Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1979 Supreme(SC) 282

SUPREME COURT OF INDIA
R.S. SARKARIA AND D.A. DESAI, JJ.
Indian Overseas Bank, Madras, Petitioner
Versus
Chemical Construction Co. and others, Respondents.
Transfer Petn No. 26 of 1978, D/- 3-5-1979.
Advocates appeared
Mr. S. T. Desai, Sr. Advocate (M/s. K. Jayaram and K. Ramkumar Advocates with him), for Petitioner; M/s. T. S. Vishwanatha Rao and Mr. A. T. M. Sampath, Advocates (for No. 1) and Mr. B. D. Bal, Sr. Advocate (Mrs. Jayashree Wad, Advocate with him) (for No. 2), for Respondents.

Advocates:
A.T.M.SAMPATH, B.D.BAL, JAYASHRI VAD, K.JAYRAMAN GOWDA, K.RAM KUMAR, S.T.DESAI, T.S.VISHVANATH RAO

Headnote:POWER OF COURT TO CHANGE THE FORUM – BALANCE OF CONVENIENCE JUSTIFYING TRANSFER – WHERE COMMON QUESTIONS OF LAW AND FACT ARISE IN TWO SUITS – WIDER IN SCOPE – POWERS OF TRANSFER UNDER THIS SECTION FAR WIDER THAN THOSE UNDER SECTION 24 – “EXPEDIENT FOR THE ENDS OF JUSTICE” – WITH A VIEW TO AVOID MULTICIPLICITY IN TRIAL OF SAME ISSUE AND RISK OF CONFLICTING DECISIONS

       -the Court should not lightly change forum and compel the plaintiff to go to another Court, with consequent increase in inconvenience and expense of prosecuting his suit
       -a mere balance of convenience in favour of proceedings in another Court, albeit a material consideration may not always be a sure criterion justifying transfer
       -held good ground for transfer
       -the substituted Section 25 is wider in scope than Section 405 of the Code of Criminal Procedure - Indian Overseas Bank v. Chemical Construction Co., AIR 1979 SC 1514; Arvee Industries v. Ratan Lal, AIR 1977 SC 2429, it is far wide as compared to Section 24.
       -discussed in the decisions of Indian Overseas Bank v. Chemical Const. Co., AIR 1979 SC 1514; Arvee Industries v. Ratan Lal Sharma, AIR 1977 SC 2429. =(1978) 1 SCR 418.

Judgement Key Points

Key Points: - The court has wide powers to transfer suits under Section 25, as broad as its powers under Section 406 of the Criminal Procedure Code (!) . - The test for transfer is whether it is "expedient in the interests of justice" (!) . - The plaintiff is the dominus litis, so the court should not lightly change the forum or impose increased inconvenience or expense on the plaintiff (!) . - A mere balance of convenience is not always a sufficient ground for transfer (!) . - Transfer is appropriate where common questions of law and fact arise in multiple suits, to avoid multiplicity of trials and risk of conflicting decisions (!) . - The instant case falls within that category, as both suits involve common parties and core issues regarding liability for bills and guarantees (!) . - The transfer should occur to the superior forum (Madras High Court) to ensure common evidence is tried together (!) . - Arguments based on financial hardship or jurisdictional objections by the second respondent are not sufficient to block the transfer (!) (!) . - Section 10 of the Code is not relevant to this transfer petition (!) . - The petition is allowed and the suit is transferred to the Madras High Court (Original Side) (!) (!) .

What is the scope of the court's power to transfer a suit under Section 25 of the Civil Procedure Code?

What are the grounds for transferring a suit to another court under Section 25?

What is the principle governing the exercise of discretion to transfer a suit based on balance of convenience?

Judgment

SARKARIA, J. :- This is a petition under Section 25 of the Civil Procedure Code 1908, as amended by Act 104 of 1976 for transfer of suit IB of 1972 instituted in the Court of District Judge, Seoni, Madhya Pradesh by the second respondent herein, against the petitioner and respondents 1, 3 & 4 to the file of the High Court of Madras (Original Side). The facts material to this petition are as under :

2. The first respondent, M/s. Chemical Construction Company, is a registered partnership having its registered office at No. 14, Milestone Mathura Road, Faridabed, Haryana and Head Office at Madras. It is represented by its partners, Shri T. V. P. Nambiar, Shir O. P. Nambiar, Shri O. V. Nambiar, Smt. Leela Nambiar and Smt. Nirmala Nambiar.

3. The second respondent, Rajadhiraj Industries Pvt. Ltd., has its registered office at Seoni, Madhya Pradesh. It is represented by its Managing Director, Shri Harishchandra Singhania.

4. The third respondent, Industrial Development Bank of India Ltd. has its registered office at Bombay and Branch offices at other places, including one at Madras.

5. The fourth respondent is Madhya Pradesh Financial Corporation, incorporated under the State Financial Corporation Act, 1957, having its registered office in Indore, Madhya Pradesh.

6. The first respondent (manufacturer) entered into a contract on November 11, 1969 with the second respondent to erect a plant for manufacture of hydrogenated vegetable oil. There was a supplementary agreement between them on January 24, 1970. The cost of the plant was Rs. 25,00,000/-. The third respondent (for short, called the Industrial Bank), agreed to finance the manufacturer (Ist respondent) under a scheme called the "Bills Rediscounting Scheme". Under that Scheme the manufacturer would obtain in convenient mutually agreed instalments the value of the machinery supplied within a few days of its delivery by discounting with his banker the bills of exchange arising our of the sale of the machinery, either before of after acceptance by the second respondent (purchaser). The bankers of the manufacturer / seller would take up the discounted bills and get them rediscounted by the Industrial Bank prior to their due dates, thus reimbursing themselves with the amount paid to the manufacturer. The discounting bank would be liable to pay to the Industrial Bank the amounts under the bills on their due dates.

7. The discounting bank would normally require the second respondent to accept the bills/promissory notes, after the payment had been guaranteed on his behalf by its banker or the fourth respondent (the State Financial Corporation) etc.

8. The petitioners, it is alleged, acted as discounting bank under the Scheme. The first respondent and the second respondent took advantage of the Scheme, and pursuant to an agreement for supply of materials between the first and second respondents, the fourth respondent executed an irrevocable guarantee on November 3, 1970 and a supplementary guarantee on February 18, 1971 in favour of the petitioner on behalf of second respondent.

9. It is further alleged that in pursuance of the independent agreement, the petitioner had discounted a total of 9 Usance Bills to the extent of Rs. 9.42 lacs which were drawn by the first respondent and accepted by the second respondent. The first eight of these bills were rediscounted by the petitioner with the third respondent (the Industrial Bank) for a total sum of Rs. 6.99 lacs, which amount was subsequently paid over to the third respondent by the petitioner but none of these eight bills were paid by the second respondent to the petitioners on the due dates. The remaining bill for Rs. 2,43,376/- was not rediscounted by the petitioner with the third respondent.

10. In September 1972, the drawees of the bills (second respondent) filed suit No. IB / 1972 in the District Court, Seoni against the petitioner and the respondents 1, 3 & 4, seeking a decree for : (a) one lac of rupees against the first respondent on

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