Holding

The Supreme Court held that the Bombay courts did not have jurisdiction and the exclusive jurisdiction clause was ineffective because Section 20 CPC, as explained, did not grant jurisdiction to Bombay based on the corporation's principal office.

Summary

Patel Roadways Ltd, a carrier with its principal office in Bombay and subordinate offices elsewhere, was sued in Madras courts for loss of goods transported from its Tamil Nadu and Madras branches to Delhi. The carrier claimed that a clause in its contracts stipulated that any dispute must be heard only in Bombay courts, seeking to oust the Madras courts' jurisdiction. The Supreme Court examined Section 20 of the CPC, particularly its Explanation, which limits a corporation's deemed place of business to either its sole/principal office or the location of a subordinate office where the cause of action arises. The Court held that the cause of action in both cases arose at the subordinate offices, not in Bombay, and that Section 20 did not confer jurisdiction on Bombay courts. Consequently, the contractual clause could not create jurisdiction where none existed, and the appeals were dismissed.

Issues considered

Whether a contractual clause conferring exclusive jurisdiction on a particular court can oust the jurisdiction of the court where the cause of action arises under Section 20 of the CPC.
Whether the Explanation to Section 20 CPC deems a corporation to carry on business at its principal office for jurisdictional purposes when the cause of action arises at a subordinate office.
Whether parties may by agreement confer jurisdiction on a court that does not otherwise possess jurisdiction under the CPC.

Legislation cited

Subjects

Section 20 CPCjurisdictionexclusive jurisdiction clausecorporate principal officesubordinate officecontractual jurisdiction clausecivil procedureexplanation to Section 20carrier liability

Judgment

PATEL ROADWAYS LIMITED, BOMBAY
A
v.
PRASAD TRADING COMPANY.

AUGUST 6, 1991

(S. RANGANATHAN, M. FATHIMA BEEVI AND B
N.D. OJHA, JJ.]

Civil Procedure Code, 1908: Section 20-Explanation-Suits-
1nstitution of-Whether parties entitled to agree that only a certain court
would have iurisdiction.

The appellant in both the appeals carried on the business of a c
carrier and transported goods on hire. It had its principal office at
Bombay and branch offices at various other places.

The respondent in the first appeal a dealer in cardamom
entrusted a consignment of cardamom to the appellant at its branch D
office at Bodinayakanur in Tamilnadu to be delivered at Delhi. After
the goods had been transported by the appellant and kept in a godown
at Delhi the same got destroyed and damaged in a fire as 'a result
whereof the consignee refuS'ed to take delivery. The respondent
instituted a suit in the sub-court within whose territorial jurisdiction
the branch office of the appellant was situated for damages alleging that E
the fire was due to the negligence and carelessness on the part of the
staff of the appellant.

Respondent No. 4 in the second appeal entrusted certain packets
of pesticides insured with the second respondent Insurance Company to
the appellant at its branch office at Madras for being carried to Delhi. F
The respondent alleged that the goods were delivered at New Delhi in a
damaged condition resulting in loss and a suit was instituted for reco-
very of the loss in the City Civil Court at Madras.

In both the aforesaid civil suits the appellant pleaded in its

'
defence that in the contract entered into between them, the parties had G
agreed that jurisdiction to decide any dispute between them would be
only with the courts at Bombay, and consequently the courts in Madras
where the two suits had been instituted had no jurisdiction. This plea
was repelled by the Trial Court in each of the suits.

The aforesaid orders were challenged by the appellant in the High H

391
392 SUPREME COURT REPORTS [ 1991) 3 S.C.R.

A Court under Section 115 C.P.C. and having failed, the appellant
appealed to this Court.

In the appeal, it was contended on behalf of the appellant that
since the courts at two places namely Madras and Bombay had jurisdic-
tion in the matter, the jurisdiction of the courts in Madras was ousted
B by the clause in the contract whereunder the parties had agreed that
jurisdiction to decide any dispute under the contract would be only in
-
the courts at Bombay.

On the question: whether in view of the relevant clause in the
contract between the parties the courts at Bombay alone had jurisdic-
C lion and the jurisdiction of the courts at Madras where the two suits
were instituted was barred.

