1

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (C) No.10184 of 2008

A.V.M. SALES CORPORATION  …    PETITIONER   

VS.

M/S. ANURADHA CHEMICALS PVT. LTD.  …    RESPONDENT

J U D G M E N T

ALTAMAS KABIR, J.

1. On 23rd December, 1988, the parties to the Special  

Leave Petition entered into an Agreement at Calcutta

2

for supply of chemicals manufactured by the Respondent  

to the Petitioner.   In continuation of the aforesaid  

Agreement,  the  parties  arrived  at  a  Mutual  

Understanding on 15th May, 1989, whereby the Respondent  

would  adjust  the  advance  lying  with  it  and  would  

exclusively supply to the Petitioner its two products,  

namely, Sodium Chromate and Sodium Dichromate in West  

Bengal,  Bihar,  Orissa  and  Assam.  The  Understanding  

between the parties included other terms and conditions  

as well.  The terms of the Understanding entered into  

between the parties were reduced into writing in an  

agreement and the same was executed at Calcutta on 5th  

August,  1989,  reiterating  the  terms  of  the  

Understanding  and  containing  an  additional  clause  

indicating  that  “Any  dispute  arising  out  of  this  agreement  will  be  subject  to  Calcutta  jurisdiction  only.” [Emphasis supplied].   

2. Since certain differences arose between the parties  

relating  to  the  supply  of  goods  in  question,  the

3

Petitioner herein filed Original Suit No.588 of 1991 in  

the  Calcutta  High  Court  on  27th August,  1991,  for  

recovery of its alleged dues from the Respondent, after  

giving due adjustment of the amount of the Invoices  

raised by the Respondent and filed its claim only for  

the balance amount, along with penalties etc.  Upon  

receiving summons of the suit filed by the Petitioner,  

the Respondent on 12th September, 1991, filed a separate  

suit against the Petitioner at Vijayawada for recovery  

of a sum of  3,86,453.05, treating the Purchase Order  

dated  12th February,  1990,  to  be  independent  of  the  

Agreement  and  also  sought  recovery  of  supplies  made  

under the Invoices raised by the Respondent upon the  

Petitioner.   

3. The Petitioner duly contested the Suit filed by the  

Respondent  by  filing  Written  Statement,  along  with  

relevant documents, in support of its case.  Out of the  

several issues raised by the Petitioner, one was the  

issue relating to the jurisdiction of the Vijayawada

4

Court to entertain the Suit on account of the exclusion  

clause  by  which  all  actions  arising  out  of  the  

Agreement and the Memorandum of Understanding were to  

be  subject  to  the  Calcutta  jurisdiction  only.   The  

other  issue  of  importance  was  with  regard  to  

adjustment, inasmuch as, the Purchase Order dated 12th  

February,  1990,  was  treated  as  independent  of  the  

Understanding  and  Agreement  arrived  at  between  the  

parties.   Rejecting  the  objection  relating  to  

jurisdiction,  the  Principal  Senior  Civil  Judge,  

Vijayawada, by his judgment and decree dated 5th March,  

1999,  decreed  the  Respondent’s  Suit  (Original  Suit  

No.519 of 1991) with costs for a sum of 3,86,453.05,  

together with interest at the rate of 12% per annum,  

from  the  date  of  the  Suit  till  realisation  of  the  

principal amount of 2,98,267.50.  The Petitioner filed  

First Appeal No.1352 of 1999 before the Andhra Pradesh  

High Court against the aforesaid judgment and decree  

dated 5th March, 1999.  By judgment and order dated 18th  

January, 2007, the learned Single Judge of the High

5

Court dismissed the Appeal filed by the Petitioner.  It  

is against the aforesaid judgment of the learned Single  

Judge of the Andhra Pradesh High Court in the First  

Appeal  preferred  by  the  Petitioner  that  the  present  

Special Leave Petition has been filed.   

4. Apart from the other grounds taken with regard to  

factual aspect of the matter, grounds have also been  

taken  regarding  the  exclusive  jurisdiction  of  the  

Courts  at  Calcutta  agreed  to  by  the  parties  in  the  

Agreement and whether the same was not binding upon the  

parties.  A further ground has also been taken as to  

whether in breach of the Agreement, the Respondent was  

entitled  to  invoke  the  jurisdiction  of  a  Court  at  

Vijayawada,  whose  jurisdiction  stood  ousted  by  the  

Agreement entered into between the parties.

