Skip to content


The Black Sea Steamship U.L. Lastochkina Odessa, Union of Soviet Socialist Republic and anr. Vs. the Union of India - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberCivil Revn. Petn. No. 1333 of 1973
Judge
Reported inAIR1976AP103
ActsIndian Contract Act, 1872 - Sections 28; Code of Civil Procedure (CPC), 1908 - Sections 29
AppellantThe Black Sea Steamship U.L. Lastochkina Odessa, Union of Soviet Socialist Republic and anr.
RespondentThe Union of India
Appellant AdvocateT. Ramachandra Rao and ;Mangu Venkata Rao, Advs.
Respondent AdvocateS.V. Sundara Rajan for ;K. Subrahmanya Reddy, Standing Counsel for Central Government
Excerpt:
.....first petitioner also present in visakhapatnam - in interest of justice court hold that court of visakhapatnam has jurisdiction to entertain suit. - - , 1. this civil revision petition raised an interesting and at the same time significant question relating to international trade and commerce. the first paragraph of the bill of lading says :being marked and numbered as above but not guaranteed hereby for the adequacy of marks and to be carried and delivered subject to all conditions terms and clauses inserted into this bill of lading in the like apparent good order and condition from the ship's deck (either into lightens or on the quay of master's option) where the responsibility of the carrier for the carriage of aforesaid goods shall cease. aggrieved by this decision, both the..........applied for stay of suit. wile upholding the condition in the bill of lading that the italian courts had jurisdiction to try the suit. g.k. mitter, j., observed : 'the court should in appropriate case enforce such covenants'. consequently he stayed the suit. the sentence have extracted would clearly show that even in this case, the learned judge was of the opinion that only in appropriate cases the convenants in the bill of lading restricting the jurisdiction to a particular court should be enforced. what is an appropriate case is a matter that should be decided by the courts in the light of the circumstances of that case. the same learned judge stayed the suit in lakshminarain v. n.v.vereenigde, : air1960cal45 (supra). he held that ordinarily the courts will try to enforce the.....
Judgment:

A. Sambasiva Rao, Acting C.J.,

1. This Civil Revision Petition raised an interesting and at the same time significant question relating to international trade and commerce. During the course of international trade agreements are interned into. It is not unusual for disputes arising in the course of such trade and commerce. Where should these disputes be adjudicated upon? If there is an agreement between the contracting parties that such disputes should be decided in a court in a particular country though the cause of action has arisen in two countries, are the courts bound to enforce that agreement despite every other consideration? That is the problem to be resolved here. In view of its importance our learned brother Ramachandra Rao, J., has directed that the petition be posted before a Division Bench.

2. The connected facts are simple. The Union of India instituted O.S. 161/68 in the Subordinate Judge's Court, Visakhapatnam, to recover a sum of Rs. 7,000 and odd as compensation for loss of a small portion of the Ammonium Sulphate which it has purchased in the State of U.S.S.R. and entrusted it to the 1st petitioner, a steamship organization at Odessa in that State for transport to a port on the east coast of India. A steam boat of that organization carried the Ammonium Sulphate to the port of Visakhapatnam in India. When the consignment was checked after it was landed at Visakhapatnam harbour, the representatives of the Union of India (respondent) found 1771 bags in slack and torn condition & that 1145 bags had not been landed at all with any contents. After survey was made the shortfall was ascertained and the suit to recover the compensation therefor was filed. The 2nd petitioner is an agent in India of the 1st petitioner and it looks after its affairs at Visakhapatnam. The suit was filed against both the petitioners to recover the amount. It was stated in the plaint that the cause of action arose at Odessa and at Visakhapatnam. It may also be noted here that the Visakhapatnam Port Trust issued a short landing certificate to the respondent.

3. There is a bill of lading issued by the master of the ship to the representative of the respondent when the consignment was handed over to the 1st petitioner for carriage. The terms and conditions of that bill of lading have been agreed to by the respondent also. The first paragraph of the bill of lading says :

'Being marked and numbered as above but not guaranteed hereby for the adequacy of marks and to be carried and delivered subject to all conditions terms and clauses inserted into this bill of lading in the like apparent good order and condition from the ship's deck (either into lightens or on the quay of master's option) where the responsibility of the carrier for the carriage of aforesaid goods shall cease.'

