part of cause of action has arisen within the jurisdiction of this
Court but he must also show that the said cause of action is an
integral part having nexus to the substantial cause of action.
In view of the admitted position that contract was
executed in Bombay, i.e., within the jurisdiction of the High
Court of Bombay, performance of the contract was also to be
done within the jurisdiction of the Bombay High Court; merely
because bank guarantee was executed at Delhi and transmitted
for performance to Bombay, it does not constitute a cause of
action to give rise to the respondent to lay the suit on the
original side of the Delhi High Court. The contention that the
Division Bench was right in its finding and that since the bank
guarantee was executed and liability was enforced from the
bank at Delhi, the Court got jurisdiction, cannot be sustained.
13. Secondly, in the decision of this Court in N. KUMARA SWAMYs
case (5 supra) it was found that there was no pleading on the part of
the petitioner as to how part of cause of action arises within the
territorial jurisdiction of this Court. In the present writ petition also,
there are no pleadings to that effect and the thrust in the affidavit is
only on the contention that the bank guarantee is conditional and
without any allegation of breach of contract, the same cannot be
invoked. In the absence of any pleadings, therefore, in the present
writ petition, to support the contention that cause of action arises
within the jurisdiction of this Court, I am clearly of the opinion that the
ratio of the decision in SOUTH EAST ASIA SHIPPING CO. LTD.s
case (3 supra) applies to the facts and circumstances of the case.
The issue is thus required to be held against the petitioner.
HYDERABAD HIGH COURT
WRIT PETITION No.41519 of 2015
DATED:07-01-2016
Consortium of Sai Rama Engineering Enterprises and Megha Engineering &
Infrastructures Ltd.
Vs
Oil and Natural Gas Corporation Limited, Rep.
Citation:AIR 2016 (NOC)498 HYD
The present writ petition is directed against the order of the
second respondent dated 19.12.2015 invoking the bank guarantee
furnished by the petitioner on the third respondent bank.
2. Petitioner states that he is the successful tenderer, who was
awarded the work, in question, under an agreement dated 27.03.2008
with respondents 1 and 2. In terms of the said contract, the petitioner
has given performance guarantee as per clause 3.3 of the agreement.
Petitioner also submits that the time for completion of the contract was
extended up to 31.12.2015 and the respondents had reserved their
right to levy liquidated damages for delay in completion of the work.
While so, the invocation of bank guarantee is questioned by
challenging the impugned letter of the second respondent, primarily,
on the ground that the bank guarantee itself is conditional and is only
invocable subject to any breach having been committed.
Petitioner states that there is no allegation of breach of any term of
the contract by the petitioner and as such, the invocation of the bank
guarantee is clearly arbitrary. The present writ petition is, accordingly,
filed by contending that the petitioner is executing the work of more
than Rs.8,000/- crores under various contracts in the country and the
credit rating of the petitioner would come down having adverse impact
on the business, if the bank guarantee is allowed to be encashed.
3. This Court on 21.12.2015, after hearing the learned counsel for
the petitioner, passed the following order while issuing notice to the
first respondent:
Learned counsel for the petitioner is permitted to take out
personal notice to respondents 1 to 3 by RPAD and file proof of
service.
List on 28.12.2015 in Motion List.
Prima facie the bank guarantee is invokable on breach of
contract. However, the impugned letter of the invocation of
respondents 1 and 2 addressed to respondent No.3 does not
allege any breach against the petitioner.
In view of the fact that the contract is still under execution,
there shall be interim stay of encashment of the bank
guarantee for a period of one week.
4. Learned standing counsel for respondents 1 and 2 has since
filed counter raising preliminary objection as to the jurisdiction of this
Court by the petitioner.
5. I have heard learned counsel for the petitioner and learned
standing counsel for respondents 1 and 2 on the aforesaid issue.
6. Learned counsel for the petitioner submits that though the
agreement between the parties dated 27.03.2008 was executed at
Mumbai, the bank guarantee, in question, was issued by the third
respondent bank located at Hyderabad and the letter of invocation was
also received at Hyderabad. Learned counsel also points out that the
clauses 1.3.1 and 1.3.11, which are extracted hereunder, of the
General Conditions of the Contract, clearly show that there is no
exclusive jurisdiction conferred on the Courts at any particular place.
