2006 Supreme(SC) 72

2006(1) Supreme 677
Supreme Court of India
(From Calcutta High Court)
Mrs. Ruma Pal and P.P. Naolekar, JJ.
Mayar (H.K.) Ltd. & Ors. —Appellants
versus
Owners & Parties, Vessel M.V. Fortune Express & Ors. —Respondents
Civil Appeal No. 867 of 2006
(Arising out of SLP (C) No. 17906 of 2004)
Decided on 30-1-2006
Counsel for the Parties :
For the Appellants : C.S. Sundaram, Sr. Advocate, Rama Mukherjee, R. Misra, S. Gautam and Goodwill Indeevar, Advocates.
For the Respondents : R.F. Nariman, Sr. Advocate, H.K. Puri, U. Banerjee, S.K. Puri, Ms. P. Puri and V.M. Chauhan, Advocates.

Important point
The Court has jurisdiction to reject the plaint where it does not disclose a cause of action.

Headnote:(i) Civil Procedure Code, 1908—Order VII Rule 11—Rejection of plaint —Scope of jurisdiction of Court—So long as the plaint discloses some cause of action which requires determination by the Court, mere fact that in the opinion of the Judge of plaintiff may not succeed cannot be a ground for rejection of plaint—Plaint cannot be rejected on basis of allegations made by defendant in his written statement or in an application for rejection of plaint—Court has to read the entire plaint as a whole to find out whether it discloses a cause of action—If it does, then the plaint cannot be rejected by the Court exercising the powers under Order VII Rule 11 of the Code.

       Held : Under Order VII Rule 11 of the Code, the Court has jurisdiction to reject the plaint where it does not disclose a cause of action, where the relief claimed is undervalued and the valuation is not corrected within a time as fixed by the Court, where insufficient court fee is paid and the additional court fee is not supplied within the period given by the Court, and where the suit appears from the statement in the plaint to be barred by any law. Rejection of the plaint in exercise of the powers under Order VII Rule 11 of the Code would be on consideration of the principles laid down by this Court. (Para 10)

       From the aforesaid, it is apparent that the plaint cannot be rejected on the basis of the allegations made by the defendant in his written statement or in an application for rejection of the plaint. The Court has to read the entire plaint as a whole to find out whether it discloses a cause of action and if it does, then the plaint cannot be rejected by the Court exercising the powers under Order VII Rule 11 of the Code. Essentially, whether the plaint discloses a cause of action, is a question of fact which has to be gathered on the basis of the averments made in the plaint in its entirety taking those averments to be correct. A cause of action is a bundle of facts which are required to be proved for obtaining relief and for the said purpose, the material facts are required to be stated but not the evidence except in certain cases where the pleadings relied on are in regard to misrepresentation, fraud, wilful default, undue influence or of the same nature. So long as the plaint discloses some cause of action which requires determination by the court, mere fact that in the opinion of the Judge the plaintiff may not succeed cannot be a ground for rejection of the plaint. In the present case, the averments made in the plaint, as has been noticed by us, do disclose the cause of action and, therefore, the High Court has rightly said that the powers under Order VII Rule 11 of the Code cannot be exercised for rejection of the suit filed by the plaintiff-appellants. (Para 11)

       (ii) Indian Carriage of Goods by Sea Act, 1925—Civil Procedure Code, 1908—Order VII Rule 11; Order VI Rule 16; Section 10—Admiralty suit in High Court at Calcutta in admiralty jurisdiction—Maintainability—Contract to sell the goods was entered into between parties—Under a Charter Party Agreement, defendants agreed to carry on board the vessel a quantity of 5200 CBM Round logs for discharge at the Port of Calcutta—Foreign vessel arrived at the Port of Calcutta and started discharging cargo lying on its deck—Allegations of breach of contract—Defendants filed application for rejection of plaint alleging that Calcutta High Court has no jurisdiction to entertain the suit—Order of permanent stay of suit holding that plaintiffs did not disclose the forum selection clause—Whether maintainable—(No)—Defendants have not made out a case for stay of proceedings of Admiralty suit pending in Calcutta High Court.