So, the responsibility of the carrier for the carriage of the goods continued till they were landed on the quay. The bill of lading is made subject to conditions, terms and clauses, inserted therein. For the purpose of jurisdiction of Court only condition No. 26 is material. It reads :

'All claims and disputes arising under and in connection with this bill of lading shall be Judged in the U.S.S.R.'

It is on the basis of this condition the petitioners, who are principal and its agent in India respectively, who filed a joint statement, disputed the jurisdiction of the Visakhapatnam Court to adjudicate upon the claim they have maintained in paragraph 11 that as per condition No. 36 the respondent has no option but to get the claim adjudicated upon in the U.S.S.R. and the Visakhapatnam Court has no jurisdiction to entertain the suit. Many other defences have been raised but for the purpose of this revision petition it is not necessary to take note of them.

4. The lower Court rejected the objections of the petitioners in regard to the jurisdiction. It decided that the issue relating to jurisdiction as to whether the court had no jurisdiction to entertain the suit should be tried on a preliminary issue. It distinguished all the decisions holding that when two Courts can take cognizance of a dispute and try, the parties would be at liberty to choose one forum and such choice would not be repugnant to Section 28 of the Indian Contract Act. This distinction by the lower court is on the ground that all those decisions dealt with situations where both the forums were in India itself. But in the present case the choice is limited to a foreign court. Then, the court has referred to Lakshminarayanan v. N.V. Vereenidge, : AIR1960Cal45 where it was held that a clause in the bill of lading could not oust the jurisdiction of the High Court to try the suit if it was otherwise triable in the High Court of Calcutta. At the same time, it was held in the decision that the clause limiting the jurisdiction could be invoked for the purpose of applying for and securing stay of the suit filed in contravention of the condition. The learned Judge held that it was more convenient to try the suit in Calcutta than in the foreign court and consequently it could refuse to exercise its discretion to stay the suit. Also referring to M/s L.T. Societa v. M/s. Lakshminarayana, : AIR1959Cal669 , the lower court held that it cannot be said that the jurisdiction of two courts is excluded by the specific clause in the bill of lading. The Visakhapatnam Court therefore, decided that it had jurisdiction to try the suit. It has further reinforced its conclusion by stating that there is no stipulation in the bill of lading that the Courts in the U.S.S.R. alone had exclusive jurisdiction to try the suits and the Courts in India were excluded from entertaining such disputes. It further relied on M/s. B.S.S. Line v. M & M.Trading Corporation, (1970) 1 Mad LJ 548 a decision of the Madras High Court where the 1st petitioner was a party and identical condition i.e., condition No. 26 fell for consideration. The learned Chief Justice, who decided that case, held that the matter rested on the balance of convenience in particular circumstances and the exigencies of justice. Pointing out that the suit was filed five years earlier, it would be positively unfair and unreasonable to drive the respondent to a court in the U.S.S.R. In view of all these reasons, the lower Court held that it had jurisdiction to entertain the suit. Aggrieved by this decision, both the defendants, the principal as well as its agent at Visakhapatnam, have filed this revision petition. Learned counsel for the petitioners contends that the lower Court's view is wrong since the parties are bound by the terms and conditions of the bill of lading which is the contract between them. Condition No. 26 clearly fixes the jurisdiction by providing that all claims and disputes in regard to the bill shall be judged in the U.S.S.R. This condition is not repugnant to Section 28 of the Indian Contract Act as it is open to the parties to agree to one of the two forums available to them. It is thus urged that condition NO. 26 should be given its full effect and force.

5. It is common ground that but for condition No. 26 the court in the U.S.S.R and the Visakhapatnam court would both have jurisdiction to entertain the suit. The plaint itself recites that the cause of action arose at Odessa in the U.S.S.R. and also at Visakhapatnam where the goods were delivered. The petitioner's seek to exclude the Visakhapatnam court's jurisdiction on the basis of condition No. 26.

