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Central Ware - Housing Corporation, New Delhi Vs. Central Bank of India Ltd., Hyderabad and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAndhra Pradesh High Court
Decided On
Case NumberC.C.C.A. No. 107 of 1969
Judge
Reported inAIR1973AP387
ActsCode of Civil Procedure (CPC), 1908 - Sections 20 and 21; Warehousing Corporation Act, 1960 - Sections 3(2); Warehousing Corporation (Amendment) Act, 1962 - Sections 3(2)
AppellantCentral Ware - Housing Corporation, New Delhi
RespondentCentral Bank of India Ltd., Hyderabad and anr.
Excerpt:
commercial - jurisdiction - sections 20 and 21 of code of civil procedure, 1908, section 3 (2) of warehousing corporation act, 1960 and section 3 (2) of warehousing corporation (amendment) act, 1962 - suit for recovery by bank - appellant filed application under order 14 rule 2 challenging suit on ground of lack of jurisdiction - appellant never proceeded with application - took part in trial - decree against appellant - in appeal question of jurisdiction raised - non proceeding with application under order 14 rule 2 and taking part in trial amounts waiver of application as contemplated under section 21- under circumstance question of jurisdiction cannot be raised. - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the.....a.v. krishna rao, j.1. this appeal is posted before us on a reference by our learned brothers kondaiah and lakshmaiah jj. though the question according to the learned judges, related to the territorial jurisdiction of the courts at secunderabad to entertain the suit out of which this appeal arose and the contention was based solely on the interpretation of the provisions of explanation ii to section 20 of the code of civil procedure, the division bench felt that on a consideration of the entire facts and circumstances the whole appeal was fit to be referred to a full bench.2. this appeal is from the judgment of the chief judge, city civil court, hyderabad at secunderabad rendered in o.s.no. 49 of 1967. the 2nd defendant is the appellant. the plaintiff obtained a decree for money against.....
Judgment:

A.V. Krishna Rao, J.

1. This appeal is posted before us on a reference by our learned brothers Kondaiah and Lakshmaiah JJ. Though the question according to the learned Judges, related to the territorial jurisdiction of the courts at Secunderabad to entertain the suit out of which this appeal arose and the contention was based solely on the interpretation of the provisions of Explanation II to Section 20 of the Code of Civil Procedure, the Division Bench felt that on a consideration of the entire facts and circumstances the whole appeal was fit to be referred to a Full Bench.

2. This appeal is from the judgment of the Chief Judge, City Civil Court, Hyderabad at Secunderabad rendered in O.S.No. 49 of 1967. The 2nd defendant is the appellant. The plaintiff obtained a decree for money against defendants 1 and 2. The 1st defendant remained exparte.

3. This suit came to be tried along with a number of other suits instituted by the plaintiff. In all the suits, the present appellant was the 2nd defendants. By consent of parties evidence was recorded in O.S.No. 14/66 and the suits were disposed of by a common judgment of the court below on 24th September 1968.

4. The plaintiff in O.S.No. 49 of 1967 out of which this appeal arises is the Central Bank of India Limited, Hyderabad. The 1st defendant is K.V.Rathnam who is a resident of Varni village in Nizamabad District in Andhra Pradesh. The 2nd defendants is the Central Ware-housing Corporation, New Delhi. The suit was for recovery of a sum of Rs. 29,267.88 seeking a decree jointly and severally against both the defendants together with future interest at 6 per cent, per annum from the date of suit till realisation. The facts necessary for the disposal of this appeal may now be stated.

5. In this judgment the plaintiff respondent will be referred to as the Bank and the 2nd defendant - appellant as the corporation. The case of the plaintiff is that on 26-7-1962 the 1st defendant opened a cash credit key loan account in his name in the Pathargatti Branch of the Bank with a view to secure cash credit facilities from the Bank. To that end he undertook to give security of paddy, rice etc., belonging to him and stored in the warehouse of the corporation by pledging the said stocks in favour of the Bank. The bank thereupon granted to the 1st defendant a credit facility to a maximum limit of Rs. 30,000/- on the security of the stocks of paddy, rice etc., then stored in the warehouse of the corporation and also to be stored in future. The 1st defendant had executed the necessary documents including a document of a pledge of goods, in favour of the Bank agreeing to pay the interest as stipulated in the agreement with the Bank. The practice followed by the Bank in connection with the pledge of goods by a customer and deliver to the Bank receipts issued by the warehouseman incharge of the corporation which would show the date of deposit of the goods, the quality, quantity, rate and value of the stocks of rice, paddy etc,. Deposited by the customer in the corporation's Warehouse. It is on the strength of the receipts issued by the warehouseman that the bank advanced loans from time to time to the customer. As per this practice the 1st defendant as customer was handing over the warehouse receipts issued by the warehouseman of the corporation from time to time and was obtaining loans from the bank. The 1st defendant also was making payments from time to time to the Bank which were duly credited in the usual and ordinary course of the transactions. The Bank relving upon the truth and correctness of the particulars contained in the warehouseman's receipts was advancing moneys on the strength of such receipts to the 1st defendant. It would appear that certain differences and discrepancies in the quantities and the qualities of the stocks deposited with the corporation in its warehouses and the receipts issued by the warehouseman of the corporation came to light. The plaintiff had issued notices to the corporation informing the corporation that it was liable for any loss that the Bank might suffer due to the incorrect and false receipts issued by the warehouseman of the corporation at Hyderabad. Thereafter in the presence of the representatives of the Bank and the Corporation, the stocks deposited in the warehouses of the corporation by the 1st defendant and also certain other customers against whom suits came to be filed later by the Bank, were inspected and samples were taken and examined. It came to light that there were differences and discrepancies between the actual stocks in deposit with the corporation and the entries in the receipts issued by the warehouseman. Thereupon the Bank sent several letters and notices to the corporation and its warehouseman pointing out that the corporation would be liable for any losses that the plaintiff might suffer as a consequence of the differences and discrepancies in the stocks actually in deposit and the warehouseman's receipts. While so, on 13-7-1965 under a requisition order issued by the Collector of Hyderabad District, the stocks of paddy belonging to the 1st defendant and stored in the warehouses of the corporation were delivered to the Government Employees' Consumers Co-operative Stores. The delivery statement would clearly disclose that while the warehouseman's receipts showed that the paddy was Basmathi quality, actually the stocks of paddy were found to comprise of inferior and different varieties such as Basangi and Akkullu etc. There was also a variation in the total quantity. While the warehouseman's receipts showed deposits to the tune of 44,700 K.G.s., only 38,045 K.Gs. were found in the warehouses, according to the statement filed with the plaintiff. By the date the suit was instituted the collector had not paid the value of the stocks requisitioned and delivered as per his order. Notices thereupon were issued by the bank to the 1st defendant to which there was no response. The plaintiff filed the suit against the 1st defendant and against the corporation the cause of the action against the corporation having arisen on the several dates of the receipts issued by the warehouseman of the corporation. It was averred in the plaint that the City Civil Court at Secunderabad had jurisdiction to try the suit because the 1st defendant had executed the documents of pledge etc, and the amounts were borrowed by him from the plaintiff at Hyderabad and as also the pledged goods were deposited in the warehouses and the godowns of the corporation at Hyderabad and several receipts were issued by the warehouseman of the corporation in Hyderabad in token of having received the stocks as stated in the receipts.

