:1: IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CHAMBER SUMMONS NO.1818 OF 2004 IN SUMMARY SUIT NO.3242 OF 2004 Pacific Refractories Ltd. ..Plaintiff. Vs. Stein Heurtey India Projects Pvt. Ltd. ..Defendant. Mr.O.S.Kutty for the Plaintiff. Mr.Virag Tulzapurkar with Mr.A.S.Doctor i/b.M/s.Junnarkar & Associates for the Defendant. CORAM : S.J. VAZIFDAR, J. CORAM : S.J. VAZIFDAR, J. CORAM : S.J. VAZIFDAR, J. DATED : 10TH FEBRUARY, 2006 DATED : 10TH FEBRUARY, 2006 DATED : 10TH FEBRUARY, 2006 ORAL JUDGMENT : ORAL JUDGMENT : ORAL JUDGMENT : The Defendant has taken out this Chamber Summons for revocation of the leave granted by me by an order dated 26.10.2005 under Clause XII of the Letters Patent to file the present suit against the Defendant in this Court. 2. The suit is filed to recover a sum of Rs.28,61,938/- together with interest at 18% per annum from the date of filing of the suit till realisation for the goods sold and delivered by the Plaintiff to the Defendant. The Plaintiff raised invoices in respect of the said sales. The supply :2: however was made pursuant to a contract entered into between the Plaintiff and the Defendant as pleaded in paragraphs 3 and 4 of the plaint. 3. Neither counsel made an application to lead evidence. Mr.Kutty, the learned counsel appearing on behalf of the Plaintiff, confined his submissions in support of his case that the leave was granted correctly only on the basis of the contract having allegedly been entered into in Bombay. Mr.Tulzapurkar, the learned Senior counsel appearing on behalf of the Defendant, in support of his contention that the leave granted ought to be revoked, submitted that the contract had been entered into in Calcutta. He further submitted that in any event, in view of Article 39 of the contract, the leave granted ought to be revoked. 4. Two questions therefore fall for consideration. Where was the contract entered into for the purpose of determining territorial jurisdiction ? Does Article 39 of the contract require the parties to adopt legal proceedings only in the Calcutta High Court to the exclusion of all other Courts ? 5. The question regarding the place where the :3: contract was entered into, involves a consideration of the pleading in paragraphs 3 and 4 of the plaint. As there was some difficulty in construing the pleading, I find it convenient to set out in extenso paragraph 3 and 4, which read as under : "3. The Plaintiff states that pursuant to an Enquiry No.116/ENQ/F2/02 dated 30-04-2003, floated by the Defendant, the Plaintiff submitted an offer No.PRL/AC/Q/0286 dated 11-07-2003, PRL/DSV/723/03 & PRL/DSV/724/03, both dated 7-08-2003, for supply of Insulating Bricks, Mica Bricks & Mortars. The Plaintiff craves leave to rely upon the aforesaid enquiry and the offers submitted, as and when produced. 4. The Plaintiff states that based on the aforesaid offers submitted by the Plaintiff, a Contract No.116/209.0/F2 came to be entered into between the Plaintiff and the Defendant for supply of Insulating Bricks, Mica Bricks & Mortars, against Purchase Order No.116/209.0/F2 dated 8-08-2003. Annexed hereto marked Exhibit ‘A’ is a copy of the said Purchase Order being L.O.I. dated 8-8-2003. The Purchase Order and contract was sent by Defendant from Kolkata, with a forwarding letter Ref.No.116/209.0/F2/01 dated 22-10-2003 to the Plaintiff at Mumbai. Upon receipt of the forwarding letter along with the contract on 25-10-2003, the Plaintiff accepted the said contract at Mumbai. In token :4: having accepted the said contract, the Plaintiff signed the same at Mumbai and returned back the Original to the Defendant, as demanded. Therefore, it is pertinent to note that the contract was accepted and concluded by the Plaintiff at Mumbai. Annexed hereto and marked Exhibit-‘B’ & ‘C’ are the copies of the ‘Forwarding letter’ Ref.No.116/209.0/F2/01 dated 22-10-2003 and the underlying Contract executed at Mumbai, respectively." 6. Paragraph 3 merely refers to an enquiry made by the Defendants and an offer made by the Plaintiff pursuant thereto. As per the pleading, the enquiry was made by the Defendant from Calcutta in writing by post and the offer was also communicated by post by the Plaintiff from Bombay. 