Companies Act Case Law M/S. Kusum Ingots & Alloys Ltd Vs Union Of India And Anr.

CASE NO.:
Appeal (civil) 9159 of 2003

PETITIONER:
M/s. Kusum Ingots & Alloys Ltd.

RESPONDENT:
Union of India and Anr.

DATE OF JUDGMENT: 28/04/2004

BENCH:
CJI, S.B. Sinha & S.H. Kapadia.

JUDGMENT:
J U D G M E N T

S.B. SINHA, J :

INTRODUCTION

Whether the seat of the Parliament or the Legislature
of a State would be a relevant factor for determining the
territorial jurisdiction of a High Court to entertain a writ
petition under Article 226 of the Constitution of India is
the question involved in this appeal which arises out of a
judgment and order dated 25.7.2003 passed by the High Court
of Delhi in C.W.P. No. 4609 of 2003 holding that the said
Court has no jurisdiction.

BACKGROUND FACTS

The appellant is a company registered under the Indian
Companies Act. Its registered office is at Mumbai. It
obtained a loan from the Bhopal Branch of State Bank of
India. The respondent No. 2 issued a notice for repayment
of the said loan from Bhopal purported to be in terms of the
provisions of Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002.

Questioning the vires of the said Act, the said writ
petition was filed before Delhi High Court by the appellant
herein which was dismissed on the ground of lack of
territorial jurisdiction.

Submissions

The only submission made on behalf of the appellant
before the High Court as also before us is that as the
constitutionality of a parliamentary act was in question,
the High Court of Delhi had the requisite jurisdiction to
entertain the writ petition.

On the other hand, the contention of the learned
counsel appearing on behalf of the respondent is that as no
cause of action arose within the territorial jurisdiction of
the High Court of Delhi, the writ petition has rightly not
been entertained.

Cause of Action:
Cause of action implies a right to sue. The material
facts which are imperative for the suitor to allege and
prove constitutes the cause of action. Cause of action is
not defined in any statute. It has, however, been
judicially interpreted inter alia to mean that every fact
which would be necessary for the plaintiff to prove, if
traversed, in order to support his right to the judgment of
the Court. Negatively put, it would mean that everything
which, if not proved, gives the defendant an immediate right
to judgment, would be part of cause of action. Its
importance is beyond any doubt. For every action, there has
to be a cause of action, if not, the plaint or the writ
petition, as the case may be, shall be rejected summarily.

Clause (2) of Article 226 of the Constitution of India
reads thus:

“(2) The power conferred by clause (1)
to issue directions, orders or writs to
any Government, authority or person may
also be exercised by any High Court
exercising jurisdiction in relation to
the territories within which the cause
of action, wholly or in part, arises for
the exercise of such power,
notwithstanding that the seat of such
Government or authority or the residence
of such person is not within those
territories.”
Section 20(c) of the Code of Civil Procedure reads as
under:
“20 OTHER SUITS TO BE INSTITUTED WHERE
DEFENDANT RESIDE OR CAUSE OF ACTION
ARISES.
Subject to the limitation aforesaid,
every suit shall be instituted in a
court within the local limits of whose
jurisdiction –
(c) the cause of action, wholly or in
part, arises.”
Although in view of Section 141 of the Code of Civil
Procedure the provisions thereof would not apply to a writ
proceedings, the phraseology used in Section 20(c) of the
Code of Civil Procedure and Clause (2) of Article 226,
being in pari materia, the decisions of this Court rendered
on interpretation of Section 20(c) of CPC shall apply to the
writ proceedings also. Before proceeding to discuss the
matter further it may be pointed out that the entire bundle
of facts pleaded need not constitute a cause of action as
what is necessary to be proved before the petitioner can
obtain a decree is the material facts. The expression
material facts is also known as integral facts.

Keeping in view the expressions used is Clause (2) of
Article 226 of the Constitution of India, indisputably even
if a small fraction of cause of action accrues within the
jurisdiction of the Court, the Court will have jurisdiction
in the matter.

