Holding

A clear and explicit contractual agreement on jurisdiction is valid and overrides the ordinary territorial jurisdiction of the court, rendering the Sub‑Judge Court, Dhanbad, without jurisdiction.

Summary

M/s Angile Insulations filed a suit in the Sub‑Judge Court, Dhanbad, to recover sums due under a contract with Davy Ashmore India Ltd. The respondent invoked clause 21 of the contract, which stipulated that any legal proceedings would be subject to the jurisdiction of the High Court of Bangalore. The trial court returned the plaint for filing in the proper court, and the High Court dismissed the appellant's revision. The Supreme Court examined whether such a jurisdiction‑designating clause is enforceable under Sections 23 and 28 of the Contract Act and whether it can override the territorial jurisdiction rules of Sections 16‑20 of the CPC. It held that a clear, unambiguous contractual agreement on jurisdiction is valid and not void under the Contract Act, and therefore the Sub‑Judge Court in Dhanbad lacks jurisdiction. Consequently, the appeal was dismissed, confirming that the suit must be instituted before the Bangalore High Court.

Issues considered

Whether a contractual clause designating the jurisdiction of a specific court is enforceable notwithstanding the territorial jurisdiction provisions of Sections 16‑20 of the CPC.
Whether such a clause violates Sections 23 and 28 of the Indian Contract Act, 1872.

Legislation cited

Code of Civil Procedure, 1908s. 16, s. 17, s. 18, s. 19, s. 20
Indian Contract Act, 1872s. 23, s. 28

Subjects

jurisdictioncontractual jurisdiction clauseCPC Section 20Contract Act Sections 23 and 28choice of courtmercantile lawcivil suit

Judgment

MIS. ANGILE INS{JLATIONS A
). v.
MIS. DAVY ASHMORE INDIA LTD. AND ANR.

APRIL 18, 1995

(K. RAMASWAMY AND B.L. HANSARIA, JJ.j B

Code of Civil Procedure, 1908: Sections 16 to 20-Jwisdiction-lnten-
tion of parties explicit in contract-Not hit by Ss.23, 28 of Contract Act-Not
amounting to contracting against statute-Such agreements between parties
permitted by mercantile law and practice. C

Comract Act, 1872: Sections 23, 28-Jurisdiction-lntention of parties
to a contract made explicit in the agreement-Not hit by Ss.23, 2&-Permitted
by Mercantile law and practice.

Appellant filed a case against Respondent In the Court of Sub-Judge, D
Dhanbad for recovery of certain amounts due from first respondent on the
basis of a contract executed by it. The respondent raised objection as
regards jurisdiction of the Court placing reliance on clause (21) of the
contract which stated that the contract was subject to the jurisdiction of
Bangalore High Court. The trial Court returned the plaint for presenta· E
lion to the proper Court. Appellant preferred a Revision which was dis·
missed by the High Court. Hence this appeal.

The appellant contended that since part of the cause of action arose
in Dhanbad as per S.20 CPC jurisdiction vests with the Sub-Judge, Dhan·
fa ha~ F

Dismissing the appeal, this Court

HELD .: 1.1. Normally that court also would have jurisdiction where
the cause of action, wbolly or in part, arises. But it will be subject to the G
terms of the contract. between the parties. In the instant case, a reading of
the relevant clause would clearly indicate that the work order Issued by
the appellant would be subject to the jurisdiction of the High Court
situated In Bangalore in the State of Karnataka. Any legal proceeding will,
therefore, be in_stltuted In a Court of competent jurisdiction within the
jurisdiction of High Court of Bangalore only. [445-F, H, 446·A] H
443
444 SUPREME COURT REPORTS [1995] 3 S.C.R.

