JUDGMENT
M.Y. Eqbal, J.
1. This appeal by the plaintiff appellant is directed against the order dated 28.4.1987 passed by the Sub Judge-VI, Patna in Title Suit No. 41 of 1990 whereby and whereunder the learned Court below allowed the petition filed by the defendant respondents holding that the Court at Patna has no jurisdiction to try the suit and accordingly, ordered for return of the plaint for presenting the same before the appropriate Court. The plaintiff had filed the aforementioned suit against the defendant respondents for a declaration that the defendant-respondent No. 2 M/s. Hindustan Antibiotics Limited is not entitled to forfeit the bank guarantee issued by the defendant No. 1. A further prayer has been made for restraining the defendant respondent No. 1 from making payment of the guarantee amount to the defendant No. 2 till the disposal of the suit.
2. The plaintiff’s case, inter alia, is that the defendant No 2 appointed the plaintiff as ‘clearing and selling agent’ on certain terms and conditions duly incorporated in the agreement dated 2.3.1987 made between the plaintiff and the defendant No. 2. The plaintiff’s further case is that in terms of the agreement, the plaintiff agreed to store the Company’s products for the purpose of despatch to the company’s approved stockists and hospitals as per the company’s instruction and to ensure execution of all orders received by the agency for the company’s products expeditiously. It is pleaded that in terms of the agreement aforesaid, the plaintiff furnished are irrevocable bank guarantee of rupees five lakhs which was issued from the defendant No. 1, Canara Bank, Govind Mitra Road, Patna, which is still subsisting. The plaintiff’s further case is that pursuant to the orders received from the Deputy Director Health Services, Bihar, Patna, defendant No. 2 asked the plaintiff to execute the orders and, accordingly, orders were executed, but payments were with-held on the ground that medicines were sub-standard. It further appears that some disputes and differences arose by and between the plaintiff and the defendant No. 2 and the plaintiff’s case is that defendant No. 2 has committed breach of the terms of the agreement by supplying products of other medicine companies, which resulted in serious complications, including withholding of payments as a result of which, the plaintiff alleged to have suffered loss for reputation in the business circle. However, defendant No. 2 sent a letter requesting the plaintiff to make payment of penal interest of the total invoice value and further a demand letter was issued for payment of certain amount, and threatened to invoke the abovementioned bank guarantee; hence the instant suit was filed by the plaintiff. On being summoned, the defendant respondent No. 2 appeared in the suit and challenged the jurisdiction of the patna Court by filing a petition stating, inter alia, that Patna Court has no jurisdiction to try the suit. According to defendant No. 2, by virtue of the agreement aforesaid, both the plaintiff and defendant No. 2 agreed that in case of disputes and differences, the Court at Pune shall have jurisdiction. It was further stated that the agreement was executed at Pune and the cause of action for the suit arose at Pune and, therefore, Patna Court has no jurisdiction. Learned Court below after hearing the parties allowed the petition filed by the defendant No. 2 and ordered for returning of the plaint holding that the Court at Patna has no jurisdiction to try the suit.
3. Mr. K.D. Chatterjee learned Senior Counsel for the appellant assailed the impugned order as being illegal and without jurisdiction. Learned Counsel submitted that from bare reading of the plaint, it would appear that the suit was exclusively with respect to bank guarantee which the defendant No. 2 wanted to forfeit and the said bank guarantee being a collateral document executed at Patna, the Court below wrongly held that the Patna Court has no jurisdiction. The learned Counsel further developed his argument by submitting that the bank guarantee is an independent agreement and further defendant No. 1 Bank is not a party to the agreement of the year 1987. The exclusion clause of the agreement shall not apply to the instant suit which has been rightly filed at Patna Court. Referring to the Clause 26 of the agreement, learned Counsel submitted that the jurisdiction of the Patna Court has been excluded by Clause 26 which relates to the agency agreement and not the bank guarantee. Learned Counsel further submitted that the Court below has failed to take notice of the fact that no part of cause of action arose within the jurisdiction of Pune Court and the agreement dated 2.3.1987 has no bearing on the facts and circumstances of the case.
4. On the other hand, Mr. Sidheshwari Prasad Singh, Senior advocate appearing on behalf of respondent No. 2 refuting the arguments of the appellant’s Counsel submitted that the bank guarantee is not an independent transaction between the parties; rather, in terms of the agreement dated 2.3.1987, the plaintiff gave the said guarantee, so that in the event of breach of contract by the plaintiff, defendant No. 2 would be entitled to invoke the bank guarantee. Learned Counsel then submitted that by the agreement, the plaintiff and defendant No. 2 conferred jurisdiction to the Court at Pune and the said agreement is valid in law and it is the Pune Court which has the exclusive jurisdiction to entertain the suit.
5. It would be proper to mention here that the notice of this appeal was issued to the defendant respondent No. 1 Canara Bank and in response to the notice, the defendant respondent No. 1 appeared in this appeal, but the learned Counsel appearing for the defendant respondent No. 1 neither appeared, nor opposed or supported the order.
