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State Trading Corporation of India (Agricultural Production Divn.) WithIn the Jurisdiction of the District Court Vs. S.S. Mohte and Company Registered Firm of Partnership by Managing Partner Sri Suraj Chand MotIn and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported in(1981)1MLJ452
AppellantState Trading Corporation of India (Agricultural Production Divn.) WithIn the Jurisdiction of the Di
RespondentS.S. Mohte and Company Registered Firm of Partnership by Managing Partner Sri Suraj Chand MotIn and
Cases ReferredGalley and Co. v. Appalasami Naidu
Excerpt:
- .....india, or, in respect of any cause of action arising at any place where it has also a subordinate office at such place.the result of the explanation is to restrict the meaning of 'carries on.... business; in clause (a) in relation to corporations. a corporation can be sued at its sole or principal office in india. at any place where it has a subordinate office, it can be sued only in respect of a cause of action arising at such a place.... however, where the suit is instituted at a place where a corporation maintains a subordinate office, the court cannot dispense with the requirements that the cause of action must arise at such a place. the decision in hindustan co-operative insurance co. v. nathu (1941) nag lj 37. having altogether ignored the second explanation, cannot be supported.....
Judgment:

V. Sethuraman, J.

1. These two appeals arise out of the judgment of the learned Fourth Assistant Judge, City civil Court, Madras, in O.S. No. 4534 of 1972. The plaintiff submitted its tender in response to an advertisement issued by the first defendant, for purchase of four items of Nutmegs with shell, Nutmegs without shell, Maco and Betelnuts. The total amount for which the plaintiff tendered came to Rs. 4,44,867. The plaintiff sent a demand draft for Rs. 44,487 being ten per cent of the value of the goods agreed to be purchased by him. The first defendant accepted the plaintiff's offer in relation to the second item, namely Nutmegs without shell, which was stored at Bombay. Out of this amount Rs. 26,409.65 due as and by way of deposit relating to the accepted quantity of the tender was retained and the balance was refunded. As a condition precedent for taking delivery of the goods, sales-tax was demanded by the first defendant and the plaintiff protested that it was contrary to the terms of the tender. Therefore, by a telegram, the plaintiff informed the first defendant that it was tendering the balance amount of price under protest on the ground that 40 per cent. of the goods were deteriorated and became unfit for human consumption. The plaintiff's partner delivered a bank draft for a sum of Rs. 2,20,409.50 exclusive of sales-tax, under protest, and requested for delivery orders. This draft was returned to the plaintiff by the first defendant stating that the amount offered under protest could not be accepted. Thereafter, the plaintiff tendered a sum of Rs. 2,23,449.10 by bank draft which was inclusive of sales-tax and requested for delivery orders. This Bank draft was also returned on 26th September, 1969, as the amount had not been tendered in time, and the quantity was not, therefore, delivered. Apart from rejecting the bank draft on the ground that it had not been tendered within time, the first defendant refused to refund the balance of Rs. 26,498.65 stating that the amount had been forfeited on account of failure of the plaintiff to lift the stock. The plaintiff came forward with the present suit Stating that the first defendant could not forfeit the deposit and that amount was liable to be returned. In the suit, the plaintiff impleaded not only the first defendant, the State Trading Corporation of India, but also the Union of India. In the written statement of the first defendant it was contended that no part of the cause of action arose at Madras, as the goods were stored at Bombay and they had to be taken delivery at Bombay. It was also contended that the tender was accepted only at Delhi. It was also contended by the first defendant that a sum of Rs. 26,499.65 was properly forfeited in accordance with the terms of the tender, which was accepted by the first defendant. The trial Court framed the following issues:

1. Whether the plaintiff is entitled for the recovery of the balance amount paid by way of earnest money?

2. Whether the plaintiff has committed breach of contract as contended by the defendant?

3. Whether this Court has no jurisdiction to entertain the suit?

4. To what relief?

2. The trial Court took up for consideration issue No. 3 relating to jurisdiction. It took the view that the invitation for a tender is in itself an offer and that the plaintiff has accepted the offer to purchase the goods in Madras as shown by Exhibit B-2 and, that therefore, part of the cause of action arose at Madras. The issue relating to jurisdiction was accordingly answered in favour of the plaintiff. The trial Court further held that the plaintiff had committed breach of trust in not lifting the goods within the time stipulated, that the defence regarding payment of sales tax was not accepted and that the first defendant was entitled to reasonable compensation fixed at Rs. 10,000 and after adjusting the sum of Rs. 12,000, the plaintiff was granted a decree for Rs. 16,408.65. The first defendant has filed A.S. No. 159 of 1976 Contending that the total amount of Rs. 27,498.65 could have been forfeited and that the Court below was wrong in holding that the first defendant was entitled to the compensation of Rs. 10,000. The plaintiff has filed App. No. 506 of 1976 contesting the decree being granted only to the extent of the sum of Rs. 10.000.