A 1.2. Where there may be two or more competent courts which can
entertain a suit consequent upon a part of the cause ofaction 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
B explicit and not vague, it Is not hit by ss.l3 and 28 of the Contract Act.
This cannot be understood as parties contracting against the statute.
Mercantile law and practice permit such agreements. (446-C, DJ

1.3. Clause(21) or the contract Is unambiguous and explicit and the
parties having agreed to vest the jurisdiction or the Court situated within
C the territorial limit of High Court of Karnataka, the Court of Subordinate
Judge, Dhanbad in Blhar 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 plaint for presentation to the
proper Court. [446·FJ
•

D A.B.C. Laminart Pvt. Ltd. and Anr. v. A.P. Agencies Sa{em, (1989) 2
sec 163, relied on.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5185 of
1995.

E From the Judgment and Order dated 17.8.87 of the Patna High Court
. in C.R.No. 20 of 1984(R).

S.N. Mishra, D.P. Mukherjee and Sanjay Kumar Ghose for the
Appellant.
F P.R. Seetharaman, Adv. (NP) for the Respondents.

The following Order of the Court was delivered :

Leave granted.
G The appellant had initiated action in the Court of Subordinate Judge,
Dhanbad for recovery of certain amounts said to be due from the first
respondent. The appellant filed the case on a contract executed by the first
respondent. On filing the suit for recovery of the amounts, the respondents
raised the objection as regards the jurisdiction of the Court and placed
H reliance on Clause (21) of the contract. Th!' trial Court returned the plaint
ANGILEINSULATIONS v. DAVY ASHMOREINDIALTD. 445
for presentatio1do the proper court by its order dated September 1, 1983. A
Thereon, the appellant carried the matter in revision to the High Court.
j
The High Court in the impugned order made in C.R.No. 20/84 dated
August 17, 1987 upheld the view of the trial Court and dismissed the
revision. Thus, this appeal by special leave.

The principal contention raised by the appellant is that s.20 of CPC B
provides that where cause of action had arisen partly within territorial
jurisdiction of one court or partly in another court, it would be open to the
• 91 ' parties to avail of the remedy at the court where part of the cause of action
had arisen. In support thereof, he contended that the contract was entered .
into and executed within the jurisdiction of the Court of the subordinate c
Judge, Dhanbad. Therefore, by operation of the Explanation lo s.20, it must
be deemed that the cause of action had arisen within the local limits of the
jurisdiction of the Court of Subordinate Judge, Dhanbad.

Normally, the plea of jurisdiction 'of the Court is to be considered in
accordance with ss.16 to 20 of CPC. Section 20 provides that subject IQ D
some limitations, every suit shall ~ e instituted in a Court within the local
limits of whose jurisdiction - (a) the defendan~ or each of the defendants
where there are more than one, at the time of the commencement of the
suit, actually and voluntarily resides, or carried on business, or personally
works for gain; or any of the defendants,' where therearemore than one, E
at the time of the commencement of the suit, actually and voluntarily
resides or carried on business or personally works for gain; provided that
. in such case either the leave of the Court is given, or the defendants who
do not reside, or carry on business; or personally works for gain.

}- So, normally that Court also would have jurisdiction where the cause F
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
G
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 Karriataka. Any legal proceeding will, H
446 SUPREME COURT REPORTS (1995] 3 S.C.R.

A 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 Pvt. Ltd. & Anr. v. A.P.
Agencies, Salem, (1989] 2 SCC 163. 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
B (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
s.28 of the Contract Act. But an agreement to oust absolutely the jurisdic-
tion of the Court will be unlawful and void being against the public policy
•,.,..,
C under s.23 of the Contract Act. We do not find any such in validity 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
D 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 ss.23 and 28 of the Contract Act.
This cannot be understood as parties contacting against the statute. Mer-
cantile law and practice permit such agreement;.

E 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 s.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
F Court of Karnataka, the Court of subordinate Judge, Dhanbad in Bihar
State has no jurisdiction to entertain the suit laid by the appellant. There-
fore, the High Court was right in upholding the order of the Trial Court
returning the plaint for presentation to the proper Court.

The appeal is accordingly dismissed. No costs.
G
G.N. Appeal dismissed.

.(