2004 (4) TMI 303 - SC - Companies Law

Supreme Court orders re-examination of jurisdiction based on evidence

The Supreme Court directed the Commission to re-examine the jurisdictional issue based on evidence. The Commission must determine whether the appellant ... Whether the Commission can at all exercise jurisdiction in respect of the complaint of unfair trade practice made by the respondent No. 1 before it ? Held that:- Merely because the effect of an unfair trade practice is felt in India, this would not clothe the Commission with jurisdiction unless the ‘effect’ is itself an ‘unfair trade practice’ within India. This follows from the nature of the powers conferred on the Commission under section 36D read with section 14. The Commission, therefore, erred in holding that it would have jurisdiction only because the effect of the trade practice was felt in India. Therefore, dispose of the appeal by directing the Commission to deal with the second aspect of the preliminary objection on evidence which may be adduced by either party and in the light of the legal issues determined by us. It is clarified that in the event the Commission finds on the evidence that the appellant does not carry on business in India through the respondent No. 2 and that the alleged unfair trade practice did not take place in India, the Commission will dismiss the respondent No. 1’s complaint without deciding the matter on merits. Issues Involved:1. Jurisdiction of the Commission under the Monopolies and Restrictive Trade Practices Act, 1969.2. Applicability of the jurisdictional clause in the contract.3. Allegations of unfair trade practices.4. Determination of whether the appellant carried on business in India.5. The necessity of evidence to determine jurisdiction.Issue-wise Detailed Analysis:1. Jurisdiction of the Commission under the Monopolies and Restrictive Trade Practices Act, 1969:The appellant challenged the Commission's jurisdiction to entertain the respondent's claim for compensation under section 12B of the Act. The Commission held it had jurisdiction, but the appellant argued that the applicable law in case of disputes would be German Law, and disputes should be resolved either in German Courts or through arbitration under the International Chamber of Commerce Rules. The appellant also contended that it neither provided any service nor carried on any trade in India, as the machine was sold outside India.2. Applicability of the jurisdictional clause in the contract:The Commission rejected the appellant's submission that the jurisdictional clause in the contract ousted its jurisdiction. The clause regarding the choice of forum was deemed void under sections 28 and 23 of the Contract Act. However, the Supreme Court clarified that such agreements are not contrary to public policy and do not contravene section 28 or section 23 of the Contract Act, referencing Hakam Singh v. Gammon (India) Ltd., A.B.C. Laminart (P.) Ltd. v. A.P. Agencies, and Modi Entertainment Network v. W.S.G. Cricket (P.) Ltd. Nevertheless, the Court concluded that the jurisdictional clause did not apply to statutory remedies under the Act, which are distinct from contractual remedies.3. Allegations of unfair trade practices:The respondent alleged several unfair trade practices by the appellant, including false representations about the machine's standard and model, passing off old goods as new, and failing to honor guarantees and warranties. These allegations were based on section 36A of the Act, which defines unfair trade practices. The Commission needed to determine whether these practices took place in India, as the Act does not have extra-territorial operation.4. Determination of whether the appellant carried on business in India:The Commission initially held that the appellant carried on trade practices in India through respondent No. 2, who was allegedly its Indian Agent. However, this assertion was contested by the appellant and required evidence to determine the true nature of the relationship. If respondent No. 2 was indeed the appellant's agent, the Commission would have jurisdiction.5. The necessity of evidence to determine jurisdiction:The Supreme Court emphasized that the second objection to the Commission's jurisdiction could not be decided by demurrer and required evidence. The Commission needed to investigate whether the alleged unfair trade practices occurred in India and whether respondent No. 2 acted as the appellant's agent. The Court directed the Commission to consider evidence on these points and clarified that if the appellant did not carry on business in India and the unfair trade practices did not occur in India, the Commission should dismiss the complaint.Conclusion:The Supreme Court directed the Commission to re-examine the jurisdictional issue based on evidence. The Commission must determine whether the appellant carried on business in India through respondent No. 2 and whether the alleged unfair trade practices took place in India. If these conditions are not met, the Commission must dismiss the complaint without addressing the merits. The appeal was disposed of without any order as to costs.