In Mussummat Chand Kour v. Partap Singh (15 IA 156), it
was held:
“… the cause of action has no relation
whatever to the defence which may be set
up by the defendant, nor does it depend
upon the character of the relief prayed
for by the plaintiff. It refers entirely
to the ground set forth in the plaint as
the cause of action, or, in other words,
to the media upon which the plaintiff
asks the court to arrive at a con-
clusion in his favour.”
This Court in Oil & Natural Gas Commission v. Utpal
Kumar Basu and Ors. (1994 (4) SCC 711) held that the
question as to whether the court has a territorial
jurisdiction to entertain a writ petition, must be arrived
at on the basis of averments made in the petition, the truth
or otherwise thereof being immaterial.

This Court in Oil and Natural Gas Commission’s case
(supra) held that all necessary facts must form an integral
part of the cause of action. It was observed:
“So also the mere fact that it sent fax
messages from Calcutta and received a
reply thereto at Calcutta would not
constitute an integral part of the cause
of action…”

In State of Rajasthan and Ors. v. M/s. Swaika
Properties and Anr. [1985 (3) SCC 217], this Court opined
that mere service of a notice would not give rise to any
cause of action unless service of notice was integral part
of the cause of action. The said decision has also been
noticed in Oil and Natural Gas Commission (supra). This
Court held:
“The answer to the question whether
service of notice is an integral part of
the cause of action within the meaning
of Art. 226(2) of the Constitution must
depend upon the nature of the impugned
order giving rise to a cause of action.”

In Aligarh Muslim University and Another Vs. Vinay
Engineering Enterprises (P) Ltd. and Another [(1994) 4 SCC
710] this Court lamented:

“2. We are surprised, not a little,
that the High Court of Calcutta should
have exercised jurisdiction in a case
where it had absolutely no jurisdiction.
The contracts in question were executed
at Aligarh, the construction work was to
be carried out at Aligarh, even the
contracts provided that in the event of
dispute the Aligarh Court alone will
have jurisdiction. The arbitrator was
from Aligarh and was to function there.
Merely because the respondent was a
Calcutta-based firm, the High Court of
Calcutta seems to have exercised
jurisdiction where it had none by
adopting a queer line of reasoning. We
are constrained to say that this is case
of abuse of jurisdiction and we feel
that the respondent deliberately moved
the Calcutta High Court ignoring the
fact that no part of the cause of action
had arisen within the jurisdiction of
that Court. It clearly shows that the
litigation filed in the Calcutta High
Court was thoroughly unsustainable.”

In Union of India and Others Vs. Adani Exports Ltd. and
Another [(2002) 1 SCC 567] it was held that in order to
confer jurisdiction on a High Court to entertain a writ
petition it must disclose that the integral facts pleaded in
support of the cause of action do constitute a cause so as
to empower the court to decide the dispute and the entire or
a part of it arose within its jurisdiction.
Recently, in National Textile Corpn. Ltd. and Ors. vs.
M/s Haribox Swalram and Ors. [JT 2004 (4) SC 508], a
Division Bench of this Court held :
“As discussed earlier, the mere fact
that the writ petitioner carries on
business at Calcutta or that the reply
to the correspondence made by it was
received at Calcutta is not an integral
part of the cause of action and,
therefore, the Calcutta High Court had
no jurisdiction to entertain the writ
petitioner and the view to the contrary
taken by the Division Bench cannot be
sustained. In view of the above
finding, the writ petition is liable to
be dismissed…”

The facts pleaded in the writ petition must have a
nexus on the basis whereof a prayer can be granted. Those
facts which have nothing to do with the prayer made therein
cannot be said to give rise to a cause of action which would
confer jurisdiction on the court.
Passing of a legislation by itself in our opinion do
not confer any such right to file a writ petition unless a
cause of action arises therefor.

