State Of Haryana & Anr vs M/S Deep Mayank & Associates &

Against the Judgment and Decree dated 23.6.1993 passed by Sri Narendra Mishra, Sub Judge I, Patna in Title Suit No.603 of 1992.

STATE OF HARYANA & ORS. ............ Defendants/Appellants (In First Appeal No. 594 of 1993)

Versus

M/S DEEP MAYANK & ASSOCIATES & ORS. ......... Plaintiffs/Respondents

DENA BANK ............ Defendant/Appellant (In First Appeal No. 662 of 1993)

Versus

M/S DEEP MAYANK & ASSOCIATES & ORS. ......... Plaintiffs/Respondents

----------

In First Appeal No. 594 of 1993 For the Defendants- Appellants : Mr. Kali Das Chatterji, Advocate Mr. Amlesh Kumar Varma, Advocate

For the Plaintiff-Respondent : Mr. Sukumar Sinha, Sr. Advocate Mr. Mukesh Kumar Modi, Advocate Mr. Avinash Kumar, Advocate

For the Dena Bank : Mrs. Sheela Sharma, Advocate Mr. Shivendra Kumar Roy, Advocate

In First Appeal No. 662 of 1993 For the Appellant-Dena Bank : Mrs. Sheela Sharma, Advocate Mr. Shivendra Kumar Roy, Advocate

For the Plaintiff-Respondent : Mr. Sukumar Sinha, Sr. Advocate Mr. Mukesh Kumar Modi, Advocate Mr. Avinash Kumar, Advocate

For the Defendant Respondent : Mr. Kali Das Chatterji, Advocate Mr. Amlesh Kumar Varma, Advocate

Dated : 2nd day of August, 2010 -2-

PRESENT

HON'BLE MR. JUSTICE MUNGESHWAR SAHOO

JUDGMENT

Mungeshwar 1. Both these first appeals have been filed against the judgment Sahoo, J. dated 23.6.1993 and the decree following thereupon signed on

15.7.1995

by Sri Narendra Mishra, the learned Sub Judge 1st Patna in

Title Suit No. 603 of 1992. Since both these first appeals arise out of

the same judgment and decree, these are heard together and are being

disposed of by this common judgment.

2. The defendant No.1 i.e. State of Harayana and defendant No.2

i.e. the Director of Lottery, have filed First Appeal No. 594 of 1993. The

defendant No.3 Dena Bank has filed other First Appeal No. 662 of

1993.

3. The plaintiff-respondent i.e. M/s. Deep Mayank and Associates

filed the aforesaid title suit No. 603 of 1992 for a declaration that the

agreement dated 29.6.1992 entered into between the plaintiffs and

defendant Nos. 1 and 2 is illegal, void, arbitrary and not enforceable in

law and the bank guarantee dated 28.7.1992 furnished by defendant

No.3 in favour of defendant No.1 is void and not enforceable in law.

The plaintiffs further prayed that the defendant No.3 Dena Bank be

directed to forthwith release the margin money and collateral securities

to the plaintiffs. The plaintiffs also prayed for declaration that the

plaintiffs did not commit any default and are not liable for damages and

the defendants are not entitled to encash the bank guarantee

G.T./100/92 dated 28.7.1992 given in favour of defendant No.1. The

plaintiffs further prayed to restrain the defendants by an order of

injunction from encashing the aforesaid bank guarantee and also -3-

prayed for cost of the suit.

4. The plaintiffs prayed the aforesaid reliefs on the facts which may

be stated in brief that, the plaintiff No.1 M/s. Deep Mayank and

Associates is a registered partnership firm and the plaintiffs are

engaged in the business of marketing of lottery tickets in different

States and have acquired sufficient experience in the said trade. They

have their registered office at Calcutta, a branch office at New Delhi

and the principal office at Patna. The defendant No.1 i.e State of

Harayana was doing lottery business and invited tenders for appointing

stockist of lottery tickets of Rs.2/- for the entire country. The plaintiffs'

tender was accepted and were made main stockist and an agreement

was executed between the parties on 29.6.1992.

5. The plaintiffs' further case is that because of the agreement the

plaintiffs became the sole stockist for a period of one year from 1st July

1992. The plaintiffs in good faith signed the agreement. At least 10

days' time was needed to organize effecting sales in the country but

the plaintiffs were not given any time. The plaintiffs were required to

pay the royalty money of Rs.1,97,280/- per draw and the draw was to

be held everyday. The further case is that the defendants had to pay a

sum of Rs.81,00,000/- to the price winners out of the tickets sold by

them prior to 1.7.1992 but the entire liability was put on to the

plaintiffs just after the agreement. The defendants promised to adjust

the amount but still 10% of that amount has not been adjusted.