6. The 1st defendant who is a resident of Nizamabad District had remained ex parte as stated earlier. The corporation alone came to contest the suit by filing their written statement and adducing evidence oral and documentary. The written statement while denying the liability of the corporation had raised several pleas. It was urged that the liability, if any, was only on the 1st defendant as the difference in quality and quantity in the goods deposited as per the receipts and the actual stocks was due to the fraud or cheating committed by the 1st defendant. The 1st defendant himself could not make any claim against the corporation and the plaintiff either as an endorsee or as an assignee or as a pledge from the 1st defendant cannot have any better rights. Under the Hyderabad Warehouse Regulation, 1358 fasli, and the rules made thereunder the liability of the warehouseman is limited. As the warehouse receipts were procured by imposture, there was no liability created. Even if there was any collusion between the warehouseman who issued the receipts and the 1st defendant; as the receipts must be said to be forged, there was no liability on the part of the corporation. It was also urged that there was an implied bar to the jurisdiction of the Civil Courts under the Hyderabad Warehouses Regulation 1358 F, and the rules made thereunder. The matter should have been referred to arbitration for all disputes relating to quality, quantity, weighing, scaling, etc., as per the Regulation and its rules. The suit also was not maintainable without first exhausting the remedy provided by the aforesaid regulation and the rules. Besides, in the absence of statutory notices as required by the Hyderabad Warehouses Regulation and the rules, the suit was not maintainable. The City Civil Court had no territorial jurisdiction, to try the suit as the corporation is a resident of New Delhi and outside the territorial jurisdiction of the Court. No part of the cause of action had arisen against the corporation. The sole and principal office of the corporation was at New Delhi and it had no branches or sub-offices anywhere in India. As per Explanation II to Section 20 of the Code of Civil Procedure the defendant must be deemed to carry on business at New Delhi only. Objection also was raised as to the territorial jurisdiction on the ground that necessary leave from the court was not obtained to institute the suit. The warehouseman T.Rajagopalachari was a necessary party to the suit and the suit was bad for non-joinder of a necessary party. The suit also was barred by limitation.

7. The following issues on the respective contentions of the parties were framed by the trial court.

1. Whether this Court has territorial jurisdiction to try the suit against the 2nd defendant ?

2. Whether jurisdiction of this Court is barred in view of the special provisions and machinery provided under the Hyderabad Warehouses Regulation and the Rules made thereunder ?

3. Whether the suit is maintainable without the plaintiff first exhaustive the remedies provided under the Hyderabad Warehouses Regulation and the Rules provided thereunder and without giving notices under the Warehouse Regulation, Rules and the conditions of storage ?

4. Whether the plaint discloses any cause of action against the 2nd defendant ?

5. Had defendant No. 1 defrauded defendant No. 2 as regards quality and quantity of the commodity stored in the warehouse and if so, the plaintiff cannot claim damages ?

6. Whether warehouseman acted outside the scope of this authority in issuing the warehouse receipts ?

7. Whether the suit is not maintainable for the reasons mentioned in paras 6 and 11 of the written statement ?

8. Whether the suit is barred by limitation ?

9. Whether Sri T. Rajagopalachari is a necessary party to the suit ?

8. The trial Court found on all the issues against the appellant and in favour of the respondent and decreed the suit.

9. In this appeal points arising out of the same issues have been argued by the appellant-corporation. Besides those points it was pointed out that the decree passed by the Court below is not in conformity with the judgment. In the judgment the decree was passed in favour of the Bank for Rs. 20,428-50 with interest at 6 per cent per annum from the date of the decree till the date of realisation, while the decree provided for interest from the date of the suit.

10. We shall now deal with the question covered by issue No. 1 whether the City Civil Court at Secunderabad has territorial jurisdiction to try the suit against the 2nd defendant. It is not disputed before us that if the City Civil Court in Hyderabad has jurisdiction, the City Civil Court at Secunderabad will have jurisdiction. The question will have to be answered having regard to the provisions of Section 20 of the C. P. C. On the allegations of the plaint there can be no doubt that the cause of action for instituting the suit has arisen in Hyderabad. Further, the counsel for the appellant does not dispute that the cause of action for instituting the suit has arisen at Hyderabad. It may be noted that the 1st defendant is not a resident within the limits of the jurisdiction of the City Civil Court, Hyderabad or even the City Civil Court, Secunderabad. The 1st defendant has remained ex parte. It is the 2nd defendant who had raised the question.

