Thursday, August 22, 2013

Guest Post: Swastik Gases v Indian Oil Corporation

(In the following post, Ms Renu Gupta, Advocate, analyses the recent judgment of the Supreme Court on exclusive jurisdiction clauses)

The recent Supreme Court decision of Swastik Gases Private Limited v. Indian Oil Corporation Limited, relating to ouster of jurisdiction clauses has been discussed on this blog here. In this article I have discussed that this judgment does not provide any helpful guideline to understand the application of “expressio unius est exclusio alterius”, i.e., expression of one is the exclusion of another.

The question in Swastik Gases was whether an ouster of jurisdiction clause, without the use of expressions such as “only”, “alone”, “exclusive”, “exclusive jurisdiction”, could still be construed to oust the jurisdiction of all courts except the one mentioned, in case of an application made under Section 11 of the Arbitration and Conciliation Act, 1996 (“Act”).

The agreement was “subject to jurisdiction of courts at Kolkata”. According to Indian Oil the agreement had been signed at Kolkata; while Swastik’s stand was that it was signed at Jaipur and except execution of the agreement at Kolkata, all necessary facts forming part of the cause of action arose at Jaipur (see para 12).
                                                                                                                                              
Lokur J., in his separate but concurring judgment, rightly stated that there are two categories of decisions regarding ouster clauses. First, where the intention of the parties can be culled out from use of the expressions “only”, “alone”, “exclusive”. Second, where the exclusion clause is not specific in as much as words like “only”, “alone” or “exclusively” are not used.

We are here concerned with the second category of decisions. The underlying basis of all the decisions in the second category is reliance on the maxim “expressio unius est exclusio alterius”, based on ABC Laminart.

The Supreme Court in ABC Laminart while discussing this maxim observed at paragraph 16 that:

“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. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed.”

Thus, the Court in ABC Laminart did not lay down any guideline to determine what may be “an appropriate case” to apply “expressio unius est exclusio alterius” to an ouster clause, and left it to be determined based on facts of each case.

In the table below, I have analysed the decisions in the second category:

Case
Clause
Part of cause of action arising in the court not specified in the ouster clause

Decision
Comments
ABC Laminart

Any dispute arising out of this sale shall be subject to Kaira jurisdiction.
Goods were delivered at the address of the respondent at Salem.
Jurisdiction of Courts other than in Kaira were not clearly, unambiguously and explicitly excluded and therefore, the Court at Salem had jurisdiction.


This work order is issued subject to the jurisdiction of the High Court situated in Bangalore in the State of Karnataka. Any legal proceeding will, therefore, fall within the jurisdiction of the above Court only.

Contract was entered into and executed within Dhanbad.

Jurisdiction clause is not void under Section 23 and 28 of Contract Act. Therefore, jurisdiction of all other courts is excluded.
Relies on ABC Laminart without any factual analysis as how does the clause unambiguously and explicitly exclude jurisdiction of all other courts.
Subject to Anand jurisdiction.
Part of cause action arose in Bombay.
The ouster clause does not use 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, the jurisdiction of all other competent courts is barred.

Relies on ABC Laminart and in the facts of the case held that the jurisdiction clause is not exclusionary.
Any legal proceeding arising out of the order shall be subject to the jurisdiction of the Courts in Mumbai.
According to plaintiff, ordered goods were delivered to the defendant in Delhi and the value of goods was to be paid by the defendant to the plaintiff at Delhi.
Since (i) order was placed at Bombay, (ii) order was accepted at Bombay, (iii) advance payment was made at Bombay, (iv) final payment was to be made at Bombay, there was a clear intention to confine the jurisdiction of the Courts in Bombay to the exclusion of all other Courts.

Relies on ABC Laminart and in the facts of the case held that the jurisdiction clause is exclusionary.

Seemingly the decision was based on larger part of the cause of action having arisen in Bombay.
The place of arbitration shall be Kolkata.
For section 9 application - After discharge of goods at port Pipavav in Gujarat, they were stored in a godown within the jurisdiction of the Bhavnagar Court.
Parties had knowingly and voluntarily agreed that the contract would be subject to Kolkata jurisdiction and even if the courts in Gujarat also had jurisdiction, it has to be held that the agreement to have the disputes decided in Kolkata was valid.

Relies on ABC Laminart without any factual analysis as how does the clause unambiguously and explicitly exclude jurisdiction of all other courts.


Shriram City Union Finance Corporation v.  Rama
Mishra

…. differences and for disputes arising out of this agreement shall be filed and referred to the courts in Calcutta for the   purpose   of jurisdiction.


Through the jurisdiction clause in the agreement, the parties have bound themselves that the courts in Calcutta alone which  will have jurisdiction.
Relies on ABC Laminart without any factual analysis as how does the clause explicitly exclude jurisdiction of all other courts.


Evidently, relying on “expressio unius est exclusio alterius” stated in ABC Laminart, the Courts have applied this maxim, without any discernible guideline as to its usage.

In Hanila Era, the only seeming rationale for applying “expressio unius est exclusio alterius” is that a larger part of cause of action arose within the territorial limits of the courts mentioned. However, Section 20(c) of Code of Civil Procedure, 1908, specifies that all courts where cause of action, wholly or in part arises have jurisdiction. It does not say that Courts where larger part of cause of action arose will have preference. Thus, even applying the test of where a larger part of cause of action does not seem right.

In Swastik Gases the Court held that:

“31…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 1 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.

Further, Lokur J. held that:

“4. The use of words like “only”, “exclusively”, “alone” and so on are not necessary to convey the intention of the parties in an exclusion of jurisdiction clause of an agreement.”

With respect, the aforesaid findings of the Court are contrary to the settle principle of law that intention of the parties can be culled out from use of the expressions “only”, “alone” and “exclusive” (see New Moga Transport Co v United India Insurance).

In a situation where there seemed to be no denial by Indian Oil of the fact that except execution of the agreement at Kolkata, all necessary facts forming part of the cause of action arose at Jaipur (see para 12), perhaps relying on Hanila Era, the test of larger part of cause of action could have been applied and jurisdiction of Jaipur courts could have been respected.

Therefore, just like the other decisions in the second category, explained above, Swatik Gases also does not lay down any clear guideline for applying “expressio unius est exclusio alterius”.

With the facts of Swatik Gases, could the Court have applied some other principles of law regarding interpretation of contracts and come to the same conclusion as it did with the aid of the maxim “expressio unius est exclusio alterius”? I will attempt to address this question in a separate post.

1 comment:

Badrinath Srinivasan said...

Swastik Gases takes a more commonsensical approach than the past decisions on the 2nd type of cases you've mentioned. Why would parties want to select a jurisdiction unless they intend to make it the only forum given that jurisdiction cannot be conferred by agreement to a court which would not ordinarily have jurisdiction? Swastik Gases thus takes away the artificial distinction between the first and the second cases.