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Partap Singh Vs. Bank of America - Court Judgment

LegalCrystal Citation
SubjectArbitration;Company
CourtMumbai High Court
Decided On
Case NumberSuit No. 602 of 1969
Judge
Reported in[1976]46CompCas532(Bom)
ActsCompanies Act, 1956 - Sections 592 and 592(1)
AppellantPartap Singh
RespondentBank of America
Appellant AdvocateParty in person
Respondent AdvocateS.P. Bharucha, Adv.
Excerpt:
.....jurisdiction to try suit - court in this country has no jurisdiction over company incorporated in foreign country merely by reason of fact that such foreign corporation may have office within jurisdiction of such court except in respect of cause of action arising at place where its office is located - applying this rule to admitted facts of present case present court has no jurisdiction to entertain or try primary suit - question answered in negative. - - it may be mentioned that there is a clause in the said indemnity agreement which provides that they could be legally enforced in punjab in india as well as in california in the united states of america. without going into the details, it may be stated that the said compensation damages are claimed by the plaintiff from the..........clause. the delivery of the name and address at which processes could be served on the defendant-bank in india as required by section 592 of the companies act, 1956, cannot possibly amount to waiver of the objection in regard to jurisdiction, for the simple reason that it was something which the defendant-bank was bound by law to do and was not a matter of volition on its part. in my opinion, the mere fact that the defendant-bank was doing business at bombay in india also cannot amount to its having submitted to the jurisdiction of the court, no matter what may be the nature of the suit filed against it. the plaintiff has further contended that by filing an appearance in the present suit without protest, and by filing a written statement in which the defence have been set out on.....
Judgment:

Vimadalal, J.

1. The plaintiff, who by profession is a medical man, has filed this suit against the Bank of America, National Trust and Savings Association, a corporation incorporated in the United States of America having an office in Bombay, which is its principal place of business in India as recorded in the office of the Registrar of Companies under section 592(1)(e) of the Companies Act, 1956. The plaintiff's case is that the defendant-bank had issued between October, 1966, and July, 1967, three time certificates of deposit in the name of the plaintiff for three different amounts aggregating to 46,020.86 U.S. Dollars, each of which was to mature six months after the date of its issue, and was to carry interest at the rate of 5 per cent. per annum. The plaintiff's case in paragraph 16 of the plaint is that, while in London, on 26th September, 1967, he happened to lose the said three time certificates of deposit which he had kept in one envelope, and in paragraph 19 of the plaint, it is stated that the plaintiff thereafter requested the defendant-bank to issue duplicates of the lost instruments. In paragraph 20 of the plaint, it is stated that the defendant-bank at its International Banking Office at San Francisco office, however, informed the plaintiff that before the said time certificates of by a Corporate Bonding Company, and in paragraph 68 to 72 of the plaint, it is stated that the plaintiff, being in urgent need of funds and it being necessary for him to join his ailing wife in London who was in considerable distress, was under those circumstances forced to execute indemnity agreements covering the replacements of the said time certificates of deposit. It may be mentioned that there is a clause in the said indemnity agreement which provides that they could be legally enforced in Punjab in India as well as in California in the United States of America. On these facts, the plaintiff has filed the present suit in this court for a declaration that the said indemnity agreements were not enforceable and had no effect as against the plaintiff, and for a decree for 72,000 U.S. Dollars, with interest thereon at the rate of 6 percent per annum from the date off the suit till recovery thereof. The plaintiff has claimed the said amount as and by way of compensation and damages on the ground that the defendant-bank had no right to insist on furnishing any indemnity bond as a condition of furnishing replacements of the said time certificates of deposit. In paragraph 115 of the plaintiff has given particulars of the said sum of 72,000 U.S. Dollars which he has claimed as and by way of compensation and damages from the defendant-bank. Without going into the details, it may be stated that the said compensation damages are claimed by the plaintiff from the defendant-bank for mental distress, worry and anxiety and injury to feelings and deterioration in health, for loss of income from private practice during the period from December 1, 1967, to July 6, 1968, for loss of opportunity to exercise the profession between those dates, for travelling expenses as well as for cancellation of certain business arrangements and other expenses.