11. The question is based upon the provisions of Section 20, C. P. C. Section 20 C. P. C. may now be extracted.

20. Subject to the limitation aforesaid every suit shall be instituted in a court within the local limits of whose jurisdiction--

(a) the defendant or each of the defendants where there are more than one, at the time of the commencement of the suits, actually and voluntarily resides or carrying on business, or personally works for gain ; or

(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides : or carries on business or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside or carry on business or personally work for gain, as aforesaid acquiesce in such institution; or

(c) the cause of action, wholly in part, arises.

Explanation I : Where a person has a permanent dwelling at one place and also a temporary residence at another place, he shall be deemed to reside at both places in respect of any cause of action arising at the place where he has such temporary residence.

Explanation II : A corporation shall be deemed to carry on business at its sole or principal office in India or in respect of any cause of action arising at any place where it has also a subordinate office, at such place. '

12. We are, however, not concerned with explanation I in this case. The contention of the counsel for the appellant is that clause (a) would not apply because the first defendant is not a resident within the local limits of the jurisdiction of the city civil court as he resided in Nizamabad district at the time of the commencement of the suit. So far as the corporation is concerned, the words ' voluntarily resides or personally works for gain ' in clause (a) are not attracted. The only words applicable are ' carry on business '. According to the learned counsel the corporation cannot be said to be carrying on business in Hyderabad. As per Explanation II the corporation shall be deemed to carry on business at its sole or principal office in India or the corporation has its Head Office at New Delhi as enacted in Section 3(2) of the Warehouseing Corporations Act, 1962. It has no subordinate office at Hyderabad. Clause (b) of Section 20 C. P. C. Also it is contended, would not apply because neither of the two defendants at the time of the commencement of the suit can be said to be carrying on business or voluntarily residing or personally working for gain within the local limits of the jurisdiction of the City Civil Court. There is no question of the proviso in Cl. (b) being attracted in the circumstances because none of the defendants can be said to fulfil the requirements of the former part of the section. Cl. (c) alone is attracted in the instant case because it is not disputed that a cause of action either wholly or in part has arisen within the local limits of the jurisdiction of the City Civil Court. What is, however contended is that as per Explanation II a corporation can be deemed to carry on business either at its sole or principal office in India or in respect of any cause of action arising at any place where it has also a subordinate office at such place. It is contended that in Hyderabad the Central Warehousing Corporation of India, the 2nd defendant in the suit has no subordinate office. Therefore, in view of the explanation, no suit can be instituted in Hyderabad taking advantage of clause (c).

13. Before we deal with these contentions we are inclined to think that the appellant cannot be permitted to raise the question of jurisdiction having regard to the fact that by his own conduct he must be said to have acquiesced to the trial of the suit by the lower court. No doubt in the written statement the question has been raised and issue No. 1 was framed. It is brought to our notice by both the counsel that an application was filed under Order 14 rule 2 C. P. C. By the appellant in the court below for trying issue No. 1 as a preliminary issue and that the same was not pursued. Order 14. Rule 2 C. P. C. states that ' where issues both of law and of fact arise in the same suit, and the court is of opinion that the case or any part thereof may be disposed of on the issues of law only, it shall those issues first and for that purpose may, if it thinks fit, postpone the settlement of the issues of fact until after the issues of law have been determined. ' The defendant in our opinion, should have after filing of the written statement requested the court to postpone the settlement of the issues of the fact in the case and determine the issues of law only, one of them being issue relating to the territorial jurisdiction. As stated already issues were framed on all the questions of fact and law arising in the case on the pleadings of the parties. If, after framing of the issues, the defendant had filed an application that issue No. 1 be tried as a preliminary issue and had not pursued the same and allowed the trial to go on and be concluded resulting in a considered judgment on all the issues involved, it would not be permissible for the appellant having lost the suit in the court below to reagitate the same in appeal particularly because he had not chosen to pursue the application which was admittedly filed by him for trial of the 1st issue alone. Then again it may be noted that the present suit was tried jointly along with a number of other suits instituted by the Bank against customers like the 1st defendant who had likewise obtained credit facilities on the strength of warehouse receipts and also against the corporation and at considerable expense to the parties. Both oral and documentary evidence was adduced and the matter was tried fully. The defendant had allowed the trial to proceed on merits on all the issues by not pursuing his application , under Order 14, Rule 2, C. P. C. He must thus be deemed to have waived his objection to the territorial jurisdiction of the city civil court. In other words, he acquiesced in the trial of the suit fully on all aspects on the footing that the court had jurisdiction to try the matter. It is not a case of inherent lack of jurisdiction on the part of the City Civil Court to try the suit. Dealing with a question of territorial jurisdiction, their Lordships of the Supreme Court in Bahrein Petroleum Co Ltd. V. P. J. Pappu : (1966)IILLJ144SC had observed that as a general rule neither consent nor waiver not acquiescence can confer jurisdiction upon a court, otherwise incompetent to try the suit ; but Section 21 of the Code provides an exception and a defect as to the place of suing, that is to say, the local venue for suits cognizable by the courts under the Code might be waived under that section. They went on to observe ' Independently of this section ( Section 21 ) the defendant may waive the objection and may be subsequently precluded from taking it. ' Further down they observed :

'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. '

Having regard to the conduct of the appellant above referred to us and deriving support from the aforesaid dicta of the Supreme Court we have no hesitation in holding that the corporation must be deemed to have waived the objection as to the local jurisdiction of the court to try the suit as it cannot be said that the court is entirely lacking in jurisdiction in respect of the subject matter of the suit.