6. The further case of the plaintiffs is that the plaintiffs had to give

bank guarantee for Rs.3,71,00,000/- in favour of defendant Nos. 1 and

2 and on the request of Patna office of the plaintiffs, the defendant

No.3 Dena Bank offered bank guarantee No. G.T./100/92 dated

23.6.1992. It was stipulated in the bank guarantee that on default by -4-

the said main stockist the bank shall on demand pay the said sum to

the Government of Harayana as per the agreement. According to the

agreement, the plaintiffs were required to pay to the price winning

tickets provided that it was claimed within 30 days from the date of

draw which the plaintiffs complied. The further case is that recently the

defendant No.1 issued public notice to the effect that all such claims

would be paid by them directly. The defendants' action is mala fide and

the defendants started violating the terms of the agreement. Therefore,

the plaintiffs are not guilty of any default. The plaintiffs were the only

stockist of tickets valued at Rs.2/- but with mala fide intention the

defendants in the bake of ticket printed that the plaintiffs were stockist

of lottery ticket of value of Rs. 5/- and 10/- and because of that the

plaintiffs' market became confused and the selling of tickets decreased.

7. The further case is that according to the agreement, the draw

was to be conducted at Chandigarh or at such other place as may be

decided by the defendant Nos. 1 and 2 in consultation with the

plaintiffs but the plaintiffs were never consulted. The result of the draw

had to be published in news papers, which are popular with the public

but it was not published in spite of plaintiffs' letters. The defendants

were required to deposit 0.81 lakh daily as printing costs of tickets and

other miscellaneous charges without there being explanation as to why

they were required to deposit the same. The numbers of the price

winning tickets were leaked out on 18.7.1992, 19.7.1992 and

20.7.1992. Prior to draw the plaintiffs informed the authorities but the

defendants took no steps. As a result of which the plaintiffs were put to

huge loss. The plaintiffs became helpless. On 21st July 1992, the

plaintiffs informed the defendants that they could not continue with the

work. However, the plaintiffs continued to work till 14.9.1992 on the

impression that the things will improve, but the defendants did not take -5-

any step and, therefore, the default was committed by the defendants

in not complying the terms of the agreement as such they are not

entitled to enforce the bank guarantee. Subsequently, the defendants

advertised in the newspaper that they would be directly selling the

tickets of Rs. 2/- and started the business themselves.

8. The further case of the plaintiffs is that the plaintiffs requested

the bank from Patna office (Dena Bank for Patna) to furnish the bank

guarantee. The defendants delivered a letter at Patna branch of the

defendant No.3 invoking bank guarantee on 3.12.1992 and, therefore,

no part of cause of action relating to this bank guarantee arose at

Chandigarh or any other place. Thus, the Patna Civil Court has

jurisdiction in this matter. The plaintiffs learnt that the defendants are

trying to encash the bank guarantee illegally and arbitrarily as per

public notice issued by the State Government of Harayana. The said

public notice was issued unauthorisedly with consulting the main

stockist and for payment of the price winners were sought to be made

by encashing the bank guarantee.

9. The further case of the plaintiff is that various terms and

conditions of the agreement are arbitrary and impossible to perform

and are beyond the imagination. The defendants with mala fide

intention incorporated clause 5 of the agreement. Likewise clause 16 of

the agreement is absolutely one sided which gives option to the

plaintiffs to terminate the agreement by giving 4 months royalty,

whereas the defendants can terminate without any liability. The

agreement is void ab initio and no clause of the same can be acted

upon. On these grounds the plaintiffs prayed for the aforesaid relief.

10. The defendant Nos. 1 and 2 on being noticed appeared and filed

a contesting written statement mainly contending that the Court has -6-

got no territorial jurisdiction to try the suit. According to them, the

agreement in question dated 29.6.1992 was executed by the plaintiffs'

firm at Chandigarh. The payment regarding the lottery tickets were

also to be made at Chandigarh. The breach of terms and conditions of

the agreement has also been committed by the plaintiffs at Chandigarh

and, therefore, no part of cause of action arose at Patna. There is also

a clause in the agreement that the jurisdiction lies at Chandigarh and

not at Patna. In the bank guarantee also it is specifically mentioned in

clause (c) that in case of any dispute the jurisdiction will be at

Chandigarh. The contract came into the existence at Chandigarh hence,

Courts at Patna have no jurisdiction to try or entertain the suit. In

dispute or difficulties or clarification of any clause of the contract was

to be referred to the secretary to the Government of Harayana, Finance

Department as arbitrator as provided in the agreement and his decision

will be final. The plaintiffs instead of availing the said remedy wrongly

filed the suit.