2. The defendant-bank has filed a written statement in paragraph 2 of which it has objected to the jurisdiction of this court to entertain and try the suit. In the said written statement, the defendant-bank has also denied its liability on merits, but in view of the fact that I have framed, in the first instance, only an issue in regard to jurisdiction and have decided to try it as a preliminary issue, it is unnecessary for me to set out the defence of the defendant-bank on merits to this somewhat curious suit. The preliminary issue which I have framed is as follows :

'Whether this court has jurisdiction to try the suit. 'As, in my opinion, the whole suit might be disposed of on this issue which is a pure issue of law only, I have postponed the settlement of the issues of law only, I have postponed the settlement of the issues of fact until after that preliminary issue has been determined, a course which is in accordance with the provision of Order 14, rule 2 of the Code of Civil Procedure.

3. At the hearing of the preliminary issue, it was made clear to me at the very outset that it is common ground that no part of the cause of action, in the present suit, has arisen within the jurisdiction of this court. The submissions of the plaintiff who appeared in person before me on the issue of jurisdiction were two-fold, viz., (1) the defendant-bank which is a corporation incorporated in the U.S.A. has, admittedly, office in Bombay which is its principle place of business in India, and can, therefore, be sued in this court by reason of the provisions of clause 12 of the Letters Patent of this court; and (2) the defendant-bank has, in any event, submitted to the jurisdiction of this court by what it has done both before and after the filing of this suit. It will be convenient to dispose of the second point relating to submission to jurisdiction first as, in my opinion, there is no substance in the same. It was submitted by the plaintiff that the note of the defendant-bank which amounted to waiver of the objection as to jurisdiction, even before this suit was filed, were that there was, admittedly, a clause in the agreements of indemnity under which the suit could be filed in California in the U.S.A. or in the State of Punjab in India; that the defendant-bank had, admittedly, registered with the Registrar of Companies under section 592 of the Companies Act, 1956, and the same address at which processes could be served upon it in India; and that it had, in fact, been doing business at its branch office at Bombay in India. In my opinion, even a cursory perusal of the clause in the agreements of indemnity which is relied upon would show that it applies only to a suit to enforce the indemnity, which is not the nature of the present suit, and that, in any event, it cannot possibly confer any right on the plaintiff to file this suit in Bombay which is not one of the places specifically mentioned in the said clause. The delivery of the name and address at which processes could be served on the defendant-bank in India as required by section 592 of the Companies Act, 1956, cannot possibly amount to waiver of the objection in regard to jurisdiction, for the simple reason that it was something which the defendant-bank was bound by law to do and was not a matter of volition on its part. In my opinion, the mere fact that the defendant-bank was doing business at Bombay in India also cannot amount to its having submitted to the jurisdiction of the court, no matter what may be the nature of the suit filed against it. The plaintiff has further contended that by filing an appearance in the present suit without protest, and by filing a written statement in which the Defence have been set out on merits, the defendant-bank has submitted to the jurisdiction of this court, at any rate, after the suit was filed. The decision of the Supreme Court in the case of Bahrein Petroleum Co. Ltd. v. P. J. Pappu, in my opinion, provides a complete answer to that contention of the plaintiff. In that case also, the first time an objection to jurisdiction was taken in the suit itself was in the written statement in which the defendants had also pleaded on merits (see para 5). Holding that the defendant in the said case had at no stage waived or abandoned their objection to the jurisdiction of the court in which that suit had been filed, it was stated by the Supreme Court as follows (para. 4) :

'If the defendant allows the trial court to proceed to judgment without raising the objection as to the place of suing and takes the chance of a verdict in his favour, he clearly waives the objection, and will not be subsequently permitted to raise it. It is even possible to say that long and continued participation by the defendant in the proceedings without any protest may, in an appropriate case, amount to a waiver of the objection. But, in this case, we find no conduct of the defendants which amounts to a waiver, or which precludes them from raising the objection.'