5. On the strength of the pleadings of the parties,  

five issues were framed by the Trial Court, of which  

the first issue was whether the Court at Vijayawada had

6

territorial jurisdiction to entertain the suit.  By his  

judgment  and  decree  dated  5th March,  1999,  in  O.S.  

No.519  of  1991,  the  learned  Principal  Senior  Civil  

Judge, Vijayawada, held that the Court at Vijayawada  

had jurisdiction to entertain the Suit as part of the  

cause  of  action  for  the  suit  arose  within  its  

jurisdiction.   The  learned  Trial  Judge,  accordingly,  

decreed the Suit, as indicated hereinabove.  In the  

First Appeal, being F.A. No.1352 of 1992, the learned  

Single Judge of the Andhra Pradesh High Court observed  

that the main contention of the Appellant before the  

High Court, who is the Petitioner herein, was that the  

Principal  Senior  Civil  Judge,  Vijayawada,  had  no  

jurisdiction to entertain the Suit as no part of the  

cause of action had arisen at Vijayawada. According to  

the Petitioner, its place of business was at Calcutta  

and  the  Agreement  for  the  supply  of  the  goods  in  

question was also entered into at Calcutta.  The goods  

were to be delivered at Calcutta and payment in respect  

thereof was to be made at Calcutta and, accordingly,

7

the Court at Vijayawada had no territorial jurisdiction  

to entertain the Suit under Section 20 of the Code of  

Civil Procedure as no part of the cause of action had  

arisen within its jurisdiction.  It was also emphasised  

that in the Agreement which was made Exh.D-5, it has  

been stipulated in Column 13 that any dispute arising  

out of the Agreement would be subject to the Calcutta  

jurisdiction only.  

6. The  question  involved  in  this  Special  Leave  

Petition has several dimensions, including the question  

as to whether the parties to an agreement can contract  

in  violation  of  Sections  23  and  28  of  the  Indian  

Contract  Act,  1872.  Obviously,  the  parties  cannot  

contract against the statutory provisions.  A connected  

question would arise as to whether the parties to an  

agreement can confer jurisdiction on a Court which has  

no territorial or pecuniary jurisdiction to entertain a  

matter?  The answer to the second question is also in  

the  negative.   However,  in  this  case  a  slightly

8

different question arises, namely, as to whether if two  

Courts have jurisdiction to try a suit, can the parties  

to  an  agreement  mutually  agree  to  exclude  the  

jurisdiction of one Court in preference to the other  

and as to whether the same would amount to violation of  

the  provisions  of  Sections  23  and  28  of  the  Indian  

Contract Act?  The said question has been answered in  

the affirmative by the Trial Court and has been upheld  

by the High Court.  

7. The question which has been raised in this Special  

Leave Petition is not new and has been considered by  

this  Court  earlier  in  several  decisions.  We  are,  

therefore, required to consider as to whether the cause  

of  action  for  the  Suit  filed  by  the  Respondent  in  

Vijayawada arose within the jurisdiction of the Court  

of  the  Principal  Senior  Civil  Judge  at  Vijayawada,  

exclusively, or whether such cause of action arose both  

in  Vijayawada  and  also  in  Calcutta?  As  has  been  

mentioned hereinbefore on behalf of the Petitioner, it

9

had been urged that the entire cause of action for the  

Suit had arisen within the jurisdiction of the Calcutta  

Courts and the Courts at Vijayawada had no jurisdiction  

whatsoever  to  entertain  a  suit  pertaining  to  the  

Understanding  and  Agreement  arrived  at  between  the  

parties.  However, it was contended on behalf of the  

Respondent that its Registered Office was situate at  

Vijayawada, the Invoices for the goods were raised at  

Vijayawada, the goods were dispatched from Vijayawada  

and  the  money  was  payable  to  the  Plaintiff  or  its  

nominee at Vijayawada, by way of Demand Drafts and,  

accordingly, the Courts at Vijayawada had jurisdiction  

to entertain the Suit.   