11. The further defence is that the plaintiffs have not approached the

Court with clean hand. They themselves have violated the terms and

conditions of the contract and stopped the sale of lottery from

15.9.1992 without serving any notice. The plaintiffs also committed

various other breaches as such they are not entitled to discretionary

relief of injunction. The notice inviting tenders was published on

12.3.1992, which contains the detailed terms and conditions and the

plaintiffs' tender was accepted and, thereafter the terms and conditions

were reduced into agreement between the parties on 29.6.1992 for one

year starting from 1st July 1992. The plaintiffs entered into the said

contract with conscious mind and without any misconception after

going through the terms and conditions and after fully understanding

the contents thereof. The plaintiffs were required to furnish irrevocable -7-

bank guarantee from a nationalized bank in favour of defendant No.2

for a sum of Rs. 3,71,00,000/-. The plaintiff executed the agreement

and in terms of the same furnished bank guarantee dated 27.6.1992

with certain modification, it was given on 28.7.1992 which was

delivered by the defendant No.3 Dena Bank at Chandigarh to the

defendant No.2. According to the terms of the bank guarantee, in case

of default by the stockist, the bank shall on demand pay the said sum

to the defendant No.1. The plaintiffs abruptly left business from

15.9.1992 and refused to honour the price winning tickets presented in

the office by the general public and thereafter with a view to provide

relief to the price winners the State Government of Harayana published

notice in the news paper informing the price winners to submit the

price winning tickets in the lottery department of Harayana

Government. The plaintiffs violated the clause Nos. 11 and 12 of the

agreement and committed breach of the terms. The printing of tickets

was the exclusive job of the defendants and the plaintiffs were to pay

Rs. 2700/- per lakh tickets as printing charges according to the terms

of the agreement. The defendants denied to have printed that the

plaintiffs were stockist of tickets of Rs. 5/- and 10/- also. The draws of

the lottery scheme were to be conducted at Chandigarh or at any such

place as may be decided. The plaintiffs were liable to pay the royalty,

printing charges, result publication charges and miscellaneous

expenses as mentioned in the agreement itself. The draw was being

conducted before the general public in presence of three Judges of high

repute and also in presence of senior officers of the State Government

as such there was no leakage of the price winning number of tickets.

The plaintiffs wrote various letters informing the defendants about their

financial crisis and did not pay the outstanding amount which clearly

establishes the breach of the terms and conditions on the part of the -8-

plaintiffs. Since 15.9.1992, the plaintiffs neither paid the royalty nor

other charges as such committed breach of the terms and conditions of

the agreement so the plaintiffs are liable to pay to the State of Haryana

a sum of Rs.5,70,13,920/-. The cheques issued by the plaintiffs for

some amount were dishonoured by the bank and, therefore, the

defendants are entitled to enforce the bank guarantee. The defendants

suffered huge loss and goodwill on account of decrease in the sale of

the lottery tickets.

12. An additional written statement was filed denying the leakage of

price winning tickets and also it was stated that the plaintiffs executed

the agreement after reading the terms and conditions of the agreement

with conscious mind. On these grounds the defendants submitted that

the plaintiffs' suit is liable to be dismissed.

13. The defendant No.3 Dena Bank did not file any written statement

and did not contest the suit.

14. In view of the pleadings of the parties, the learned Court below

framed 7 issues, which are as follows :

(i) Is the suit as framed maintainable ?

(ii) Have the plaintiff got valid cause of action for the suit ?

(iii) Is the suit bard by law of limitation and principles of

estopple, waiver and acquiescence ?

(iv) Has this Court got jurisdiction to try this suit ?

(v) Is the agreement dated 29.6.1992 in between the

plaintiffs and the defendants, illegal, void, arbitrary and not

enforceable in law ?

(vi) Are the defendants entitled to encash the bank

guarantee No. G.T./110/92 dated 28.7.1992 and are the -9-

plaintiffs liable to pay the damages to the defendants ?

(vii) Are the plaintiffs entitled to the relief/reliefs if any ?

15. After trial while deciding issue Nos. 4 and 5, the lower Court

below came to the conclusion that the Court has jurisdiction to try the

suit and the agreement dated 29.6.1992 Ext. G is illegal, void and not

enforceable in law and while deciding issue Nos. 1, 2 and 6 at

paragraph 7, the lower Court below found that the defendant Nos. 1

and 2 are not entitled to encash the bank guarantee No. G.T./100/92

dated 28.7.1992 which is also void and then decreed the plaintiffs' suit.

16. It appears that earlier both these appeals were heard by this

Court and by terms of the judgment dated 3.2.1995, three issues were

framed and the matter was remanded to the trial Court under Order

XLI Rule 25 C.P.C. for trying those issues giving liberties to the parties

to leave additional evidence. The three issues are as follows :

(i) Did the defendants-appellants practice fraud upon the

plaintiffs-respondents by not inserting the terms and

conditions determined and finalized between the Director of

Lottery, Harayana State and the plaintiff at Patna ?

(ii) Did the defendants-appellants insert the terms and

conditions in the deed of contract contrary to the terms and

conditions of tender on which the plaintiffs were appointed

stockist ?

(iii) Was the performance of contract made impossible by

leaking out the first price winning ticket on behalf of the

defendants-appellants subsequent to the contract ?

