Civil Procedure Law

A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem

(1989) 2 SCC 163; AIR 1989 SC 1239

Facts

A.B.C. Laminart, a manufacturer situated within Kaira district in Gujarat, agreed to supply 5,000 bobbins of metallic yarn to A.P. Agencies, a partnership firm carrying on business at Salem.
The written terms contained Clause 11:
“Any dispute arising out of this sale shall be subject to Kaira jurisdiction.”
A dispute later arose, and A.P. Agencies filed a suit before the Subordinate Judge at Salem for:
Recovery of the balance of an advance; and
Damages.
The defendants raised a preliminary objection that the Salem court lacked territorial jurisdiction because Clause 11 conferred exclusive jurisdiction upon the Kaira court.
The trial court accepted the objection and returned the plaint for presentation at Kaira.
The Madras High Court reversed the order and directed the Salem court to decide the suit on merits.
The suppliers appealed to the Supreme Court, arguing that the parties were bound to litigate only at Kaira.

Which places form part of the cause of action in a suit arising from a contract under Section 20(c) CPC?
Whether the Kaira court and Salem court were both independently competent.
Whether the words “subject to Kaira jurisdiction,” without “alone,” “only” or “exclusive,” excluded the jurisdiction of Salem.

A cause of action is the bundle of material facts that the plaintiff must prove to obtain judgment.
In contractual disputes, relevant connecting factors may include:
The place where the contract was made;
The place where performance was required;
The place where goods were delivered;
The place where payment was due; and
The place where breach occurred or repudiation was communicated.
Parties cannot confer jurisdiction upon a court having no connection recognised by law.
Where several courts possess jurisdiction, parties may validly select one and exclude the others.
Whether a jurisdiction clause is exclusive depends upon proper construction of:
Its language; and
The surrounding circumstances.
Words such as “alone,” “only” and “exclusive” ordinarily make exclusion clear.
Even without them, exclusivity may sometimes be inferred through the principle that express mention of one forum implies exclusion of another.
The inference, however, must arise clearly from the clause and context.

The Court first held that Clause 11 formed part of the agreement because the parties had transacted on the basis of the printed terms.
Kaira was a competent forum.
The order confirmation was sent from the supplier’s place in Gujarat, and the making of the contract constituted part of the cause of action.
Salem was also competent because the bobbins were delivered there.
Delivery and contractual performance provided a substantial connecting factor under Section 20(c).
This was therefore not a case where the selected court was legally incompetent.
The parties could validly have excluded Salem and chosen Kaira alone.
The decisive question was whether they had actually expressed that exclusive intention.
Clause 11 merely stated that disputes would be “subject to Kaira jurisdiction.”
It did not state that:
Kaira courts alone would have jurisdiction; or
No other court could entertain proceedings.
The remaining contractual terms and surrounding circumstances did not clearly show an intention to prohibit proceedings at Salem.
The Court therefore treated the clause as confirming Kaira’s jurisdiction, not as unambiguously destroying the jurisdiction of every other competent court.
Because exclusion of an otherwise lawful forum should not be inferred from ambiguous language, Salem retained jurisdiction.
The case therefore separated two questions:
Whether the named court possesses jurisdiction under the CPC; and
Whether the contract clearly makes that jurisdiction exclusive.

The Supreme Court dismissed the appeal and upheld the Madras High Court’s direction that the Salem court hear the suit.
Both Kaira and Salem had connecting factors and jurisdiction under Section 20(c).
Clause 11 was valid insofar as it recognised Kaira jurisdiction, but its wording did not clearly, unambiguously and explicitly exclude Salem.
The judgment established important connecting factors for contractual causes of action and the method for construing jurisdiction clauses.
Swastik Gases later clarified that absence of “only” or “exclusive” is not automatically decisive; exclusivity may still be inferred where the clause and context clearly show that intention.
Use this case for: Determine statutory jurisdiction first, then ask whether the contractual clause clearly excludes the other competent courts.