A distinction between a legislation and executive
action should be borne in mind while determining the said
question.
A parliamentary legislation when receives the assent of
the President of India and published in an Official Gazette,
unless specifically excluded, will apply to the entire
territory of India. If passing of a legislation gives rise
to a cause of action, a writ petition questioning the
constitutionality thereof can be filed in any High Court of
the country. It is not so done because a cause of action
will arise only when the provisions of the Act or some of
them which were implemented shall give rise to civil or evil
consequences to the petitioner. A writ court, it is well
settled would not determine a constitutional question in
vacuum.
The court must have the requisite territorial
jurisdiction. An order passed on writ petition questioning
the constitutionality of a Parliamentary Act whether interim
or final keeping in view the provisions contained in Clause
(2) of Article 226 of the Constitution of India, will have
effect throughout the territory of India subject of course
to the applicability of the Act.
Situs of office of the Respondents – whether relevant?
A writ petition, however, questioning the
constitutionality of a Parliamentary Act shall not be
maintainable in the High Court of Delhi only because the
seat of the Union of India is in Delhi. (See Abdul Kafi Khan
Vs. Union of India and Others, AIR 1979 Cal 354)
Learned counsel for the appellant in support of his
argument would contend that situs of framing law or rule
would give jurisdiction to Delhi High Court and in support
of the said contention relied upon the decisions of this
Court in Nasiruddin vs. State Transport Appellate Tribunal
(AIR 1976 SC 331) and U.P. Rashtriya Chini Mill Adhikari
Parishad, Lucknow vs. State of U.P. and others (1995) 4 SCC
738. So far as the decision of this Court in Nasiruddin
vs. State Transport Appellate Tribunal (supra) is concerned
it is not an authority for the proposition that the situs of
legislature of a State or the authority in power to make
subordinate legislation or issue a notification would
confer power or jurisdiction on the High Court or a bench of
the High Court to entertain petition under Article 226 of
the Constitution. In fact this Court while construing the
provisions of United Provinces High Courts (Amalgamation)
Order, 1948 stated the law thus:
“The conclusion as well as the
reasoning of the High Court is
incorrect. It is unsound because the
expression “cause of action” in an
application under Article 226 would be
as the expression is understood and if
the cause of action arose because of the
appellate order or the revisional order
which came to be passed at Lucknow then
Lucknow would have jurisdiction though
the original order was passed at a place
outside the areas in Oudh. It may be
that the original order was in favour of
the person applying for a writ. In such
case an adverse appellate order might be
the cause of action. The expression
“cause of action” is well-known. If
the cause of action arises wholly or in
part at a place within the specified
Oudh areas, the Lucknow Bench will have
jurisdiction. If the cause of action
arises wholly within the specified Oudh
areas, it is indisputable that the
Lucknow Bench would have exclusive
jurisdiction in such a matter. If the
cause of action arises in part within
the specified areas in Oudh it would be
open to the litigant who is the dominus
litis to have his forum conveniens. The
litigant has the right to go to a Court
where part of his cause of action
arises. In such cases, it is incorrect
to say that the litigant chooses any
particular Court. The choice is by
reason of the jurisdiction of the Court
being attracted by part of cause of
action arising within the jurisdiction
of the Court. Similarly, if the cause
of action can be said to have arisen
partly within specified areas in arisen
in Oudh and partly outside the specified
Oudh areas, the litigant will have the
choice to institute proceedings either
at Allahabad or Lucknow. The Court will
find out in each case whether the
jurisdiction of the Court is rightly
attracted by the alleged cause of
action”.