17. Against the said judgment the State of Harayana filed Civil

Appeal No. 10301 of 1995 before the Hon'ble Supreme Court of India.

The Hon'ble Supreme Court by terms of order dated 6.11.1995 directed -10-

the trial Court to decide the issues framed by this Court in the order of

remand within three months and the Hon'ble Supreme Court observed

that it is only desirable that the High Court should immediately take of

the matter for the disposal of the appeals after the findings are sent

back by the trial Court. From perusal of the order of the Hon'ble

Supreme Court, it appears that the matter of jurisdiction to entertain

the suit in the State of Bihar was also raised. Regarding this question of

jurisdiction of the Court the Hon'ble Supreme Court observed as

follows:-

"It is not necessary for us to make any observation on such rival contention of the parties since the appeal pending before the Patna High Court and the issues including the issues regarding the maintainability of the suit will be gone into in disposing of the appeals".

18. Pursuant to the remand order, the trial Court by terms of the

order dated 18.2.1997 passed by Sri Subesha Nand Jha, Sub Judge, 1st

Patna recorded the findings on all the three issues deciding all these

issues in favour of the plaintiffs.

19. Against the said finding of the lower Court below the appellants

in First Appeal No. 594 of 1993 i.e. State of Haryana have filed an

objection under Order XLI Rule 26 C.P.C. on 9thy July 1997.

20. Mr. Chatterji, learned counsel appearing on behalf of appellants

in First Appeal No. 594 of 1993 i.e. State of Haryana assailed the

impugned judgment and decree on two counts. Firstly, that the Civil

Court in Bihar i.e. at Patna has no jurisdiction to try the suit because of

the fact that the execution of the agreement dated 29th June 1992 was

done at Chandigarh. The lotteries were being drawn at Chandigarh. The

bank guarantee was payable at Chandigarh. The terms of agreement

stipulates clearly that the Civil Court at Chandigarh will have the -11-

jurisdiction only to decide the dispute between the parties concerned

and also clause (c) of the bank guarantee mentions that in the event of

any dispute, the only Civil Court at Chandigarh shall have the

jurisdiction to decide the dispute. In such view of the matter, no cause

of action arose at Patna. The learned counsel further submitted that the

plaintiffs with mala fide intention making false allegations and

statements in plaint filed the suit at Patna and, therefore, in the written

statement the defendants raised the question of jurisdiction of the

Court. The defendants also filed an application under order XIV Rule 2

to decide the question of jurisdiction but since the Court below

proceeded to decide the suit itself on merit, the defendants consented

for the disposal of the suit and in the suit itself the jurisdiction matter

was an issue. The learned counsel further submitted that while deciding

the said issue of jurisdiction, the learned Court below has not at all

considered the legal position and in only one line stated that this Court

had got jurisdiction without their being any basis. The learned counsel

further submitted that the learned Court below did not even care to

mention in the impugned judgment as to how cause of action or part of

cause of action arose at Patna. According to the learned counsel Civil

Court at Chandigarh has only the exclusive jurisdiction to try the suit

because no part of cause of action arose at Patna and the plaintiffs

filing the suit at Patna is, therefore, not bona fide. According to the

learned counsel by mere statement made by the plaintiffs in the plaint

to the effect that cause of action arose at Patna jurisdiction will not be

conferred on Civil Court at Patna. The cause of action is bundle of facts

from which it can be gathered about the jurisdiction of the Court.

21. So far the merit of the case is concerned, Sri Chatterji submitted

that the lower Court below has wrongly held that the agreement is void

and illegal on the ground that the terms which were agreed upon -12-

between the parties were not inserted in the agreement dated

29.6.1992 and the terms which were not agreed upon have been

inserted in the said agreement. Learned counsel further submitted that

according to Section 92 of the Evidence Act, the oral evidence is

inadmissible to prove the terms and conditions of the agreement

particularly, when it was reduced to writing which was produced in the

Court which has been marked as Ext. G. The learned counsel further

submitted that there was no specific pleading of fraud as required

under Order VI Rule 4 C.P.C. and further that the plaintiffs have not

proved the fraud beyond all reasonable doubts as it is well settled

principles of law that fraud must be established beyond all reasonable

doubts just like criminal case. The learned counsel further submitted

that the plaintiffs entered into the agreement with open eyes and

carried on his business up to 14.9.1992 and because of financial crises

they could not perform the contract and so with mala fide intention

filed the suit at Patna making false allegations. Since the default was

on part of the plaintiffs for non-performing the terms and conditions

and because of the fact that the defendants incurred heavy loss

because of the abrupt stopping of the business by the plaintiffs, the

defendants were entitled to have bank guarantee encashed. On these

grounds, the learned counsel Mr. Chatterji submitted that the

impugned judgment and decree are liable to be set aside and the

plaintiffs' suit is liable to be dismissed.