14. Coming to Section 20 C. P. C. We are of opinion that clause (b) and explanation-I need not be considered by us. It may be noted that each of the clauses (a) (b) and (c) is disjunctive and provides for distinct situations. So far as clause (a) is concerned, it requires that the defendant or if there are more defendants that each of the defendants at the time of the commencement of the suit must be actually or voluntarily residing or carrying on business or personally working for gain within the local limits of the jurisdiction of a particular court for a suit to be competently instituted in that court. Now in the instant case so far as the 1st defendant is concerned he is certainly not residing or working for gain or carrying on any business within the local limits of the jurisdiction of the court. The requirement that each of the defendants must be doing the things mentioned in the clause is totally absent. Explanation II has two distinct parts. (1) A corporation shall be deemed to carry on business at its sole or principal office in India ; and (2) A corporation shall be deemed to carry on business in respect of any clause of action arising at any place where it has also a subordinate office at such place. So far as the second part is concerned, if any cause of action arises at any place where it has also a subordinate office, it shall be deemed to carry on business there and a suit could be instituted in the court having jurisdiction over such place. In our opinion, Explanation II is only explanatory regarding corporations carrying on business as envisaged by clause (a) of S. 20 C. P. C. The words ' carrying on business ' occur only in clauses (a) and (b). We are, therefore, inclined to think that in the instant case having regard to the fact that the 1st defendant is a non-resident, is not carrying on business or personally working for gain within the limits of the City Civil Court, Secunderabad and even assuming that we could hold that the 2nd defendant is carrying on business in Hyderabad, still clause (a) is not attracted. If clause (a) is not attracted, explanation II which goes to explain clause (a) cannot also be of any avail.

15. As pointed out by us earlier, each of the clauses in Section 20 C. P. C. Is independent of each of the other clauses because after each clause the word ' or ' is used. That leaves us with Clause (c) which provides for a suit to be instituted in a court within the local limits of whose jurisdiction the clause of action wholly or in part arises. It is not disputed before us that there is a cause of action for the plaintiff within the local limits of the jurisdiction of the City Civil Court at Secunderabad. That being so clearly the City Civil Court, has jurisdiction under clause (c). This conclusion of ours should dispose of the question of the local jurisdiction against the appellant.

16. We shall however consider arguments touching upon clause (a) of Section 20 C. P. C. Read with Explanation II out of deference to the order of reference made by Kondaiah and Lakshmaiah JJ.

17. According to the contention of the appellant, the 2nd defendant the Central Warehousing Corporation, has no subordinate office in Hyderabad. It is plainly conceded that in case if it could be said that there is a subordinate office at Hyderabad, the suit would lie in Hyderabad or Secunderabad. The contention is that there is only one Head Office statutorily located in New Delhi and it has no subordinate offices anywhere in India and it cannot be said that any cause of action can be said to have arisen at Hyderabad within the meaning of second part of Explanation II to Section 20.

18. Section 3(2) of the Warehousing Corporation Act, 1962 states that the Head Office of the Central Warehousing Corporation shall be at New Delhi. The very words ' Head Office ' must mean that there could be subordinate offices elsewhere in the country. Section 11 of the Act enumerates the functions of the Central Warehousing Corporation. It reads as follows :

'11 Subject to the provisions of this Act, the central warehousing corporation may-- (a) acquire and build godowns and warehouses at such suitable places in India as it thinks fit ;

(b) run warehouses for the storage of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities offered by individuals, co-operative societies and other institutions ;

(c) arrange fecilities for the transport of agricultural produce, seeds, manures fertilizers, agricultural implements and notified commodities to and from warehouses ;

(d) subscribe to the share capital of a State warehousing corporation ;

(e) act as agent of the Government for the purpose of the purchase, sale storage and distribution of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities, and

(f) carry out such other functions as may be prescribed. '

19. Section 11(a) empowers the corporation to acquire and build godowns and warehouses at suitable places. Section 11(b) empowers the corporation to run warehouses for storage of agricultural produce etc. Section 11(c) empowers the corporation to arrange facilities for transport of agricultural produce etc. If the corporation acquires or builds godowns in other places in India and then run such godowns or warehouses and arrange facilities of transport etc., to and from warehouses, quite clearly the corporation must run offices at those places. Once they acquire or construct warehouses at any place in India they would be bound by any local Act governing the warehouses.

20. In Hyderabad we have the Hyderabad Warehouses Regulation, 1358 Fasli which governs the activities of the corporation once it acquires or builds warehouses in Hyderabad. A reference to the relevant provisions of the Hyderabad warehouses regulation may now be made. Section 3 of the Hyderabad Warehouses Regulation states that subject to the provisions of Section 11 no person or firm shall without a licence carry on the business of a warehouseman or represent or hold himself out as a warehouseman. Warehouseman is defined in Section 2(i) as a person or firm holding a licence for issuing under Section 27 receipts for goods stored in his warehouse. Chapter III of the Regulation provides for the duties of the warehouseman. Chapter IV provides for inspection and classification of goods and Chapter V provides for warehouses for the issue of receipts by a warehouseman. These various provisions make it clear that any person who could be called a warehouseman ( and in this case the corporation fulfils the description of a warehouseman ) must necessarily have an office to do the various things.

21. As observed by a Division Bench of the Patna High Court in Bank of Bengal v. Sarat Chandra Mitra, 48 Ind Cas 943 = ( AIR 1918 Pat 126 ) a corporation may be said to reside wherever it carries on its business irrespective of the location of its head office. That being so, if the corporation, the 2nd defendant in this case, may be said to carry on its business in Hyderabad in warehousing it must be said that it has a subordinate office within the meaning of Explanation I to Section 20, C. P. C.