4. These observations of the Supreme Court leave no room for doubt that not only is there no obligation on a defendant who objects to the jurisdiction of the court to file an appearance under protest, but that the filing of a written statement in which, after objecting to jurisdiction, the defendant also pleads to the merits of the plaintiff's case, does not amount to waiver of the objection to jurisdiction. The filling of an appearance under protest and not filing a written statement is a course which is adopted when a party desires to apply for stay of a suit under section 34 of the Arbitration Act, but that is because the filing of an appearance simpliciter or filing a written statement might amount to taking 'steps in the proceedings' within the terms of section 34 of the Indian Arbitration Act 1940. No such question can, however, arise when an appearance, or a written statement objecting to the jurisdiction of the court, is filed by a defendant in a suit, unless an application under section 34 of the Arbitration Act is made in that suit. Following the decision of the Supreme Court in the Bahrein Petroleum Company's cases, I hold that there can be no waiver of the objection to jurisdiction, if the defendant files a written statement in which he objects to the jurisdiction of the court, though he may also plead in the same written statement to the merits of the plaintiff's case. That is precisely what has happened in the present case, and I must, therefore, reject the plaintiff's contention that the defendant has submitted to jurisdiction of the court by filing a written statement in which he has also pleaded to the averments in the plain on merits.

5. That brings me to the question as to whether this court has jurisdiction to try the suit in view of the fact that the defendant-bank has admittedly a branch office in Bombay at which it transacts normal banking business. The plaintiff contends that the defendant bank could be said to 'carry on business' in Bombay within the terms of clause 12 of the Letters Patent by reason of the fact that it has a branch office in Bombay at which it carries on its normal banking activities. It has been held by the Supreme Court in the case of Union of India v. Ladulal Jain that the expression 'voluntarily resides or personally works for gain' occurring in section 20 of the Code of Civil Procedure cannot be appropriately applied to the case of the Government but that the mere fact that the expression that 'carries on business' is used in that section along with the said expression, does not mean that it would apply only to such persons to whom the other two expressions regarding residence or personally working for gain would apply (para 7). It was observed in the judgment in the said case (para 6) that the principle behind the provisions of clauses (a) and (b) of section 20 of the Code of Civil Procedure was that the suit should be instituted at a place where the defendant is able to defend it without undue trouble. These observations of the Supreme Court in paragraphs 6 & 7 of its judgment apply also to clause 12 of the Letters Patent of this court. The sole contention raised before the Supreme Court in Ladulal Jain's case was that the running of railways by the Union of India cannot be said to amount to its carrying on business and that, therefore, the fact that the headquarters of the railway administration in question were located within the jurisdiction of the court in which the suit was filed did not give it jurisdiction under section 20 of the Code if Civil Procedure. Rejecting that contention, it was held by the Supreme Court (paras. 11 and 16) that the running of railways was 'business' and the Union of India could be sued in the appropriate court within whose territorial jurisdiction the headquarters of the railway concerned were situated. The expression 'voluntarily resides or personally works for gain' which is also used in clause 12 of the Letters Patent of this court, obviously, cannot apply to a bank but, having regard to the view taken by the Supreme Court in Ladulal Jain's case, it must be held that from that it cannot follow that the expression 'carries on business' which also occurs in clause 12 would apply only to such persons to whom the other two expressions would apply. If the Government can carry on business, as held by the Supreme Court in Ladulal Jain's case, a fortiori a bank can carry on business within the terms of clause 12, and, indeed, there would be no difficulty if the bank in question in the present case was a bank incorporated in this country. The difficulty really arises because the defendant bank is admittedly one which has been incorporated in the U.S.A. and the present suit is, admittedly, one in which the whole cause of action has arisen in San Francisco and/or London and, therefore, clearly outside the jurisdiction of this court.

