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Case Name: ARCADIA SHIPPING LTD. V.  TATA STEEL LIMITED AND OTHERS
Case Number: SPECIAL LEAVE PETITION (CIVIL) NO.8488 OF 2024
Dated: April 16, 2024
Quorum: Honorable Justice Sanjiv Khanna and Justice Dipankar Datta

FACTS OF THE CASE

The facts of the case and pleadings arises in the plaint, Suit No. 458/2000:

Bhushan Steel & Strips Ltd is the original plaintiff in a dispute with Tata Steel Limited, TYO Trading Enterprises, Commercial Bank of Ethiopia, Arcadia Shipping Limited, and M.G. Trading Worldwide Pvt. Ltd. as the defendants. Bhushan Steel, a manufacturer of galvanised steel corrugated sheets, was instructed by TYO Trading to place supply orders for the material. The material was dispatched by Bhushan Steel and loaded by shippers Arcadia from Mumbai, India, to Djibouti, Ethiopia.

Bhushan Steel prepaid freight charges to Arcadia, who was directed to deliver the goods to the Bank of Ethiopia. The Bank of Ethiopia refused to encash the Letter of Credit due to discrepancies. Bhushan Steel informed Arcadia that both shipments had been released to TYO Trading, as they had presented a Bill of Lading endorsed by the Bank of Ethiopia. However, the payment was not received by Bhushan Steel, and the material could not be shipped back to Bhushan Steel.

The defendants took a contradictory stand, with TYO Trading stating they paid for the goods, while Arcadia claimed the material was released upon presentation of the Bill of Lading. PNB returned the original documents, including the Bill of Ladings, to Bhushan Steel, stating they had received them without any encashment of the Letter of Credit by the Bank of Ethiopia.

ISSUSES

1. Whether the defendants are jointly liable for the loss suffered by Bhushan steel of $2,73,510 in the deal of galvanized steel corrugated sheets ?
2. Whether the Delhi High Court have the territorial jurisdiction to entertain this suit ?

LEGAL PROVISIONS

1. CONSTITUTION OF INDIA 

• ARTICLE 136: Special Leave Petition

(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.

(2) Nothing in clause (1) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces.

2. CODE OF CIVIL PROCEDURE 

• Section 20(C): It accords dominus litis to the plaintiff to institute a suit within the local limits of whose jurisdiction the cause of action, wholly or in part, arises. Every suit is based upon the cause of action, and the circumstances of the cause of action, even in part, will confer territorial jurisdiction on the court.

• ORDER 1 RULE 3: Who may be joined as defendants?

All persons may be joined in one suit as defendants where—

(a) any right to relief in respect of, or arising out of, the same act or transaction or series of acts or transactions is alleged to exist against such persons, whether jointly, severally or in the alternative; and

(b) if separate suits were brought against such persons, any common question of law or fact would arise.

• ORDER 1 RULE 7: When plaintiff in doubt from whom redress is to be sought.

Where the plaintiff is in doubt as to the person from whom he is entitled to obtain redress, he may join two or more defendants in order that the question as to which of the defendants is liable and to what extent may be determined as between all parties.

 Contentions of plaintiff

The plaintiff is entitled to $2,76,510 in a bill of lading dispute between Tata Steel Limited and TYO Trading Enterprises. The plaintiff is entitled to the payment if the goods were released by the Bank of Ethiopia after obtaining a duly endorsed bill of lading from TYO Trading Enterprises. If the goods were released without obtaining the endorsement, the defendants are jointly and severally liable to the plaintiff for making payment. TYO Trading Enterprises cannot escape its liability under any circumstances, as the irrevocable Letter of Credit would not have been issued in favor of the plaintiff. The plaintiff would not have supplied the goods, and the Bank of Ethiopia’s liability arises if they delivered the goods without obtaining endorsement from TYO Trading Enterprises. The cause of action arose when the plaintiff was assigned an order by M.G. Trading Worldwide Pvt Ltd, and the defendants were jointly and severally liable. The High Court at Delhi possesses territorial jurisdiction to decide the suit.