22. Exs. A-24 to A-54 are all warehouse receipts issued to different individuals. Exs. A-53 and A-54 are the warehouse receipts issued by the corporation's warehouseman to the 1st defendant. A perusal of the receipts shows that when the goods are deposited with the warehousing Corporation the particulars regarding the name and location of the warehouse, warehouseman's licence, the name and address of the depositor and the description of the goods the rate of storing and other charges, the condition of the goods, particulars of insurance of the goods, the period for which the goods are accepted for storage, the market price at the time of the deposit were all to be stated. Under the heading ' the description of the goods ' the kind, class or standard or grade of the foods, the number of packages or lots, the quantity either in weight or measure are all to be noted. Once they acquire or construct warehouses at any place in India they would be bound by any local Act governing the warehouses.

23. In Hyderabad we have the Hyderabad Warehouse Regulation 1358 Fasli which governs the activities of the corporation once it acquires or builds warehouses in Hyderabad. A reference to the relevant provisions of the Hyderabad warehouses regulation may now be made Section 3 of the Hyderabad Warehouses Regulation states that subject to the provisions of Section 11 no person or firm shall without a licence carry on the business of a warehouseman or represent or hold himself out as a warehouseman. Warehouseman is defined in Section 2(i) as a person or firm holding a licence for issuing under Section 27 receipts for goods stored in his warehouse. Chapter III of the Regulation provides for the duties of the warehouseman, Chapter IV provides for inspection and classification of goods and Chapter V provides for warehouses for the issue of receipts by a warehouseman. These various provisions make it clear that any person who could be called a warehouseman ( and in this case the corporation fulfils the description of a warehouseman ) must necessarily have an office to do the various things

24. As observed by a Division Bench of the Patna High Court in Bank of Bengal v. Sarat Chandra Mitra, 48 Ind Cas 943 = (AIR 1918 Pat 26) a corporation may be said to reside wherever it carries on its business irrespective of the location of its head office. That being so, if the corporation, the 2nd defendant in this case, may be said to carry on its business in Hyderabad in warehousing, it must be said that it has a subordinate office within the meaning of Explanation II to Section 20 C.P.C.

25. Exs. A - 24 to A-54 are all warehouse receipts issued to different individuals. Exs. A-53 and A-54 are all warehouse receipts issued by the corporation's warehouseman to the 1st defendant. A perusal of these receipts shows that when the goods are deposited with the warehousing Corporation, the particulars regarding the name location of the warehouse, warehouseman's licence, the name and address of the depositor and the description of the goods the rate of storing and other charges, the condition of the goods particulars of insurance of the goods the period for which the goods are accepted for storage, the market price at the time of the deposit were all to be stated. Under the heading 'The description of the goods' the kind class or standard or grade of the goods the number of packages or lots the quantity either in weight or measure are all to be noted. The receipt is made out in the name of the Central warehousing corporation and the location of the warehouse being given as Nampalli, Hyderabad. As evidenced by the receipts, the depositor may obtain from time to time the release of parts of the goods deposited and entries in that behalf are to do various things expected of a warehouseman with regard to the deposit of the goods an office has got to be maintained with the warehouseman and may be other employees to conduct the business of running a warehouse. For instance, D.W. 2 is an upper division clerk of the Central Warehousing Corporation. It is also to be noticed that these receipts were not issued subject to confirmation by the head office at Delhi. The warehouseman of the defendant corporation functions without any reference to the Head Office at Delhi and definitely transacts business. In the conduct of this business the 2nd defendant corporation having located its warehouse in Hyderabad is governed by the Hyderabad Warehouses Regulation and the Rules made thereunder. A reference to the oral evidence of D. Ws. 1 to 3 would show that an office is run in Hyderabad by the 2nd defendant. It may be that in the receipts issued only the name of the Central Warehousing Corporation is shown and it is not specifically stated that there is a subordinate office at Nampalli. Hyderabad. It cannot on the material be doubted that the Central Warehousing Corporation in having opened a warehouse at Hyderabad is functioning as a subordinate office. In this view of the matter also as admittedly the cause of action has arisen in Hyderabad, the 2nd defendant can be sued in Hyderabad. By reason of the nature and business conducted by the defendant corporation in Hyderabad the warehouse here must be deemed to be a subordinate office for the purpose of Explanation II.

26. Reliance was placed by the appellant upon an unreported decision of a bench of the court in C.C.C.A. Nos. 164 165 and 251 of 1965 (Andh Pra). In the judgment rendered by Venkatesam and Venkateswara Rao JJ. ON 19-12-1969 their Lordships had to consider the question of territorial jurisdiction in certain suits filed by the Canara Bank Limited against the Central Warehousing Corporation. The learned Judges in that case in construing the provisions of Section 20 C.P.C. had upheld the contention that no suit by the Canara Bank was maintainable in the City Civil Court Hyderabad as the Corporation's Head Office was admittedly at Delhi and as the corporation had no subordinate office at Hyderabad where the cause of action had arisen. In dealing with the scope of Explanation 11 the learned Judges observed that a mere description of a provision as 'Explanation' is not decisive of its true meaning and must be interpreted according to its own tenor and not with the aid of the section to which it is annexed. They further expressed the opinion that a plain reading of Section 20 would show that clauses (a) to (c) contain general provisions governing jurisdiction of courts, while Explanation a I and II embody special provisions for determining the forum in certain cases. Then they applied the well established principle of construction that a general rule has to give way to a special or a particular rule.

