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High Court of Kerala
PIUS C. KURIAKOSE & K. HARILAL
Dr. Joy P. Chungath, Represented by Power of Attorney Holder, Alfo Joy
Versus
M/s Lawkin Ltd., Rep. by its Principal Officer and V.P. Finance & Commercial & co. Secretary
FAO No. 202 of 2006
Decided on : 10-11-2011
Civil Procedure Code, 1908 - Section 20(c) - Determination of 'territorial jurisdiction' under S.20 of the Civil Procedure Code and the intent purpose and legal effect of the 'Explanation' to that section are the issues arose for our consideration in this appeal - Held, Court find that a part of 'cause of action', which give rise to a right to sue against the defendant has arisen and consequently the suit will lie before the Sub Court, within the local limits of whose jurisdiction that part of the cause of action has arisen - Court is inclined to set aside the impugned order passed by the Sub Court - FAO Allowed
Certainly. Here are the key points derived from the provided legal document regarding the issue of territorial jurisdiction under Section 20 of the Civil Procedure Code:
The primary issue concerns the interpretation of Section 20, including its purpose, legal effect, and the role of the Explanation attached to it, especially in relation to corporations (!) (!) .
The suit was initially dismissed on the ground that the court lacked territorial jurisdiction because the defendant's principal place of business is in Mumbai, and no part of the cause of action was alleged to have arisen in Ernakulam (!) .
The defendant contended that the entire transaction, including the signing of the Memorandum of Understanding (MOU), took place at Mumbai, and the defendant does not maintain an office or carry on business in Ernakulam, thus no part of the cause of action arose there (!) (!) .
The court below accepted this contention, relying on the explanation to Section 20, which deems a corporation to carry on business only at its principal or subordinate offices. Since no subordinate office exists in Ernakulam, the court found the suit lacked jurisdiction (!) (!) .
The appellant argued that a part of the cause of action arose at Ernakulam because the plaintiff took a building on rent, incurred expenses for renovation, and conducted negotiations there, which constitute a part of the transaction giving rise to the claim (!) (!) (!) .
The appellant emphasized that each clause of Section 20 is disjunctive and must be interpreted independently, meaning that the suit could be filed in Ernakulam if any part of the cause of action arose there, regardless of the defendant's subordinate office status (!) (!) .
The court analyzed the legal meaning of "cause of action," concluding that it includes all facts necessary to support the right to sue, and that a part of the cause of action can arise from transactions or events that occur at different locations (!) (!) (!) .
The court recognized that pleadings indicated that significant parts of the transaction, including negotiations, infrastructure setup, and expenses, occurred in Ernakulam, thus establishing that a part of the cause of action arose there (!) (!) (!) .
The purpose of the Explanation to Section 20 is to clarify the meaning of "carry on business" for corporations, and it does not restrict jurisdiction solely to the principal or subordinate offices, especially when the cause of action or part thereof arises at a different location (!) (!) (!) .
The court concluded that since a part of the cause of action arose in Ernakulam, the suit is properly instituted there, and the order returning the plaint for lack of jurisdiction was erroneous (!) (!) .
It was also clarified that the defendant's principal office being in Mumbai does not preclude jurisdiction in Ernakulam if the cause of action or part of it occurred there. The plaintiff has the right to choose the court where a part of the cause of action has arisen, and the suit could have been filed in Ernakulam accordingly (!) (!) .
The appellate court set aside the order dismissing the suit for want of jurisdiction and directed that the suit could be refiled in the proper court in Ernakulam, affirming the court's jurisdiction based on the facts established (!) .
These points collectively emphasize that under Section 20, a suit can be instituted in a jurisdiction where any part of the cause of action has arisen, and the interpretation of the section, including its Explanation, should be harmonized with the purpose of ensuring access to justice and proper adjudication of disputes.
1. The determination of ‘territorial jurisdiction’ under Section 20 of the Civil Procedure Code and the intent, purpose and legal effect of the ‘Explanation’ to that section are the issues arose for our consideration in this appeal.
2. An order directing that the plaint be returned for presentation before the proper court in which the suit should have been instituted, passed by the IInd Additional Subordinate Court, Ernakulam in O.S.No.228/2005 under Order VII Rule 10 of the Civil Procedure Code, on the premise that the above said court has no territorial jurisdiction to try the suit, is challenged in this appeal. The plaintiff is a consultant (Pediatric and Hospital service) at Kochi and represented by his power of attorney holder. The defendant is a company incorporated under the Companies Act and having its registered office at Firosh Nagar, Mumbai.
3. Facts:
The facts relevant in the context of issue involved in this appeal can briefly be stated as follows:
In response to an advertisement made by the defendant Company calling for appointing a franchisee at Kochi for their ITES Division, plaintiff applied and defendant chose the plaintiff as their franchisee in Kerala. Subsequently they entered into a Memorandum of Understanding (MOU) which was signed at Mumbai. Pursuant to the MOU, the plaintiff has taken a building on rent at Ernakulam, made preparations and the premises was got ready by spending money for infrastructure lay out and furniture. But later they could not arrive on an agreement acceptable to both parties and consequently the understanding fell down. Subsequently the defendant unilaterally cancelled the MOU by a letter and that culminated to the institution of the present suit for realization of a total amount of Rs.5 lakhs as damages including an amount of Rs.50,000/- paid to the defendant as franchisee fee. The remaining amount was the compensation or the expenses incurred for the renovation and payment of rent for the building which has been taken on rent at Ernakulam.
4. The defendant entered appearance in the suit and filed a written statement disputing the territorial jurisdiction of the Sub Court at Ernakulam, among other serious contentions. It is contended that the memorandum of understanding was executed at the corporate office of the defendant at Mumbai in the State of Maharashtra. The defendant is having its registered office and principal place of business at Mumbai in the State of Maharashtra and no part of the transaction alleged in the plaint has taken place in Kerala. It is also contended that the defendant company is neither having an office nor carries on business or personally works for gain at Ernakulam. No part of the cause of action has arisen at Ernakulam. Therefore the Sub Court at Ernakulam has no territorial jurisdiction to entertain the suit and the suit is liable to be returned for presentation before the proper court. Thus the issue regarding territorial jurisdiction has been taken as a preliminary issue.
5. Findings of the court below:
In view of the rival contentions disputing territorial jurisdiction, the court below has considered the question whether the Sub Court at Ernakulam has territorial jurisdiction to try the suit. After considering the above said rival contentions in detail, the court below accepted the preliminary objection raised by the defendant and returned the plaint for presentation before the proper court on the basis of the following reasons:
As the defendant is a Corporation, the ‘Explanation’ to Section 20 is applicable regarding the place of jurisdiction. It is provided that the Corporation shall be deemed to carry on business at its sole or principal office in India or in respect of any cause of action arising at any place where it has also a subordinate office at such place. The plaintiff has no case that the defendant Corporation has a subordinate office at Ernakulam. So, the defendant Corporation shall be deemed to carry on business at its
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