen and the

major part of cause of action shall be considered for applicability of

territorial jurisdiction of the Court and had taken a full circle in observing

that the concept of part of cause of action is irrelevant and had no

application in criminal proceedings and only that High Court could

entertain a prayer for quashing which has the supervisory jurisdiction over

the jurisdictional court which is monitoring the investigation as per Cr.P.C.

8. The issue whether a writ petition under Article 226 is maintainable

against a Criminal Court situated outside the territorial jurisdiction of the

Court as well as whether the Court could judicially review the action of the

Magistrate in taking cognizance of the offence located outside the territorial

jurisdiction of the court is considered by the High Court of Kerala in Dr.GRR,J

Augustine Babu P.M. Vs. Mohd. Samiur Rahman Ansari and Ors.6. It

held that:

"8. The main issue to be decided in this petition is as to whether Writ Petition under Article 226 is maintainable as against a criminal court which is situated outside the territorial jurisdiction of this Court. A Full Bench of this Court had occasion to consider that pertinent issue in Meenakshi Sathish v.

Southern Petrochemicals Industries reported in 2007 (1) KLT 890 FB and it was held in paragraphs 9 and 10 thereof that in view of clause (2) of Article 226, if part of the cause of action had arisen in the State, writ could be issued against an authority, though the seat of that authority is outside the territorial jurisdiction of this Court. But, the cause of action which must arise in Kerala for issuing the writs of certiorari or prohibition, must relate to the commissions or omissions of an inferior court or Tribunal amenable to the writ jurisdiction of that court and not that of a private party. This Court cannot judicially review the actions of the first respondent therein (the complainant concerned) and that if a complainant files any complaint before any court it may do it rightly or wrongly and the complainant in a complaint alleging offence under Section 138 of the Negotiable Instruments Act, being a private party is not amenable to the writ jurisdiction of this Court under Article 226 and therefore, this Court cannot judicially review the actions of such a complainant by invoking the powers conferred under Article 226 of the Constitution of India. The other point that was considered by the Full Bench was as to whether the court could judicially review the action of the Magistrate in taking cognizance of the offence under Section 190(1)(a) read with Section 200 of the Cr.P.C and in issuing process under Section 204 Cr.P.C It was found on facts that the entire cause of action as far as the action of the learned Magistrate was found to have arisen in Coimbatore, which is outside the territorial jurisdiction of this Court and it was held that even if the complainant has wrongly filed a complaint before the Coimbatore court, the action of taking cognizance and issuance of the process took place outside the jurisdiction of this Court and therefore, the reliefs sought for in the Writ Petition cannot be granted by this Court and that even if the cause of action for the complaint under Section 138 of the Negotiable Instruments Act arose in Kerala, this Court cannot interfere with the proceedings for a criminal court which is situated outside the

2017 (4) KLJ 390 Dr.GRR,J

territorial jurisdiction of this Court. It will be profitable to refer to paragraphs 8, 9 and 10 of the above said Full Bench decision in Mrs. Meenakshi Sathish v. M/S. Southern Petrochemical Industries &. Ors. reported in 2007 (1) KLT 890 (F.B).

"8. In the light of the above mentioned two decisions of the Apex Court in Navinchandra and Mosaraf Hossain Khan, which Division Bench decision of this Court, that is whether the decision in Krishnakumar Menon's case or the decision in U.B.C's case, lays down the correct legal position, is the point to be answered in this case. There cannot be any dispute that the complaint before the Coimbatore court and taking cognizance of the same by the said court cannot be challenged under S.482 of the Cr.P.C or under Art.227 of the Constitution of India, before this Court. The only contention raised is that a Writ Petition under Article 226 will lie, in view of clause (2) thereof, as part of the cause of action in the transaction regarding issuance of the cheque, its dishonour etc., arose in Kerala.

9. Article 226(2) of the Constitution of India reads as follows:

"226. Power of High Courts to issue certain writs:--

(1) .......

(2) The power conferred by clause (1) to issue directions, orders or writs to any Government authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories."