3. The learned Counsel for the Appellant (defendant) in A.S. No. 159 of 1976, submitted that the City Civil Court had no jurisdiction to entertain the suit and that the decree granted was, therefore, a nullity. It was also contended that the first defendant was entitled to forfeit the entire amount that was paid as earnest money in accordance with the terms of the invitation for the tender.

4. Section 20, Civil Procedure Code, in so far as it is material runs as follows:

Subject to the limitations set out, 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 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 or in part, arises.

Explanation I, omitted by Act CIV of 1976.

Explanation 2-A.--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.

In the present case it is not in dispute that the State Trading Corporation has its registered 'office in New Delhi. It has only a branch or subordinate office in Madras-It is not in dispute that the Branch office did not have anything to do with the transactions under consideration. On those facts the matter has to be considered either in the light of Clause (c) of Section 20 or the Explanation.

5. It may first be considered as to whether the cause of action in part arose within the jurisdiction of the City Civil Court. The tender in this case was invited by advertisement in the newspapers. These tenders were required to be submitted to the first defendant's office at New Delhi and the first defendant accepted the tender only in New Delhi. The goods were stored in Bombay, and they were liable to be delivered only in Bombay. Thus, no part of the cause of action arose within the jurisdiction of the City Civil Court. The City Civil Court has taken the view that the invitation or tender is an offer, and that the submission of the tender was an acceptance of the offer in Madras. It was, therefore held in effect that the contract was entered into in Madras and that therefore, the City Civil Court had jurisdiction to entertain the suit.

6. A somewhat similar question came up for consideration by this Court in Manilal v. Venkatachalapathi (1921) ILR 44 Mad 95. In that case, Venkatachalapathi, was carrying on business in Madura and Manilal in Bombay. On 7th September, 1940, Venkatachalapathi wrote to Manilal offering to purchase certain goods and the offer was accepted at Bombay. The question for consideration by this Court was whether the Court in Madura had jurisdiction to entertain the suit filed by Venkatachalapathi against Manilal, the Bombay party. It was held:

A contract is made at the place where the offer is accepted. In accordance with English authorities this Court has held that an offer when accepted by post is accepted at the place where the letter of acceptance is posted and therefore, the cause of action arises there.

A large number of decisions of Benches of this Court has been cited in support of the above proposition. A contrary view had been taken by two learned Judges sitting singly and those decisions were overruled as wrong. This decision was followed by a Bench of the Bombay High Court consisting of Gajendragadkar, J., as he then was and Vyas, J. in Baroda Oil Orchers Trades v. Parshottam : AIR1954Bom491 . In the case before the Bombay High Court the plaintiff sent a telegram from Baroda offering to purchase certain goods from defendants who were in Kanpur. The defendants accepted the offer by telegram, despatched from Kanpur. The plaintiff filed the suit in the Baroda Court against the defendant for damages for breach of the contract. On the question whether the Baroda Court had jurisdiction, it was held that no part of the cause of action had arisen in Baroda as the offer was made at Kanpur and the acceptance was made at Kanpur and that the whole of the contract was made at Kanpur, and that, therefore, the Baroda Court had no jurisdiction to try the suit. The learned Judges pointed out at page 580 that--

When a civil Court deals with the question as to where the contract is made, it must decide that question in the light of the provisions relating to the making of contract and therefore, the decision of the question as to whether the trial Court had jurisdiction must necessarily imply the decision of the question as to where the contract was made in the light of the provisions of Section 4 of the Indian Contract Act.

It was further pointed out that under Section 4, the proposal which was made became complete only when its communication came to the knowledge of the person to whom it was made and that unless the proposal was communicated to the person to whom it was made, it was not complete and in that sense was inchoate and inconclusive. On this basis only when the proposal reached Kanpur, it was complete and, so far as acceptance was concerned, it was pointed out that under Section 4, the communication of an acceptance was complete as against the proposer, when it was put in the course of transmission to him so as to be out of the power of the acceptor and that it necessarily meant that as soon as the acceptance was posted or a telegram to that effect was sent, the acceptance was complete against the proposer, and so far as the proposer was concerned, the contract was concluded at that time. Even if the acceptance did not reach the proposer on account of its loss in transit, the contract would still be complete and for its breach, the proposer would be entitled to sue in damages. This position has again been reiterated in Venkatesa Bat v. Kamalapat Motilal : AIR1957Mad201 .

7. The result is that in the present case, the contract was made in New Delhi and that the delivery has to be made in Bombay where the goods were located. Therefore, there is no question of any contract having been entered in Madras or any cause of action having arisen here. The conclusion of the learned Judge on this point is clearly erroneous.