22. On the other hand, Sri Sukumar Sinha, the learned senior

counsel appearing on behalf of the plaintiffs-respondents in both the

appeals submitted that the plaintiffs in the plaint have given specific

instances regarding cause of action which arose at Patna. The learned

counsel further submitted that the bank guarantee was provided by the

defendant No.3 i.e. Dena Bank of Patna prior to entering into the -13-

agreement. This bank guarantee was condition precedent for entering

into the agreement which was furnished by the plaintiffs and,

therefore, Civil Court at Patna has the jurisdiction to decide the suit.

The learned counsel further submitted that all the discussions between

the parties regarding the terms and conditions were finalized at Patna,

therefore, this Civil Court has got the jurisdiction and the learned Court

below rightly held so. The learned counsel further submitted that

although application under Order XIV Rule 2 C.P.C. was filed before the

Court below but the defendants did not press the said application and

with the consent of the parties the suit itself was disposed of and now,

therefore, in the appeal the defendants -appellants cannot be allowed

to raise the said question again in view of Section 21 C.P.C. The

learned counsel further submitted that moreover, according to Section

21 sub section (1) the said question of jurisdiction cannot be allowed

unless there has been a consequence failure of justice.

23. So far the merit is concerned, the learned counsel submitted that

bar of Section 92 of the Evidence Act regarding inadmissibility of oral

evidence in this case is not applicable because the plaintiffs are not

challenging the terms and conditions of the agreement but according to

the plaintiffs agreed terms and conditions were not written in the

agreement and the terms and conditions which were not agreed

between the parties have been mentioned in the agreement and

moreover, some of the terms and conditions are beneficial and

unilateral in favour of the State Government. The learned counsel

further submitted that the defendants made the business impossible by

not performing the terms and conditions of the agreement and,

therefore, the defendants were at fault so plaintiffs are not liable for

damages and the bank guarantee cannot be encashed by the State

Government of Harayana. According to the learned counsel the -14-

agreement is void because it is a wagery contract as such it is void

under Section 30 of the Contract Act. The learned counsel further

submitted that after trial the learned Court below on appreciation of

evidence has decided all the issues in favour of the plaintiffs and there

is no illegality in the impugned judgment and decree as such no

interference is called for in this appeal.

24. Learned counsel for the plaintiffs-respondents submitted that the

first appeal filed by Dena Bank is not at all maintainable because Dena

Bank has nothing to say in the matter and moreover, Dena Bank had

not contested by filing written statement and no evidence was also

adduced. The learned counsel for Dena Bank-appellant in first appeal

662 of 1993 submitted that the Bank will obey the judgment of the first

appeal No. 594 of 1993. This appeal has been filed only to safeguard

the interest of bank and for nothing else.

25. Both the learned counsels relied upon various decisions on the

question of jurisdiction of the Court and also regarding merits of the

case of the parties. The said decisions shall be considered while

deciding the said issues.

26. In view of the above rival contentions of the parties the following

points arises for consideration in this appeal.

(i) Whether the civil court at Patna has the jurisdiction to try

the suit as framed and filed by the plaintiffs claiming the

reliefs as mentioned above ?

(ii) Whether the agreement dated 29.6.1992 between the

parties is void, illegal, arbitrary and not enforceable in law

and as such the defendants are entitled to encash the bank

guarantee or not ?

-15- FINDINGS

27. So far point (i) is concerned, according to the defendants the

Civil Court at Patna has got no jurisdiction to try the suit because of the

fact that the agreement in question was executed at Chandigarh and

clause 25 contains that for the settlement of any dispute therein or

relating thereto only the Court at Chandigarh will have the jurisdiction.

Further case is that the bank guarantee is payable at Chandigarh and

no cause of action arose at Patna. The learned counsel for the

appellants submitted that only because averments have been made in

the plaint to the effect that discussion between the parties took place

at Patna although it is denied by the defendants no cause of action will

be conferred on the Court at Patna. On the contrary, according to the

plaintiffs part of cause of action arose at Patna and in the plaint at

paragraphs 5, 16 and 25 it has specifically been pleaded that only

Patna Court had the jurisdiction to try the suit. The learned counsel for

the respondents submitted that the bank guarantee is given by Dena

Bank, Patna and it was to be enforced at Patna and, therefore, the Civil

Court has the jurisdiction. Now, let us considered the legal position. For

better appreciation, it will not be out of place to quote here Section 20

of the Code of Civil Procedure.

"20. Other suits to be instituted where defendants reside or cause of action arises.- Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction-

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

(b) any of the defendants, where there are more -16-

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."

28. In view of the aforesaid provisions the suit was to be filed

according to clause (a) and (b) at the place of resident of the

defendants and carry of business and according to clause (c) where the

cause of action wholly or in part arises. The dispute in this case

between the parties is according to the plaintiffs Patna Civil Court has

got exclusive jurisdiction and whereas according to the defendants-

appellants, Patna Civil Court has no jurisdiction because no cause of

action arose here.