6. Section 28 of the Indian Contract Act makes void agreements in restraint of legal proceedings. This hurdle is sought to be got over by contending that when more than one forum is available t the contracting parties, t hey had freedom to choose by agreement, one such forum and such restriction does not come within the ambit of Section 28. The decision of the Division Bench of the Court of Andhra Pradesh in Libra Mrine Works v. Baldota Bros, AIR 1962 Andh Pra 452 is strongly relied on by Sri T. Ramachandra Rao for the petitioners. There, Chandra Reddy, C.J. speaking for himself and Jaganmohan Reddy, J., (as he then was) held that a contract, which curtails the choice which a party has under the ordinary law and confines such a right to one or other of the competent courts is not vitiated by reasons of Section 28. Consequently, Section 28 does not cause any impediment in the way of the parties agreeing to limit recourse to one of several competent courts. The agreement merely amounts to selection of one of the several jurisdictions and it does not deprive any court of its inherent jurisdiction. It is open to the parties to agree to such a course and it is not hit by Sec. 28. The learned Judge relied on two Madras decisions and one Full Bench decision of the Lahore High Court. One of the Madras decisions on which the aforesaid view was vested was the one in HK.Dada (India) Ltd., v. M.P.S.Mills Company Limited, : AIR1954Mad845 . Rajamannar, Chief Justice, speaking for the Bench held that where there are two connected courts which can deal with the subject-matter of the litigation, it is open to the parties to a contract to agree that the dispute in respect thereof should be adjudicated upon by one of the two competent Courts and such an agreement is perfectly legal and not contrary to Section 28 of the Contract Act. That is so because the party is not thereby restricted absolutely from enforcing his rights under, or in respect of the contract by the usual legal proceedings in the ordinary Tribunals, as the restriction is only partial. The Supreme Court, itself has spoken on the subject in Hakam Singh v. Gammon (India) Limited, : [1971]3SCR314 . There, it was held that the parties cannot by agreement confer jurisdiction on courts not possessed by it under the Code, but the agreement that one of the Courts having such jurisdiction alone shall try a dispute is not contrary to public policy and does not contravene Section 28 of the Contract Act. Thus, the legal position that the parties are at liberty to choose one of the several Courts which have inherent jurisdiction to try the cause is beyond dispute. At the same time, it should be noted that in all the cases referred to above, the different courts which had jurisdiction to entertain the suit were all in India.

7. That, in our view, is very important circumstances for consideration in the context of the present case. Here the choice was between a court in the U.S.S.R and a Court in India. The bill of lading is document laying down the terms and conditions of the carriage of the goods entered into the course of international trade and commerce. It is of common knowledge that as years have been rolling by, international trade and commerce have been growing by leaps and bounds. It is fully realised that no country could afford to live in isolation, however affluent it might be in its natural resources and its possession of material wealth. A significant occurrence in one country has its reverberations and impact on the other countries. With the tremendous growth in the facilities of communication, the contracts among the different countries in the world and its people have grown enormously. Such a contact must necessarily involve growth in international trade and commerce. Indeed, it is not unrealistic to say that preservation of international trade and commerce in as free a manner as possible, though subject to the interests of the respective countries, is a great imperative in the modern context and for the welfare of the entire humanity. The lesser the restrictions on the maintenance of free channels of such trade, the greater would be the mutual understanding. It is from this perspective that agreements concerning international trade and commerce should be examined and enforced. In addition to the freedom of parties to choose their own forums for legal action, the other dimension of free trade and trade and commerce between countries resulting in greater human welfare has entered the field. Therefore, Jurists and Courts have begun to give more and more prominence to this new requirements of the international trade and commerce. They have consequently been considering despite the agreement between the parties to limit the choice of the forum for settlement of disputes to a Court in a particular country, as to which of the forums which have jurisdiction to entertain the cause, would be more convenient to the parties to adjudicate upon the dispute. The concept of balance of convenience has thus been projected into the course of international trade and commerce and in enforcing the terms of agreement between the parties.