27. The proper function of an explanation to a section was explained by a Full Bench of this Court in Umamaheswara Rao v. Sri Hanumandeswara Devesthanam : AIR1966AP33 in the following terms:

'It is well understood that the proper function of an explanation is to make plain or elucidate what is enacted and not to add to or subtract from it. An explanation does not either restrict or extend the enacting part: it does not enlarge or narrow down the scope of the provision that it is supposed to explain.'

An explanation has to be read so as to harmonise with and clear up any ambiguity in the main section and not to be construed independently of the provisions of the section which it is meant to explain. An explanation is often appended to stress upon a particular thing which ordinarily would not appear clearly from the provisions of the section. As observed by the Supreme Court in Burmah Shell Oil Storage and Distributing Co. Of India Ltd. V. Commercial Tax Officer : [1961]1SCR902 it would be an error to explain the explanation with the aid of the section because that would be reversing their roles. Further. The opinion expressed by the learned Judges that a plain reading of Section 20 would show that clauses (a) to (c) contain general provisions governing jurisdiction of courts while Explanations I and II embody special provisions for determining the forum in certain cases,. Does not commend itself to us. There is no question of explanations being special provisions and the clauses being general provisions, so that the principle that general rule has to give way to a special or a particular rule could be invoked.

28. Further , the learned Judges inconsidering the question whether the corporation had a subordinate office at Hyderabad expressed the opinion that the warehouse at Hyderabad is only a godown for storage of agricultural produce and other commodities and no administrative business which is a necessary concomitant of an office was carried on at this warehouse. They further expressed the opinion 'simply because a company carries on its manufacturing and other business operations in a particular place, it cannot be said that it has a subordinate office there if no administrative business of the company is conducted at that place'. For these observations the learned Judges have relied upon the observations of a Division Bench of the Madras High Court in Tutika Basavaraju v. Parry and Co., (1904) ILR 27 Mad 315.

29. In the above Madras case there was a suit for recovery of a deposit of Rs. 1,000/- and also damages consequent upon breach of contract. The defendants pleaded that they were managing agents of East India Distilleries and Sugar Factories limited and that they could not be sued on the contract and that the suit should have been brought against the Company. The contract in question purports to be a memorandum of sale by the East India Distilleries and Sugar Factories Limited. The defendants Messrs. Parry and Company signed the contracts as managing agents on behalf of the East India Distilleries and Sugar Factories Limited. The Distilleries Company was registered in England and had its registered office in England. The contention of the defendants was that notwithstanding the registered office being in England it should be regarded that the said Company was residing here in India where it manufacturing business is carried on. The Division Bench of the Madras High Court had repelled the contention. In the course of the judgment the Division Bench of the Madras High Court had referred to English cases n the subject. Reliance had been placed upon the observations of Dicey in his 'Conflict of Laws' to the effect that if a company incorporated under the Companies Acts 1862 and 1890 for the carrying on of manufactures in India, had a registered office in England and its affairs were conducted in England, the company was domiciled in England and not in India. They referred to the case of Taylor v. Crowland Gas and Coke Co. ((1855) II Ex. 1 at p. 6) wherein it was held that a corporation must be considered as dwelling at the place where it carried on its business. This decision was distinguished by the Bench on the ground that the place of business referred there was the place where the administrative business of the Corporation was carried on.

30. We do not think having regard to Section 20 C.P.C. and its provisions, the test of administrative business is always the correct test. The question whether there is a subordinate office having regard to Explanation II to Section 20 is always a pure question of fact to be determined upon a scrutiny of the course of business and trading. The view expressed by the learned Judges Venkatesam and Venkateswara Rao, that there can never be a subordinate office of a company unless administrative business is conducted at that place is too widely put to be accepted. The existence of an administrative office in order to determine whether an office carrying on business is the principal office or is a subordinate office has to be determined as a fact having regard to the relevant circumstances of the particular business and its requirements. When in running the warehouse, it is conducted as a business with the necessity to keep files, copies of correspondence, employ staff and do all things necessary and incidental to the business it would be futile to say that it is just a warehouse and not an office. In transacting the business of warehousing, an office of necessity connotes the idea of some administration. Then again the learned Judges had observed that the Warehousing Corporations Act of 1962 did not provide for the establishment by it, of any branches of subordinate offices. But when we see that in Section 3(2) the Act provided that the Head Office of the Central Warehousing Corporation shall be at Delhi the very words 'Head Office' presupposes the possibility of the existence of Subordinate Office. With great respect therefore, we do not agree with the reasoning of the learned Judges which made them to come to the conclusion that the City Civil Court, Hyderabad had no jurisdiction to entertain the suit in view of Explanation II as we expressed earlier, is merely enacted to explain the words 'carrying on business' in relation to a corporation and is not meant to confer or take away the jurisdiction which is possessed by a Court having regard to clauses (a) (b) and (c) of Section 20.

31. The trial court placing reliance upon Ramappa v. Ganpath ( (1906) ILR 30 Bom 31) observed that the said decision was on all fours applicable to the facts of the present case. It was of the view that the said decision enabled it to hold that there was an acquiescence on the part of the 2nd defendant. We do not think that the court below was right in drawing assistance from the decision of the Bombay High Court. The case before the Bombay High Court came to be considered under Sec. 17 and Sec. 20 of the old C.P.C. of 1882. Section 17 of the old Code provided for suits to be instituted where the defendants resided or the cause of action arose. Section 20 of the Code of 1908 was enacted replacing the old Section 17. For the words 'all other suits' in Section 17 of the old Code the words 'every suit' were added in the new Section 20. Besides the words 'wholly or in part' in clause (c) are new. Clause (a) of the old Code Section 17 stated merely 'the cause of action arises.' Section 20 of the Code of 1882 provided for the applications for stay where all the defendants did not reside within the jurisdiction of the Court. It required that every such application should be made at the earliest opportunity and in all cases before the issues are settled: and any defendant not so applying should be deemed to have acquiesced in the institution of the suit. This provision is not found in the new Act and in the new Sections 22, 23 and 24 which provide for transfer of suits in the new Code, no such presumption of submission to the jurisdiction of the Court by invoking principle of acquiescence is to be found.

