The High Court of Judicature at Madras dismissed an original side appeal challenging the rejection of leave to sue. The court upheld the exclusivity of a Mumbai jurisdiction clause in the underlying guarantee agreement, ruling that adding parties does not oust the agreed jurisdiction.
Original side appeal dismissed; parties to bear their own costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 06.08.2015
CORAM
THE HON'BLE MR.SANJAY KISHAN KAUL, CHIEF JUSTICE and
THE HON'BLE MR. JUSTICE R.MAHADEVAN
O.S.A.No.107 of 2015
1.M/s.AAT Academy India Limited Formerly known as Access Atlantech Edutainment India Ltd., having its Corporate Office at 6/9 Damodaran Street, Off – Mayor Ramanthan Salai, Chetpet, Chennai 600 031. And its Registered office at No.1176, Trichy Road, Ramanathapuram, Coimbatore 641045. represented by its Managing Director Rathish Babu. 2.Rathish Bau ... Appellants versus 1.Tasneem Patel 2.Greycells Education Limited, (Previously known as Greycells Entertainment Limited) having its registered office at D-2, 1st Floor, Poddar Chambers, 126, Mathuradas Compound, N.M.Joshi Marg, Lower Parel (West) Mumbai 400 013. 3.Bela Desai 4.Sanjay Chainani 5.Keynote Commodities Limited The Ruby, 9th Floor, Senapati Bapat Marg, Dadar West, Mumbai, Maharashtra 400 028 represented by Vineet Suchanti ... Respondents
Appeals filed under Order 36 Rule 9 of Original Side Rules read with Clause 15 of the Letters Patent Act, against the order dated 06.02.2015 made in A.No.1152 of 2014 in C.S.Diary No.6040 of 2014, on the file of this Court.
For Appellant : Mr.Karthic Seshadri for Mr N.P.Vijaykumar
For Respondents : Mr.P.Giridhar for R.1 to R.5
(Judgement of the Court was delivered by The Hon'ble Chief Justice)
The appeal arises out of the impugned order dated 06.02.2015 of the learned Single Judge dismissing the application of the appellants/plaintiffs in A.No.1152 of 2014, for leave to sue at Chennai, predicated on a reasoning that the exclusion clause in the agreement inter se the appellants and the first respondent disentitled the appellants of such right.
transfer deed in respect of the loan transaction, but were not supposed to act upon and these documents were to be held by the third respondent. A letter of guarantee was executed on 17.04.2010 and blank share transfer deeds dated 13.04.2010 along with bill of exchange were sent to the third respondent. The financial assistance of Rs.37,50,000/- after deducting interest for a period of 90 days of loan was received by the second appellant which, however, could not be repaid on account of cash flow problems, though interest is stated to have been paid for the subsequent period. However, the first defendant by letter dated 03.10.2011, recalled the loan and sought to invoke, the pledge of one lakh shares.
“a.”For a declaration that sale of suit schedule shares of the 1st plaintiff by the 1st defendant in favour of the 5th defendant and/or any further alienations thereof is illegal, null and void and consequently
b. For a mandatory injunction directing the defendants 1 to 5 to return the suit schedule shares held by the 1st plaintiff in 2nd defendant to the 1st plaintiff.
In the alternative to prayer (a) and (b) seek a judgment and decree as per prayer (c.)
(c.) For a direction to Defendants 1 to 5 to jointly and severally render true and fair account of the sale of the suit schedule shares and to jointly and severally compensate the plaintiffs for the loss suffered which is estimated for the present at Rs.60,00,000/- (Rupees Sixty Lakhs only) or such other sum that may be found due and payable upon an account being taken, as damages to the plaintiffs together with interest at 18% per annum on the damages till realisation of the said amount.
(d) For a declaration that personal guarantee dated 17.04.2010 executed by the 1st plaintiff in favour of the 1st defendant is a sham and nominal document.
(e) Costs for the suit
“18.JURISDICTION:
18.1.Each party agrees that the courts in the city of Mumbai, India, shall have exclusive jurisdiction to settle the disputes which may arise out of or in connection with this Guarantee and that accordingly any suit, legal action or proceedings (together referred to as “Proceedings”) arising out of or in connection with this Guarantee may be brought in Courts in Mumbai and the Guarantor irrevocably submits to and accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of Courts in Mumbai.”
clause. The appellants have tried to build a case based on breach of faith and trust as according to them, the shares illegally transferred were never supposed to be in the custody of the first respondent, but in the custody of the third respondent, even though there is no documentation in this behalf. The appellants also seek to absolve themselves of the liability of the consequences of transfer of shares by claiming that the documents executed were never supposed to be acted upon. This story prima facie is difficult to accept. The fact however remains that the suit arises from the consequences of the principal document being the guarantee, while the appellant seeks to assign role to the other parties, all the respondents are ad idem that the competent court would be at Mumbai. It is not the case of the added parties that since they are not party to the ouster clause, the Mumbai Courts should not have jurisdiction, but the stand is to the contrary.
1996, on the limited aspect that as third parties to an arbitration agreement cannot be compelled to join in the arbitration proceedings, nor can they insist that they have the right to join the arbitration proceedings, on analogy, the same position would arise in case of leave to sue. In our view, the Judgement could have no application to the facts of the case where the appellants, contrary to the written agreements, seek to build the case on the alleged oral understanding to include the third parties with the object of creating jurisdiction other than at a place where exclusive jurisdiction has been conferred. The exclusive jurisdiction is conferred in terms of a clause in the guarantee, which agreement is sought to be cancelled and which has given rise to the controversy and the claim in the suit by the additional parties who want the suit to be tried as per the ouster clause.
Sd/Assistant Registrar(CS II) //True Copy// Sub Assistant Registrar ksr To The Sub - Assistant Registrar, Original Side, High Court, Madras.
+2cc's to Mr.N.P.Vijaya Kumar, Advocate, S.R.No.40688 +1cc to Mr.P.Giridharan, Advocate, S.R.No.41002
O.S.A.No.107 of 2015 PVR(CO) CA(25/08/2015)
3 issues framed by the court
Whether an exclusive jurisdiction clause in a guarantee agreement bars a suit filed in Chennai despite inclusion of parties not bound by the clause.
Whether the plaintiff's right as dominus litis to choose the court is overridden by contractual jurisdiction clauses.
Whether an appeal challenging the dismissal of an application for leave to sue under Order 36 Rule 9 should be allowed.
Colour shows how this judgement treated each authority
P.R. Shah, Shares and Stock Brokers Private Limited vs. B.H.H. Securities Private Limited and Others (2012 (1) SCC 594)Referred¶38
M/s. AAT Academy India Limited
Rathish Bau
Tasneem Patel
Greycells Education Limited
Bela Desai
Sanjay Chainani
Sanjay Kishan Kaul
R. Mahadevan
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