1.3.1 Applicable Laws
All questions, disputes or differences arising under, out
of or in connection with this Contract shall be settled in
accordance with law of India (both procedural and
substantive) from time to time in force and to the
exclusive jurisdiction of the Court in India, subject to the
provisions of clause 1.3.2.
1.3.11 The Arbitration shall be held at the place from where the
contract has been awarded. However, parties can
mutually agree for a different place.
Reliance is also placed on clause 3.3.2, which provides as
follows:
3.2.2 In the event of completion of Works is delayed beyond
the Scheduled Completion Date for any reasons whatsoever,
the Contractor shall get the validity of the guarantee suitably
extended so as to make it valid for 12 months plus 60 days
from the actual date of completion of Works. However if the
delay is attributable to the Company, Company shall bear the
cost of extension of such Performance Guarantee for such
extended period at the normal bank rates as applicable to
International Banking procedures.
7. The terms and conditions of the bank guarantee viz. clause 2
thereof is relied upon to substantiate that the bank undertakes to pay
immediately the amount of Rs.3,88,89,000/- on breach of contract by
the contractor. This part of the bank guarantee is contended to be a
conditional one and as there is no allegation of any breach by the
contractor, the petitioner contends that the letter of invocation is
contrary to the terms and conditions of the bank guarantee, which is
accepted by the first respondent.
8. Learned counsel for the petitioner also placed reliance upon a
decision of the Supreme Court in STATE OF MAHARASHTRA v.
NATIONAL CONSTRUCTION COMPANY , particularly, paras 13 and
14 thereof to contend that the bank guarantee is ordinarily a contract
quite distinct and independent of underlying contract, the performance
of which it seeks to secure and to that extent it cannot be said to give
rise to a cause of action separate from that of the underlying contract.
Reliance is also placed upon another decision of the Supreme Court in
HINDUSTAN STEEL WORKS CONSTRUCTION LTD. v. TARAPORE
AND CO. where the Supreme Court in para 14 dealt with a case of
unconditional bank guarantee, which is not dependent upon any
dispute or proceeding between the parties at whose instance the bank
guarantee is given and the beneficiary. Learned counsel contends on
the basis of the aforesaid decisions that firstly the bank guarantee in
the case on hand is conditional and secondly, it being a separate
contract apart from the contract underlying with the first respondent,
unless the conditions under the bank guarantee are fulfilled, the same
cannot be invoked and submits that since there is no restriction or
exclusive jurisdiction conferred on Court at any particular place,
this writ petition is maintainable before this Court.
9. Per contra, Mr. Kakarla Venkat Rao, learned standing counsel
for respondents 1 and 2, who has filed preliminary counter, submits
that the contract was entered into in Mumbai and various extensions
were granted to the petitioner up to 31.12.2015 and only, thereafter,
the bank guarantee is invoked. Learned standing counsel submits that
mere giving of bank guarantee by the third respondent bank at
Hyderabad does not amount to giving a cause of action for maintaining
the present writ petition. Learned standing counsel also relied upon
the decision of the Supreme Court in SOUTH EAST ASIA SHIPPING
CO. LTD. v. NAV BHARAT ENTERPRISES PVT. LTD. to explain the
manner as to when cause of action arises. Another decision of the
Supreme Court in OIL & NATURAL GAS COMMISSION v. UTPAL
KUMAR BASU is also relied upon wherein it was held that territorial
jurisdiction is to be decided on the facts pleaded in the petition
disregarding the truth or otherwise thereof and that the facts pleaded
must form integral part of the cause of action. Learned standing
counsel also relied upon a decision of this Court rendered by me,
in N. KUMARA SWAMY v. UCO BANK where similar question was
considered but with reference to a writ petition arising out of service
matter and the decision of the Supreme Court in OIL & NATURAL
GAS COMMISSIONs case (4 supra) was already noticed and followed
in the aforesaid decision and it was held in para 25 as follows:
25. Considering the legal position as settled by the decisions
aforesaid, it is already noticed that there are no pleadings on
the part of the petitioner, as to how any part of cause of action
arises within the territorial jurisdiction of this Court. On the
contrary, taking the averments, as noted above, no part of
cause of action arises within the territorial jurisdiction of this
Court inasmuch as on the date of service of show cause
notices, which were originally impugned at the time of filing of
the writ petition and when the charge memos were sought to
be served on the petitioner, he was working at head office at
Kolkata. It is not only essential for the petitioner to show that a
part of cause of action has arisen within the jurisdiction of this
Court but he must also show that the said cause of action is an
integral part having nexus to the substantial cause of action.