Dismissing the appeals, this Court,

HELD: 1. The courts at Bombay in these two cases did not at
D all have jurisdiction and cons<:quently the agreement between the
parties conferring exclusive jurisdiction on courts at Bombay is of no
avail. [4010)
·.y
2. Clauses (a) and (h) of Section 20 refer to a court within the
local limits of whose jurisdiction the defendant "carries on business".
E Clause (c) on the other hand refers to a court within the local limits of
whose jurisdiction the cause of action wholly or in part arises. [397H-398A I

3. Section 20 of the Code before its amendment by the Code of
Civil Procedure (Amendment) Act, 1976 had two Explanations being
Explanation I and II. By the AmE,ndment Act Explanation I was omitted
F and Explanation II was renumbeired a~ the present Explanation. [398G I

4. The Explanation is in two parts, one before the word "or"
occurring between the words "office in India" and the words "in

'
respect of'' and the other thereafter. The Explanation applies to a
defendant which is a corporation which term, would include even a
G company such as the appellant in the instant case. The first part of the
Explanation applies only to such a corporation which has its sole or
principal office at a particular place. In that event the courts within
whose jurisdiction the sole or priincipal office of the defendant is situate
~· .
will also have jurisdiction inasmuch as even if the defendant may not be
actually carrying on business at that place, it will "be deem< i to carry
H on business" at that place because of the fiction created by the
Explanation. [398C-F]
•
PATEL ROADWAYS'· PRASAD TRADING CO. 393

5. The latter part of the Explanation takes care of a case where the
A
defendant does not have a sole office but has a principal office at one

""""\ - place and bas also a subordinate office at another place. The words "at
such place" occurring at the end of the Explanation and the word "or"
referred to above which is disjunctive clearly suggest that if the case
falls within th~ latter part of the Explanation it is not. the court within
whose jurisdiction the principal office of the defendant is situate but the B
court within whose jurisdiction it bas a subordinate office which alone
shall have jurisdiction "in respect of any canse of action arising at-jmy
(
place where ft bas also a subordinate office". [398E-F] ..
·--~-·...
~ 6. The Explanation is really an explanation to clail§e"''(li)'~is in
the nature ot a clarification on the sc<ipe of clause (a) viz. as' t.o be.~e
the corporation ~ be said to carry.on business. This, it is clarified,
c
will be the place where the principal office is situated (whether or not
any buslDtss act.ally is carried on there) or the place where a business
is caITied.on giving rise to a caose of action (even though the principal
oltice of the' corporation is not toca&ed there) so long as there is a
subordinate office of the corporation situated at such place. The linking D
tegetber of the place where the cause of action arises with the 1 place
r Where a su'"!rdinate office is located clearly shows that the intention of
the legislature was tllat, in the case of a corporation, for the purposes of
. clause (a), the locaiion of the subordinate ort'ice, within the local limits
of which a caose of action arises, is to be the relevant phlce for the filing
of a sfJit and not the principal place of business. [399G-400B] E

7. If tile intention was that the location of the sole or principal :
office as well as the location of the subordinate office (within the limits;)
l of which a cause of action arises) are to be deemed to .be places where·~
the corporation Is deemed to be carrying or business, the disjnnctive
·'·
"or" will not be there. Instead, the second part of the explanation Fl
wonld. have read "and, in respect of any canse of action arising at any t Ii
place where It has a subotdinate office, also at such place". [400C I

8. The dear lntendment of the Explanation, however, is that,
where the corpotlitlon has a subordinate office in the place where the
cause of action arises, it cannot be heard to say that it cannot be sued G
there because it lines not carry on business at tllat piace. It would be a
great hardship it, in spite of the corporation having a subordinate office
at the place where the cause of action arises (with which in all probabi-
lity the plaintiff has bad deillings), suc:h plaintiff is to be compelled to
travel to the place where the corporation has its principal place. That
place should be convenient to the plaintiff; and since the corporation . H
394 SUPREME COURT REPORTS [1991) 3 S.C.R.

has an office at such place, it will also be under no disadvantage. Thus
A
the Explanation provides an alternative locus for the corporation's
place of business, not an additional one. [400F-G]

