Judgement Briefs

Civil Procedure Law

Hakam Singh v. Gammon (India) Ltd.

(1971) 1 SCC 286; AIR 1971 SC 740

Citation
(1971) 1 SCC 286; AIR 1971 SC 740
Court
Supreme Court of India
Date
8 January 1971
Bench
J.C. Shah, C.J. and K.S. Hegde, J.

Facts

  • Hakam Singh agreed to perform construction work for Gammon (India) Ltd. under a written tender.
  • The tender contained an arbitration clause for disputes arising from the subcontract.
  • Clause 13 further stated that:
  • Regardless of where the work was executed, the contract would be deemed to have been entered into at Bombay; and
  • The courts in Bombay alone would have jurisdiction.
  • After disputes arose, Hakam Singh filed a petition under Section 20 of the Arbitration Act, 1940 before the Subordinate Judge at Varanasi.
  • He sought:
  • Filing of the arbitration agreement; and
  • Reference of the dispute to arbitration.
  • Gammon objected that Clause 13 required proceedings to be brought only before a Bombay court.
  • The Varanasi court held that:
  • The entire cause of action had arisen at Varanasi; and
  • The parties could not create jurisdiction in Bombay by agreement.
  • The Allahabad High Court reversed that order.
  • It held that Bombay courts independently possessed jurisdiction and directed return of the petition for presentation there.
  • Hakam Singh appealed to the Supreme Court.

Issues

  • Whether parties can confer jurisdiction by agreement upon a court that does not possess it under the CPC.
  • Whether parties may validly select one court exclusively where two or more courts are otherwise competent.
  • Whether Bombay courts independently possessed jurisdiction because Gammon’s principal office was situated there.

Rule

  • Territorial jurisdiction for proceedings governed by the CPC must first exist under the statutory rules, particularly Section 20.
  • Parties cannot create jurisdiction in a court that the CPC does not otherwise recognise.
  • Consent cannot cure a complete absence of jurisdiction.
  • However, where two or more courts are competent under the CPC, parties may agree that disputes will be brought only in one of them.
  • Such a choice does not completely restrain legal proceedings.
  • It merely selects one competent forum and is therefore:
  • Not opposed to public policy; and
  • Not invalid under Section 28 of the Contract Act.
  • Under Section 20 and its explanation concerning corporations, a company is deemed to carry on business at its sole or principal office.
  • The expression “corporation” includes a company registered under the Companies Act, not only a statutory corporation.
  • The Arbitration Act, 1940 made CPC rules applicable to court proceedings under that Act.

Application

  • The first question was whether Bombay was a competent forum independently of Clause 13.
  • Gammon was a registered company with its principal place of business in Bombay.
  • Under Section 20 CPC, read with the explanation relating to corporations, the company could be sued at its principal office.
  • The Court rejected the argument that “corporation” referred only to bodies created by statute.
  • A registered company is also a legal person and falls within the CPC expression.
  • Bombay therefore possessed jurisdiction under the general law.
  • Clause 13 did not attempt to give power to a wholly unconnected court.
  • Varanasi may also have possessed jurisdiction because the construction work and relevant events occurred there.
  • The existence of more than one competent court was precisely the situation in which a forum-selection agreement could operate.
  • By agreeing that Bombay courts “alone” would decide disputes, the parties restricted themselves to one legally competent forum.
  • The clause did not:
  • Eliminate access to courts altogether; or
  • Submit the dispute to an incompetent body.
  • It only prevented the parties from choosing another otherwise available territorial forum.
  • The Varanasi court therefore erred by looking only at the place where the cause of action arose and ignoring Gammon’s principal office as an independent basis under Section 20.
  • Because the arbitration proceeding was governed by CPC territorial principles, the jurisdiction clause applied to the petition for filing the arbitration agreement.

Held

  • The Supreme Court dismissed the appeal.
  • It affirmed the High Court’s direction that the petition be returned for presentation before the proper Bombay court.
  • Parties cannot confer jurisdiction upon an incompetent court, but they can validly select one among several courts that already possess jurisdiction.
  • Bombay was competent because Gammon carried on business through its principal office there.
  • Clause 13 was therefore binding and excluded Varanasi as between the contracting parties.
  • Use this case for: An exclusive-jurisdiction clause is valid only when the chosen court already possesses jurisdiction under the CPC.