6. The fact that the defendant-bank which is a foreign company registered in the U.S.A. has got registrar with the Registrar of Companies in this country, the particulars which it is required to deliver to the Registrar under section 592 of Companies Act, 1956, cannot make its branch office or offices in India a distinct legal entity from the defendant-bank which is a foreign corporation. The question, therefore, is whether that foreign corporation can be sued in this court in respect of a cause of action which has admittedly arisen wholly outside our country. If a foreign corporation were to get itself registered under the Companies Act, 1956, in this country, there could be no doubt that it could thereafter be said that it itself carries on business in this country. The precise question for my decision, however, is as to what is the position in regard to jurisdiction, if a foreign company does not get itself registered under the Companies Act in this country and, without doing so, carries on business in this country through a branch office or offices, one of which may be registered as its principal place of business in India under section 592 of the Companies Act. The English cases on the point do not afford assistance because the problems in the case of a foreign corporation has, as far as England is concerned, been to defined the circumstances in which service of the writ is permissible (Cheshire's Private International Law, 9th edition, page 81). In England the service of the writ is the foundation of the court's jurisdiction and, in action in personam, the position is that whenever a defendant can be legally served with a writ, the court has jurisdiction to entertain an action against him. 'Hence in an action in personam, the rules as to the legal service of a writ define the limits of the court's jurisdiction' (Dicey on the Conflict of Laws, 9th edition, pages 158-159). A foreign corporation which has a branch office in England at which it carries on business can be served with the writ at that branch office in the manner provided in Order 65, rule 3 of the Rules of the Supreme Court in England by reason of the provisions of section 412 of the English Companies Act, 1948. At common law, a foreign corporation which is so served with the writ is treated as being present in England for the purpose of jurisdiction, but the rule of English Common Law under which the rules as to the legal service of a writ define the limits of the Court's jurisdiction over foreign corporations was never applied in India prior to the commencement of our Constitution and cannot, therefore, be held to have been preserved under article 372(1) of the Constitution. Indeed, it appears to me that the situation of a foreign corporation being sued in India in respect of a cause of action which arose abroad was never contemplated when the Queen granted the Letters Patent to this Court in 1865, or when the legislature enacted section 20 of that Code contains a specific provision in Explanation II thereof that a corporation is to be deemed to carry on business at its sole or principal office in India, or in respect of a cause of action arising at any place where it has also a subordinate office at such place. That Explanation does not find place in clause 12 of the Letters Patent of this court as well as section 20 of the Code of Civil Procedure embody provisions of municipal law dealing only with the domestic jurisdiction of the courts of this country. To hold otherwise and to apply section 20 as well as clause 12 in the matter of jurisdiction over foreign corporations would lead to the curious result that there would be two different rules of private international law on that point, one for chartered high courts, and another for the remaining courts in the country. There cannot be two differing rules of private international law applicable on the same point in the same country. There is no judicial decision which has been brought to my notice either by the plaintiff or by the learned counsel for the defendant-bank which lays down what should be the rule of private international law to be applied to a case like the present one in our country. In Ladulal Jain's case, which had already been cited above, the Supreme Court was concerned with the jurisdiction of courts located in India. That was also been cited above, as the final order of the Supreme Court which confirmed the orders of the trial court and the District Court returning the plaint for presentation to the proper court clearly shows. An order returning the plaint for presentation to the proper court can be made under Order 7, rule 10 of the Code of Civil Procedure only in cases in which the proper court to which the plaint is to be presented is situated in this country. That, indeed, is one more reason why clause 12 of the Letters Patent as well as section 20 of the Code of Civil Procedure must be held to embody only rules of municipal law, for if a court holds that it has no jurisdiction by reason of either of those provisions, it would have to make an order returning the plaint under Order 7, rule 10 of the Code of Civil Procedure which, it may be stated, has now been made applicable to this court also. Reliance was sought to be placed upon the observations of a single judge of the Calcutta High Court in the case of Babulal Choukhani v. Caltex (India) Ltd. but the judgment in the said case cannot be of any assistance for determining the question now before me. The facts of the said case show that the company in question was registered outside India, that its principal office in India was in Bombay, that it had a branch office in Calcutta and that the whole cause of action had arisen in Calcutta itself. The question as to whether the said company being a foreign company could be sued in India was not raised at all in the said case, but the only contention advanced was that it could be sued in Bombay where it had its head office in India, and not at Calcutta where in had its 'district office' (see para. 16). Applying clause 12 of the Letters Patent, it was held (para. 23) that with no such 'legal fiction' in clause 12 as is to be found in Explanation II to section V of the Code of Civil Procedure, it had to be held that the company did carry on business also at Calcutta and could, therefore, be sued there. Moreover, the cause of action in the said case had arisen in Calcutta. Reliance was also sought to be placed upon the judgment of a Division Bench of the Allahabad High Court in the case of Guardian Assurance Co. v. Shiva Mangal Singh in which it was stated that no authority had been cited in support of the proposition that a foreign company cannot carry on business in another country, and that, on the other hand, there were clear authorities in support of the contrary proposition. There can be no quarrel with that proposition in regard to a business transaction entered into by a foreign corporation in India which gives rise to the cause of action in a suit. A reference to the facts of the said case clearly shows that the policy of insurance under which the claim was made against the foreign insurance company was issued by it at Calcutta under the signatures of their director and local managers where, therefore, a part of the cause of action arose. The said case did not relate to a foreign company being sued in respect of a cause of action which had wholly arisen abroad, which is the question with which I am concerned in the present case.

