A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem
Supreme Court of India, 13 March 1989, 2 judges, 1989 AIR 1239; 1989 SCR (2) 1; 1989 SCC (2) 163
Parties may agree to confine disputes to one of several courts that have jurisdiction, but a clause merely making disputes 'subject to Kaira jurisdiction' did not clearly exclude the Salem court, which therefore could try the suit.
Facts
The first appellant, a Gujarat manufacturer of metallic yarn, agreed on 2 October 1974 to supply 5000 bobbins to the respondent firm at Salem. Clause 11 of the general terms printed on the order confirmation said: 'Any dispute arising out of this sale shall be subject to Kaira jurisdiction.' Disputes arose and the respondent sued at Salem for the balance of its advance and for damages. The Subordinate Judge, Salem, upheld the appellants' preliminary objection that only the Kaira court had jurisdiction and returned the plaint. The Madras High Court allowed the respondent's appeal and directed the suit to be tried on merits. The appellants appealed by special leave.
Questions before the Court
- Did Clause 11, printed among the general terms of sale, form part of the agreement?
- Is an agreement choosing a particular court's jurisdiction valid under Sections 23 and 28 of the Contract Act?
- Did Clause 11 exclude the jurisdiction of the court at Salem?
What the Court held
- Clause 11 formed part of the agreement, since the parties had transacted business on its basis, and they were bound by it.
- An agreement that absolutely ousts the jurisdiction of the courts is void under Sections 23 and 28 of the Contract Act. But where two or more courts have jurisdiction, an agreement to submit disputes to one of them is valid; if the chosen court would not otherwise have jurisdiction, the agreement is void.
- Jurisdiction in contract cases depends on connecting factors such as the place where the contract was made, performed or payment was due. Kaira had jurisdiction because the contract was made there, and Salem had jurisdiction because the goods were delivered there.
- Words like 'alone', 'only' or 'exclusive' make exclusion clear; without them the maxim expressio unius est exclusio alterius may apply in an appropriate case. Clause 11 fixed the situs at Kaira but did not clearly exclude other courts, so the Salem court had jurisdiction. The appeal was dismissed without costs.
Why it matters
The judgment states the rules on forum selection clauses: an agreement cannot confer jurisdiction on a court that has none or oust all courts, but parties may choose one of several competent courts. It explains cause of action in contract suits through connecting factors and holds that a clause excludes other competent courts only where the exclusion is clear, from words such as 'only' or 'exclusive' or, in an appropriate case, by implication.
In the Court's words
Copied from the official judgment; each passage links to its page.
“This is subject to exceptions, namely, (1) contract to refer to arbitration and to abide by its award, (2) as a matter of commercial law and practice to submit disputes on or in respect of the contract to agreed proper jurisdiction”
“If on the other hand the jurisdiction they agreed to submit to would not otherwise be proper jurisdiction to decide disputes arising out of the contract it must be declared void being against public policy.”
“if the parties to the contract agreed to vest jurisdiction in one such court to try the dispute which might arise as between themselves the agreement would be valid. If such a contract is clear, unambiguous and explicit and not vague it is not hit by sections 23 and 28 of the Contract Act.”
Provisions interpreted
Case and bench
- Parties
- A.B.C. Laminart Pvt. Ltd. & Anr. v. A.P. Agencies, Salem
- Case
- Civil Appeal No. 2682 of 1982
- Decided
- 13 March 1989
- Bench
- Saikia, K.N., Oza, G.L.
- Opinions
- Judgment of the Court delivered by K.N. Saikia, J.
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