8. We may usefully refer to what Chief Justice Burger observed at p. 318 in Zapaa Offshore Co, v. The 'Bremen' and Unterweser Reederi G.M.B.H. (The 'Chapparal'), (1972) 2 Lloyd's LR 315 :

'For at least two decades we have witnessed an expansion of overseas commercial activities by business enterprise based in the United States. The barrier of distance that once tended to confine a business concern to a modest territory no longer does so. Here we see an American Company with special expertise contracting with a foreign company to tow a complex machine thousand of miles across seas and oceans. The expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under or laws and in our Courts. Absence a forum, the consideration relied on by the Court of Appeals would be persuasive reasons for holding an American forum convenient in the traditional sense, but in an era of expanding world trade and commerce, the absolute aspects of the doctrine of the Carbon Black case have little lace and would be a heavy hand indeed on the future development of international commercial dealings by Americans. We cannot have trade and commerce in world markets and international waters exclusively on our terms, governed by our laws and resolved in our Courts.'

9. Cheshire has this to say on this aspect in his famous treatise on Private International Law at page 222 of the 6th Edition :

'As distinct from the exercise of implied choice of the proper law, the express choice of a foreign tribunal is not absolutely binding. In accordance with the excellent principle that a contractual undertaking should be honoured, there is indeed, a prima facie rule that an action brought in England in defiance of an agreement to submit to arbitration abroad will be stayed the Cap Blanco ( (1913) P 130) Austrian Lloyd Steamship Co., v. Gresham Life Assurance Society Ltd., ( (1903) 1 KB 249), but nevertheless the court has a discretion in the matter and where the parties are amenable to the jurisdiction, as for example, where the defendant is present in England, it will allow the English action to continue if it considers that the ends of justice will be better served by a trial in this country. (The Athance (1922) 11 LLL Rep 6). The Fehmarn ( (1958) 1 WLR 159.')

The learned author Cheshire is thus of the opinion that once the parties are amenable to jurisdiction of a Court, it is open to the Court in a particular country, though the parties have agreed to have their actions adjudicated upon in a different country to entertain the cause and adjudicate upon it. If it considers that the ends of justice will be better served by a trial in its country.

10. There was more or less similar question which fell for consideration before the Court of Appeals in the Fehmarn, (1958) 1 WLR 150. In that case an English Company, which had imported a cargo of turpentine into London form a Russian Port in a German Vessel, brought an action in England alleging that the turpentine was discovered to be contaminated. There was a term in the bill of lading, to which the English company was a party, that all claims and disputes arising thereunder shall be judged in the U.S.S.R It is immediately seen that this condition is practically identical with the condition with which we are now concerned. The defence was that the action could be brought only in the U.S.S.R. Overruling this objection, the House of Lords held that since the English Courts clearly had jurisdiction, and it being shown that, in all the circumstances, the Judge had sufficient reason for exercising his discretion in the way he did, the court should not interfere with the exercise of that discretion. Lord Denning, one of the Law Lords who decided the case in his opinion said :

'I do not regard the choice of law in the contract as decisive. I prefer to look to see with what country is the dispute most closely concerned.'

The circumstances taken into consideration by Lord Denning, Law Lord incoming to this conclusion were, after discharge, the turpentine and the vessel were surveyed in the United Kingdom and all the plaintiffs as to their title to sue were in that country. The defendant's vessel traded regularly to the United Kingdom. In these circumstances, it was decided that the court in the United Kingdom had sufficient reason for exercising its discretion deciding the case by itself despite the agreement to the contrary expressed in the bill of lading. It is patent that this is very much analogous to the case on hand.

11. Again the Court of Appeal in Macken Der v. Feldia A.G., (1967)2 WLR 119 reiterated the principle. In the words of Lord Denning, M.R. 'But although there is jurisdiction to give leave it is a matter of discretion as to whether it should be granted.' It may be noted here that in that circumstances the Court declined to entertain the cause. But it is patent from the facts that the conclusion was based from the peculiar circumstances of the case. the defendant in the cause had already started proceedings in accordance with the foreign jurisdiction clause.

