1992 S C M R 1174

[Supreme Court of Pakistan]

Present: Muhammad Afzal Zullah, CJ.

Wali Muhammad Khan, J

Messrs KADIR MOTORS (REGD). RAWALPINDI---- Appellant

Versus

Messrs NATIONAL MOTORS LTD., KARACHI

And 3 others----- Respondents

Civil Appeal No. 784 of 1990, decided on 10th February, 1992.

(On appeal from the judgment and order dated 21-3-1990 of the Lahore High Court,
Rawalpindi Bench, Rawalpindi, passed in F.A.O. No.1.83/80).

(a) Contract Act (IX of 1872)---

----S. 28---Civil Procedure Code (V of 1908), S.20---Constitution of Pakistan (1973),

Art.185(3)---Leave to appeal was granted to consider the extent and scope of S.28 of the
Contract Act, 1872 regarding the ouster of jurisdiction of Courts by the consent of the
parties and the question of interpretation of a clause in the agreement which related to the
ouster of jurisdiction of the Courts by consent.

(b) Civil Procedure Code (V of 1908)---

---S. 20---Scope and application of S.20---Suit for. recovery---Plaint showed that

defendant resided at Karachi and their principal office was also located at
Karachi---Original contract between the' parties which had given rise to the filing of the
suit for recovery was negotiated and entered into at Karachi-- Primarily the Courts at
Karachi had jurisdiction to try the suit according to S.20(1)(c), C.P.C.

(c) Contract Act (IX of 1872)---

----S. 28---Object of S:z8, Contract Act, 1872---Parties cannot be restrained from entering
into an agreement to get their disputes decided by a particular Court of competent
jurisdiction for their convenience and avoidance of unnecessary objections to the territorial
jurisdiction of Courts---Such an agreement would be legal and not hit by S.28 and parties
were bound to follow the same:

Section 28 of the Contract Act provided that every agreement in restraint of legal
proceedings is void. There is nothing in the provision to restrain the parties from entering
into an agreement to get their- disputes decided by a particular Court of competent
jurisdiction for their convenience and avoidance of unnecessary objections to the territorial
jurisdiction of Courts. The intention behind section 28 of the Contract Act, 1872 is that all
those agreements which restrain a person to enforce his rights under a contract by usual
legal proceedings in the ordinary Tribunals are void. It obviously implies that a party
cannot be restrained to enforce his right in ordinary Court of law but if by mutual agreement
between the parties a particular Court having territorial and pecuniary jurisdiction is
selected for the determination of their dispute, there appears to be nothing wrong or illegal
in it or opposed to public policy.

Such an agreement is legal and not hit by section 28 of the Contract Act and the parties are
bound to follow it.

Messrs Brady & Co. (Pakistan) Ltd. v. Messrs Sayed Saigol Industries Ltd. 1981 S C M R
494 and WAPDA and 2 others v. Mian Ghulam Bari P L D 1991 SC,780 distinguished.

State Life Insurance Corporation of Pakistan v. Rana Muhammad Saleem 1987 S C M R

393 ref.

MA. Siddiqui, Advocate Supreme Court and Ejaz Muhammad Khan, Advocate-on-Record
for Appellant.

Bashir Ahmad Ansari, Advocate Supreme Court and Ch. AkItar Ali, Advocate-on-Record
for Respondent No.l.

Nemo for Respondents Nos.2 to 4.

Date of hearing: 10th February, 1992.

JUDGMENT

WALI MUHAMMAD KHAN, J.---Messrs Kadir Motors, Rawalpindi appellant has

challenged the order, dated 21-3-1990 passed by a learned Single Judge of the Lahore High
Court, whereby their F.A.O. No.183 of 1980 against the order of Civil Judge 1st Class,
Rawalpindi dated 22-3-1980, was dismissed. Leave granting order is as follows: -
"After hearing the learned counsel in support, of this petition, we have I come to the
conclusion that the main question involved in this case is the interpretation of clause 27 of
the agreement which relates to the ouster of jurisdiction of the Courts by consent and thus
the extent and scope of section 28 of the Contract Act regarding the ouster of jurisdiction
by consent of the parties needs consideration. As further contended that ouster of
jurisdiction clause in the agreement is controlled by section 20 of the C.P.C and as held in
the case reported in 1981 S C M R 494 that jurisdiction of the Civil Courts are subject to
section 20 of the C.P.C, and the parties by consent cannot take away the same.

Since the case in hand involves the interpretation of a. legal question of great public
importance, therefore, we grant leave to appeal."