8. It has often been stated by this Court that cause  

of  action  comprises  a  bundle  of  facts  which  are  

relevant for the determination of the  lis between the  

parties.  In the instant case, since the invoices for  

the goods in question were raised at Vijayawada, the  

goods were dispatched from Vijayawada and the money was

10

payable to the Respondent or its nominee at Vijayawada,  

in our view, the same comprised part of the bundle of  

facts giving rise to the cause of action for the Suit.  

At the same time, since the Petitioner/ Defendant in  

the Suit had its place of business at Calcutta and the  

Agreement for supply of the goods was entered into at  

Calcutta  and  the  goods  were  to  be  delivered  at  

Calcutta,  a  part  of  the  cause  of  action  also  arose  

within the jurisdiction of the Courts at Calcutta for  

the purposes of the suit.  Accordingly, both the Courts  

within the jurisdiction of Calcutta and Vijayawada had  

jurisdiction  under  Section  20  of  the  Code  of  Civil  

Procedure to try the Suit, as part of the cause of  

action of the Suit had arisen within the jurisdiction  

of both the said Courts.

9. This leads us to the next question as to whether,  

if two Courts have jurisdiction to entertain a Suit,  

whether the parties may by mutual agreement exclude the  

jurisdiction of one of the Courts, having regard to the

11

provisions of Sections 23 and 28 of the Indian Contract  

Act, 1872.  Section 23 of the aforesaid Act indicates  

what considerations and objects are lawful and what are  

not,  including  the  considerations  or  objects  of  an  

agreement, if forbidden by law.  Section 28 of the Act,  

which has a direct bearing on the facts of this case,  

clearly spells out that any agreement in restraint of  

legal proceedings is void.  For the sake of reference,  

the same is extracted hereinbelow :

“28.  Agreements  in  restrain  of  legal  proceedings, void – [Every agreement,    (a) by which any party thereto is restricted  

absolutely from enforcing his rights under  or  in  respect  of  any  contract,  by  the  usual  legal  proceedings  in  the  ordinary  tribunals, or which limits the time within  which he may thus enforce his rights, or

(b) which extinguishes the rights of any party  thereto, or discharges any party thereto  from any liability, under or in respect of  any contract on the expiry of a specified  period so as to restrict any party from  enforcing  his  rights,  is  void  to  the  extent.]

 Exception 1 : Saving of contract to refer to  arbitration  dispute  that  may  arise.-  This

12

section shall not render illegal contract, by  which  two  or  more  persons  agree  that  any  dispute which may arise between them in respect  of any subject or class of subjects shall be  referred  to  arbitration,  and  that  only  the  amount  awarded  in  such  arbitration  shall  be  recoverable  in  respect  of  the  dispute  so  referred.   Exception  2  : Saving  of  contract  to  refer  question that have already arisen. - Nor shall  this  section  render  illegal  any  contract  in  writing, by which two or more persons agree to  refer to arbitration any question between them  which  has  already  arisen,  or  affect  any  provision  of  any  law  in  force  for  the  time  being as to reference to arbitration.”  

10. Basically,  what  Section  28  read  with  Section  23  

does,  is  to  make  it  very  clear  that  if  any  mutual  

agreement  is  intended  to  restrict  or  extinguish  the  

right of a party from enforcing his/her right under or  

in  respect  of  a  contract,  by  the  usual  legal  

proceedings  in  the  ordinary  Tribunals,  such  an  

agreement  would  to  that  extent  be  void.   In  other  

words, parties cannot contract against a statute.

13

11. One of the earlier cases in which this question had  

arisen, was the case of  A.B.C. Laminart Pvt. Ltd. &  

Anr. Vs.  A.P.  Agencies,  Salem [AIR  1989  SC  1239  =  

(1989) 2 SCC 163].  In the said case, the cause of  

action  for  the  suit  had  arisen  both  within  the  

jurisdiction  of  the  Civil  Court  at  Salem  in  Andhra  

Pradesh and in the Civil Court of Kaira in the State of  

Gujarat.  The  question  arose  as  to  whether  since  by  

mutual  agreement  the  jurisdiction  had  been  confined  

only to the Courts within Kaira jurisdiction, the suit  

filed at Salem was at all maintainable?  This Court,  

inter alia, held that there could be no doubt that an  

agreement to oust absolutely the jurisdiction of the  

Court will be unlawful and void, being against public  

policy.  However, such a result would ensue if it is  

shown that the jurisdiction to which the parties had  

agreed to submit had nothing to do with the contract.  