9. In the instant hvo cases since clause (c) is not attracted to
confer jurisdiction .in courts at Bombay and the appellant has admit-
ll tedly its subordinate offict'S at the respective places where the goods in
these two cases were delivered to it for purposes of transport, the courts
at Bombay had no jurisdiction at all "I entertain the suits filed by the
respondents and the parties could not confer jurisdiction on the courts
at Bombay by an agreemen1t. Accordingly, no exception can be taken to
the findings in this behalf' recorded by the trial court and the High
Court. [401C-D)
c
Hakam Singh v. M/s. Gammon (India) Ltd., [1971) 3 SCR page
314, referred to.

CIVIL APPELLATE JURISDICTION: Civil App,eaL Nos.
D 3050-3051of1991.

From the Judgment and Orders dated 23.8.90 & 13.6.1990 of the 1·
Madras High Court in Civil Revision Petition Nos. 1236/85 and 2758 of
1988.

E T.S.K. Iyer, Rajiv Datta and Shahid Azad for the Appellant.

M.S. Nargolkar, D.M. Nargolkar and A.T.M. Sampath for the
Respondents.

The Judgment of the Court was delivered by
F
OJHA,J. Special leave granted.

Since in both these appeals an identical question of law arises
they are being decided by a common judgment. Facts in a nutshell
necessary for appreciating the question involved may be stated. M/s
G Patel Roadways (P) Limited, the appellant in both these appeals car-
ries on the business of a carrier and transports goods on hire. It has its j.,
principal office at Bombay and branch offices at various other places
which shall hereinafter be referred to as subordinate offices.

M/s Prasad Trading Company, the respondent in the Civil
H Appeal arising out of SLP (C) No. 14660 of 1990 who is a dealer in
PATEL ROADWAYS v. PRASAD TRADING CO. (OJHA. J.l 395

cardamom entrusted a consignment of 850 kilograms of cardamon1 to
.·\
the appellant at its subordinate office at Bodinayakanur in Tamil Nadu
to be delivered at Delhi. After the goods had been transported by the
appellant and kept in a godown at Delhi the same got destroyed and
damaged in a fire as a result whereof the consignee refused to take
delivery. The respondent instituted a suit in the Court of Subordinate
Judge, Periakulam within whose territorial jurisdiction the subor- B
dinate office of the appellant where the goods were entrusted for
transport is situate for damages alleging that the fire was due to the
negligence and carelessness on the part of the staff of the appellant.

M/s Tropical Agro Systems Private Limited, the respondent 1 in
th.e Civil Appeal arising out of SLP (C) No. 14692 of 1990 on the
other hand entrusted certain packets of pesticides insured with the
c
second respondent, M/s Oriental Insurance Company Limited to the
appellant at its subordinate office at Madras for being carried to New
Delhi. According to the respondents the goods aforesaid were
delivered at New Delhi in a damaged condition resulting in loss to the
first respondent and a suit was instituted. for recovery of the loss so D
sustained by the respondents in the Court of the Third Assistant
Judge, City Civil Court, Madras. In both the suits the appellant inter
alia took the plea in its defence. that in the contract entered into bet-
ween them the parties had agreed that jurisdiction to decide. any dis-
pute between them would be only with the courts at Bombay and
consequently the courts in Madras where the two suits referred to E
above had been instituted had no jurisdiction. This plea was repelled
in both the suits by the trial court. The order of the trial court in each
of the two suits was challenged by the appellant before the High Court
of Judicature at Madras under Section 115 of the Code of Civil Proce-
dure (hereinafter referred to as the Code). This challenge having
failed in each of the civil revisions, the appellant has preferred these F
civil appeals. The question which arises in both these civil appeals,
therefore, is as to whether in view of the relevant clause in the contract
between the parties the courts at Bom~ay alone had jurisdiction and
the jurisdiction of the courts at Madras ':here the two suits were
instituted was barred.
G
It has been urged by the learned counsel for the appellant that
apart from the courts within whose territorial jurisdiction the goods
were delivered to the appellant for transport, the courts at Bombay
also had jurisdiction to entertain a suit arising out of the contract
between the parties in view of the Explanation to Section 20 of the
Code inasmuch as the principal office of the appellant was situate in H
396 SUPREME COURT REPORTS [1991] 3 S.C.R.