The said clause was introduced as clause (1A) by the 15th Amendment Act, 1963, in view of the decisions of the Apex Court in Election Commission, India v. Saka Venkata Subba Rao ((1953) S.C.R 1144), Rashid v. I.T Investigation Commission ((1954) S.C.R 738), Lt. Col.

Khajoor Singh v. Union Of India & Another (AIR 1961 SC 532) and Collector of Customs v. E.I Commercial Co. (AIR 1963 SC 1124). The result of the above decisions was that Writ Petitions under Art.226 against the Union of India were maintainable only in the High Dr.GRR,J

Court of Punjab, as at the relevant time the territory of national capital was under the jurisdiction of the said High Court. The High Courts of Madras and Assam took a different view that if part of the cause of action arose within the respective States, writs could be issued to the Union of India by them. To get over the above decisions of the Apex Court and make the law in tune with the decisions of the above High Courts, the amendment was introduced. Art.226 was drastically amended by Constitution 42nd Amendment Act, 1976. The original position was substantially restored later, by the Constitution 44 Amendment Act, 1978. In view of clause (2) of Art.226, if part of the cause of action arose in the State, writ could be issued against an authority, though the seat of it is outside the territorial jurisdiction of this Court.

10. But, the cause of action which must arise in Kerala for issuing the writs of certiorari or prohibition, must relate to the commissions or omissions of an inferior court or Tribunal amenable to the writ jurisdiction of this Court and not that of a private party. This Court cannot judicially review the actions of the 1 respondent. It may file any complaint before any court. It may do it rightly or wrongly. The 1st respondent being a private party not amenable to the writ jurisdiction of this Court, we cannot judicially review its actions. But, the point to be decided is whether we can judicially review the action of the Magistrate in taking cognizance under S.190(1)(a) read with S.200 of the Cr.P.C of the offence alleged against the petitioner and issuing process under S.204 The entire cause of action, as far as the action of the learned Magistrate is concerned, arose in Coimbatore, outside the jurisdiction of this Court. So, even if the complainant has wrongly filed a complaint before the Coimbatore court, the action of taking cognizance and issuance of the process took place outside the jurisdiction of this Court. Therefore, we have no doubt in our mind that the reliefs sought in this Writ Petition cannot be granted by this Court. We are of the view that the decision of the Division Bench in M/S. Ubc & Others v. M.R Govarthanam (2005 (2) KLT 461) lays down the correct legal position. The observation in Krishnakumar Menon's case concerning the power of this Court under Art.226 of the Constitution of India is an obiter. Further, the decision of the Apex Court in Navinchandra's case (supra) cannot have any application to a case arising on a private complaint Dr.GRR,J

under S.138 of the Negotiable Instruments Act. In Navinchandra's case, the Apex Court considered the question regarding quashing of an F.I.R and the criminal investigation conducted by the police in Shillong about the offences committed or the cause of action which arose in Maharashtra State. So, as the police from Shillong has to do investigation in Maharashtra, the Apex Court observed that the Bombay High Court has jurisdiction in the matter. The said observation can have no application to a private complaint, based on which a Magistrate's court, which is outside the jurisdiction of the Kerala High Court takes cognizance and proceeds with the trial. So, the observation in Krishnakumar Menon's case, concerning the jurisdiction of the High Court under Article 226 of the Constitution of India, does not lay down the correct legal position, as far as private complaints are concerned. Even if the cause of action for the complaint under S.138 of the Negotiable Instruments Act arose in Kerala, the Kerala High Court cannot interfere with the proceedings before a criminal court, outside the jurisdiction of this Court."

9. In the present case also the learned senior counsel for the

petitioners placed reliance upon the decision of the Hon'ble Supreme Court

reported in Navin Chandra N. Majithia's case (1 supra) to contend that

from the provision in clause (2) of Article 226 it is clear that the

maintainability or otherwise of the writ petition in the High court would

depend on whether the cause of action for filing the same arose, wholly or

in part, within the territorial jurisdiction of the Court.

10. This Court also agrees with the view taken by the Kerala High

Court as the present case has reached the stage of completion of

investigation and entered the stage of taking cognizance by the Court which Dr.GRR,J

is situated in another State, outside the territorial jurisdiction of this State, it

is considered not appropriate to call for records from the said Court over