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Orissa Oil Industries Ltd. Vs. Bihar State Forest Development Corporation Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberSuit No. 34 of 1978
Judge
Reported inAIR1979Cal261
AppellantOrissa Oil Industries Ltd.
RespondentBihar State Forest Development Corporation Ltd. and anr.
Appellant AdvocateB.N. Sen and ;S. Pal and ;R. Paul, Advs.
Respondent AdvocateGupta, ;Aninda Mitter and ;P.K. Roy, Advs.
Cases Referred(Sm. Kamal Srimal v. Padatn Chand Sindhur
Excerpt:
- .....1, its servants, agents and assigns from forfeiting the security deposit of rs. 5,00,000/- under a bank guarantee no. 19/77 given by the defendant no. 2 on 9-7-1977, perpetual injunction against the defendant no. 2 from making any payment in terms of the said bank guarantee, decree for rs. 93,691.92, rs. 45,850/- and rs. 35,836/- against the defendant no. 1 in terms of paragraphs 6, 7 and 10 of the plaint, alternatively an enquiry into damages, declaration that the notice dated 2-7-78 issued by the defendant no. 1 was null and void, temporary injunction, receiver, etc.2. the facts alleged in the plaint were that on 12-7-1977 the plaintiff and the defendant no. 1 entered into an agreement in writing whereby the plaintiff agreed to purchase 8000 metric tons of sal seeds of certain.....
Judgment:
ORDER

Pratibha Bonnerjea, J.

1. On 18-1-1978, the plaintiff instituted the above suit against the defendants for specific performance of the agreement dated 12-7-1977, for perpetual injunction restraining the defendant No. 1, its servants, agents and assigns from forfeiting the security deposit of Rs. 5,00,000/- under a Bank guarantee No. 19/77 given by the defendant No. 2 on 9-7-1977, perpetual injunction against the defendant No. 2 from making any payment in terms of the said Bank guarantee, decree for Rs. 93,691.92, Rs. 45,850/- and Rs. 35,836/- against the defendant No. 1 in terms of paragraphs 6, 7 and 10 of the plaint, alternatively an enquiry into damages, declaration that the notice dated 2-7-78 issued by the defendant No. 1 was null and void, Temporary injunction, receiver, etc.

2. The facts alleged in the plaint were that on 12-7-1977 the plaintiff and the defendant No. 1 entered into an agreement in writing whereby the plaintiff agreed to purchase 8000 metric tons of Sal seeds of certain description and quality at agreed price on terms and conditions contained therein. In paragraph 5 of the plaint, it was alleged that the plaintiff was to furnish security to the defendant No. 1 for Rs. 5,00,000/- who had agreed to accept the security in the form of a Bank guarantee in lieu of cash security. Pursuant to this agreement the defendant No. 2 had issued the said Bank guarantee No. 19/77 dated 9-7-1977 from its Ganesh Chandra Avenue Branch within the jurisdiction of this Court. It was further alleged that the plaintiff had lifted 4416.363 metric tons of goods on payment of Rs. 39,50,000/- but the goods were found to be not of agreed quality or description. The plaintiff always was and till is ready and willing to perform its part of the contract but the defendant No. 1 committed breach of the contract by supplying goods of inferior quality. Thereafter the defendant No. 1 by a letter dated 2-1-1978 wrongfully and illegally alleged that the plaintiff had committed breach of the contract by its failure to take delivery of the goods. The said purported notice was given in terms of the contract dated 12-7-1977 threatening to cancel the contract and toforfeit the security deposit. In paragraph 15of the plaint, the plaintiff alleged that part of the cause of action arose within jurisdiction by issue of the said Bank guarantee from the Ganesh Chandra Avenue Branch of the defendant No. 2 and prayed for leave under Clause 12 of the Letters Patent as well as Clause 14 of the Letters Patent to institute the present suit.

3. On careful reading of the plaint it appears that the plaintiff proceeded on the basis that the issue of the Bank guarantee is the only part of the cause of action which arose within the jurisdiction of this Court and that all other causes of action arose outside. Leave under Clause 14 of the Letters Patent was prayed for to add claims for damages against the defendants which cause of action admittedly arose outside jurisdiction of this Court.

4. On 18-1-1978, simultaneously with the filing of the suit the plaintiff took out an application against the defendants for restraining the defendant No. 1 from enforcing the Bank guarantee and an order was made on that date for maintaining status quo.