8. The question that next arises for consideration is whether the situation of the subordinate office at Madras, of the first defendant Corporation gave jurisdiction to the City Civil Court, to try the suit. In Bharat Insurance Co. v. Wasudeo Ramachandra AIR 1956 Nag 203. the Nagpur High Court considered maintainability of a suit in Nagpur with reference to a policy of insurance effected with a company having the head office at Delhi. The proposal for the policy was made at Delhi and was accepted at Delhi. The money was also payable to the nominee at Delhi. The assured died at a place in Hyderabad State. The nominee brought a suit at Nagpur where the company had a branch office. A Division Bench of the Nagpur High Court held that the Court at Nagpur had no jurisdiction to entertain the suit. The learned Judges referred to the decision of a single Judge in Hindustan Co-operative Insurance Co. Limited v. Nathu (1941) Nag LJ 37. wherein it was held that the Court had jurisdiction over a similar claim for the insurance amount. It was observed by Bhatt, j., in an earlier case as follows:

The necessary condition contemplated by the second explanation to Section 20 is that the cause of action in respect of which the suit is brought should arise at the place where the Corporation has its subordinate office.

In other words, a corporation can be sued at a place where it has a subordinate office on the ground that it carries on its business there only in respect of a cause of action arising at such a place.

Reference was made to several decisions of other High Courts bearing on the point. It was further observed in paragraph 7 of the same judgment of the Nagpur High Court as follows:

In view of Clause (a) of Section 20, Civil Procedure Code, a corporation can be sued where it carries on its business and under Clause (c) it can always be sued at the place where the cause of action, wholly or in part arises. By reason, however, of the second Explanation in the section, a corporation is 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.

The result of the Explanation is to restrict the meaning of 'carries on.... business; in Clause (a) in relation to corporations. A corporation can be sued at its sole or principal office in India. At any place where it has a subordinate Office, it can be sued only in respect of a cause of action arising at such a place.... However, where the suit is instituted at a place where a Corporation maintains a subordinate office, the Court cannot dispense with the requirements that the cause of action must arise at such a place. The decision in Hindustan Co-operative Insurance Co. v. Nathu (1941) Nag LJ 37. having altogether ignored the second Explanation, cannot be supported and must be overruled.

This decision has subsequently been followed in Kamala Chopa v. Life Insurance Corporation of India : AIR1975Delhi15 . The decision of the Kerala High Court in Nedungadi Bank v. Central Bank of India : AIR1961Ker50 . is also to the same effect. Thus, the legal position is well established that the existence of a subordinate office cannot give rise to jurisdiction unless the cause of action arose at least in part at that place.

9. The cause of action in the present case was the non-payment of the amount paid as advance or earnest. The amount was paid in New Delhi where it was received and the cause of action for its return has necessarily to be at that place.

10. Mr. N. C. Raghavachari, learned Counsel for the plaintiff, however,, submitted that the cause of action could be said to have arisen in Madras because the debtor was bound to trace out and make payment at the place of the creditor and that in. the present case the payment had to be made only in Madras where the creditor resided. For this purpose, he referred to the decision in Venkatesa Bhat v. Kamalapet Motilal : AIR1957Mad201 . I do not find that this case can be said to support the contention of the learned Counsel for the plaintiff. At page 205 after referring to the decision of this Court in Raman Chettiar v. Gopalachari (1911) ILR 34 Mad 233. wherein it was held that the common law rule that the debtor is bound to find the creditor for making payment, did not control the express provisions in Explanation III to Section 20, Civil Procedure Code, and that the place of payment in order to give jurisdiction must be where the money is payable expressly or impliedly under the contract itself and not under any general rule of law, it was observed in paragraph 19 as follows:

Though this decision was under the old Code, this Court has again expressed the same view in Galley and Co. v. Appalasami Naidu : AIR1946Mad300 . wherein it has been pointed out that there has been a pronounced disinclination on the part of the Indian Courts to apply to this country unreserved by the English common law maxim that a debtor should find and pay his creditor and that generally speaking the place of payment has to be determined independently of any such general maxim with reference to the terms of the contract, the circumstances attending on it, the necessities of the case and having regard also to the statutory provision contained in the Civil Procedure Code and in Section 49 of the Contract Act.

It is not, therefore, possible to accept that this decision in any manner, supports the theory that the general maxim that the debtor is bound to find the creditor for making the payment, is applicable to a case like this. The result is that the City Civil Court would not have jurisdiction to entertain the suit.

11. The trial Court has gone into the merits of the claim. I do not want to go into the merits of the claim and the findings on merits are discharged. Necessarily, the plaint will have to be returned to the plaintiff for presentation to the proper Court. The judgment and decree of the trial Court are set aside. Appeal No. 159 of 1976 is accordingly, allowed. In the view that I have taken namely, that the City Civil Court had no jurisdiction to entertain the suit, there is no question of the plaintiff getting a decree for the full amount in the suit filed in the City Civil Court. The decree itself having been set aside in the connected appeal App. No. 507 of 1976 will stand dismissed (corrected in open Court on 23rd June, 1980, when the matter was posted). There will be no order as to costs in both the appeals.


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