Bombay. Ac<:ording to learned counsel for the appellant since courts
A
at two places namely Madras and Bombay had jurisdiction in the mat-
ter, the jurisdiction of the courts in Madras was ousted by the clause in
the contract whereunder the parties had agreed that jurisdiction to
decide any dispute under the contract would be only in the courts at
Bombay. Consequently the courts where the two suits were instituted
B had no jurisdiction to entertain them and the trial court in each of the
two cases as well as the High Court erred in law in taking a contrary
view.

Having heard learned counsel for the parties we find it difficult
to agree with this submission. For the sake of convenience Section 20
of the Code except the illustrations is reproduced hereunder:
c
· "20. Other suits to be instituted where defendants reside
or cause of action arises:- Subject to the limitations afore-
said, every suit shall be instituted in a Court within the
local limits of whose jurisdiction:-
D
(a) the defendant, or each of the defendants where
there are more than one, at the time of the com- '1
mencement of the suit, actually and voluntarily
resides, or carries on business, or personally works
for gain; or
E
(b) any 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 busi-
ness, or personally works for gain, provided that in
such case either the leave of the Court is given, or the
F defendants who do not reside, or carry on business,
or personally work for gain, as aforesaid, acquiesce in
such insti1tution; or

(c) the ca.use of action, wholly or in part, arises.

G Explanation:- A corporation shall be deemed to carry
on business. at its sole or principal office in India or, in
respect of any cause of action arising at any place where it
has also a subordinate office, at such place."

In Hakam Singh v. M/s. Gammon (India) Ltd., [1971) 3 SCR
H Page 314 it was held that "corporation" referred to in Section 20
PATEL ROADWAYS v. PRASAD TRADING CO. [OJHA. J.J 397

meant not only a statutory corporation but also a company registered A
under the Indian Companies Act. It was also held that it is not open to
the parties by agreement to confer jurisdiction on any court which it
did not otherwise possess under the Code. But where two courts have
jurisdiction under the Code to try a suit or proceeding an agreement
between the parties that the dispute between them shall be tried in one
of such courts is not contrary to public policy nor does such an agree- B
ment contravene Section 28 of the Contract Act. In that case also there
was a clause in the agreement being clause No. 13 which provided that
notwithstanding the place where the work under the contract was to be
executed the contract shall be deemed to have been enter~d into bet-
ween the parties at Bombay and the court in Bombay alone shall have
jurisdiction to adjudicate thereon. The trial court had held that the
entire cause of action had arisen at Varanasi and the parties could not
c
by agreement confer jurisdiction on the courts at Bombay which they
did not otherwise possess. Jn a civil revision filed by the respondent
the Allahabad High Court held that the courts at Bombay had also
jurisdiction and in view of clause 13 of the agreement the jurisdiction
of the courts at Varanasi stood ousted. It is in the appeal against the D
said judgment of the High Court that the propositions of law referred
to above were laid down by this Court. It was held that since the
respondent had its head office at Bombay the courts at Bombay also
had jurisdiction by virtue of Section 20 of the Code read with its
Explanation and in view of clause 13 of the agreement between the
parties the courts in Bombay alone had jurisdiction in the matter. The E
appeal was accordingly dismissed. This view was reiterated by this
Court in Globe Transport Corporation v. Triveni Engineering Works
and Another, [1983] 4 SCC Page 707.

Reliance has been placed by learned counsel for the appellant on
these two decisions and if it can be held that the courts at Bombay also ·F
had jurisdiction in the two suits referred to above the judgments
appealed against will have to be set aside on the basis of these deci-
sions. The question, however, is as to whether in any of these two suits
the courts at Bombay also had jurisdiction apart from the courts within
whose jurisdiction the goods were entrusted to the appellant for
purposes of transport. Having given our anxious consideration to the G
~ matter we are of the opinion that the courts at Bombay in these two
cases did not at all have jurisdiction and consequently the agreement
between the parties conferring exclusive jurisdiction on courts ai
Bombay is of no avail.