32. In (1906) ILR 30 Bom 81 (supra) the plaintiff had filed a suit against three defendants in the court at Sirisi. Only the Ist defendant lived within the jurisdiction of that Court and defendants 23 and 3 outside the jurisdiction of that Court. There was no application under Section 17 of the Code of 1882 for leave to sue defendants 2 and 3. On the other hand, defendants 2 and 3 had taken an objection in their written statement that the Court had no jurisdiction, but they made no application under Section 20 of the Code. The trial court allowed the plaintiff's claim against defendants 2 and 3 who did not reside within its jurisdiction. There was an appeal by the 3rd defendant and in the appeal the decree of the lower court was set aside on the ground of want of jurisdiction and the plaint was ordered to be returned for presentation to the proper Court. The plaintiff had appealed to the High Court. The High Court had reversed the order of the District Court. It was held by the High Court that as the defendants 2 and 3 did not make an application under Section 20 of the Code of 1882, they must be deemed to have acquiesced in the institution of the suit and it could not be said that the suit had been improperly instituted. There is no provision in the present Section 20 similar to the one contained in the old section 20. No application as contemplated by the old Section 20 is provided in the present Code. We do not therefore, think that the said decision has any application the situation obtaining in the instant case under the present Code.

33. As a result of our foregoing discussion, we are of opinion that Clause (c) governs the case as the cause of action has arisen within the jurisdiction of the City Civil Court at Hyderabad Clause (c) which is quite independent of the other two clauses has nothing to do with the residence or otherwise of the defendants. As the Ist defendant is not a resident within the local limits of the jurisdiction of the City Civil Court Hyderabad. Clause (a) is inapplicable. If Clause (as) is inapplicable, there is no need to consider Explanation II as the same is enacted to explain the words 'carry on business' in relation to a corporation.

34 In order to appreciate some of the contentions advanced by the counsel for the Corporation on merits, we may usefully refer to some of the provisions in the Hyderabad Warehouses Regulation 1358 Fasli. The Regulation extends to the whole of the Hyderabad State. Section 2(b) defines ' Depositor ' as meaning a person or firm which tenders goods to the warehouseman for storing in his warehouse and includes any person who lawfully holds the receipt issued by the warehouseman in respect of the goods and derives title to it by endorsement or transfer from the depositor or his lawfull transferee. Under Section 2(g) ' receipt ' means a warehouse receipt in the form prescribed, issued by the warehouseman to a depositor depositing goods in a warehouse. Section 2(h) defines ' warehouse ' as meaning a building structure or other protected enclosure which is used or may be used for the purpose of storing goods. Section 2 (i) defines ' Warehouseman ' as meaning a person or firm holding a licence for issuing under Section 27 receipts for goods stored in his warehouse. Chapter III provides for the duties of the warehouseman. Chapter IV provides for inspection and classification of goods. Section 27 in Chapter V requires every warehouseman to issue receipt in the prescribed form containing full particulars in respect of the goods stored in his warehouse by each depositor. Section 28 provides that these receipts are transferable by endorsement entitling the lawful holder to receive the goods specified in it on the same terms and conditions on which the person who originally deposited the goods would have been entitled to receive them. A reference to the above provisions would show that the Bank is in the position of a depositor as defined. As the Bank held the receipt issued by the warehouseman under Section 27 in respect of the goods and had derived title to it by the endorsement or transfer from the depositor, the Bank fulfils the description of a depositor. The learned counsel for the appellant submitted that the suit is not maintainable inasmuch as the Bank which is in the position of a depositor had not exhausted the remedies provided by the Act. The argument in this behalf is based upon Section 23 of the Regulation. Section 23 is as follows :

'23. (1) The prescribed authority may issue licences to qualified and competent persons entitling them to act as weighers, samplers and classifiers of any goods stored or to be stored in a warehouse and to issue certificates as to weight, quality or grade of the goods which they have examined.

(2) The certificates issued by the weighers, samplers and classifiers as to weight, quality or grade of the goods stored in the warehouse shall, subject to any order in appeal preferred by either of them to the Board of Arbitration, be binding on the warehouseman and depositor.

(3) The prescribed authority may appoint a Board of Arbitrators to decide complaints against weighers, samplers and classifiers or warehouseman relating to weight, quality or grade of the goods stored in the warehouses. The decision of the Board of Arbitrators shall be final and shall not be liable to be questioned in a court of law. '

35. We do not see anything in this section which makes it obligatory for a depositor to refer a claim such as the one contained in the present suit to arbitration. Sec. 23 inter alia provides that a certificate issued by weighers, samplers and calssifiers as to the weight, quality or grade of the goods stored in the warehouse shall be binding between the warehouseman and the depositor which is made subject to any order in an appeal preferred either by the warehouseman or the depositor to the Board of Arbitrators. Section 23 (3) provides for the appointment by the prescribed authority of a Board of Arbitrators to decide complaints against weighers, samplers and classifiers or the warehouseman relating to weight, quality or grade of the goods stored in the warehouses and such a decision of the Board of Arbitrators shall be final and not liable to be questioned in a court of law. In the instant case the bank who is in the position of a depositor for the purpose of the Regulation is not seeking to go behind the certificate issued regarding the weight, quality or grade of the goods evidenced by the receipts. The Bank is suing the corporation and the 1st defendant accepting the correctness of the particulars shown in the receipts as to the weight, quality or grade. Section 23, in the circumstances, has no application. It is not the case that there is any other agreement between the 1st defendant, the depositor and the 2nd defendant, corporation that all or any matters arising out of a deposit of goods with the Corporation should be referred to arbitration. The contention in this behalf must be rejected.