29. In paragraph 5 of the plaint, it is mentioned that Dena Bank of

Patna offered bank guarantee G.T./100/92 dated 28.7.1992. At

paragraph 16 of the plaint, it is mentioned that the defendant Nos. 1

and 2 delivered a letter at Patna branch of defendant No.3 invoking the

bank guarantee on 3.12.1992 and, therefore, no part of the cause of

action relating to this bank guarantee accrued at Chandigarh or at any

other place and thus, the Patna Court has jurisdiction in this matter. At

paragraph 25, it is mentioned that because the Bank guarantee is

invoked by the defendants on 3.12.1992, the Civil Court at Patna has

got the jurisdiction. On these allegations, the suit has been filed before

the Civil Court at Patna.

30. In paragraph 5 of the written statement the statement of

plaintiffs made in paragraph 5 has been replied, whereas it is stated

that the bank guarantee was handed over on 28.7.1992 at Chandigarh -17-

against the receipts according to the terms and conditions of the

agreement. Likewise at paragraph 15 reply of paragraph 16 of plaint

has been made wherein it is stated that the Civil Court at Patna has no

jurisdiction because no cause of action accrued to the plaintiffs at

Patna. The agreement was executed at Chandigarh. The payment was

to be made by the plaintiffs at Chandigarh and the breach was

committed by the plaintiffs at Chandigarh and in the agreement it was

agreed between the parties that Court at Chandigarh will have

jurisdiction and besides that in the bank guarantee also the jurisdiction

of Chandigarh Court was agreed between the parties. In paragraph 25

of the written statement the paragraph 25 of the plaint has been

replied and stated that no cause of action accrued to the plaintiffs to

file the present suit against the defendants at Patna.

31. In view of the facts as pleaded by the parties, there is no dispute

that the agreement in question dated 29.6.1992 was executed by the

parties at Chandigarh. Clause 25 of the said agreement contains the

terms and conditions that in case of any dispute the Court at

Chandigarh will have the jurisdiction only. This agreement has been

proved and marked as Ext. G. From perusal of the bank guarantee also

it appears that in clause (c) it is specifically mentioned that the

Chandigarh Court only has the jurisdiction to decide the dispute

between the parties. So far the furnishing of bank guarantee is

concerned admittedly Dena Bank is of Patna.

32. In the case of Hakam Singh Vs. M/s. Gammon (India) Ltd.

reported in AIR 1971 SC 740, the Hon'ble Supreme Court held that

the jurisdiction of the Court under the Arbitration Act to entertain a

proceeding for filing an award is accordingly, governed by the

provisions of the Code of Civil Procedure. By clause 13 of the

agreement it was expressly stipulated between the parties that the -18-

contract shall be deemed to have been entered into by the parties

concerned in the city of Bombay in any event the respondents have

their principal office in Bombay and they were liable in respect of a

cause of action arising under the terms of the tender to be sued in the

Court of Bombay. It is not open to the parties by agreement to confer

by their agreement jurisdiction of Court which it does not possess

under the code. In that case, it appears that the appellants before the

Hon'ble Supreme Court had agreed to do certain construction work for

the respondents on the terms and conditions of the written tender.

According to clause 12 and 13 it was stipulated that only the Bombay

Court has the jurisdiction to decide the dispute. The dispute arose

between the parties and an application was filed before the Sub Judge,

Varanasi for an order under Section 20 of the Indian Arbitration Act,

1940. The Hon'ble Supreme Court at paragraph 6 has held as follows :

"Since an application for filing an award in respect of a dispute arising out of the terms of the agreement could be filed in the Courts in the City of Bombay, both because of the terms of Cl. 13 of the agreement and because the respondents had their Head Office where they carry on business at Bombay, the agreement between the parties that the Courts in Bombay alone shall have jurisdiction to try the proceeding relating to arbitration was binding between them."

33. In the case of A.B.C. Laminart Pvt. Ltd. and another Vs. A.P.

Agencies, Salem reported in AIR 1989 SC 1239, the Hon'ble

Supreme Court relying upon various decisions including the above

referred decision i.e. 1971 SC 740 has held at paragraph 21 as follows:

"From the foregoing decisions it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other Courts. When the clause is -19-

clear, unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other Courts are to avoid exercising jurisdiction. As regards construction of the ouster clause when words like „alone‟, „only‟, „exclusive‟, and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim „expressiounius est exclusio alterius‟ - expression of one is the exclusion of another may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed."