The said decision is an authority for the proposition
that the place from where an appellate order or a revisional
order is passed may give rise to a part of cause of action
although the original order was at a place outside the said
area. When a part of the cause of action arises within one
or the other High Court, it will be for the petitioner to
choose his forum.
The view taken by this Court in U.P. Rashtriya Chini
Mill Adhikari Parishad, Lucknow (supra) that situs of issue
of an order or notification by the Government would come
within the meaning of expression ‘cases arising’ in clause
14 of the (Amalgamation) Order is not a correct view of law
for the reason hereafter stated and to that extent the said
decision is overruled. In fact, a legislation, it is trite,
is not confined to a statute enacted by the Parliament or
Legislature of a State, which would include delegated
legislation and subordinate legislation or an executive
order made by the Union of India, State or any other
statutory authority. In a case where the field is not
covered by any statutory rule, executive instruction issued
in this behalf shall also come with within the purview
thereof. situs of office of the Parliament, Legislature of
a State or authorities empowered to make subordinate
legislation would not by itself constitute any cause of
action or cases arising. In other words, framing of a
statute, statutory rule or issue of an executive order or
instruction would not confer jurisdiction upon a court only
because of the situs of the office of the maker thereof.

When an order, however, is passed by a Court or
Tribunal or an executive authority whether under provisions
of a statute or otherwise, a part of cause of action arises
at that place. Even in a given case, when the original
authority is constituted at one place and the appellate
authority is constituted at another, a writ petition would
be maintainable at both the places. In other words as order
of the appellate authority constitutes a part of cause of
action, a writ petition would be maintainable in the High
Court within whose jurisdiction it is situate having regard
to the fact that the order of the appellate authority is
also required to be set aside and as the order of the
original authority merges with that of the appellate
authority.

Lt. Col. Khajoor Singh Vs. The Union of India and
Another [(1961) 2 SCR 828] whereupon the learned counsel
appearing on behalf of the appellant placed strong reliance
was rendered at a point of time when clause (2) of Article
226 had not been inserted. In that case the Court held that
the jurisdiction of the High Court under Article 226 of the
Constitution of India, properly construed, depends not on
the residence or location of the person affected by the
order but of the person or authority passing the order and
the place where the order has effect. In the latter sense,
namely, the office of the authority who is to implement the
order would attract the territorial jurisdiction of the
Court was considered having regard to Section 20(c) of the
Code of Civil Procedure as Article 226 of the Constitution
thence stood stating :

“…The concept of cause of action
cannot in our opinion be introduced in
Art. 226, for by doing so we shall be
doing away with the express provision
contained therein which requires that
the person or authority to whom the writ
is to be issued should be resident in or
located within the territories over
which the High Court has jurisdiction.
It is true that this may result in some
inconvenience to person residing far
away from New Delhi who are aggrieved by
some order of the Government of India as
such, and that may be a reason for
making a suitable constitutional
amendment in Art. 226. But the argument
of inconvenience, in our opinion, cannot
affect the plain language of Art. 226,
nor can the concept of the place of
cause of action be introduced into it
for that would do away with the two
limitations on the powers of the High
Court contained in it.”
In view of clause 2 of Article 226 of the Constitution
of India now if a part of cause of action arises outside the
jurisdiction of the High Court, it would have jurisdiction
to issue a writ. The decision in Khajoor Singh (supra) has,
thus, no application.

Forum Conveniens

We must, however, remind ourselves that even if a small
part of cause of action arises within the territorial
jurisdiction of the High Court, the same by itself may not
be considered to be a determinative factor compelling the
High Court to decide the matter on merit. In appropriate
cases, the Court may refuse to exercise its discretionary
jurisdiction by invoking the doctrine of forum conveniens.
(See Bhagar Singh Bagga v. Dewan Jagbir Sawhany, AIR 1941
Cal; Mandal Jalan v. Madanlal, (1945) 49 CWN 357; Bharat
Coking Coal Limited v. M/s Jharia Talkies & Cold Storage
Pvt. Ltd. (1997) CWN 122; S.S.Jain & Co. & Anr. v. Union of
India & Ors. (1994) CHN 445; M/s. New Horizon Ltd. v. Union
of India, AIR 1994 Delhi 126)
Conclusion

For the aforementioned reasons, there is no merit in
this appeal which is dismissed accordingly. No costs.

 

 

 

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