Clause§;( aJ;!!!Fd (b) of Section 20 inter alia refer to a court within H
. -; _.,,.,,.
398 SUPREME COURT REPORTS [1991] 3 S.C.R.

the local limits of whose jurisdiction the defendant inter alia "carries
A
on business". Clause (c) on the other hand refers to a court within the
local limits of whose jurisdiction the cause of action wholly or in part
arises. It has not been urged before us on behalf of the appellant that
the cause of action wholly or in part arose in Bombay. Consequently
clause (c) is not attracted to the facts of these cases. What has been
B urged with the aid of the Explanation to Section 20 of the Code is that
since the appellant has its principal office in Bombay it shall be
deemed to carry on business at Bombay and consequently the courts at
Bombay will also have jurisdiction. On a plain reading of the Explana-
tion to Sect!on 20 of the Code we find Ml apparent fallacy in the
aforesaid argument. The Explanation is iH two parts, one before the
c word "or" occurring between the words "office in India" and the words
"in respect of" and the other thereafter. The Explanation applies to a
defendant which is a corporation which term, as seen above, would
include even a company such as the appellant in the instant case. The
first part of the Explanation applies only to such a corporation which
has its sole or principal office at a particular place. In that event the
D courts within whose jurisdiction the sole or principal office of the
defendant is situate will also have jurisdiction inasmuch as even if the
defendant may not be actually carrying on business at that place, it will
"be deemed to carry on business" at that place because of the fiction
created by the Explanation. The latter part of the Explanation takes
care of a case where the defendant does not have a sole office but has a
E principal office at one place and has also a subordinate office at
another place. The words "at such place" occurring at the end of the
Explanation and the word "or" referred to above which is disjunctive
clearly suggest that if the case falls within the latter part of the Expla-
nation it is not the Court within whose jurisdiction the principal office
of the defendant is situate but the court within whose jurisdiction it has
F a subordinate office which alone shall have jurisdiction "in respect of
any cause of action arising at any place where it has also a subordinate
office".

Here we may point out that the view which we take finds support
from a circumstance which, in our opinion, is relevant. Section 20 of
G the Code before its amendment by the Code of Civil Procedure
(Amendment) Act, 1976 had two Explanations being Explanations I
and II. By the Amendment Act Explanation I was omitted and Expla-
nation II was renumbered as the present Explanation. Explanation I so
omitted read as hereunder:-

H "Explanation I: Where a person has a permanent dwelling
PATEL ROADWAYS v. PRASAD TRADING CO. (OJHA. J.] 399

at one place and also temporary residence at another place.
A
he shall be deemed to reside at both places in respect of any
cause of action arising at the place where he has such
temporary residence."

This Explanation dealt with the case of pla~e of residence of the
defendant and provided with regard to a person· having a permanent B
dwelling at one place and also temporary at another place that such
person shall be deemed to reside at both places in respect of any cause
of action arising at the place where he has such temporary residence.
The language used in Explanation II on the other hand which is the
present Explanation was entirely different. Had the intention been
that if a corporation had its principal office at one place and a subor- C
dinate office at another place and the cause of action arose at the place
where it had its subordinate office it shall be deemed to be carrying on
business at both places the language used in Explanation II would have
been identical to that of Explanation I which was dealing with a case Of
a person having a permanent dwelling at one place and also temporary
residence at another place. The mar~ed difference in the language of D
the two Explanations clearly supports the view which we have taken
with regard to the interpretation of the present Explanation to Section
20 of the Code which was Explanation II earlier as indicated above.