12. It is unnecessary to deal with other English decisions. No decision of that country is brought to our notice which excluded the English jurisdiction in the light of a condition to that effect in the agreement despite the balance of convenience being in favour of exercising the English jurisdiction. Sri Ramachandra Rao, then invites our attention, to some Indian decisions in Haji Abdulla v. G.R. Stamp, AIR 1924 Bom 381 it was held that the clause in a policy of marine insurance to the effect that all disputes must be referred to in England for settlement and no legal proceedings shall be taken to enforce any claim except in England where the underwriters are alone domiciled and carry on business, as a clause amounting to a submission to arbitration. But then the learned Judges observed that the relevant clause in the agreement did not amount either the a reference to arbitration or to an absolute ouster. Then the defendant would be entitled to have the suit set down for dismissal. But it is in the interest of the plaintiff to have the suit stayed so that after the proceedings in the English Courts are finished, they may take such action in the case as they may be advanced. It is patent that considerations of justice were taken into account by the Bombay High Court. The next decision is that of Bhagat Ram v. Ramniwas, AIR 1949 Ajmer 44. While holding that the choice of one of the two courts which could entertain the suit for settlement of disputes is not in contravention of Section 29 of the Contract Act, a learned single Judge of the Court expressed the opinion that the fact that the court where the suit is agreed to be filed is in the Indian State is immaterial. It cannot be anticipated whether the defendant could submit to the jurisdiction of the said Court. In such a case, if the suit is filed in a Court other than the agreed one, the plaint would be returned to be filed in the court agreed upon by the parties. More than this opinion, learned counsel stresses upon the other view stated by the learned Judge that it is the duty of the Court to decide legal points without reference to extraneous considerations like hardship. Basing on this opinion, it is urged before us that balance of convenience and hardship should not weigh with the Courts in deciding upon the preliminary question of jurisdiction of the court. It is a case where both Courts were in the Indian continent one in British India and the other is an Indian State. That apart, the consideration of balance of convenience and the interest of justice were not fully considered by the learned single Judge. Even otherwise, we are not inclined to agree with that view in the light of the decisions referred to above and which we shall refer to hereafter. Once again the two courts between which the parties exercise their choice were in the Indian sub-continent. In Orient Ship Supply Co., v. Kalamarsand Co., AIR 1951 Trav-Co 1, which is the next case relied on by the learned counsel for the petitioners, the learned Judge observed that the clause agreeing upon a particular Court expresses the intention of the parties and determines the proper law of the contract. Once again the questions which are now posed before us were not debated before the Bench of the Travancore Cochin High Court. We consequently find very little light in the decision on this aspect. In M/s. L.T. Societa v. M/s. Lakshminarayana, : AIR1959Cal69 (supra) the dispute related to international trade and an agreement in respect thereof. On short delivery of goods, the plaintiffs brought a suit for compensation in Calcutta High Court, though it was admitted that the contracts of carriage were governed by the Italian Law. The defendants applied for stay of suit. Wile upholding the condition in the bill of lading that the Italian Courts had jurisdiction to try the suit. G.K. Mitter, J., observed : 'The Court should in appropriate case enforce such covenants'. Consequently he stayed the suit. The sentence have extracted would clearly show that even in this case, the learned Judge was of the opinion that only in appropriate cases the convenants in the bill of lading restricting the jurisdiction to a particular Court should be enforced. What is an appropriate case is a matter that should be decided by the Courts in the light of the circumstances of that case. The same learned Judge stayed the suit in Lakshminarain v. N.V.Vereenigde, : AIR1960Cal45 (supra). He held that ordinarily the courts will try to enforce the contract between the parteis preferring a particular court. Such a clause could, however, be invoked for the purpose of the stay of the suit filed in contravention thereof. The court had to find out whether taking into consideration the entire facts placed before it the courts mentioned in the bill of lading were the Courts of convenience. Applying that principle to the facts of the case before him, it was fund that it was more convenience to have the suit tried in Calcutta than in Holland and consequently the court would refuse to exercise the discretion for stay of the suit. This is a view which is very much in accordance with the view we are taking. In the same volume there is a decision of the Division Bench in M/s. Lakshminarayana Ramniwas v. L.T.S.P.A.D.N.S. in Triesta, : AIR1960Cal155 where the learned Judge observed that if on a consideration of the circumstances of the case the Court comes to the conclusion that it will be unjust or unfair to stay the suit, it may refuse to grant the stay asked for but not otherwise. The learned Judge proceeded to observe that the balance of convenience was not overwhelmingly in favour of the trial of the suit for damages for short delivery of the goods in the Calcutta High Court as against the trial of the suit before the appropriate court in Italy. This is once again further support our view. Then there is the decision of Veeraswami, C.J. in M/s. B.S.S.S.Line v. M & M Trading Corporation, (1970-1) Mad LJ 548 (supra) where the learned Chief Justice, after a review of the case law on the point, held that the he had no hesitation in taking the view that balance of convenience as well as the ends of justice tend towards sustaining the jurisdiction of the Court of Small Causes in Madras to entertain and dispose of the suit. It was further observed that the claim was so small that it would be unrealistic and unfair to drive the respondent to resort to the Russian Courts. Here in would be of particular relevance to note that the 1st petitioner before us was the petitioner there and the bill of lading under consideration before the learned Chief Justice, including condition No. 26 is on identical terms with those before us. That case is on all fours with the case which we are now considering. Once again a similar question relating to forum selection clause in the agreement arose in Union of India v. N.B. Bulgare, : AIR1973Cal526 . Relying on M/s. Lakshminarayana Ramniwas v. L.T.S.P.A.D.N.S. in Triesta, : AIR1960Cal155 the learned Judge held that in the case before him, looking to the balance of convenience, the law applicable and the fats of the cost, the dispute should be decided in the Bulgarian Court and in that view he granted the defendant's prayer to stay the suit.