7. The first sentence in paragraph 4 merely states that based on the aforesaid offer, meaning thereby, the offer referred to in paragraph 3, a contract came to be entered into between the Plaintiff and the Defendant. Now, the offer was made from Bombay by post. In the plaint, the Plaintiff does not state how a contract "......came to be entered into......" to wit, the Plaintiff does not state the mode of communication of the acceptance of the :5: Plaintiff’s offer by the Defendant. It is not the Plaintiff’s case that the offer was accepted telephonically or by any other mode of instantaneous communication. Nor is it the Plaintiff’s case that the Defendant accepted the offer in Bombay. In fact, it is admitted that the contract, Exhibit "C" to the plaint, was signed by the Defendant in Calcutta. It is further admitted that the contract itself was forwarded by post. In the circumstances, it is clear that the contract was accepted by the Defendant in Calcutta and the acceptance was put into a course of transmission by the Defendant by posting the same to the Plaintiff in Bombay. 8. It is settled law that when an offer is accepted by post, the contract is complete when the acceptance is put into a course of transmission by posting the letter. In Bhagwandas Goverdhandas Kedia v. M/s.Girdharlal Purshottamdas & Co., AIR 1966 Supreme Court, 543, a three Judge Bench of the Supreme Court dealt in detail with the question as to where a contract is considered to have been made. The Supreme Court made a distinction between contracts entered into through the intervention of the postal authorities and contracts entered into by instantaneous communication eg. by telephone. In :6: paragraphs 7 and 8 the Supreme Court, on a consideration of the provisions of the Indian Contract Act, held that a contract becomes complete as soon as the acceptance is made by the acceptor and when the acceptance of the offer is communicated to the offeror. It was held that acceptance and intimation of acceptance of offer are therefore both necessary to result in a binding contract. However, the Supreme Court further held that on this rule is engrafted an exception when a contract is made by letters sent by post. The Supreme Court inter-alia held as under : "(8) ............................ But on this rule is engrafted an exception based on grounds of convenience which has the merit not of logic or principle in support, but of long acceptance by judicial decisions. If the parties are not in the presence of each other, and the offeror has not prescribed a communication of acceptance, insistence upon communication of acceptance of the offer by the offeree would be found to be inconvenient, when the contract is made by letters sent by post. ................................. ................................. When by agreement, course of conduct, or usage of trade, acceptance by post or telegram is authorised, the bargain is struck and the contract is complete when the acceptance is put into a course of transmission by the :7: offeree by posting a letter or dispatching a telegram." 9. In A.B.C. Laminart Pvt. Ltd. & Anr. v. A.P. Agencies, Salem, AIR (1989) 2 SCC, 163, a two Judge Bench of the Supreme Court held as under : "15. 15. 15. In the matter of a contract there may arise causes of action of various kinds. In a suit for damages for breach of contract the cause of action consists of the making of the contract, and of its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. The making of the contract is part of the cause of action. A suit on a contract, therefore, can be filed at the place where it was made. The determination of the place where the contract was made is part of the law of contract. But making of an offer on a particular place does not form cause of action in a suit for damages for breach of contract. Ordinarily, acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a court within whose jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have (been) performed or its performance completed. If the contract is to be performed at the place where it is made, the suit on the contract is to be filed there and :8: nowhere else." (emphasis supplied) The above observations are not contrary to the ratio of the judgment of the three Judge Bench of the Supreme Court in Bhagwandas Goverdhandas Kedia v. M/s.Girdharlal Purshottamdas & Co. The word "Ordinarily" in the above extract makes this clear. In A.B.C. Laminart Pvt. Ltd. & Anr. v. A.P. Agencies, Salem, the Supreme Court merely held that "ordinarily" a contract is made only upon communication of its acceptance. The Supreme Court did not deal with the exception to this rule laid down in Bhagwandas Goverdhandas Kedia v. M/s.Girdharlal Purshottamdas & Co. The exception applies when a contract is made by letters, exchanged through post. 10. In the circumstances, based solely on the pleadings in paragraphs 3 and 4, it must be held that the contract was made in Calcutta. 