P.R TRANSPORT AGENCY V.

UNION OF INDIA

 Citation- (AIR 2006 All 23, 2006 (1) AWC 504)

 Court- Hon‟ble Allahabad High Court
 Bench- S Harkauli, U Pandey
I. INTRODUCTION

The present case has been decided by the Hon‟ble High Court of Allahabad pertaining to the
scope and cover of Section 13(3) of the Information Technology Act, 2000 and the jurisdiction
of the courts in case of disputes arising out of an E- Contracts. The issue of place in case of
electronic contract was given the first judicial clarity in the present case.

The further the judgement clarifies the application of Section 13(3) of the information
Technology Act, 2000 as well as the power of the courts under Article 226 of the constitution of
India, 1950 and Section 20 of the Civil Procedure Code, 1908.

II. FACTS

Bharat Coaking Coal (BCC) held and e-auction for coal in different lots, the
petitioner submitted its tender or bid in the said auction and the petitioner‟s bid was
accepted for 4000 metric tons of coal from Dobari Colliery at the price of Rs. 1,625/-
per metric tons. The bid of P.R transport Agency was accepted by BCC. The
acceptance letter was issued on 19th July 2005 by email to email address of the
plaintiff.

Acting upon acceptance, P.R Transport agency deposited a sum of Rs. 81.12 Lakhs
towards the cheque drawn in favour of Bharat Coaking Coal in terms of the „Terms of
Allocation‟. The cheque was accepted and encashed by respondent No. 3.

Later the Bharat Coaking Coal Refused to deliver the coal and sent Communication
to PR Transport agency stating that‟s its bid has been wrongfully accepted “due to
some technical and unavoidable reasons”.
 The reason was that there was some other person whose bid for the same amount was
comparatively higher than the plaintiffs bid due to some flaw in the software, the
higher bid has not been considered earlier.

Aggrieved by this letter, PRTA approached the Hon‟ble High Court of Allahabad.

III. ISSUES INVOLVED

1. Whether the Court has the territorial jurisdiction to hear this writ petition?

2. Whether the “ouster‟ Clause of the tender agreement has the effect of excluding the
writ jurisdiction of the Court?

3. Whether the respondents are bound by their concluded contract?

IV. ARGUMENTS ON BEHALF OF PETITIONER

The Petitioner contended that since communication of acceptance was received by PRTA at UP,
the contract can be stated to have been entered-into at UP. In an action based on breach of
contract, the „place of contract‟ is one of the determinative factors for deciding territorial
jurisdiction.

V. ARGUMENTS ON BEHALF OF RESPONDENTS

The objection of the defendants are divided into three parts :-

(1) No part of cause of action has arisen within the territory of U.P.

(2) No facts have been pleaded in the writ petition on the basis of which it can be said that
any part of cause of action has arisen within the territory of U.P.
(3) The jurisdiction of this Court under Article 226 of the Constitution of
India stands ousted in favour of the Jharkhand High Court under Clause 10.5 of the Tender
Agreement, the relevant part of which reads that (any) „dispute arising out of this scheme shall
be subject to the jurisdiction of the Jharkhand High Court‟.

The defendant further contended that P R Transport Agency (PRTA) was awarded a tender by
BCCL in Jharkhand. The acceptance of the PRTA‟s bid was conveyed through an e-mail. The e-
mail was received at Chamauli, Uttar Pradesh (U.P.). The respondent contended that since the
tender had taken place in Jharkhand, no cause of action arose in Uttar Pradesh.And therefore the
Allahabad High Court did not have the jurisdiction to take up the case under Article 226 of the
Constitution of India and Section 20 of The Civil Procedure Code.

VI. FINDINGS OF THE COURT

1. The court found that the partnership deed between the Petitioners is dated 7.7.2000, and in it
the principal place of business is at Chandauli and the only other place where the petitioner
carries on business is Varanasi, which is also in the State of U.P.
The acceptance of the tender, communicated by the respondents to the petitioner by e-mail, will
be deemed to be received by the petitioner at Varanasi/Chandauli, which are the only two places
where the petitioner has his place of business.

The Court further stated that, “The contention of the petitioner with regard to territorial
jurisdiction is that because the communication of the acceptance of the tender was received by
the petitioner by e-mail at Chandauli (U.P.), therefore, the contract from which this dispute
arises was completed at Chandauli and in a case seeking performance of the contract or alleging
breach of the contract by the respondents, the completion of the contract is a part of the “cause
of action‟. There the place where the contract was completed by receipt of communication of
acceptance is a place where „part of cause of action‟ arises.”

The court while referring to the Halsbury‟s laws of England 4th Edition Re-issue Vol. 9(1)
Paragraph 683 Page-434, 435 stated that, it has been said in reference to contracts made orally as
by telephone, or in writing as by telex or fax, that the contract is complete when and where the
acceptance is received. However, those principles can apply only where the transmitting terminal
and the receiving terminal are at fixed points. In case of e-mail, the data (in this case acceptance)
can be transmitted from anywhere by the e-mail account holder, it goes to the memory of a
„server‟ which may be located anywhere and can be retrieved by the addressee account holder
from anywhere in the world and, therefore, there is no fixed point either of transmission or of
receipt.

The Hon‟ble High Court held that the law with respect to contracts entered into via telephone is
pretty clear and the contract in such cases is complete as soon as the acceptance is communicated
and at the place where the same is received.

This principle, however, cannot be imported in case of e-mails as an email can be accessed at
any place in the world by the addressee. This absence of a static place of receipt or transmission
is taken-care of by Section 13(3) of the IT Act, 2000, which states“…an electronic record is
deemed to be received at the place where the addressee has his place of business”. Applying this
categorical provision, Hon‟ble High Court ruled that since the email acceptance is deemed to
have been received at UP, it had the requisite territorial jurisdiction to decide the case.