The mere residence of the petitioner at Hyderabad after his
retirement and merely because the charges relate to the
alleged omissions and commissions of the branch of the
respondent bank at Hyderabad, in my view, has no nexus with
the cause of action relating to initiation of disciplinary
proceedings against the petitioner. In a given case, the charges
may relate to any event happening in any branch in any part of
India but the situs with respect to initiation of disciplinary
proceedings cannot be said to have any integral nexus with the
omissions and commissions at all/any of such branches. The
show cause notices as well as the charge memos in the present
case incidentally refer to omissions and commissions at Banjara
Hills branch at Hyderabad, but even if it could have been at
some other branch in Karnataka or Kerala, it would not be
permissible, under Article 226(2) of the Constitution of India,
for the petitioner to invoke the territorial jurisdiction of the High
Court within whos territorial limits, such branch is situated.
The preliminary objection raised by the learned senior counsel
for the respondents has, therefore, to be held as well founded
and sustainable and consequently, the writ petition is liable to
be dismissed on this ground alone.
10. Since the preliminary objection as to jurisdiction is proposed to
be dealt with first, the merits of the claim of the petitioner and the first
respondent are not dealt with hereunder and would depend upon the
decision on the following preliminary issue:
Whether this Court has territorial jurisdiction to entertain
this writ petition in terms of Article 226(2) of the
Constitution of India?
ISSUE:
11. Admittedly, the agreement as well as the extensions and
impugned proceedings between the parties have all been held at
Mumbai, though the head office of first respondent is at New Delhi, the
entire correspondence including the invocation under the impugned
proceedings emanated from the Delhi office of the first respondent.
The relevant clauses of the agreement are already extracted above.
It is, however, necessary to notice one other clause in the bank
guarantee viz. clause 8, which reads as follows:
8. The Bank also agree that this guarantee shall be governed
and construed in accordance with Indian Laws and subject to
the exclusive jurisdiction of Indian Courts of the place from
where tenders have been invited.
It would, thus, be evident from the above that the agreement
does not specify the exclusive jurisdiction for the Courts at any
particular place and under the aforesaid clause, the third respondent
bank also agrees that the bank guarantee shall be governed and
construed in accordance with the Indian laws subject to exclusive
jurisdiction of the Indian Courts of the place from where tenders have
been invited.
12. On the face of it, therefore, it is difficult to accept the contention
of the learned counsel for the petitioner that the cause of action would
arise in the jurisdiction of this Court merely because the third
respondent bank is located and the bank guarantee is given at
Hyderabad. That apart the decision in SOUTH EAST ASIA SHIPPING
CO. LTD.s case (3 supra) clearly answers the contention of the
learned counsel for the petitioner, as under:
3. In view of the admitted position that contract was
executed in Bombay, i.e., within the jurisdiction of the High
Court of Bombay, performance of the contract was also to be
done within the jurisdiction of the Bombay High Court; merely
because bank guarantee was executed at Delhi and transmitted
for performance to Bombay, it does not constitute a cause of
action to give rise to the respondent to lay the suit on the
original side of the Delhi High Court. The contention that the
Division Bench was right in its finding and that since the bank
guarantee was executed and liability was enforced from the
bank at Delhi, the Court got jurisdiction, cannot be sustained.
13. Secondly, in the decision of this Court in N. KUMARA SWAMYs
case (5 supra) it was found that there was no pleading on the part of
the petitioner as to how part of cause of action arises within the
territorial jurisdiction of this Court. In the present writ petition also,
there are no pleadings to that effect and the thrust in the affidavit is
only on the contention that the bank guarantee is conditional and
without any allegation of breach of contract, the same cannot be
invoked. In the absence of any pleadings, therefore, in the present
writ petition, to support the contention that cause of action arises
within the jurisdiction of this Court, I am clearly of the opinion that the
ratio of the decision in SOUTH EAST ASIA SHIPPING CO. LTD.s
case (3 supra) applies to the facts and circumstances of the case.
The issue is thus required to be held against the petitioner.
The writ petition is liable to be dismissed and is accordingly
dismissed. However, petitioner is at liberty to approach the
appropriate competent Court for appropriate relief. As a sequel,
the miscellaneous applications, if any, shall stand closed. There shall
be no order as to costs.
______________________
VILAS V. AFZULPURKAR, J
January 7, 2016
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