11. I will now consider the matter on the basis of the documents annexed to the plaint. :9: 12. Exhibit "A" is a letter dated 8.8.2003 addressed by the Defendant to the Plaintiff stating, "We intend to place an order on you for supply of ............" The letter ends by the Defendant, asking the Plaintiff to send their formal acceptance, "along with detailed item wise price break up and despatch schedule for issuing the Formal Contract/Purchase order." The letter was therefore an invitation to offer by the Defendant to the Plaintiff. 13. There is a gap in the correspondence as annexed, for Exhibit "B" to the plaint is a letter dated 22.10.2003 addressed by the Defendant to the Plaintiff, enclosing the original contract signed by them and requesting the Plaintiff to sign and return a copy for the Defendant’s record. Obviously, between the invitation to offer contained in the letter dated 8.8.2003 (Exhibit "A" to the plaint) and the letter dated 22.10.2003 (Exhibit "B" to the plaint) must have been an offer. This could not have been the offer dated 11.7.2003 or the offer dated 7.8.2003 referred to in paragraph 3 of the plaint for they were prior to the letter dated 8.8.2003. :10: 14. Thus, the offer was obviously between 8.8.2003, and 22.10.2003. The same was accepted by the Defendant’s letter dated 22.10.2003 in Calcutta and posted from there to the Plaintiff in Bombay. In view of the judgment of the Supreme Court in Bhagwandas Goverdhandas, it must be held that the contract in that case would also be deemed to have been made in Calcutta. 15. Let me look at the matter differently. The letter dated 8.8.2003 refers to the Plaintiff’s letter dated 7.8.2003 at item 3 of the reference to the letter. This is the offer referred to in paragraph 3 of the plaint. Even if the letter dated 8.8.2003 is deemed to be an acceptance of that offer, it would not be of any assistance to the Plaintiff, for the acceptance, was made in Calcutta. The letter dated 8.8.2003 accepting the offer made by the Plaintiff’s letter dated 7.8.2003 was posted from Calcutta, after having been accepted in Calcutta. Once again, on the basis of the judgment of the Supreme Court in Bhagwandas’s case, the contract must be deemed to have been made in Calcutta. 16. In the circumstances, whichever way we consider :11: the pleadings or the correspondence, it must be held that the contract was made in Calcutta and not in Bombay. This probably explains the draftsmans reluctance to plead how the offer was made and how, as opposed to where, it was accepted. The pleading merely states that the offer was accepted in Bombay. 17. There is yet another reason why it must be held that the contract was made in Calcutta and not in Bombay. We have seen earlier that the normal rule is that the acceptance and the intimation of acceptance of offer, are both necessary to result in a binding contract. We have also seen that the Supreme Court in Bhagwandas Goverdhandas Kedia v. M/s.Girdharlal Purshottamdas & Co., held that to this normal rule is an exception, the exception being that when by agreement, acceptance by post is authorised, the contract is complete when the acceptance is put into a course of transmission by the offeree by posting the letter. There is however a caveat to this exception. 18. Even where the acceptance of an offer by post is authorised, the acceptance would be complete at the place where the communication of the acceptance is received, if the parties required the :12: communication of acceptance to be intimated. This is clear from the following observations of the Supreme Court in Bhagwandas Goverdhandas Kedia v. M/s.Girdharlal Purshottamdas & Co., which though a part of paragraph 8 extracted above, I find convenient to reproduce again here : (8) ............................ "If the parties are not in the presence of each other, and the offeror has not prescribed a mode of communication of acceptance, insistence upon communication of acceptance of the offer by the offeree would be found to be inconvenient, when the contract is made by letters sent by post...................." (emphasis supplied) It will be clear from the above observation that the exception operates only when the parties have not prescribed the mode of communication of acceptance. 