36. Another submission made by the learned counsel was that the suit was not maintainable against the Corporation as the plaintiff had not issued a notice as provided under the Hyderabad Warehouses Regulation and the Rules. Reference was made to rule 16 of the Rules framed under the Regulation and also Conditions 4 (d) and 5 (d) of the conditions in the Warehousing Rules. Rule 16 of the Warehousing Rules reads thus :

'Notice of loss or damage to goods; If at the time of taking delivery of the goods stored the depositor finds that the goods are lost or damaged, he shall give a notice in writing to the warehouseman with full particulars of the loss or damage within 72 hours of the delivery. A copy of such notice shall also be sent to the prescribed authority. No claim against the warehouseman shall be valid if the notice of loss or damage has not been given by the depositor in time. Similar notice of claim for damages shall be given to the warehouseman by the depositor in case the depositor comes to know of the loss or damage while the goods are stored in the warehouse. '

Clauses 4 (d) and 5 (d) read as follows :

'4 (d). The depositor of goods shall examine the contents of the goods at the time of taking delivery and shall give notice in writing with full particulars of the loss or damage, if any, caused to the goods, to the warehouseman within 72 hours after delivery. A copy of the notice shall also be sent to the prescribed authority. No claim against the warehouseman shall be valid if the notice of loss or damage has not been given by the depositor in time. Similar notice of claim for damages shall be given to the warehouseman by the depositor in case he comes to know the loss or damage while the goods are in the warehouse.

5 (d) The depositor of goods shall examine the contents of the goods at the time of taking of delivery and shall give notice in writing with full particulars of the loss or damage, if any, caused to the goods to the warehouseman forthwith or give notice within 72 hours of his examining the goods and defer taking delivery of the goods till then. A copy of the notice shall also be sent to the prescribed authority. No claim against the warehouseman shall be valid if such notice of loss or damage has not been given by the depositor as aforesaid. Similar notice for claim of damage shall be given to the warehouseman by the depositor in case he ( depositor ) comes to know of the loss or damage while the goods are in the warehouse. '

Rule 16 of the warehousing rules contemplates two types of notices. The first part requires a notice within 72 hours of delivery of the goods stored if at the time of taking delivery of the goods the depositor finds that there is loss or damage to the goods stored. The second part requires for the notice to be given to the warehouseman of a claim for damages by the depositor in case the depositor comes to know of the loss or damage while the goods are stored in the warehouse. Quite clearly the notice contemplated by the first part of this rule is not attracted to the case of the Bank treating it as a depositor, but by an order of the Collector requisitioning the goods delivery was made to the Government Employees' Consumers Co-operative stores on 13-7-1965. Even the second part of the requirement of a notice of the claim for damages is not attracted. There is nothing on record which would justify our holding that the depositor had come to know of the loss or damage while the goods are stored in the warehouse. What is stored is evidenced by the receipts Exs. A-53 and A-54 in so far as the present 1st defendant is concerned. The Bank has accepted the correctness and indeed it was entitled to assume the correctness of the warehouse receipts. That any loss or damage had occurred to the goods while they were stored in the warehouse is a matter which is not proved as a fact. For what all appears between the 1st defendant and the warehouseman Rajagopalachari in the matter of the entries in the warehouse receipts. The plaintiff is a third party who acted bona fide on the strength of the warehouse receipts which were endorsed to them and on the strength of which the Bank had advanced the loans to the 1st defendant. We are of the view that the rule 16 is not attracted. There was never any need in the instant case for complaince with the requirements of the rule. Clause 4 (d) of the conditions of storage is more or less similar to rule 16 and for the same reasons as given with regard to the in-applicability of Rule 16 in the instant case we find that clause 4 (d) is of no effect in the present case. Likewise clause 5 (d) of the conditions of storage also has no application.

37. It was sought to be argued that warehouseman Rajagopalachari had acted beyond the scope of his duties as a warehouseman and a certain investigation made by the Crime Branch had revealed that the 1st defendant in the present suit and the 1st defendants in similar suits filed by the Bank disclosed that the depositors had cheated the warehousing corporation by depositing inferior quality of goods and had acted in collusion with the warehouseman Rajagopalachari and that therefore the corporation is not liable. Assuming all this to be so, we fail to see what effect this has on the bank's claim when they had acted in good faith and no fraud or collusion is attributed to them. Even the knowledge of the alleged fraud and collusion between the 1st defendant and the warehouseman is not alleged. We see no substance in this contention.

38. On the question of limitation, the suit is instituted on 19-7-1965 and we do not see how it is barred by limitation. The question of limitation in fact has not been argued. We hold the suit is in time.

39. It would appear that subsequent to the institution of the suit certain amounts were paid by the Collector Hyderabad for the goods requisitioned and delivered to the Government Employees' Consumers Co-operative stores and a decree was passed by the court below taking that payment into consideration. The judgment directed that interest at 6% per annum on a sum of Rs. 20,428-50 should be paid from the date of the decree till the date of realisation. It is stated that the decree has been drafted that the interest is to run from the date of the plaint till the date of the realisation, the decree being not in accordance with the direction in the judgment regarding interest will have to be modified. The plaintiff will, therefore, be entitled to a decree on the amount of Rs. 20,428-50 with interest at 6 per cent per annum from the date of the decree only. The decree will be accordingly modified. Subject to this modification in the decretal portion of the court below, the appeal fails and is dismissed with costs.

40. Ordered accordingly.


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