       Held : As per law of pleadings under Order VI Rule 2 of the Code, every pleading should contain, and contain only, a statement in a concise form of the material facts on which the party relies for his claim or defence, as the case may be. Thus, the facts on which the plaintiff relies to prove his case have to be pleaded by him. Similarly, it is for the defendant to plead the material facts on which his defence stands. The expression ‘material facts’ has not been defined anywhere, but from the wording of Order VI Rule 2 the material facts would be, upon which a party relies for his claim or defence. The material facts are facts upon which the plaintiff’s cause of action or defendant’s defence depends and the facts which must be proved in order to establish the plaintiff’s right to the relief claimed in the plaint or the defendant’s defence in the written statement. Which particular fact is a material fact and is required to be pleaded by a party, would depend on the facts and circumstances of each case. (Para 16)

       The allegations in the plaint are to the effect that the parties have entered into a contract on 7.1.2000 to carry on board the vessel M.V. Fortune Express under the six split bills of lading 642 logs from the port of Sarawak, Malaysia for discharge at the port of Calcutta, India. As per stowage plan, 578 logs were lying on the deck of the vessel. At the time of the discharge of the cargo lying on the deck of the vessel, it was found that 456 logs out of 578 logs were missing and had been short-landed. The plaintiffs claimed a decree for the proportionate value of 456 logs, port and other charges, custom duty and proportionate insurance payment. As per the plaintiffs’ allegation, the logs, which were to be carried on the vessel owned by the defendants, had not been delivered at the port of destination. Thus, all the material facts on the basis of which the plaintiffs claimed the decree are alleged in the plaint. As the logs were not delivered at the port at Calcutta, the port of destination, the part of cause of action arose within the jurisdiction of the Calcutta Court and, thus, the suit filed by the plaintiffs at Calcutta was maintainable although it may be pleaded by the defendants in their written statement that the Calcutta High Court has no jurisdiction on account of Clause 3 of BOL. For the purpose of the cause of action, it was not necessary for the plaintiffs to plead the ouster of the jurisdiction of the Calcutta Court. In fact, it was for the defendants to plead and prove the ouster of the jurisdiction of the Calcutta Court and conferment of the jurisdiction in the Singapore Court alone. On a bare reading of Clause 3 of BOL, it is clear that any dispute arising under the BOL shall be decided in the country where the carrier has its principal place of business and the law of such country shall apply except as provided elsewhere in the BOL. Therefore, the exclusion clause refers to the jurisdiction of a court where the carrier has its principal place of business. Unless and until it is established that the defendant-carrier has its principal place of business at Singapore, the exclusion clause has no application. Simply because in the cause title of the plaint, the plaintiffs have described defendant No. 2-Trustrade Enterprises PTE Ltd. to be carrying on business at Singapore, would not ipso facto establish the fact that the principal place of business of defendant No. 2 (respondent herein) is/was at Singapore to exclude the jurisdiction of the Calcutta Court which admittedly has the jurisdiction to try the suit. Therefore, absence of reference of Clause 3 of BOL in the pleadings cannot be said to be suppression of the material fact as the question of jurisdiction would be required to be adjudicated and decided on the basis of the material placed on record at the trial. (Para 17)

       To get the order of stay of a suit on the ground of abuse of process, the applicant must show that plaintiff would not succeed but that he could not possibly succeed on the basis of the pleadings and in the circumstances of the case. In other words, the defendant would be required to show very strong case in his favour. The power would be exercised by the Court if defendant could show to the court that the action impugned is frivolous, vexatious or is taken simply to harass the defendant or where there is no cause of action in law or in equity. The power of the court restraining the proceedings are to be exercised sparingly or only in exceptional cases. The stay of proceedings is a serious interruption in the right, that a party has to proceed with the trial to get it to its legitimate end according to substantive merit of his case. The court to exercise the power to stay the proceedings has to keep in mind that the positive case has been made out by the defendant whereby the court can reach to the conclusion that proceedings, however, indicate an abuse of the process of Court. The High Court has granted stay of proceedings as it found plaintiffs guilty of suppression of jurisdictional clause of BOL and on the finding that plaintiffs have no case on merits, and thus it would be abuse of process of the Court if the plaintiffs are permitted to go ahead with the trial in Calcutta Court. We are no satisfied that the defendants have made out the case on any of the counts. (Para 22)