5. This application was contested by the defendant No. 1. In the affidavit-in-opposi-tion, affirmed on behalf of the defendant No. 1, it was specifically pleaded that no part of the cause of action in the suit arose within jurisdiction. On 31-1-1978 an order was made on that application whereby Mr. P. D. Himat Singha and Mr. B. P. Khaitan were appointed joint Receivers over the said sum of Rs. 5,00,000/- and the defendant No. 2 was directed to hand over the said sum to them. On 15-2-1978 another application was made by the plaintiff for appointment of an independent surveyor to ascertain the condition and quality of the goods in dispute. On 21-2-1978 an ad interim order was made giving liberty to the plaintiff to have the goods inspected by his own surveyor. On 21-4-78, another order was made by Sabyasachi Mukherjee J. on the plaintiff's said application for injunction and the said order was as follows :--

'Upon Mr. Ghose's client giving a bank guarantee in favour of and with satisfaction of the Registrar, O. S., of this court for a sum of Rs. 2,50,000/- his client will be at liberty to take away Rs. 2,50,000/- out of the moneys lying in the hands of the Receiver now and which has been deposited in the bank.

Similarly upon furnishing a bank guarantee to the satisfaction of the Registrar, O. S., and in favour of the Registrar, O. S. of this court for a sum of Rs. 2,50,000/- Mr. Roy's client will be at liberty to take away Rupees 2,50,000/- from the amounts deposited with the Receiver in this case.

These bank guarantees must be kept renewed by both the parties until disposal of the suit and they must renew the bank guarantees 6 weeks prior to the expiry of the existing bank guarantee. Upon such renewal they must inform the other side of such renewal. In default of such intimation the respective party will be at liberty to ask for enforcement of the bank guarantee.

Copy of plaint if not served will be served in course of tomorrow. Written Statement 4 weeks thereafter. Cross order of discovery within 3 weeks thereafter, inspection forthwith thereafter and the suit to appear in the appropriate prospective list 8 weeks hence. Liberty to apply. Costs cost in the cause.

Registrar, Receiver and all parties to act on a signed copy of the minutes.'

6. The aforesaid order dated 21-4-78 was given effect to by both the plaintiff and the defendant No. 1 by withdrawing Rupees 2,50,000/- as provided in the order but the defendant No. 1 did not file any written statement in terms of the said order. There-alter the suit appeared in the list of undefended suits and was adjourned till 19-6-78 at the request of the parties.

7. On 16-6-1978, the defendant No. 1 took out the present application praying for following orders :--

(a) This suit i.e. Suit No. 34 of 1978(Orissa Oil Industries Limited v. Bihar State Forest Development Corporation Ltd. & Anr)be dismissed with costs.

(b) Leave granted under Clause 12 of the Letters Patent be revoked.

(c) Leave granted under Clause 14 of the Letters Patent be revoked.

(d) The reliefs for specific performance and injunction as contained in prayers (a), (b) and (c) of the plaint be struck out.

(e) An injunction do issue restraining the plaintiff from proceeding with the suit any further.

(f) The suit be not transferred to the peremptory list of undefended suit until disposal of this application.

(g) All further proceedings in this suit be stayed until the disposal of this application.

(h) Ad interim orders in terms of prayers (e) and (f) above.

(i) Alternatively the time to file the written statement be extended by six weeks from the date of the order to be made on this application.

(j) Costs of and incidental to this application be paid by the plaintiff.

(k) Such further or other orders as to this Hon'ble Court may seem fit and proper.

8. Two grounds have been given in the petition for revocation of the leave underClause 14 of the Letters Patent, viz. (1) non-application of that clause on the facts alleged in the plaint and (2) non-compliance of the procedures mentioned in that clause. The grounds for revocation of the leave under Clause 12 of the Letters Patent were (1) no part of the cause of action arose within jurisdiction and (2) in case part of the cause of action has arisen, the balance of convenience demanded revocation of the leave on the grounds set out in paragraph 33 of the petition. The plaintiff filed an affidavit-in-opposition through one of its directors Shri Ramawatar Himatsingh affirmed on 5-7-1978 denying all the allegations in the petition. In paragraph 22 of this affidavit, the plaintiff alleged that the petitioner had taken steps in the suit by contesting various proceedings and by obtaining direction for filing written Statement and had taken advantage under the order dated 21-4-1978, by receiving Rs. 2,50,000/-. It was further alleged that the time to file written statement had expired on 23-5-1978 and the suit had been transferred to the undefended list and that this belated application was made mala fide by way of an afterthought only to delay the hearing. The petitioner's affidavit-in-reply was affirmed by its General Manager Ramanand Misra on 29-7-1978 who denied all the allegations in the said affidavit-in-opposition. The defendant No. 2 did not enter appearance nor took any step in the present suit up-till-now.