19. This is, in fact, also the view in England. Mr.Tulzapurkar, relied upon the judgment of the Court of Appeal in Holwell Securities Ltd. v. Hughes, (1974)1 All ER, 161. The following observations of the Court of Appeal indicate the exception and the qualification to this exception :13: which I have mentioned :- "The plaintiff’s main contention below and before this court has been that the option was exercised and the contract for sale and purchase was constituted at the moment that the letter addressed to the defendant with its enclosure was committed by the plaintiffs’ solicitors to the proper representative of the postal service, so that its failure to reach its destination is irrelevant. It is the law in the first place that prima facie acceptance of an offer must be communicated to the offeror. On the principle the law has engrafted a doctrine that, if in any given case the true view is that the parties contemplated that the postal service might be used for the purpose of forwarding an acceptance of the offer, committal of the acceptance in a regular manner to the postal service will be acceptance of the offer so as to constitute a contract, even if the letter goes astray and is lost. Nor, as was once suggested, are such cases limited to cases in which the offer has been made by post. It suffices I think at this stage to refer to Henthorn v. Fraser. In the present case, as I read a passage in the judgment below, Templeman concluded that the parties have contemplated that the postal service might be used to communicate acceptance of the offer (by exercise of the option); and I agree with that. But that is not and cannot be the end of the matter. In any :14: case, before one can find that the basic principle of the need for communication of acceptance to the offeror is displaced by this artificial concept of communication by the act of posting, it is necessary that the offer is in its terms consistent with such displacement and not one which by its terms points rather in the direction of actual communication. We were referred to Henthorn v Fraser and to the obiter dicta of Farwell in Bruner v Moore, which latter was a case of an option to purchase patent rights. But in neither of those cases was there apparently any language in the offer directed to the manner of acceptance of the offer or exercise of the option. The relevant language here is, ‘THE said option shall be exercisable by notice in writing to the Intending Vendor...’, a very common phrase in an option agreement. There is, of course, nothing in that phrase to suggest that the notification to the defendant could not be made by post. But the requirement of notice... to’, in my judgment, is language which should be taken expressly to assert the ordinary situation in law that acceptance requires to be communicated or notified to the offeror, and is inconsistent with the theory that acceptance can be constituted by the act of posting, referred to by Anson as ‘acceptance without notification’." (emphasis supplied) 20. The qualification to the exception operates in the present case. In the present case, the :15: communication of the acceptance was required to be made. The communication of the acceptance was, in fact, made. The communication of the acceptance was required to be made in Calcutta and was, in fact, made in Calcutta. Firstly, the Plaintiff has admitted the same in paragraph 4 of the plaint which I have extracted above. The relevant averment is :- ".................. in token of having accepted the said contract, the Plaintiff signed the same at Mumbai and returned back the original to the Defendant, as demanded........." (emphasis supplied) 21. It was not contended by Mr.Kutty that this was an error in drafting. In fact, it was not an error. The contract itself mandated the communication of the acceptance. Article 5 of the contract which makes this clear, reads as under :- "ARTICLE 5 - CORRESPONDENCE : The Supplier shall return the Acceptance Copy of the Contract duly signed signifying acceptance of the Contract within seven days of the Contract. All information concerning supplier’s Contract Number, relevant reference to various work shall be submitted to :16: the Purchaser." (emphasis supplied) Article 5 did not require a copy of the contract to be forwarded merely for the Defendant’s record. It required the contract to be forwarded in order to signify the acceptance of the contract. The stipulation was not an empty or idle formality. 22. Admittedly, the signed contract signifying acceptance was forwarded to the Defendant in Calcutta. This was in accordance with Article 43 of the contract which required all communication to be addressed to the Managing Director of the Defendant in Calcutta. 23. Mr.Tulzapurkar’s submission that no part of the cause of action arose in Mumbai is therefore well founded. The leave granted under Clause XII of the Letters Patent is liable to be revoked on this ground alone. 