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2015 Supreme(Cal) 248
CALCUTTA HIGH COURT
SOUMEN SEN, J.
McNally Bharat Engineering Company Limited – Appellant
Vs.
Maharashtra State Power Generation Company Limited – Respondent
G.A. No. 2875 of 2014
Decided On : 11.6.2015
A party cannot confer jurisdiction on a Court which does not otherwise have the jurisdiction to try and determine the suit.
Headnote:
JURISDICTION - FORUM SELECTION CLAUSE - BANK GUARANTEE - INVOCATION OF BANK GUARANTEE - CAUSE OF ACTION - LETTERS PATENT, 1861, CLAUSE 12 - ARBITRATION AND CONCILIATION ACT, 1996, SECTION 8 - CODE OF CIVIL PROCEDURE, 1908, ORDER 2, RULE 2 - LETTERS PATENT, 1861, CLAUSE 12 - CONTRACT ACT, 1872, SECTIONS 23 AND 28 - CIVIL PROCEDURE CODE, 1908, SECTION 20(C).
Fact of the Case:
The plaintiff filed a suit seeking a permanent injunction restraining the defendants from giving effect to an expired bank guarantee. The plaintiff contended that the bank guarantee was valid only for 15 months from the date of performance guarantee test and that the defendant No. 1 had invoked the bank guarantee in connivance with the defendant No. 2. The defendant No. 1 filed an application for rejection of the plaint and in the alternative for presentation of the plaint before the appropriate Court having jurisdiction, contending that the suit was barred under Section 8 of the Arbitration and Conciliation Act, 1996 and that the Courts in Mumbai had exclusive jurisdiction to determine the dispute.
Finding of the Court:
The Court held that the plaintiff could not dispute that a part of the cause of action had arisen at Mumbai and that even without the exclusivity clause, the jurisdictions of other Courts were ousted. The Court further held that the plaintiff was under an obligation to disclose the entire contract and ought to have brought attention of the Court of the exclusive jurisdiction since the grant of leave under Clause 12 of the Letters Patent was discretionary.
Issues: 1. Whether the suit was barred under Section 8 of the Arbitration and Conciliation Act, 1996? 2. Whether the Courts in Mumbai had exclusive jurisdiction to determine the dispute? 3. Whether the plaintiff was under an obligation to disclose the entire contract and ought to have brought attention of the Court of the exclusive jurisdiction?
Ratio Decidendi: 1. The Court held that the defendant No. 1 had not prayed for referring the dispute to arbitration and hence it could be concluded that the defendant No. 1 was not claiming referring of the dispute to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. 2. The Court held that since the plaintiff did not dispute that a part of the cause of action had arisen at Mumbai, the jurisdictions of other Courts were ousted. The Court further held that the plaintiff was under an obligation to disclose the entire contract and ought to have brought attention of the Court of the exclusive jurisdiction since the grant of leave under Clause 12 of the Letters Patent was discretionary.
Final Decision: The Court allowed the application filed by the defendant No. 1 and revoked the leave granted under Clause 12 of the Letters Patent. The plaint filed in the suit was returned to the plaintiff in order to enable the plaintiff to institute the suit before the appropriate Courts at Mumbai.
1. The defendant No. 1 is the applicant. The defendant No. 1 has filed this application for rejection of the plaint and in the alternative for presentation of the plaint before the appropriate Court having jurisdiction.
2. The plaintiff has filed the suit praying, inter alia, for a decree for perpetual injunction restraining the defendants, their men, agents and servants from giving any effect or further effect to the expired performance guarantee being Bank Guarantee No. 4044IFIB G070015 issued by the defendant No. 2 in favour of the defendant No. 1. The plaintiff states that under the letter of award dated 5th October, 2007 followed by a formal contract agreement dated 27th May, 2008. The plaintiff was required to carry out design, engineering, manufacture, supply, erection, testing and commissioning of an Ash handling system with all accessories for New Parli Thermal Project. The plaintiff in terms of the said agreement furnished a bank guarantee dated 14th November, 2007 issued by the defendant No. 2 for a sum of Rs. 3,83,11,400/-. The said bank guarantee was valid upto 5th of July, 2010 with a claim period of six months post such guarantee period. The said bank guarantee, inter alia, provided that the defendant No. 2 undertake to pay amounts due and payable under the guarantee on a demand received from the defendant No. 1 stating that the amount claimed is due by way of loss or damage caused. The said performance guarantee in terms of Clause 9 of the General Conditions of the contract was to be kept valid upto 90 days beyond the guarantee period. The guarantee period is provided in Clause 40 of the General Conditions of the Contract which, inter alia, is a period of 12 calendar months commencing immediately upon satisfactory completion of the performance guarantee or acceptance tests. The plaintiff from time to time had carried out their obligations under the contract with the defendant No. 1 and as a matter of fact the performance guarantee test was carried out in the month of July, 2010 and completion of such performance guarantee test was confirmed in a meeting held on 31st July, 2010 as would be evident from the minutes of the meeting dated 31st July, 2010. Accordingly the bank guarantee was only liable to be extended till a period of 15 months from 31st July, 2010. The said period expired on or about October, 2011.
3. The minutes of the meeting would show that the defendant No. 1 was satisfied with the performance of the plaintiff. Subsequently, the plaintiff was requested to extend the bank guarantee and the plaintiff without understanding the true purport of the agreement between the parties had kept on extending the bank guarantee. On 15th of July, 2013, an extension of the bank guarantee for a period upto 30th September, 2013 was issued by the defendant No. 2 in favour of the defendant No. 1. The bank guarantee stood expired on 30th September, 2013. The claim period also stood expired on 31st March, 2014. Within the aforesaid period, the defendant No. 1 did not make any demand upon the defendant No. 2 for encashment of such bank guarantee. However, on 18th June, 2014 the plaintiff received certain documents from the defendant No. 2 wherefrom it transpired that by a letter dated 28th May, 2014 had been issued to the Branch Manager of the defendant No. 2 by the defendant No. 1 alleging that they had requested the plaintiff to extend the validity of the bank guarantee. The defendant No. 1 had referred to a letter dated 9th May, 2014 by which such request was made for extension of the bank guarantee. The plaintiff contends that without conceding the factum that the said letter of 9th May, 2014 had not been received by the plaintiff and without conceding that the validity of the bank guarantee had expired by that time, the said letter is not a notice of encashment of the bank guarantee in terms of the conditions provided in such bank guarantee. There has not been any letter of demand issued by the defendant No.