34. In the present case at our hand, the parties to contract conferred

exclusive jurisdiction to try suit on Court at Chandigarh. Clause 25 of

the contract clearly stipulates this condition. Likewise clause (c) of the

bank guarantee also clearly stipulates that the Court at Chandigarh will

have the jurisdiction to decide the dispute. In such circumstances,

where the parties have entered into forum selection agreement, alleged

hardship or inconvenience of either party is not sufficient ground to

allow either party to file suit in breach of terms of agreement. The

terms agreed between the parties regarding forum to file suit is binding

on the parties. It is well settled principles of law that antecedent

transaction in respect of which a contract is made will not furnish a

cause of action for a suit on the contract. In this case, the learned

counsel for the plaintiffs-respondents submitted that prior to entering

into agreement there was discussion between the parties at Patna

regarding the terms and conditions. In my opinion, this antecedent

transaction will not furnish a cause of action. A Court will have -20-

jurisdiction over a matter if the cause of action arises within the local

limits of jurisdiction. The expression "cause of action" means every fact

which it would be necessary for the plaintiffs to prove if it is traversed

in order to support his right to the judgment of the Court. In other

words, the cause of action means the whole bundle of facts which it is

necessary for the plaintiffs to prove in order to entitle him to succeed in

the suit.

35. In a recent decision reported in (1994) 4 SCC 710 Aligarh

Muslim University and another Vs. Vinay Engineering

Enterprises (P) Ltd. and another, the Hon'ble Supreme Court at

paragraphs 2 and 3 has held as follows :

"2. We are surprised, not a little, that the High Court of Calcutta should have exercised jurisdiction in a case where it had absolutely no jurisdiction. The contracts in question were executed at Aligarh, the construction work was to be carried out at Aligarh, even the contracts provided that in the event of dispute the Aligarh Court alone will have jurisdiction. The arbitrator was from Aligarh and was to function there. Merely because the respondent was a Calcutta-based firm, the High Court of Calcutta seems to have exercised jurisdiction where it had none by adopting a queer line of reasoning. We are constrained to say that this is a case of abuse of jurisdiction and we feel that the respondent deliberately moved the Calcutta High Court ignoring the fact that no part of the cause of action had arisen within the jurisdiction of that Court. It clearly shows that the litigation filed in the Calcutta High Court was thoroughly unsustainable.

3. In the result we allow these appeals, set aside the impugned orders of the High Court and direct that the proceedings initiated in the High Court of Calcutta shall be returned to the respondent for -21-

presentation in proper court. The hearing cost is quantified at Rs. 10,000 which Respondent 1 Vinay Engineering will pay, in any case before the application is presented to the Aligarh Court."

36. In another decision reported in (1994) 4 SCC 711 Oil and

Natural Gas Commission Vs. Utpal Kumar Basu and others, the

Hon'ble Supreme Court has held that even if the averments in the writ

petition are taken as true it cannot be said that a part of the cause of

action arose within the jurisdiction of the Calcutta High Court. The

Hon'ble Supreme Court found that the advertisement itself mentioned

that the tenders should be submitted to E.I.L. at New Delhi, that those

would be scrutinized at New Delhi and that a final decision whether or

not to award the contract to the tenderer would be taken at New Delhi.

It appears that in that case, writ was filed before the Hon'ble Calcutta

High Court and considering the above facts the Hon'ble Supreme Court

held that since NICCO had not invoked the jurisdiction of the Calcutta

High Court bona fide, this is a fit case for granting exemplary costs to

ensure that such abuse of the Court's jurisdiction does not take place in

future and imposed Rs.50,000/- cost.

37. In the present case at our hand, even if the whole pleadings of

the plaint are taken to be correct with regard to cause of action then

also in my opinion, no part of cause of action arose at Patna.

Furnishing of bank guarantee by Dena Bank of Patna will not confer

jurisdiction on the Civil Court at Patna. The agreement Ext. G dated

29.6.1992 has been challenged by the plaintiffs on the ground that it is

void, illegal and arbitrary and the consequential relief has been sought

regarding bank guarantee, therefore, the main relief is with respect to

the agreement dated 29.6.1992 Ext. G. If it is held void then the bank

guarantee will not be enforceable and if it is held that it is legal and

valid then the bank guarantee is liable to be invoked by the appellants. -22-

Moreover, the bank guarantee is also required to be paid at Chandigarh

and not at Patna. Furnishing of bank guarantee is only consequential to

the main agreement. The appellants required the plaintiffs to furnish

bank guarantee. The plaintiffs might have furnished bank guarantee of

any other bank from another city but that does not mean that Civil

Court of that city would have acquired territorial jurisdiction to decide

the dispute with respect to voidibility of the contract between the

parties.

38. The learned counsel for the plaintiffs-respondents submitted that

according to Section 21 C.P.C. the appellants cannot be permitted to

raise this question here because in the Courts below after filing

application under order XIV Rule 2 the defendants did not press the

same and consented for final disposal of the suit. So far this question is

concerned also, I find no force because if Patna Court has no

jurisdiction then by agreement between the parties jurisdiction cannot

be conferred on the Courts at Patna. Where a Court has no jurisdiction

over a litigation its judgments and orders however, precisely certain or

technically correct, are mere nullities and can be declared as void at

any time by a Court where it is presented and in case of initial lack of

jurisdiction no amount of consent or waiver on the part of the parties

can create jurisdiction where there is none.