We have heard Mr. MA. Siddiqui, Advocate, for the appellant, Mr. Bashir Ahmad Ansari,
Advocate for respondent No.l, and have perused the record of the case. As is apparent from
the leave granting order, the sole question for determination in the instant appeal is whether
the controversy between the parties could only he adjudicated upon by the Karachi Courts
and the Courts at Rawalpindi had no jurisdiction in the matter. Section 20 of the Civil
Procedure Code deals with the jurisdiction of the Court and for convenience sake it is being
reproduced as under:--

"20. Other suits to be instituted where defendants reside or cause of action

arises.-- Subject to the limitations aforesaid, every suit shall be instituted in a Court within
the local limits of whose jurisdiction---

(a) the defendant, or each of the defendants where there are more than one at the time of
the commencement of the suit, actually and voluntarily resides, or carries on business, or
personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of the commencement
of the suit, actually and voluntarily resides, or carries on business or personally works for
gain, provided that in such case either the leave of the Court is given, or the defendants
who do not reside, or carry on business; or personally work for gain, as aforesaid, acquiesce
in such institution; or

(c) the cause of section, wholly or in part, arises."

Section 28 of the Contract Act is relevant for the determination of the plea of jurisdiction
as raised in the written statement and as such the same is also reproduced as follows:--

"28. Agreements in restraint of legal proceedings void: Every agreement, by which

any party is restricted absolutely from enforcing his rights under or in respect of any
contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time
within which he may thus enforce his rights, is void to that extent,

-----------------------------------------------

---------------------------------------------

The bare reading of the section 20 of the Civil Procedure Code makes it amply clear that
all suits shall have to be instituted in a Court within the local limits of whose jurisdiction
the defendant, or any of the defendants, actually and voluntarily resides, or carries on
business, or personally works for gain, at the commencement of the suit, or if there are
more defendants then, one of them resides, or carries on business, or personally works for
gain, subject to the leave of the Court, or the acquiescence of other defendants, or where
the cause of action, wholly or in part, arises. According to Explanation II appended to the
said section, a corporation shall be deemed to carry on business at its sole or principal
office in Pakistan or, in respect of any cause of action arising at any place where it has also
a subordinate office, at such place.

According to the contents of the plaint, defendant No.l, namely, Messrs National Motors
Limited, the successor-in-interest of Ghandhara Industries Limited, reside at Karachi and
their principal office is also located at Karachi as is admitted in the heading of the .plaint.
The original contract between the parties which has given rise to the filing of the present
suit for recovery of Rs.52,24,086.27 was negotiated and entered into at Karachi. As such
primarily the Courts at Karachi, undoubtedly, have jurisdiction to try the suit according to
section 20, sub-clauses (a) and (c) of the Civil Procedure Code.

However, the learned trial Judge in his judgment, dated 22-3-1980, without proper
discussion, has noted that Civil Courts at Rawalpindi also had the jurisdiction, presumably
on the ground that the part of the cause of action arises at Rawalpindi because the delivery
is to be made here and also because defendant No. 1 maintains a sub-office here as well.
This finding was not questioned before us by the respondents' side and we do not consider
it advisable at this stage to record our definite finding whether the Courts at Rawalpindi
too, have the jurisdiction in the matter or not.

The defendant/respondent-1 relied on clause 27 of the agreement (Exh.D./1) between the

parties which confers exclusive jurisdiction on the Karachi Courts in the event of any
dispute arising between the parties. Clause 27 of the agreement is in the following terms
as incorporated in the judgment of the High Court (page 16 of the paper book):--

"27. The place of payment of all sums due by The Dealer to The Company is at the
Company's Office in Karachi. The parties hereby agree that any suit to enforce the rights
of either party under this agreement shall be instituted in and tried by the Courts of ordinary
original civil jurisdiction in the city of Karachi and the Dealer expressly agrees to submit
to the jurisdiction of such Courts."

To wriggle out of this agreement, the learned counsel for the appellant placed reliance on
section 28 of the Contract Act which provides that every agreement in restraint of legal
proceedings is void. We have minutely read the said provision of law and could not find
anything therein to restrain the parties from entering into an agreement to get their disputes
decided by a particular Court of competent jurisdiction for their convenience and avoidance
of unnecessary objections to the territorial jurisdiction of Courts. The intention behind the
said provision of law is that all those agreements which restrain a person to enforce his
rights under a contract by usual legal proceedings in the ordinary tribunals are void. It
obviously implies that a party cannot be restrained to enforce his right in ordinary Court of
law but if by mutual agreement between the parties a particular Court having territorial and
pecuniary jurisdiction is selected for the determination of their dispute, there appears to be
nothing wrong or illegal in it or opposed to public policy

The learned counsel for the appellant placed reliance on the judgments of this Court in the
cases of Messrs Brady & Co. (Pakistan) Ltd. v. Messrs Sayed Saigol Industries Ltd. 1981
SCMR 494, WAPDA and 2 others v. Mian Ghulam Bari PLD 1991 SC 780 and State Life
Insurance Corporation of Pakistan v. Rana Muhammad Saleem 1987 SCMR 393. The case
of Messrs Brady & Co., is not much relevant because it deals with question of jurisdiction
in cases against corporations having head office at one place and branch office at another
place. Even the dictum in this case, being reproduced below, does not advance the case of
the appellant in any way.