7. What then is the proper rule to be applied in this country as a rule of private international law in cases in which a foreign company, that is, a company incorporated in a foreign country, is sought to be sued in respect of a cause of action that has arisen wholly outside India, as in the present case. Private international law has been described as meaning, 'the rules voluntarily chose by a given State for the decision of cases which have a foreign complexion' and private international was is not the same in all countries, there being no one system that can claim universal recognition (Cheshire's Private international Law, 9th edition, pages 5 and 9). As stated in the very first Chapter of Cheshire's Private International Law, the said book is concerned solely with private international law as it obtains in England, that is to say, with the rules that guide an English court whenever it is seized of a case that contains some foreign element. There is undoubtedly in motion a process of ameliorating the lack of unanimity among the various systems of private international law by means of international conventions, but the best way of ensuring recognition of a rule of private international law to be adopted by a country is that such rule should be rational and not one that might lead to injustice. The question, therefor, is what is the rational rule that should be 'voluntarily chosen' by our country for the purpose of deciding the question of jurisdiction that arises in the present case. As already stated above, there is no reason why the peculiar rule of English private international law based on the service of the writ should be adopted in this country. If causes of action arising out of business done by foreign corporations anywhere else in the world are to be entertained in our country by adopting the rule contained in clause 12 of the Letters Patent as a rule of private international law normally by reason of the fact that those foreign corporations may have a branch office within our country, it would lead to the assured result that a suit could be filed by any person, including a foreigner, in Bombay against the Bank of America in respect of a cause of action relating to a transaction that may have arisen wholly in London, or Hongkong, or anywhere else in the world, such rule, if adopted as a rule of private international law by us, would not command recognition in foreign countries. In my opinion, the proper course to follow in a case like the present one is to extend the rule of municipal law contained in Explanation II to section 20 of the Code of Civil Procedure, which our legislature has itself thought to be a rational rule to be applied by courts in the exercise of their domestic jurisdiction, to cases like the present one by adopting it as a rule of private international law. Such a rule would not lead to injustice and would receive recognition in foreign countries. I, therefore, hold that a court in this country has no jurisdiction over a company incorporated in a foreign country merely by reason of the fact that such foreign corporation may have an office within the jurisdiction of such court, except in respect of cause of action arising at the place where its office is located. I also hold that in applying that rule, the fact that the office in question may have been registered with the Registrar of Companies as the principal place of business of such foreign corporation in India under section 592(1)(a) of the Companies Act, 1956, would make no difference. Applying that rule to the admitted facts of the present case, I hold that this court has no jurisdiction to entertain or try the present suit. The preliminary issue framed by me must, therefore, be answered in the negative and against the plaintiff, and the plaintiff's suit is dismissed with costs.


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