6. Before appreciating rival contentions of the Counsels for the parties, it would be useful to first look into the relevant portion of the plaint. The main relief claimed by the plaintiff appellant in the suit is for declaration that the defendant No. 2 is not entitled to forfeit the bank guarantee No. 2/87 dated 25.8.1987 issued by the defendant No. 1 Bank. After such declaration, a consequential relief by way of injunction has been claimed restraining the defendant Bank from forfeiting the above bank guarantee and making payment to defendant No. 2. In the body of the plaint, it was admitted by the plaintiff appellant that it was on the basis of the agreement dated 2.3.1987 entered into by and between the plaintiff and the defendant No. 2. Plaintiff furnished the bank guarantee of rupees five lakhs in favour of the defendant No. 2. It is, therefore, evident from the plaint that the bank guarantee is riot an independent transaction or agreement; rather, it was furnished by the plaintiff on the basis of the condition incorporated in the agreement. It further appears, from the plaint that the plaintiff tried to make out a case that it was defendant No. 2 who committed breach of agreement and not the plaintiff and, therefore, in apprehension that the defendant No. 2 may invoke the bank guarantee, the plaintiff filed the suit. In my opinion, thereafter, the basis of the suit is the agreement of the year 1987 and the main issue that would arise for adjudication is as to which party-plaintiff or the defendant No. 2, committed breach of agreement. It can, therefore, be safely concluded that the relief claimed in the suit is on the basis of the agreement of the year 1987.
7. Now the agreement has to be looked into for deciding the main question involved in the appeal. As stated above, by the aforesaid agreement, defendant No. 2 appointed the plaintiff as ‘clearing and selling agent in the State of Bihar. The agreement contained various terms and conditions, which the parties mutually agreed. Clauses 25 and 26 are relevant, which are quoted herein below:
CLAUSE-25 : Should there be any dispute between the company and the agency in regard to or related to or arising out of this agreement, the parties shall try to resolve the dispute in mutual trust and good-will. In the event such dispute of difference is not settled amicably by negotiation, the same shall be referred to the Chief Executive of the Company as the sole arbitrator and the matter settled as per Rules of Indian Arbitration Act. The decision of the arbitrator shall be final and binding on both parties.
CLAUSE-26 : Any dispute arising under this agreement shall be under exclusive jurisdiction of the Pune Court.
8. From bare reading of the Clause 26 of the agreement, it is manifest that both the parties i.e., plaintiff and the defendant No. 2 by agreement conferred exclusive jurisdiction on the Pune Court to try all disputes arising out of the agreement. The validity of such clause giving exclusive jurisdiction to one of the two Courts has been considered by the Apex Court time and again and the question no longer remains res Integra. The question was first considered by the Apex Court in the case of Hakam Singh v. Gammon (India ) Ltd. , and the following principle has been laid down:
3. …The Code of Civil Procedure in its entirety applies to proceedings under the Arbitration Act. The jurisdiction of the Courts under the Arbitration Act to entertain a proceeding for filing an award is accordingly governed by the provisions of the Code of Civil Procedure. By Clause 13 of the agreement it was expressly stipulated between the parties that the contract shall be deemed to have been entered into by the parties concerned in the City of Bombay. In any event, the respondents have their principal office in Bombay and they were liable in respect of a cause of action arising under the terms of the tender to be sued in the Courts at Bombay. It is not open to the parties by agreement to confer by their agreement jurisdiction on a Court which it does not possess under the Code. But where two Courts or more have under the Code of Civil Procedure jurisdiction to try a suit or proceeding an agreement between them shall be tried in one of such Courts is not contrary to public policy. Such an agreement does not contravene Section 28 of the Contract Act.
9. The Apex Court again considered a similar question in the case of ABC Lamincrt Pvt. Ltd. v. A.P. Agencies , and it was held, that a contract to vest jurisdiction in one of the Courts within whose jurisdiction cause of action arises is a valid contract and is not against public policy. It was held 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 there within, 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. This cannot be understood as parties contracting against the Statute. Mercantile Law and practice permit such agreement.
The aforesaid view was reiterated again by the Apex Court in the case of Angile Insulations v. Davy Ashore India Limited AIR 1995 SC 153.
10. In the light of the settled principles of law as discussed herein above, there can be no doubt that parties by an agreement can confer jurisdiction to one Court out of two Courts having jurisdiction under law. Clause 26 of the Agreement of the present case is, therefore, valid in law and any suit arising out of that agreement is triable by the Court at Pune. The submission of Mr. Chatterjee that since the defendant No. 1 Canara Bank is not a party to the agreement of the year 1987, relief has been claimed against the Bank, therefore, the Patna Court has jurisdiction to entertain the suit cannot be accepted. I have already discussed herein above that the instant suit is based on the agreement and the main relief claimed in the suit is against the defendant No. 2. It is only when it is declared by the Court that the defendant No. 2 is not entitled to forfeit or invoke the bank guarantee, the consequential relief for injunction restraining the Bank from making payment of the guarantee amount to the defendant No. 2 would arise. I am therefore of the definite view that the Bank guarantee is not an independent transaction. Rather, it was issued in terms of the agreement of the year 1987 executed by and between the plaintiff and defendant No. 2. It is true that defendant No. 1, in fact, is not bound by Clause 26 of the agreement, but if it is shown that the defendant No. 1 bank is made aware of the implications of the agreement, then Pune Court shall have jurisdiction to entertain the suit of the instant nature. It is worth to mention here that in the suit, it was defendant No. 2 who took objection of jurisdiction and the defendant No. 1 Bank did not raise any objection or supported the plaintiff’s plea about the jurisdiction of Patna Court. In this appeal also, as noticed above, although respondent No. 1 Bank appeared, but no objection was raised with regard to jurisdiction of either Patna or Pune Court. Defendant respondent No. 1 is, therefore, aware that the main relief claimed in the suit is against the defendant No. 2 which arise out of the agreement of the year 1987. In that view of the matter also, I am of the opinion that Clause 26 of the agreement is valid in law and in terms thereof, Pune Court has jurisdiction as held by the learned Court below.
11. In the result, 1 do not find any merit in this appeal, which is, accordingly, dismissed.