"Explanation II (of section. 20, C.P.C.) can be sub-divided into two parts; one dealing with
the principal office and other with subordinate office -- a limitation has been placed
regarding subordinate office only; which would mean that a party choosing to institute a
suit at a place where the corporation has only a subordinate office would have. initially to
show that the cause of action arose there. Thus, it would appear that the location of the
subordinate office does not give the plaintiff a choice to institute the suit at that place. The
law did not recognise that the location of a subordinate office of a corporation can be
converted, through a deeming clause, into a place where the corporation carries on
business. It would be so only under a limitation namely, that where cause of action arose
and the corporation has also a subordinate office at that place. The combination of these
two facts would become equal to the `carrying on business'. The underlying idea seems to
be that regarding corporation, it would not be correct to assume that it `carries on business',
as envisaged in section 20, at a subordinate office. Thus, looked at from this angle as well,
the entire Explanation 11 would appear to be relateable to the phrase `carries on business'
used in clauses (a) and (b) of section 20 and clause (c) remains independent thereof."
The case of WAPDA and 2 others v. Mian Ghulam Bari also relates to the place where the
cause of action partly arose and where also Explanation Il of section 20 has been dealt with.
The concluding para of the judgment is to the following effect:-

"It is true that in the second part of the explanation a scope has been left for filing of the
suit at a place where a corporation has a subordinate office provided any cause of action
arose at that place. But this part of explanation is preceded by another alternative; namely,
that a corporation shall be deemed to carry on a business at its sole or principal office. The
use of the word `or' between the two is very significant. It means that the corporation shall
be deemed to carry on business at its sole or principal office as well as at any place where
it has a subordinate office but in the latter case the cause of action should have arisen at
that place. Thus, the argument of the learned counsel being too wide to be accepted and the
same also being in negation of the statutory explanation, has no force. Leave to appeal,
accordingly is refused."

The case of State Life Insurance Corporation of Pakistan v. Rana Muhammad Saleem
clinches the matter against the appellant as in the. said case, sections 9 and 20 of the Civil
Procedure Code and section 28 of the Contract Act came up for consideration to determine
whether any agreement which restricts the trial of suits between the parties by Courts of
competent jurisdiction at a particular place is void or not. Their Lordships, on reviewing
the precedent cases held as follows:--

We have considered the arguments of the learned counsel for the parties. Under section 9
of the Code of Civil Procedure the Civil Courts have jurisdiction to try all of a civil nature
expending the suit of which their cognizance is either expressly or impliedly barred. Under
section 20 of the Code of Civil Procedure every suit is to be instituted in a Civil Court
within the local limits of whose jurisdiction the defendant resides or carries on business or
where the cause of action wholly or in part arose. Under section 28 of the Contract Act
every agreement by which any party thereto is restricted absolutely from enforcing his
rights under or in respect of any contract, by the usual legal proceedings in the ordinary
tribunals or which limits the time within which he may thus enforce his rights, is void to
that extent It is. evident from a plain reading of these provisions that there is no absolute
exclusion of jurisdiction under section 9 or section 20 of the Code of Civil Procedure nor
there is any violation of the provisions of section 28 of the Contract when two or more
Courts have jurisdiction to try a suit and the parties mutually agree to choose or take their
dispute to one of them. The Civil Courts exercise their jurisdiction under the Code of Civil
Procedure. If they do not possess such jurisdiction under the Code it cannot be conferred
on them through a mutual agreement of the parties to a dispute. But in a situation where
two or more Courts have jurisdiction to try a suit under the Code of Civil Procedure, then
an agreement between the parties that any dispute. arising between them shall be tried only
by one of such Courts could not be considered contrary to public polite as it would neither
contravene the provisions laid down in section 28 of the Contract Act nor would it violate
in any manner the provisions of section 9 or section 20 of the Code of Civil Procedure."

As stated earlier the two cases of Messrs Brady and WAPDA through throw much light on
the questions of determination of territorial jurisdiction Courts, they are not much relevant
in the instant case because we have all decided not to embark upon the same question
inasmuch as the lower forums have not considered this aspect of the case. This main
argument regarding clause 27 of the agreement has been sufficiently explained above and
in view of the dictum of this Court in case of State Life Insurance Corporation of Pakistan
v. Rana Muhammad Saleem 1987 S C .M R 393 the matter is clinched, to the agreement is
legal and not hit by section 28 of the Contract Act and the parties are bound to follow it.

Consequently, the judgments of the lower two forums do not suffer from any legal infirmity
and by maintaining them, the instant appeal is dismissed with no order as to costs.

M. B. A. /K-185/S Appeal dismissed.