       The Court has found that the Calcutta Court has jurisdiction to try the proceedings except when the forum selection clause excludes the jurisdiction of the Court. The Court has also found that the law of Singapore is not known. The case of the defendant carrier/owner of the ship, of exclusion of the Calcutta Court, is solely based on the exclusion clause which conferred jurisdiction on the Court where the defendant has the principal place of business, which according to us has to be determined only after sufficient material is placed before the Court. (Para 27)

       From this, it appears that the principal place of business would be where the governing power of the corporation is exercised or the place of a corporation’s Chief Executive Offices, which is typically viewed as the nerve center or the place designated as the principal place of business of the corporation in its incorporation under the various statutes. Therefore, to arrive at a finding as to which is the principal place of business, the parties would be required to place the relevant material before the Court. The Court cannot arrive at a finding of a particular place being the principal place of business at the preliminary stage of the hearing of the suit. The defendants have not placed any material before the Court that the Singapore Court is another available forum which is clearly or distinctly more appropriate than the Indian Courts. The Court has not taken into consideration that the action commenced by the plaintiff-appellants in Calcutta Court founded on the facts which are most real and substantially connected in terms of convenience or expense, availability of the witnesses and the law governing the relevant transaction in the Indian Court. There is no averment in the application filed by the defendants that continuance of the action in Calcutta High Court would work injustice to them because it is oppressive or vexatious to them or would be an abuse of the process of the Court. There was no material before the Court how the trial at Singapore would be more convenient to the parties vis-a-vis the trial of the suit at Calcutta and that justice could be done between the parties at substantially less inconvenience and expense. Nor it has been shown that stay would not deprive the plaintiffs of legitimate personal or juridical advantage available to them. In the facts of the case, we are not satisfied that there is other forum having jurisdiction, in which the case may be tried more suitably for the interest of all the parties and for ends of justice. The Rules of the High Court of Calcutta on the Original Side, Appendix No. 5 under the caption ‘Admiralty Rules’, the Rules for regulating the procedure and practice in cases brought before the High Court at Calcutta under the Colonial Courts of Admiralty Act, 1890 were framed. The suit was defined to mean any suit, action, or other proceedings instituted in the said court in its jurisdiction under the Colonial Courts of Admiralty Act. (Paras 27 and 28)

       The maintainability of the suit filed by the plaintiff-appellants was the question raised before the court and the court was quite aware of the fact that the defendants are submitting to the jurisdiction of the court subject to their rights and contentions that the suit is not maintainable in the Calcutta High Court. Thus, it cannot be said that at the time of the filing of the letter of intention for furnishing guarantee parties were not aware that the question of the jurisdiction of the court would be raised. Not only the parties the court was also aware that the issue of jurisdiction of the court would be in question. The defendants have not pressed for dismissal of the suit even when the bank guarantee was furnished on 17.5.2000. The defendants have not asserted dismissal of suit on the ground of jurisdiction of the Court at the outset when letter of intention was furnished by the Punjab National Bank on their behalf nor at the time of furnishing bank guarantee and waited till 7.7.2001 to file an application. From reading of Admiralty Rules, it appears that it is a usual and common practice to issue warrant of arrest if the affidavit filed under Rule 4 contains all particulars required. Thus, it cannot be said that arrest of the ship was obtained by the plaintiffs suppressing material facts which would warrant stay of suit by the Court. For the reasons aforementioned, we are of the view that the defendants have not made out a case for stay of the proceedings of Admiralty Suit No. 11 of 2000 pending in the Calcutta High Court and the High Court has committed an error in passing the order of permanent stay and discharging the bank guarantee. (Paras 33 and 34)

       (iii) Words and Phrases—Words ‘Principal place of business’—Meaning—Principal place of business would be where the governing power of the corporation is exercised or the place of a corporation’s Chief Executive Officers. (Para 27)