Facts of the Case

M/s Sagar Marketing filed an appeal before the Delhi High Court challenging the order dated 08 September 2022 passed by the learned Commercial Court. By the impugned order, the Commercial Court had rejected the appellant’s application filed under Order VII Rules 10 and 11 of the Code of Civil Procedure, 1908 (CPC) in CS (COMM) No. 229/2022.

The appellant contended that no part of the cause of action had arisen within the territorial jurisdiction of the learned Commercial Court in Delhi and, therefore, the plaint was liable to be returned.

According to the appellant, the entire transaction concerning the supply of goods and payment had occurred in the State of Karnataka. The appellant specifically claimed that:

  • the goods were supplied by the respondent from its godown in Karnataka to the appellant’s premises in Karnataka;
  • the appellant had placed the order for goods in Karnataka;
  • GST relating to the transaction was paid by the defendants in Karnataka; and
  • the appellant had its principal place of business in Karnataka.

The learned Commercial Court examined the averments contained in the plaint and found that those averments indicated that a part of the cause of action had arisen within its territorial jurisdiction. Consequently, the Commercial Court framed an issue regarding whether it possessed territorial jurisdiction to entertain the suit.

The respondent-plaintiff had specifically pleaded that the defendant placed orders from its office to the plaintiff company’s registered office at D-7, Udyog Nagar, Rohtak Road, New Delhi-110041. It was further pleaded that direct payments and other transactions relating to invoices were made to the plaintiff company’s bank account maintained in Delhi; the ledger account was maintained at the plaintiff’s Delhi office; acknowledgements and commitments were made at the registered office; dealings relating to the supplies took place at the registered office in New Delhi; and the retail invoices contained terms providing that disputes would be subject to Delhi jurisdiction.

On that basis, the plaintiff asserted that the cause of action had arisen within Delhi and that the Commercial Court possessed territorial jurisdiction.

Issues Involved

  • Whether the learned Commercial Court had territorial jurisdiction to entertain and decide the commercial suit.
  • Whether the plaint was liable to be returned under Order VII Rule 10 CPC on the ground that no part of the cause of action arose within Delhi.
  • Whether, while deciding an application under Order VII Rule 10 CPC, the Court must accept the averments made in the plaint as correct for determining territorial jurisdiction.
  • Whether the appellant could secure return of the plaint merely by disputing the correctness of the plaintiff’s jurisdictional averments.
  • Whether conflicting factual assertions regarding the place where the transaction, payments, acknowledgements and dealings occurred constituted a triable issue.
  • Whether the rejection of the appellant’s application under Order VII Rules 10 and 11 CPC warranted interference in appeal.

Petitioner/Appellant’s Arguments

The appellant, M/s Sagar Marketing, argued that no part of the cause of action had arisen within the territorial jurisdiction of the learned Commercial Court in Delhi.

The appellant maintained that the entire transaction concerning supply and payment of goods had taken place in Karnataka and, therefore, the suit instituted in Delhi was not maintainable.

The appellant relied upon the factual circumstances that the goods were supplied from the respondent’s godown in Karnataka to the appellant’s premises in Karnataka, the orders were allegedly placed in Karnataka, GST was paid in Karnataka, and the appellant’s principal place of business was situated in Karnataka.

Accordingly, the appellant contended that the plaint ought to have been returned for presentation before the court having proper territorial jurisdiction.

The appellant essentially sought to controvert the plaintiff’s assertions that material parts of the cause of action had arisen in Delhi.

Respondent/Plaintiff’s Arguments

As reflected in the plaint and specifically in paragraph 22 thereof, the respondent-plaintiff asserted that material parts of the cause of action arose within Delhi.