9. Mr. B. N. Sen, appearing in support of the application submitted that if only a part of the cause of action arises within the jurisdiction, then Clause 14 of the Letters Patent would not be attracted. If one cause of action in its entirety arises within the jurisdiction, then the plaintiff would be entitled to invoke the provisions under Clause 14 and after obtaining leave would be entitled to join other causes of action which had completely arisen outside the jurisdiction. On the facts of this case as alleged in the plaint, Clause 14 could not be invoked. Moreover, due to non-compliance of the procedure mentioned in Clause 14, the purported order for leave obtained by the plaintiff was a nullity. Clause 14 is as follows :--

'And we do further ordain that where plaintiff has several causes of action against a defendant, such causes of action not being for land or other immovable property, and the said High Court shall have original jurisdiction in respect of one of such causes of action, it shall be lawful for the said High Court to call on the defendant to show cause why the several causes of action should not be joined together in one suit and to makesuch order for trial for the same as to the said High Court shall seem fit.'

10. I am unable to accept the first contention of Mr. Sen that one cause of action in its entirety must arise within the jurisdictionfor attracting clause 14 of the Letters Patent. (1910) ILR 34 Bom 564 (Dobson v. Krishna Mills Ltd.) is an authority on this point which supports the submission of Mr. Gupta the Counsel for the plaintiff, that if a part of the cause of action arises within the jurisdiction then the provisions of clause 14 of the Letters Patent can be invoked by the plaintiff who can file the suit by obtaining leave both under clauses 12 and 14 of the Letters Patent. I am in agreement with the views taken in (1910) ILR 34 Bom 564. Mr. Sen's next point is non-compliance of the procedure provided in Clause 14 of the Letters Patent by the plaintiff at the time of obtaining leave under that clause. Mr. Gupta, counsel for the plaintiff admits the said position but submits that non-compliance of the procedure is a mere irregularity and nothing more. Mr. Sen pointed out that both the Clauses 12 and 14 of the Letters Patent appeared under the heading 'Civil Jurisdiction of the High Court' and non-compliance of the procedure would go to the root of the whole thing; and would not confer any jurisdiction on this court to try the suit on the causes of action which arose outside its jurisdiction. Mr. Sen relied on an unreported Judgment of Buekland J. delivered on 23-5-1928 in Suit No. 1441 of 1928 (Gour Chand Mallick v. Administrator General of Bengal) in this connection where he had held that leave under Clause 14 had to be obtained prior to the institution of the suit on notice to the defendant who would be entitled to show cause against proposed joinder of causes ol action. Mr. Sen also cited (1977) 2 Cal LJ 538 (Sm. Kamal Srimal v. Padatn Chand Sindhur) where Subyasachi Mukheijee J. had differed with Buekland J. and had held that such leave could be obtained even after the institution of the suit. But both the learned Judges had agreed on one point that an independent or separate application has to be made by the plaintiff on notice to the defendant for obtaining leave under Clause 14 of the Letters Patent and that the defendant will have the right to show cause against proposed joinder of causes of action. No leave under Clause 14 can be granted by Court without hearing the defendant, In (1910) ILR 34 Bom 564 it has been held as follows:--

'If no application was made under Clause 14 that part of the plaint which related to claim C would be struck out as soon as the case came on for hearing.'

11. Admittedly no such application has been made by the plaintiff in the present case. I agree with Mr. Sen and hold that the leave obtained by the plaintiff under Clause 14 of the Letters Patent without any notice to the defendants was of no legal consequence and was a nullity. The order being null and void, it did not confer any jurisdiction on this court to entertain the suit on the causes of action which arose outside jurisdiction and were joined in terms of the purported order granting leave to join the same. The plaintiff's suit for damages in connection with the Sal seeds agreement is, therefore, misconceived and should be struck out unless a fresh leave is granted to the plaintiff for joining the said causes of action on a properly framed application on notice to the defendant as provided in clause 14 of the Letters Patent.