If,  on  the  other  hand,  it  is  found  that  the  

jurisdiction agreed would also be a proper jurisdiction  

in the matter of the contract, it could not be said

14

that it ousted the jurisdiction of the Court.  After  

considering the facts involved in the said case and the  

submissions made on behalf of the parties, this Court  

observed as follows :

“Thus it is now a settled principle that where  there may be two or more competent Courts which  can entertain a suit consequent upon a part of  the cause of action having arisen therewithin,  if the parties to the contract agreed to vest  jurisdiction  in  one  such  Court  to  try  the  dispute  which  might  arise  as  between  themselves, the agreement would be valid.  If  such  a  contract  is  clear,  unambiguous  and  explicit  and  not  vague,  it  is  not  hit  by  Sections  23  and  28  of  the  Contract  Act  and  cannot  also  be  understood  as  parties  contracting against the statute.”   

12. A similar view was taken by this Court in  Angile  

Insulations vs. Davy Ashmore India Ltd. & Anr. [(1995)  

4 SCC 153], wherein the Hon’ble Judges while referring  

to the decision of this Court in  A.B.C. Laminart Pvt.  

Ltd.’s case (supra), inter alia, held that where two  

Courts have jurisdiction consequent upon the cause of  

action  or  a  part  thereof  arising  therein,  if  the  

parties agree in clear and unambiguous terms to exclude

15

the jurisdiction of the other, the said decision could  

not offend the provisions of Section 23 of the Contract  

Act.  In such a case, the suit would lie in the Court  

to be agreed upon by the parties.   

13. This Court has consistently taken the same view in  

several  subsequent  cases.  We  may  refer  to  one  such  

decision of this Court in  Hanil Era Textiles Ltd. Vs.  

Puromatic Filters (P) Ltd. [AIR 2004 SC 2432 = (2004) 4  

SCC 671], where part of the cause of action arose at  

both Delhi and Bombay.  This Court held that the mutual  

agreement  to  exclude  the  jurisdiction  of  the  Delhi  

Courts to entertain the suit was not opposed to public  

policy and was valid.

14. As indicated herein earlier, in this case also the  

cause of action for the Original Suit No.519 of 1991,  

filed  by  the  Respondent  before  the  Principal  Senior  

Civil  Judge,  Vijayawada,  arose  partly  within  the

16

jurisdiction of the Calcutta Courts and the Courts at  

Vijayawada.

15. Having  regard  to  the  provisions  referred  to  

hereinabove, though the Courts at Vijayawada would also  

have jurisdiction, along with the Courts at Calcutta,  

to entertain and try a suit relating to and arising out  

of  the  Agreement  dated  23rd December,  1988,  and  the  

Mutual  Understanding  dated  15th May,  1989,  such  

jurisdiction of the Courts at Vijayawada would stand  

ousted  by  virtue  of  the  exclusion  clause  in  the  

Agreement.   

16. The Special Leave Petition has, therefore, to be  

allowed.  The decree passed by the Principal Senior  

Civil Judge, Vijayawada in O.S. No.519 of 1991, and the  

impugned judgment of the High Court dated 18th January,  

2007, are set aside. The Trial Court at Vijayawada is  

directed  to  return  the  plaint  of  the  Original  Suit  

No.519 of 1991 to the Plaintiff to present the same

17

before  the  appropriate  Court  in  Calcutta  having  

jurisdiction to try the suit.   

17. The  Special  Leave  Petition  is,  accordingly,  

allowed, but there will be no order as to costs.

 …………………………………………J.                                    (ALTAMAS KABIR)

New Delhi                     ………………………………………J. Dated: 17.01.2012                 (CYRIAC JOSEPH)