39. Moreover, this Section 21 C.P.C. applies where the defendants

did not raise the question of want of jurisdiction at the very initial

stage. In the instant case, the defendants raised the said question and

issue was framed. Since the Court proceeded to decide the suit itself

the application under Order XIV Rule 2 was not pressed and the said

issue was decided by the Court below with other issues. It may be

mentioned here that this suit was filed in 1992 and judgment was

delivered in 1993 just within span of one year. In such circumstances, -23-

it cannot be said that the defendants waived the point of jurisdiction.

The Hon'ble Supreme Court also, as referred to above, observed that

the issue is still to be decided by the appellant Court. In my opinion,

therefore, this issue still persist and it should be entertained by this

appellate Court otherwise the very object of Section 20 of the code

would be frustrated and the plaintiff would receive encouragement to

circumvent the section by instituting his suit in the Court of his choice

in contravention of the said section. The learned counsel submitted that

no prejudice has been caused to the appellants. So far this submission

also in my opinion, on this ground alone the judgment and decree

passed by a Court who has got no initial jurisdiction to try the suit

cannot be held to be the final decision between the parties and is

binding on them. Moreover, on this ground the plaintiffs-respondents

cannot be allowed to circumvent the provision as contained in Section

20 of the Code of Civil Procedure.

40. The learned counsel for the plaintiffs-respondents submitted that

by filing written statement the defendants-appellants submitted

themselves to the jurisdiction of Court and, therefore, now they are

stopped to challenge the jurisdiction of the Court because they took a

chance in the trial and now are giving a surprise. So far this submission

is concerned also in my opinion, only because written statement has

been filed taking other defence on merit, it cannot be said that the

defendants-appellants submitted to the jurisdiction of the Court and

are therefore, deprived of their right to agitate the said question.

41. In the present case, the parties have agreed with regard to

exclusion of jurisdiction of a Court and clearly stipulated to submit to

the jurisdiction of particular Court i.e. at Chandigarh. Since the contract

was executed and signed by the parties at Chandigarh, the lotteries

were being drawn at Chandigarh, the royalty was also being paid at -24-

Chandigarh, the breach of terms of the agreement was also committed

at Chandigarh, the bank guarantee was also payable at Chandigarh, it

cannot be said that Chandigarh Court has no jurisdiction to try the suit

particularly, when the parties agreed in clause 25 of the agreement and

clause (C) of the bank guarantee conferring jurisdiction exclusively on

Civil Court at Chandigarh .

42. In view of my above discussion, I find much force on the

submission of the learned counsel appearing on behalf of the appellant

State of Harayana and accordingly, I hold that no cause of action or

part of cause of action arose at Patna and, therefore, Civil Court at

Patna has got no jurisdiction to try the suit. It appears that the

plaintiffs filed the suit knowing full well the contents of the agreement

containing the conditions of conferring jurisdiction of Civil Court at

Chandigarh and also the condition of Clause (c) of the bank guarantee

intentionally filed the suit at Patna making averments to the effect that

only Patna Court has the jurisdiction. Only because it is pleaded in the

plaint, the Patna Civil Court will not acquire any jurisdiction nor

jurisdiction shall be created at Patna Court.

43. So far the other first appeal No. 662 of 1993 is concerned, no

separate discussion is necessary because the defendant No.3 appellant

Dena Bank had not filed written statement and moreover, the bank is

not contesting. According to Section 126 of the Contract Act, Dena

Bank is a surety and the plaintiffs are principal debtor and the State of

Haryana is creditor. It is well settled principles that debtor is required

to chase the creditor and the bank guarantee was payable at

Chandigarh. Bank guarantee is payable on demand, as such bank is

liable to pay as and when demand was made by beneficiary and the

bank is not concerned with inter se dispute between the parties. -25-

44. In the present case, I have already found that the Patna Civil

Court has got no jurisdiction to try the suit and, therefore, I am not

proceeding to decide the second point which was formulated above.

45. In view of my above finding, both the first appeals are allowed.

In the result, the impugned judgment and decree and the subsequent

finding recorded by the learned trial Court after remand by this Court,

are set aside and it is held that the Civil Court at Patna/Bihar have got

no jurisdiction to decide the disputes between the parties. Accordingly,

the office is directed to send back the records of the Court below so

that the learned Court below shall return the plaint and the other

documents of the concerned parties as provided under Order VII Rule

10 for proper presentation of the plaint before appropriate forum.

(Mungeshwar Sahoo, J.) Patna High Court, Patna Dated : 2nd August, 2010 N.A.F.R./ S.S.