12. Mr. Sen then urged that the plaintiff had no locus standi to institute the suit in respect of the guarantee agreement as the plaintiff was not a party to the said contract. The guarantee agreement was not dependent on the Sal Seeds agreement. His next point was that the issue of the Bank guarantee from Ganesh Ghandra Avenue branch would not confer any jurisdiction on this court to entertain the suit. Mere 'Issue' of that document was a unilateral act of the plaintiff and was not part of the cause of action under the guarantee agreement. I will take up last point first, viz. whether issue of the Bank guarantee is a part of the cause of action or not. From the recital of the Bank guarantee No. 18/77 dated 9-7-1977 we get the terms on which the Bank guarantee was furnished by the plaintiff. It appears that originally the term was that the plaintiff would furnish cash security to the extent of Rs. 5,00,000/-. Subsequently the petitioner and the plaintiff agreed that the plaintiff would be exempted from furnishing cash security 'on production of a Bank guarantee for Rs. 5 lacs'. To get this exemption, the plaintiff had to be ready with the Bank guarantee for producing the same before the defendant No. 1 for their acceptance. Therefore the 'issue' of the Bank guarantee was one stage earlier than production of the same before the defendant No. 1. The Bank guarantee is earlier in date that that of the Sal Seeds agreement. Mr. Sen submitted that on the facts of this case, the issue of the Bank guarantee was a unilateral act on the part of the plaintiff and the petitioner had nothing to do with the same. How when and under what circumstances the bank guarantee was issued are matters of evidence and cannot be decided on the basis of documents annexed to the pleadings before me. In the premises it is not possible to hold that the bank guarantee was a deposit given bythe plaintiff under the Sal seed agreement as submitted on behalf of the plaintiff or that it was an independent agreement between the defendant No. 1 and the defendant No. 2 only with which the plaintiff had nothing to do as contended on behalf of the defendant No. 1. Both cases are possible and which version is correct would be decided at the trial. If the submission made on behalf of the defendant that bank guarantee was given under the terms of the Sal seed agreement and was an integral part of that contract could be established on evidence, then certainly the plaintiff would have locus standi to institute the present suit. If on the other hand, it was proved to be a completely independent agreement between the two defendants only, then the plaintiff would not have the cause of action to institute the suit. In view of the above position, I am not dealing with the cases cited by the plaintiff and the defendant No. 1 on these points at the time of hearing of this present application. Whether the plaintiff has any cause of action or this court has any jurisdiction to try the suit; by virtue of a part of the cause of, action having arisen within its jurisdiction as alleged, will be decided at the trial and I am not inclined to decide the same on this summary application. In the premises I am against the revocation of the leave at this stage. The prayer for revocation of the leave is also refused on the ground that the application is belated and has been taken out after the defendant No. 1 has acquiesced in the steps taken by the plaintiff for the progress of the suit by hotly contesting the two interlocutory applications. The defendant No. 1 could have taken out an application for revocation of the leave immediately on receiving the notices of plaintiffs applications for injunction and for inspection of the goods. These two applications of the plaintiff could have been stayed until the disposal of the application for revocation of the leave. All these courses were open to the defendant No. 1. Moreover, the defendant No. 1 had taken a benefit under the order dated 21-4-1978, by withdrawing Rs. 2,50,000/- on furnishing a bank guarantee in favour of the Registrar. O. S. This benefit the defendant No. 1 was not entitled to get but for that order. The said order also directed the defendant No. 1 to file the written statement. Mr. Sen, appearing on behalf of the defendant No. 1, in support of the petition, however, contended, that the order for filing written statement was not obtained by his client and it was an order of Court. In the present petition, the defendant No. 1, however, made an express prayer for extension of time to file the written statement if the prayerfor revocation of the leave is rejected. This shows the attitude of the defendant No. 1 towards the present suit. On the facts of this case 1 have no doubt that the defendant No. 1 has acquiesced in the steps taken by the plaintiff for prosecuting the suit. I also hold that the defendant No. 1 has taken benefit under the order dated 21-4-1978. If at the trial, it is found that no part of the cause of action at all arose within the jurisdiction or the plaintiff was a total stranger to the bank guarantee agreement, the matter will be different. If the suit proceeds only on the basis of the bank guarantee, all possible evidence will be available in Calcutta and its hearing by this Court will be to the advantage of the parties to the suit. In view of this, I am not dealing with the question of balance of convenience which was mainly urged by the defendant No. 1 on the ground of plaintiff's claim for damages -- the cause of action for which admittedly arose entirely outside the jurisdiction of this Court.

13. In the premises, there will be an order in terms of prayer (c) and (i) of the petition. Each party to pay and bear its own costs of this application.


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