24. In the above circumstances, the mere fact that a solitary sentence in paragraph 4 of the affidavit in support of the Chamber Summons to the effect that admittedly, only a part of the cause of action in :17: the suit has arisen in Mumbai, is of no consequence. This statement was made in the context of the Defendant’s contention that in view of Article 39 of the contract only the Calcutta High Court would have jurisdiction. The admission referred to by the Defendant therefore was qua the Plaintiff and not the Defendant. In any event this being a question of law an averment by the parties cannot be decisive of the matter. 25. This brings to Mr.Tulzapurkar’s second submission, based on Article 39 of the contract, which reads as under : ARTICLE 39 - GOVERNING LAW AND JURISDICTION : All legal actions or suits arising out of, or in connection with this Contract or the subject matter thereof shall govern by Indian Laws and under the jurisdiction of Calcutta High Court." 26. A similar and in material particulars an almost identical clause, fell for the consideration of the Supreme Court in Angile Insulations v. Davy Ashmore India Ltd., (1995) 4 SCC 153, where the Supreme Court held as under : :18: "5. So, normally that court also would have jurisdiction where the cause of action, wholly or in part, arises. But it will be subject to the terms of the contract between the parties. In this case, clause (21) reads thus: "This work order is issued subject to the jurisdiction of the High Court situated in Bangalore in the State of Karnataka. Any legal proceeding will, therefore, fall within the jurisdiction of the above court only." A reading of this clause would clearly indicate that the work order issued by the appellant will be subject to the jurisdiction of the High Court situated in Bangalore in the State of Karnataka. Any legal proceeding will, therefore, be instituted in a Court of competent jurisdiction within the jurisdiction of High Court of Bangalore only. The controversy has been considered by this Court in A.B.C. Laminart (P) Ltd. v. A.P. Agencies, (1989) 2 SCC 163 : (AIR 1989 SC 1239). Considering the entire case law on the topic, this Court held that the citizen has the right to have his legal position determined by the ordinary Tribunal except, of course, subject to contract (a) when there is an arbitration clause which is valid and binding under the law, and (b) when parties to a contract agree as to the jurisdiction to which dispute in respect of the contract shall be subject. This is clear from Section 28 of the Contract Act. :19: But an agreement to oust absolutely the jurisdiction of the court will be unlawful and void being against the public policy under Section 23 of the Contract Act. We do not find any such invalidity of clause (21) of the contract pleaded in this case. On the other hand, this Court laid that where there may be two or more competent courts which can entertain a suit consequent upon a part of the cause of action having arisen therewith, 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. This cannot be understood as parties contacting against the statute. Mercantile law and practice permit such agreements. 6. In this view of the law and in view of the fact that the agreement under which clause (21) was incorporated as one such clause, the parties are bound by the contract. The contract had not been pleaded to be void and being opposed to Section 23 of the contract Act. As seen, clause (21) is unambiguous and explicit and that, therefore, the parties having agreed to vest the jurisdiction of the court situated within the territorial limit of High Court of Karnataka, the Court of Subordinate Judge, Dhanbad in Bihar State has no jurisdiction to entertain the suit laid by the appellant. Therefore, the High Court was right in upholding the order of the trial court returning the :20: plaint for presentation to the proper court." (emphasis supplied) 27. Mr.Tulzapurkar’s reliance upon the judgment is well founded. The judgment, to my mind, virtually concludes the matter in the Defendant’s favour. There really is no difference in substance between Article 39 and the clause construed by the Supreme Court. It must be held that Article 39 is unambiguous and explicit and that therefore the parties having agreed to vest the jurisdiction in the Courts within the territorial limit of the Calcutta High Court, this Court has no jurisdiction to entertain this suit. 28. Mr.Kutty, however, submitted that properly construed, the clause did not oust the jurisdiction of all other