We would also like to add that the interpretation sought to be
placed by the appellant on the provision in question renders the exp la- E
nation totally redundant. If the intention of the legislature was, as is
said on their behalf, that a suit against a corporation could be
instituted either at the place of its sole or principal office (whether or
not the corporation carries on business at that place) or at any other
place where the cause of action arises, the provisions of clauses (a), (b)
and (c) together with the first part of the explanation would have F
completely achieved the purpose. Indeed the effect would have been
wider. The suit could have been instituted at the place of the principal
. '
office because of the situation of such office (whether or not any actual
business was carried on there). Alternatively, a suit could have been
in'stituted at the place where the cause of action arose under clause (c)
(irrespective of whether the corporation had a subordinate office in G
such place or not). This was, therefore, not the purpose of the expla-
nation. The explanation is really an explanation tci clause (a). It is in
the nature of a clarification on the scope of cjause· (a) viz. as to where
the corporation can be said to carry on busi;ess. 'Phis, it is clarified,
will be the place where the principal office is"tituated (whether or not
any business actually is carried on there) or the place where a business H
400 SUPREME COURT _REPORTS [1991] 3 S.C R.

A is carried on giving rise to a cause of action (even though the principal
office of the corporation is not located there) so long tis there is a
subordinate office of the corporation situated at such place. The linking
together of the place where the cause of action arises with the place
where a subordinate office is located clearly shows that the intention of
the legislature was that, in the case of a corporation, for th.e purposes
B of clause (a), the location of th1~ subordinate office, within the local
limits of which a cause of action arises, is to be the relevi1nt place for
the filing of a suit and not the principal place of business. If the inten-
tion was that the location of the sole or principal office as well as the
location of the subordinate office (within the limits of which a cause of
action arises) are to be deemed to be places where the corporation is
deemed to be carrying on business, the disjuncti~e "or" will not be
c
there. Instead, the second part of the explanation. would have read
·'and, in respect of any cause of action arising at any place where it has
a subordinate office, also at such place".

As far as we can see the interpretation which we have placed on
D this section does not create any practical or undue difficulties or dis-
advantage either (o the plaintiff or a defendant corporation. It is true
that, normally, under clauses (a) to (c), the plaintiff has a choice of
forum and cannot be compelled to gb to the place of residence or
business of the corporation and can file a suit at a place where the
cause of action arises. If a corporation desires to be protected from
E being dragged into litigation at some place merely because a casue of
action arises there it can save itself from such a situation by an exclu-
sion clause as has been done in the present case. The clear intendment
of the Explanation, however, is that, where the corporation has a
subordinate office in the place where the cause of action arises, it
cannot be heard to say that it cannot be sued there because it does not
F carry on business at that place. It would be a great hardship if, in spite
of the corporation having a subordinate office at the place where the
cause of action arises (with which in all probability the plaintiff has had
dealings), such plaintiff is to be compelled to travel to the place where
the corporation has its principal place. That place should be con-
venient to the plaintiff; and since the corporation has an office at such
G place, it will also be under no disadvantage. Thus the Explanation
provides an alternative locus for the corporation's place of business,
not an additional one.

There may be only one extrn-<>rdinary situation in which this
interpretation may cause an apparent anomaly. This is where the
H plaintiff has also his/its place of business at the same place as the
PATEL ROADWAYS v. PRASAD TRADING CO. [OJHA, l.[ 401

corporation but the cause of action has arisen at some other place. The A
above interpretation would preclude him from filing a suit irrthat place
of business common to both parties and compel him to go to a court
having jurisdiction over the place where the cause of action.has arisen.
But this is not really a hardship because such plaintiff must have had
some nexus or connection with the place since some part of the cause
B
of action had arisen there; if he can have dealings with the corporation
at such a place giving rise to the cause of action, there is no reason why
he should find it disadvantageous or difficult to file a suit at such place.
Equally, the corporation, having a subordinate office at the place, will
suffer no disadvantage.

In this view of the matter since in the Instant two cases clause (c) c
is not attracted to confer jurisdiction on courts at Bombay and the
appellant has admittedly its subordinate offices at the respective places
where the goods in these two cases were delivered to it for purpose of
transport the courts at Bombay had no jurisdiction at all to entertain
the suits filed by the respondents and the parties could not confer
D
jurisdiction on the c;ourts at Bombay by an agreement. Accordingly no
exception can be taken to the findings in this behalf recorded by the
trial court and the High Court in these two cases.

In the result, we find no merit in any of these two appeals and
they are accordingly dismissed but in the circumstances of the case the
parties shall bear their own costs. E

N.V.K. Appeals dismissed