Monday, July 22, 2013

Supreme Court on Jurisdiction Clauses

A recent decision of the Supreme Court, Swastik Gases v. Indian Oil Corp. (Civil Appeal 5086 of 2013, decision dated July, 3, 2013), examines the position of Indian law dealing with exclusive jurisdiction clauses.

The Court was concerned with a case where an agreement was executed in Kolkata, while all the other elements of the cause of action had taken place in Jaipur.  The agreement provided for arbitration (clause 17) in accordance with the 1996 Act, without specifying any seat.  A separate jurisdiction clause (clause 18) stated, “The Agreement shall be subject to jurisdiction of the Courts at Kolkata”.  The appellant had filed a petition u/s.11 in the Rajasthan High Court, on the basis that a substantial part of the cause of action arose in Jaipur.  The Respondent’s resisted the jurisdiction of the Rajasthan High Court, on the strength of clause 18.

The fulcrum of the Appellant’s case was the decision in ABC Laminart v AP Agencies (1989, Supreme Court), where the Court had held:

As regards construction of the ouster clause when words like ‘alone’, ‘only’, ‘exclusive’ and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim ‘expressio unius est exclusio alterius’ — expression of one is the exclusion of another — may be applied. What is an appropriate case shall depend on the facts of the case

If out of the two jurisdictions one was excluded by clause 11 it would not absolutely oust the jurisdiction of the court and, therefore, would not be void against public policy and would not violate Sections 23 and 28 of the Contract Act. The question then is whether it can be construed to have excluded the jurisdiction of the court at Salem. In the clause ‘any dispute arising out of this sale shall be subject to Kaira jurisdiction’ ex facie we do not find exclusionary words like ‘exclusive’, ‘alone’, ‘only’ and the like. Can the maxim ‘expressio unius est exclusio alterius’ be applied under the facts and circumstances of the case? The order of confirmation is of no assistance. The other general terms and conditions are also not indicative of exclusion of other jurisdictions. Under the facts and circumstances of the case we hold that while connecting factor with Kaira jurisdiction was ensured by fixing the situs of the contract within Kaira, other jurisdictions having connecting factors were not clearly, unambiguously and explicitly excluded. That being the position it could not be said that the jurisdiction of the court at Salem which court otherwise had jurisdiction under law through connecting factor of delivery of goods thereat was expressly excluded……”

The extracts above would indicate that ABC Laminart did not absolutely rule out an ouster of jurisdiction in the absence of express words like ‘alone’ or ‘only’.  In RSDV Finance v. Vallabh Glass Works (1993 SC), the Supreme Court held, purporting to rely on ABC Laminart:

The endorsement ‘Subject to Anand jurisdiction’ does not contain the ouster clause using the words like ‘alone’, ‘only’, ‘exclusive’ and the like. Thus the maxim ‘expressio unius est exclusio alterius’ cannot be applied under the facts and circumstances of the case and it cannot be held that merely because the deposit receipt contained the endorsement ‘Subject to Anand jurisdiction’ it excluded the jurisdiction of all other courts who were otherwise competent to entertain the suit.

The Supreme Court in Swastik Gases considered these, and several other cases, and held (per Lodha J; Kurian Joseph J agreeing with the judgment of Lodha J)

It is a fact that whilst providing for jurisdiction clause in the agreement the words like ‘alone’, ‘only’, ‘exclusive’ or ‘exclusive jurisdiction’ have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties - by having clause 18 in the agreement – is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts.

Accordingly, the appeal was dismissed.  The Court thus seems to have affirmed that the choice of one of two jurisdictions is sufficient to (at least) raise a presumption as to valid ouster of the jurisdiction, even in the absence of specific exclusionary words.  (Lokur J. delivered a separate concurring judgment, also separately analyzing the case law.  Lokur J, conclusion was: “The absence of words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” is neither decisive nor does it make any material difference in deciding the jurisdiction of a court. The very existence of a jurisdiction clause in an agreement makes the intention of the parties to an agreement quite clear and it is not advisable to read such a clause in the agreement like a statute.”)


Renu Gupta said...

There are 2 interesting aspects of an ouster clause vis-a-vis filing of a petition under Section 11 of the Arbitration and Conciliation Act, 1996.

First, it is often argued that "Court" used in such clauses does not mean "Chief Justice" as is the expression used in Section 11 and therefore an ouster of jurisdiction clause does not necessarily apply to filing of a Section 11 petition. Reliance is placed on the decision in SBP v. Patel Engineering, to say that the Chief Justice under Section 11 is a judicial authority and not Court. I think a few high courts have taken this view.

Second, it is also argued that "Courts" applies only to civil courts and therefore should not apply to filing of a Section 11 petition before a Chief Justice.

Unfortunately, there is no SC decision (in my knowledge) dealing with these two aspects in the context of a section 11 petition.

Badrinath Srinivasan said...

@ Renu Gupta, It would be too technical for those courts to make such a distinction between "courts" and the "Chief Justice" from a contractual perspective. Such an interpretation would force the parties to negotiate an additional clause or at least, make a mention of it in the jurisdiction clause, of choosing the appropriate "Chief Justice" as well.

Tara said...

@Badrinath - thank goodness they don't too! What a nightmare it would be to have to go through a selection process for the Chief Justice, just like we have to go through with selecting a jury.

Ranjan Jha said...

From the perusal of the judgment, i am unable to understand from where the Court has arrived on a conclusion that cause of action has also arisen in the territorial jurisdiction of Court at Kolkata, when the Counsel for Appellate has denied the fact that Agreement was executed at Kolkata.

Contention in para 12: It was the submission of the learned counsel that except execution of the agreement, which was done at Kolkata, though it was signed at Jaipur, all other necessary bundle of facts forming ‘cause of action’ have arisen at Jaipur.

Finding in para 31: In the instant case, the appellant does not dispute that part of cause of action has arisen in Kolkata. What appellant says is that part of cause of action has also arisen in Jaipur and, therefore, Chief Justice of the Rajasthan High Court or the designate Judge has jurisdiction to consider the application made by the appellant for the appointment of an arbitrator under Section 11.

Anonymous said...

Ranjan, perhaps the court was saying that para 12 indicated that the appellant was arguing that except execution, the entire CoA was in Rajasthan; but execution was also part of the CoA? A minor part, not a substantial one, but a part nonetheless?

Anonymous said...

There was a Ex stock and hss agreement between the parties. These Agreement did not contain any jurisdiction clause but invoices relating to these agreement contained Jurisdiction for high Court of Ahmedabad. Also arbitration clause contained the seat of jurisdiction for seat of Arbitration as London. Where should a case be maintable? Under which Jurisdiction and under which law?