Defendant ‘s contention

This Court lacks territorial jurisdiction to entertain and decide the present suit. Apparently, no cause of action arose against Arcadia within the jurisdiction of the Court to grant the relief prayed by the plaintiff. It is not a controversy that the goods in question were shipped / loaded at Mumbai; the freight charges were paid there. The goods were to be delivered at Djibouti Port, Ethiopia Apparently, no cause of action whatsoever qua Arcadia arose at Delhi to attract the territorial jurisdiction of this Court. This Court has no jurisdiction to entertain and the judgment records that Arcadia had not disclosed who was the ‘Principal’, who was an undisclosed foreign party. Arcadia had not produced document to show if the freight charges were received on behalf of the ‘Principal’ etc.

COURTS ANALYSIS AND Judgment

In the judgment or order dated December 20, 2017, the Single Judge of the High Court at Delhi recorded the following findings:

The goods were released by Arcadia unauthorizedly and have not been accounted for by them. Accordingly, Arcadia is liable to Bhushan Steel for the loss suffered. Arcadia should pay Bhushan Steel the value of the goods without any interest. Despite these findings, the Single Judge directed the return of the complaint on the question of territorial jurisdiction.

A Division Bench of the High Court at Delhi, vide judgment/order 09.01.2024, allowed an appeal against the judgement/order passed by the Single Judge dated December 20, 2017, in an appeal preferred by Tata Steel Limited.

The present appeal has been preferred by the appellant, Arcadia, against the judgment/order of the Division Bench of the High Court at Delhi, dated January 8, 2024.

Arcadia claims two transactions occurred: the sale of goods and a shipment of goods from Mumbai to Djibouti. They claim their involvement was restricted to the second transaction, as supply orders were placed in Delhi. However, the court finds Arcadia’s contentions unfounded as the transactions are intertwined and cannot be compartmentalized into silos. The shipment of goods was linked to the sale of goods by Bhushan Steel through the Bill of Lading. The release of goods by Arcadia hinged on the presentation of the Bill of Lading by TYO Trading at the point of receipt. The Bank of Ethiopia issued the Letter of Credit, and Bhushan Steel remained the owner of the goods. The actions of Arcadia and the transactions were interconnected, and a part of the cause of action had arisen in Delhi.

It would be opportune to refer to the provisions of the CPC.

Section 20(c) of the Code accords dominus litis to the plaintiff to institute a suit within local limits of whose jurisdiction the cause of action, wholly or in part, arises. Every suit is based upon the cause of action, and the circumstances of the cause of action, even in part, will confer territorial jurisdiction on the court. The expression ‘cause of action’ can be given either a restrictive or wide meaning. However, it is judicially read to mean every fact that the plaintiff should prove to support their right to the judgment.

Order I Rule 3 of the Code states that the plaintiff may join as a defendant in one suit all persons against whom the plaintiff claims the right to relief in respect of, or arising out of, the same act, transaction or series of transactions. The claim, viz. the defendants can be joint, several or alternative. Thus, it is permissible to file one civil suit, even when separate suits can be brought against such persons, when common questions of law and fact arise.

Order I Rule 7 of the Code permits a plaintiff who is in doubt as to the person from whom they are entitled to obtain redress to join two or more defendants in order that the question of which of the defendants is liable and to what extent can be decided in one suit.

The supply order was placed in Delhi, and the payment was to be released in Delhi. The cause of action arose in part at Delhi, under Section 20(c) of the Code. Bhushan Steel could enjoin all defendants, including Arcadia, in a single suit under Order I Rules 3 and 7 of the Code. The relief claimed by Bhushan Steel lies against all defendants, albeit to different extents, and was ‘in respect of and arises out of a series of transactions’. The Division Bench of the High Court was right in setting aside the Single Judge’s finding on territorial jurisdiction.

The Single Judge held that no liability could be fastened to TYO Trading and Bank of Ethiopia, but liability could be fastened to Arcadia. In the context of the dispute, the remedy was to file a civil suit against the defendants, which was maintainable in Delhi, a part of the cause of action having arisen in Delhi. Therefore, the Single Judge erred in upholding Arcadia’s contention regarding the lack of territorial jurisdiction of the Delhi High Court and absence of any cause of action arising against them in Delhi, based on their businesses being located in Mumbai. For the aforesaid reasons, the present civil appeal is dismissed. Pending application(s), if any, shall be disposed of.

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JUDEMENT REVIEWED BY: ABHISHEK SINGH

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