13. The above discussion yields the firm conclusion that it is perfectly open to the court to consider the balance of convenience, the interests of justice and like circumstances, when it decides the question of jurisdiction of a Court in the light of a clause in the agreement between the parties choosing one of several courts or forums which were available to them. Indeed such a consideration is essential in the interests of international trade and commerce for the better relations between the countries an the people of the world.

14. Applying the above principle to the circumstances of the present case, it is abundantly clear that the balance of convenience and the interests of justice are in favour of adjudicating upon the respondent's dispute before the Visakhapatnam Court. The short fall was discovered after the consignment was landed at Visakhapatnam Port. The said Port authorities gave a certificate to the respondent in regard to the shortfall and the claim in respect thereof has to be gathered from Visakhapatnam. Needless to point out that it is positively inconvenient and highly expensive to take all this material and all the witnesses from Visakhapatnam all the way to Odessa in the U.S.S.R Further, the sum is so small that it would e unwise for any person to spend much more than the amount claimed in the sit. Equally important is the consideration that the 1st petitioner is not in any way inconvenienced because the 2nd petitioner is its agent at Visakhapatnam, which looks after not only the actual landing of the consignment from the ships but also all its affairs at Visakhapatnam. With the result, the 1st petitioner undergoes no inconvenience at all because the 2nd petitioner can easily look after not only this legal matter but all its affairs. The facts of this case thus clearly show that the balance of convenience and interest of justice are in favour of the Visakhapatnam Court deciding the suit.

15. Further, in this particular case there is another additional feature which would support the view we are taking. A joint and several decree is sought against both the petitioners. It cannot be visualised now what the ultimate decree in the suit would be, and if there is a decree, whether it would be against both the petitioners or against one particular petitioner. If it is Odessa Court there would be no cause of action against the 2nd petitioner, since it is the 1st petitioner's agent, only in Visakhapatnam. So, Odessa Court would have no jurisdiction to entertain a suit against the 2nd petitioner. Thus, from any perspective, we have no hesitation to hold that the Visakhapatnam Court has jurisdiction to entertain the suit despite condition No.26 of the bill of lading.

16. In the result, we uphold the view taken by the lower court and, dismiss the revision petition. In the circumstances of the case and in view of the fact that it has been somewhat a moot point so far we direct the parties to bear their own costs of this revision petition.

17. Revision dismissed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //