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State of Orissa Vs. Goenka Investment and Mining Industries Pvt. Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata High Court
Decided On
Case NumberC.O. No. 3494 of 1982
Judge
Reported inAIR1983Cal438,[1985]58CompCas325(Cal),87CWN627
ActsCode of Civil Procedure (CPC) , 1908 - Section 20; ;Contract Act, 1872 - Section 229
AppellantState of Orissa
RespondentGoenka Investment and Mining Industries Pvt. Ltd. and ors.
Appellant AdvocateD.K. Sen, ;P.N. Chunder and ;S.B. Mandal, Advs.
Respondent AdvocateSaktinath Mukherjee, ;Bhaskar Ghosh, ;S. Ganguly and ;Tapan Kumar Sen, Advs. for Respondent No. 1
DispositionRevision dismissed
Cases ReferredRivers Steam Navigation Company v. Bisweswar Kundu
Excerpt:
- anil k. sen, j. 1. this is a revi-sional application at the instance of the defendant, the state of orissa (hereinafter referred to as the defendant) and is directed against an order dated june 10, 1982, passed by the learned subordinate judge, 1st court, alipore, in money suit no. 18 of 1978. by the order impugned, the learned subordinate judge has decided a preliminary issue on the point of court's jurisdiction to try the suit.2. goenka investment and mining industries private limited, a company incorporated, under the provisions of the companies act, 1956 (hereinafter referred to as the plaintiff) instituted the aforesaid suit claiming a decree for a sum of rs. 2,82,97,355.62 by way of damages and alternatively claiming an enquiry into the damages suffered by them and for a decree for.....
Judgment:

Anil K. Sen, J.

1. This is a revi-sional application at the instance of the defendant, the State of Orissa (hereinafter referred to as the defendant) and is directed against an order dated June 10, 1982, passed by the learned Subordinate Judge, 1st Court, Alipore, in Money Suit No. 18 of 1978. By the order impugned, the learned Subordinate Judge has decided a preliminary issue on the point of court's jurisdiction to try the suit.

2. Goenka Investment and Mining Industries Private Limited, a Company incorporated, under the provisions of the Companies Act, 1956 (hereinafter referred to as the plaintiff) instituted the aforesaid suit claiming a decree for a sum of Rs. 2,82,97,355.62 by way of damages and alternatively claiming an enquiry into the damages suffered by them and for a decree for such sum as may be found due on such enquiry. The plaintiff's case shortly is that by an agreement dated July 15, 1971, the defendant appointed the plaintiff an agent for mining, getting and raising coal from a colliery known as Handidhua Colliery situate within the District of Dhenkanal in the State of Orissa and for sale and despatch of coal for a period of 25 years with effect from the date of the agreement on terms and conditions set out in the agreement. Pursuant to the said agreement it is claimed by the plaintiff that they not only purchased certain plants, machineries and other colliery accessories of the value of Rs. 3,75,000/-from the defendant but purchased still other machineries, tools and equipments for the purpose of operating the mine. The plaintiffs further pleaded that they incurred various other expenses for retrieving the colliery and making it free from water and setting up an elaborate establishment for the mining operation to be carried on by them in terms of the agreement. It is claimed that all this was done by them on the defendant's representation and warranty that the agreement would continue and subsist for 25 years but the defendant wrongfully and illegally terminated the said agreement by a notice dated April 15, 1975, served upon the plaintiff on April 18, 1975, and took possession of the colliery on June 11, 1976. As a result the plaintiff suffered enormous loss, the particulars whereof being set out in the plaint. They claimed a decree for damages in the manner set out hereinbefore.

3. This suit was filed in the 1st Court of the learned Subordinate Judge at Alipore and the plaintiff pleaded jurisdiction in such court on the ground that the plaintiff suffered loss and damages within the jurisdiction of the said court as also on the ground that the cause of action arose at No. 6, Alipore Park Road, Calcutta, within the jurisdiction of the said court, when a notice of termination was served upon the plaintiff at that place.

4. The defendant filed a written statement contesting the claim put forward by the plaintiff on its merits. But at this stage we are not concerned with that part of the defendants defence. In the written statement, however, the defendant raised a specific plea that the learned Subordinate Judge has no territorial jurisdiction to try the suit. Reason assigned for such a plea was that the defendant neither resides nor carries on business within the jurisdiction of the learned Subordinate Judge, the colliery in dispute is situate beyond the jurisdiction and that no part of the cause of action can be said to have arisen within the jurisdiction of that court. It was pleaded specifically that the notice of termination of the agreement was served upon the plaintiffs through their manager at Handidhua Colliery, Talcher, in the State of Orissa on April 17, 1975. In view of such a plea raised on behalf of the defendant a preliminary issue was framed as to whether the court of the learned Subordinate Judge has jurisdiction to try the suit. This issue was decided by the learned Subordinate Judge on evidence both oral and documentary. The evidence led by the parses establishes beyond dispute that two notices in original terminating the agreement dated April 16, 1975, addressed to the 'Goenka Invest ment and Mining Industries Private Limited, 6, Alipore Park Road, Calcutta-700027', signed by the Secretary, Mining and Geology Department of the State of Orissa, were served by messenger. One of these notices was served on S. R. Chandra, Manager of the colliery at Talcher on April 17, 1975, while the other was served on the day following, that is, on April 18, 1975, at the plaintiff's registered office at 6, Alipore Park Road, Calcutta. The plaintiffs, however, led some evidence to show that they purchased various machineries necessary for the mining operations of the colliery in terms of the agreement at their registered office at Calcutta to support their claim that by such purchase a part of the damages was incurred at that place within the jurisdiction of the court of the learned Subordinate Judge.

5. In deciding the issue in favour of the plaintiffs the learned Subordinate Judge held that the place where the plaintiff made their purchases or made their payments resulting in the damages is a material factor as is the place of breach of contract in a suit based on such breach. Accordingly, it was held by the learned Subordinate Judge that when the plaintiff made certain purchases of machineries and equipments at their registered office within the jurisdiction of his court, a part of the plaintiffs' cause of action arose within the said jurisdiction. On the point of termination, the learned Subordinate Judge held that though two notices of such termination were served, -- one at Talcher and the other at No. 6, Alipore Park Road, the defendant really intended to serve the notice at the registered office of the plaintiff, namely, 6, Alipore Park Road, and in that view delivery of one of the notices at the colliery office at Talcher was of no consequence. According to he learned Subordinate Judge, the termination of agreement became complete and effective only when it was served upon the plaintiffs at their registered office at Calcutta on April 18, 1975. The defend ant's objection as to the jurisdiction having been so overruled, the defendant has now preferred the present revisional application.

6. Mr. D. K. Sen appearing on behalf of the defendant/petitioner has challenged the two grounds on which the learned Subordinate Judge had overruled the defendant's objection on the point of jurisdiction According to Mr. Sen, the present suit in its substance is a suit for damages for wrongful termination of an agreement between the parties. The purchases of machineries, tools and equipments as also other expenses incurred as pleaded by the plaintiffs in their plaint are materials relevant for determination of the quantum of damages suffered by them which damage, if any, they suffered not really by the purchases so made or expendi'ures so incurred but by wrongful termination of the agreement by the defendant So far as the second ground assigned by the learned Subordinate Judge is concerned, it is contended by Mr. Sen that both under the terms of the agreement as also under the law, the defendant was entitled to serve the notice of termination on the plaintiffs' agent at Talcher which the defendant did on April 17, 1975, According to Mr. Sen, once such a notice of termination is served, the legal consequence thereof follows and, the agreement stood terminated on and from that date, being so effected at Talcher beyond the jurisdiction of the learned Subordinate Judge. The notice that was served at Calcutta on the day following was by way of abundant caution but such service according to Mr. Sen is of no consequence for the purpose of determination of time or place of the plaintiffs' cause of action because the cause of action had already arisen on the previous date at Talcher. In that view according to Mr. Sen, no part of the cause of action can be said to have arisen within the jurisdiction of the court of the learned Subordinate Judge and hence the learned Subordinate Judge has no jurisdiction to entertain the suit.

7. Mr. Sakti Nath Mukherji appearing on behalf of the plaintiff/opposite party has contested the points thus raised by Mr. Sen and has further supported the two grounds assigned by the learned Subordinate Judge in support of his conclusion. According to Mr. Mukherji, various factors are involved in resulting the damages to the plaintiffs. One of the factors was the purchases made and expenditures incurred by them and since part of that was made within the jurisdiction of the Court of the learned Subordinate Judge, it was rightly held, by the learned Subordinate Judge that a part of the cause of action arose within his jurisdiction. In any event, according to Mr. Mukherji, service of notice of termination of the agreement furnished a part of the cause of action and that in the present case must be held to have been effected only at No. 6, Alipore Park Road, Calcutta, and not at Talcher. Mr. Mukherji has contended that S. Chandra, the Local Manager was not authorised to receive any notice of termination and, as such, service of such a notice on him is of no consequence. Further, according to Mr. Mukherji such service takes its effect not immediately but only on the expiry of a reasonable time necessary for communicating the contents thereof to the plaintiff. But according to Mr. Mukherji when before the expiry of such a reasonable time there had been a fresh service upon the plaintiff at Calcutta that alone effectively terminated the agreement furnishing the cause of action for the plaintiffs' suit.

8. We have carefully considered the rival contentions put forward before us. We are, however, unable to agree with the learned Subordinate Judge that purchase of certain machineries and equipments by the plaintiffs at their Calcutta Office would constitute a part of the cause of action. Such purchases and exr penditures were undoubtly made by the plaintiffs for the purpose of carrying on the mining operation in terms of the agreement. But for the termination they would, have used them for the purpose of operating the mine at the colliery. The plaintiffs did not suffer the loss or damage when such purchases were made or the expenditures were incurred. They suffered the loss only when they were unable to use them profitably or when they lost them on the wrongful termination of the agreement by the defendant and the defendant's taking over possession of the colliery from the plaintiffs. Such purchases or expenditures would undoubtedly be relevant factors for determining the quantum of damages suffered but it can never be said that they constitute a part of the cause of action for the damage. Our attention has been drawn by Mr. Sen to a decision of the Supreme Court in the case of Firm Pannalal Janakidas v. Mohanlal, : [1950]1SCR979 where Kania, C. J. observed as follows :

'It was argued that damages formed part of the cause of action of the respond-ents in framing the counter claim and, therefore, Section 18 (2) stood in the way of the respondents. The contention is unsound because the cause of action is pleaded by the averment that there was a duty or agreement to insure and that there was a failure to perform that duty, that loss had occasioned to the respondents because of the failure to perform the duty and the appellants, were, therefore, liable for breach of the duty. The quantum of damages is not a part of the cause of action. It is a matter to be ascertained by the court according to well laid down principles of law.'

We are, therefore, unable to sustain the first ground assigned by the learned Subordinate Judge in support of his decision on the issue or accept the contention put forward by Mr. Mukherji in support thereof.

9. The second ground assigned by the learned Subordinate Judge in our view is the real point of importance for our consideration. It may be taken as well settled by now that revocation or termination is a part of the cause of action in a suit for breach of a contract and, therefore, the place where the contract was so revoked or terminated may well determine the forum for trial of such a suit. Therefore, the pertinent question for our consideration in the present case is as to whether the termination of the agreement was effected at Calcutta or at Tal-cher. To decide this controversy it would be necessary to take note of one of the clauses in the agreement (Ext. 5) between the parties, being the last or the 54th clause thereof, which reads as follows:--

'The agent shall open one office either at Talcher or at Bhubaneswar for making all transactions in connection with this agreement which will be recognised as the office of the agent for the purposes of operation of this agreement. Every notice required to be given to the agent shall be given in writing to such persons at the above address as the agent may appoint for the purpose of receiving such notice and if there shall have been no such appointment then it shall be sent by registered post to the address of the agent recorded in this agreement or at such other addresses in India as might have been intimated in writing by the agent sending by registered post and such shall be conclusive of the fact that such notice has been, served on the agent.'

10. Strong reliance is placed, by Mr. Sen on a letter Ext. B. Dt. Dec. 20, 1974. This is a letter written by the General Manager for the plaintiffs to the Mining Officer, Talcher Circle, Talcher, the material part whereof reads as follows:

'Sub: Delivery of Letters

Ref: Your letter No. 2093 dt. 19-12-74.

Dear Sir,

With reference to the above I am to say that our Manager Shri S. R. Chandra and Assistant Manager Shri K. P. Chatterji are being authorised to receive all the letters during my absence to avoid unnecessary delay in communication.'

11. According to Mr. Sen, this letter must be read as an appointment contemplated by Clause 54 of the agreement between the parties authorising both S. R. Chandra and K. P. Chatterji to receive letters on behalf of the plaintiffs se that service of the notice of termination on S. R. Chandra at the colliery on April 17, 1975, caused the termination. Necessarily according to Mr. Sen the place of such termination is at Talcher beyond the jurisdiction of the learned Subordinate Judge.

12. We are, however, not in a position to accept this contention of Mr. Sen. The letter (Ext. B) is an authorisation by the General Manager as it would be evident from the Mining Officer's letter referred to therein. The Mining . Officer in his letter dated Dec. 19, 1974, was complaining to the General Manager that in the absence of the General Manager the staff of his office were not receiving letters sent by the Mining Officer creating administrative troubles and hence he was requesting the General Manager to authorise someone on his behalf to accept such communication. It is well known that in a mining operation various regulations are to be fulfilled which necessitated communication between those carrying on the mining operation and the supervising officers appointed under the statute or the statutory regulations. It was the inconvenience of service of such communication which led the Mining Officer to request the General Manager to authorise someone on his behalf to accept the letters addressed to him. Clause 54 of the agreement on the other hand contemplates that the second party to the agreement, namely, the plaintiff, referred to as the agent, is required to open an office either at Talcher or at Bhubaneswar and appoint a person at the said office for the purpose of receiving notices required, to be given obviously having regard to the agreement between the parties. The clause further provides that in the absence of any such appointment by the agent such notices are to be addressed to the registered office of the agent at 6, Alipore Park Road, Calcutta. The agent referred to in this Clause 54 is a company incorporated under the Companies Act. Its organs entitled to act are specified by the articles of constitution. Reference has rightly been made by Mr. Mukherji to such articles of constitution of the plaintiff company as a public document to show that the General Manager had no authority to make the appointment or give any authority to receive notices contemplated by Clause 54 of the agreement. Reliance has been placed by Mr. Mukherji on decisions in the cases of Freeman v. Buckhurst (1964) 1 All ER 630 and British Thompson Houston Co. v. Federal E. Bank, 1932 All ER (reprint) 448 in support of his claim that this court should take into consideration the articles of constitution in determining whether the authorisation relied on by Mr. Sen can be said to be due authorisation in terms of Clause 54 of the agreement or not. We feel no hesitation in accepting this contention of Mr. Mukherji because in our view apart from the ineligibility of the General Manager to make such an authorisation, reading the two documents Exts. A and B together it is quite evident to us that Ext. B dated Dec. 20, 1974, cannot be read as an authorisation contemplated by Clause 54 of the agreement between the parties. Though it was written for the plaintiffs it was really an authorisation by the General Manager to his subordinate officers authorising them to accept communications from the Mining Officers; it was certainly not an authorisation by the plaintiffs to receive on their behalf all communications contemplated by Clause 54 of the agreement.

13. Mr. D. K. Sen has next contended that even if it be assumed that S. R. Chandra was not authorised by the plaintiffs company in terms of Clause 54 of the agreement, yet the said S. R. Chandra being a local Manager of the plaintiff company at the colliery would be an agent of the plaintiffs within the meaning of Section 182 of the Contract Act, and as such, service of notice of termination of the contract on him would be effective from the moment of such service in terminating the agreement. Strong reliance is placed by Mr. Sen on the provision of Section 229 of the Contract Act, which provides that any notice given to an agent in course of the business transacted, by him for the principal, shall, as between the principal and third parties have the same legal consequence as if it had been given to the principal. To meet this contention of Mr. Sen, Mr. Mukherji has raised three objections thereto. In the first place it is contended by Mr. Mukherji that any and every ministerial servant is not an agent of his master and, therefore, though S. R. Chandra might have been appointed a Local Manager at the mines it cannot be held that he would be acting as his master's agent. Secondly it is contended by Mr. Mukherji that even if notice to S. R. Chandra be construed to be a notice to an agent within the meaning of Section 229 of the Contract Act, that would be effective so far as the principal is concerned only after the expiry of a reasonable time needed for the agent to communicate the same to the principal. In the facts of the present case according to Mr. Mukherji when before the expiry of such a reasonable time the defendant themselves served another notice on April 18, 1975, on the plaintiff at Calcutta, it should be held that the termination of the contract became effective on the service of that second notice and necessarily, therefore, such termination took effect at Calcutta within the jurisdiction of the learned Subordinate Judge. The third objection raised by Mr. Mukherji in this regard deserves serious consideration. Referring to and relying upon Clause 54 of the agreement between the parties it is contended by Mr, Mukherji that the defendant knew it well that no person other than one expressly authorised in terms of Clause 54 could accept such a notice of termination and they knew it further that in the absence of any such authorised agent service is to be effected at the registered office of the Company at Calcutta. Having been aware of such an agreement between the parties the defendant did serve the notice of termination by a special messenger at the registered office of the Company on April 18, 1975. Therefore, the defendant cannot rely upon service of the notice of termination of the agreement on S. R. Chandra whose absence of authority to act on behalf of the defendant in accepting the notice was known to the defendant and such service would be no valid service within the meaning of Section 229 of the Contract Act.

14. We have carefully considered, the rival contentions thus put forward before us. In our considered opinion we may accept the contention of Mr. D. K. Sen only if we can hold that S. R. Chandra was an agent of the plaintiff and he received the notice in course of the business transacted by him for the plaintiff, his principal and that the notice became effective from the moment it was served upon him. Necessarily, therefore, we have to consider the three objections raised by Mr. Mukherji in this regard. So far as the first objection raised by Mr. Mukherji is concerned, there is no reason to think that merely because S. R. Chandra stood in the position of a ministerial servant of the plaintiff he would not be an agent of the plaintiff. If the authority of S. R. Chandra as the Local Manager was extensive enough to cover all dealings with the defendant in matters pertaining to the agreement there is no reason why he would not be a person who may be taken up as an agent of the principal in all his acts in that regard. It may be that in the facts of the present case evidence is lacking to establish the actual extent of his authority but we are unable to go to that extreme as is suggested by Mr. Mukherji, namely, S. R. Chandra being a ministerial servant cannot be taken to be an agent of the plaintiff company.

15. So far as the second objection raised by Mr. Mukherji is concerned, he has relied, strongly upon the following annotation of Mulla on Section 229 of the Contract Act:--

'When the knowledge of an agent is imputated to the principal, the principal is considered to have notice as from the time when he would have received notice if the agent had performed his duty and communicated with him with reasonable diligence.'

This note is based upon an English decision in the case of Proudfoot v. Montefiore, (1867) 2 QB 571. (511?) Reliance is also placed by Mr. Mukherji on Article 833 Vol. 1 Halsbury's Laws of England, 4th Edn. No doubt in enunciating the principle it is observed therein that where an agent receives notice or acquires knowledge of any fact material to the transaction in course of which it is so received or acquired the principal is taken to have received notice of it from the agent at the time when he should have received, it if the agent had performed, his duty with due diligence. According to Mr. Mukherji Section 229 of the Contract Act merely incorporates in the statute the well settled English principle in this regard which recognises notice to an agent as a notice to the principal as and when such a notice is served in course of the business entrusted to the agent by the principal. When according to Mr. Mukherji such principle further enjoins that such notice can be ascribed to the principal only upon the expiry of a reasonable time needed for communication thereof by the agent to the principal, the same must be construed to be a part of what Section 229 of the Contract Act provides. We, however, feel some difficulty in accepting such a contention of Mr, Mukherji because the law in so far as India is concerned is codified and must be found within the terms of Section 229 of the Contract Act. Section 229 on the other hand provides that no sooner a notice is served upon an agent it shall have same legal consequence as if it had been given to the principal. This provision does neither expressly nor by necessary implication defer the legal consequence until the expiry of a reasonable time needed for the agent to communicate to the principal. That apart even in English law a distinction is made between a notice to an agent and the knowledge acquired by an agent. While in the latter case the knowledge is imputed to the principal only on the expiry of a reasonable time needed for the agent to communicate to the principal the knowledge so acquired by him, in the case of notice it has been held to be effective from the moment it is so served upon the agent. The decision in the case of Proudfoot v. Montefiore (supra) is with regard to knowledge. There P's agent A shipped a cargo freight from Smyrna. A sent the shipping document to P on Jan. 19. Ship sailed but was stranded and the cargo became a total loss. A was informed of these events on January 24. A wrote to P informing him of such events on Jan. 26. P, however, before he could receive the said communication insured the cargo being unaware of the loss. In view of the said facts it was held that P could not recover the insurance money because A after learning about the loss had deliberately sent a letter instead of telegraphing in order that P should not be prevented from insuring. His misguided zeal in the interest of P proved to be unavailing and P was affected by A's knowledge which in the circumstances ought to have been sent more quickly to P. Though such is the position in case of knowledge derived by an agent, so far as the effect of service of notice is concerned, the position appears to be otherwise because it has been held that service of such a notice affects the principal automatically at the moment of such service. We find this distinction between service of a notice and acquiring of knowledge when we refer to Ameri-can Restatement of the Law of Agency (Second) 270 and 278. Reference may also be made to Powell on the Law of Agency 2nd Edn. pages 236 to 244 and Bowstead on Agency 14th Edn. Article 106. Therefore, we are unable to accept the contention of Mr. Mukherji that the effect of service of the notice of termination on S. R. Chandra should be construed to be deferred so far as the principal is concerned until the expiry of a reasonoble time needed, for S. R. Chardra to communicate the same to the plaintiff, we hold as such particularly in view of the provision of Section 229 of the Contract Act, which speaks of legal consequences to follow no sooner the notice is served on an agent.

16. We now proceed to consider the third objection raised by Mr. Mukherji. On a careful consideration, we find great substance in this objection. Even on the provision of Section 229 of the Contract Act, notice to be received by the agent must be in course of the business transacted by him for the principal. If, therefore, receiving such a notice is not within his authority and if the agent's lack of authority in this regard is known to the defendant, then certainly the defendant cannot rely upon service of the notice on such an agent as the service on the principal. In the present case we have already referred to Clause 54 of the agreement which provides in no uncertain terms that every notice required to be given to the plaintiff with regard to the transactions in connection with the agreement must be given to a person appointed and authorised in terms of Clause 54 and in the absence of any such person such notice must be served at the registered office of the plaintiff, that is, at No. 6, Alipore Park Road, Calcutta. In our view the defendant was therefore, quite aware of the restrictive covenant that a notice like a notice of termination cannot be served on any and every agent of the plaintiff. It is to be served either on an agent specifically appointed and authorised in terms of Clause 54 or upon the plaintiff at their Calcutta Office. It is obvious that in the present case the defendant being aware of such a position took care to do so when they served, such a notice at the Calcutta Office on April 18, 1975. Their earlier service upon S. R. Chandra cannot, therefore, be relied upon for the purpose of contending that by such service the agreement was terminated at Talcher one day earlier, that is, on April 17, 1975. Moreover here the plaintiff is a limited company and one dealing with an agent or officer of such a company must take care to be satisfied that such an agent or officer is duly authorised in that regard under the articles of association. A person dealing with an officer of such a company knowing that officer's want of authority cannot rely upon service of a notice accepted by such an officer beyond his authority as due service upon the principal company. Mr. Mukherji has rightly relied upon an earlier decision of this court in the case of Rivers Steam Navigation Company v. Bisweswar Kundu, AIR 1928 Cal 371. In this view, we uphold the last objection raised by Mr. Mukherji and hold that S. R. Chandra not being authorised .by the plaintiff to receive such a notice of termination and his lack of authority being known to the defendant, service on him on April 17, 1975, could not and did not terminate the agreement so that the cause of action for the present suit did not arise on the service of such a notice but arose only on the service of the notice of termination on April 18, 1975, at Calcutta within the jurisdiction of the learned Subordinate Judge. In that view we uphold the decision of the learned Subordinate Judge on the preliminary issue though on grounds different from those assigned by him.

17. This revisional application, therefore, fails and is dismissed on contest. There will be no order for costs.

S.N. Sanyal, J.

I agree.


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