The plaintiff pleaded that:

  • orders were placed with its registered office situated at D-7, Udyog Nagar, Rohtak Road, New Delhi-110041;
  • direct payments and transactions relating to invoices were made to the plaintiff company’s bank account maintained in Delhi;
  • the ledger account was kept and maintained at the plaintiff’s office at H-19, Ground Floor, Udyog Nagar, Rohtak Road, Delhi-110041;
  • the defendant made acknowledgements and commitments at the registered office;
  • dealings concerning the supplies took place at the registered office in New Delhi; and
  • retail invoices, described as executed agreements containing terms and conditions, specifically provided that disputes would be subject to Delhi jurisdiction.

On these pleadings, the respondent asserted that the cause of action had arisen within Delhi and that the Commercial Court had territorial jurisdiction to entertain and decide the suit.

Court Order / Findings

The Delhi High Court dismissed the appeal as unmerited and found no fault with the Commercial Court’s decision rejecting the appellant’s application under Order VII Rule 10 CPC.

The High Court recorded that the impugned order appeared not to be an appealable order. However, without entering into the question of maintainability of the appeal, the Court proceeded to examine the matter and held that it was unable to fault the impugned order.

The Court reaffirmed the settled legal position that, at the stage of considering an application under Order VII Rule 10 CPC, the question whether the Court has jurisdiction to entertain the suit must be determined on a demurrer. In other words, the Court must proceed by accepting all averments made in the plaint as correct for that limited purpose.

The High Court examined the plaintiff’s specific jurisdictional pleadings in paragraph 22 of the plaint. It found that, if those averments were accepted as correct, the learned Commercial Court would possess jurisdiction to try the suit.

The Court observed that the appellant was essentially seeking to controvert those averments as factually incorrect. Such a factual dispute could not justify return of the plaint at that stage.

The High Court held that the controversy regarding the correctness of the jurisdictional facts pleaded by the plaintiff was a triable issue.

Accordingly, the Court found no fault with the Commercial Court’s decision rejecting the application under Order VII Rule 10 CPC and dismissed the appeal.

Important Clarification

The decision draws a clear distinction between testing the sufficiency of jurisdictional averments in the plaint and determining the ultimate truth of those averments after evidence.

At the stage of an application under Order VII Rule 10 CPC, the Court is not required to finally adjudicate competing factual versions regarding where the transaction actually occurred. The immediate inquiry is whether the plaint, assuming its averments to be correct, discloses facts that confer territorial jurisdiction upon the Court.

Therefore, where the plaint specifically pleads that orders were placed at a Delhi registered office, payments or transactions were connected with a Delhi bank account, ledgers were maintained in Delhi, acknowledgements and commitments were made at the Delhi office, dealings took place at the Delhi registered office, and invoices contained a Delhi jurisdiction clause, such averments cannot simply be displaced at the Order VII Rule 10 stage by the defendant’s contrary assertion that the entire transaction occurred elsewhere.

The High Court’s finding does not amount to a final determination that every jurisdictional fact pleaded by the plaintiff was conclusively proved. Rather, it means that the appellant’s challenge to the correctness of those averments raised a factual controversy requiring trial.

A further important clarification is that the High Court observed that the impugned order appeared not to be appealable, but expressly did not decide the maintainability question. The appeal was dismissed on merits because the Court found no fault with the Commercial Court’s approach.

Sections  Involved

  • Order VII Rule 10, Code of Civil Procedure, 1908 – Return of plaint for presentation to the Court in which the suit should have been instituted.
  • Order VII Rule 11, Code of Civil Procedure, 1908 – Rejection of plaint.
  • Section 20, Code of Civil Procedure, 1908 – Territorial jurisdiction based on the defendant’s location and/or the place where the cause of action wholly or partly arises; relevant to the underlying territorial jurisdiction controversy.
  • Code of Civil Procedure, 1908 – General procedural framework governing return/rejection of plaint and territorial jurisdiction.
  • Commercial Courts Act, 2015 – Relevant procedural context because the dispute arose from a commercial suit and the appeal was registered as FAO (COMM) 175/2022.

 Link to download the order:https://mytaxexpert.co.in/uploads/1783159247_881compressed.pdf

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