The Court further relied on Sec 13(3) of the Information Technology Act and held that when the
mail was sent, it was intended for the address from where the Company was working. Since, the
office of the Company was in Chamauli and Varanasi, both of which fell within U.P so the High
Court had jurisdiction. So, a partial cause of action arose which allows the High Court to
exercise its jurisdiction.

2. The court regarding the second issue stated that Jurisdiction of civil courts is created by
statute and cannot be created or conferred by the consent of the parties upon a court which
has not been granted territorial or pecuniary or other (subject matter related) jurisdiction by
statute. Under Section 28 of the Indian Contract Act, 1872, the parties by their agreement are
not permitted to totally exclude the jurisdiction of civil courts which has been created by
statute However, where several civil courts have territorial jurisdiction in respect of a suit,
 parties may by agreement confine themselves to any one or more of such civil courts and
such an agreement would not be violative of Section 28 of the Contract Act. Section 20
C.P.C. for the civil court and Article 226 of the Constitution of India for the High Court‟s
permit the exercise of territorial jurisdiction where the cause of action wholly or in part
arises within their territories. To that extent, the words used in the two provisions are similar.
Further, “When the parties enter into an agreement confining themselves to the jurisdiction of
one of the several civil courts having territorial jurisdiction in respect of a suit, basically the
parties are placing a restraint upon themselves from approaching the other civil courts whose
jurisdiction has been excluded by the agreement. In this manner the jurisdiction of the other civil
courts gets ousted, subject only to one restriction which is provided in Section 28 of the Contract
Act, However, the power of judicial review given to the High Courts by Article 226 of the
Constitution of India, and being a basic feature of the Constitution, cannot be curtailed even by
statute”.

The court finally held that the ouster clauses can oust a territorial jurisdiction only of civil courts
and not of the High Court in respect of however under Article 226 of the Constitution of India,
provided such power exists in the High Court on account of part of cause of action having arisen
with its territorial jurisdiction.
3. The court regarding the second issue stated that the third party has not appeared before
the court and there is no averment from the side of the petitioner or the respondents that
the said third party has so far challenged the acceptance of the bid of the petitioner. In
absence of such challenge, respondents are firstly bound by their concluded contract and
thereafter they are further bound by the principle of promissory estoppel, in as much as
the petitioner has altered its legal position to its disadvantage, acting upon the
communication of acceptance sent to it by these respondents, by depositing large amount
of money, viz. Rs. 81,12,000/- by cheque which has also been encashed by the
respondents.
There can be no doubt that the respondents are 'State' within the meaning of Article 12 of
the Constitution of India and the cancellation of the auction and the contract of sale in
favour of the petitioner at such a highly belated stage, without giving any opportunity of
 hearing to the petitioner, is violative of the principles of natural justice and on that ground
also it cannot be sustained.
VII. DECISION OF THE COURT
The Hon‟ble High Court allowed the writ petition and directed respondents to handover
the coal, covered by the petitioner's accepted bid, to the petitioner without further delay.
VIII. LEGAL PROVISIONS

1. Section 13 of Information Technology Act, 2000

“13. Time and place of despatch and receipt of electronic record.—(1) Save as otherwise
agreed to between the originator and the addressee, the despatch of an electronic record occurs
when it enters a computer resource outside the control of the originator.

(2) Save as otherwise agreed between the originator and the addressee, the time of receipt of an
electronic record shall be determined as follows, namely:—

(a) if the addressee has designated a computer resource for the purpose of receiving electronic
records,—

(i) receipt occurs at the time when the electronic record enters the designated computer
resource; or

(ii) if the electronic record is sent to a computer resource of the addressee that is not the
designated computer resource, receipt occurs at the time when the electronic record is retrieved
by the addressee;

(b) if the addressee has not designated a computer resource along with specified timings, if any,
receipt occurs when the electronic record enters the computer resources of the addressee.

(3) Save as otherwise agreed to between the originator and the addressee, an electronic record
is deemed to be despatched at the place where the originator has his place of business, and is
deemed to be received at the place where the addressee has his place of business.
(4) The provisions of sub-section (2) shall apply notwithstanding that the place where the
computer resource is located may be different from the place where the electronic record is
deemed to have been received under sub-section (3).

(5) For the purposes of this section,—

(a) if the originator or the addressee has more than one place of business, the principal place of
business, shall be the place of business;

(b) if the originator or the addressee does not have a place of business, his usual place of
residence shall be deemed to be the place of business;

(c) “usual place of residence”, in relation to a body corporate, means the place where it is
registered.”

Jurisdiction is an important issue under an electronic contract. The ease of accessibility that is
conferred upon the parties in an electronic commerce creates challenges for the legal system. Sec
13 of the Information Technology Act (IT Act) answers this by bringing clarity and objectivity to
this issue

The Section deals with four major issues from both sides, i.e the Proposer and the Acceptor. The
issues are:

i. The Time of Dispatch of Electronic Contract

ii. The Place of Dispatch of Electronic Contract

iii. The Time of Receipt of Electronic Contract

iv. The Place of Receipt of Electronic Contract

These issues can be decided by the Parties, through a prior agreement. But, if there are no such
agreement, then the default position under Sec 13 of the IT Act will take place.

In this case, Dispatch means, when the electronic information has moved from the computer
resource and is beyond the control of the originator; while Receipt means when the electronic
information has moved in a computer resource which is within the control of the receiver. The
Time of Dispatch or Receipt will be determined based on the time the electronic information was
received or sent from the Designated Computer Resource (DCR).

IX. CONCLUSION/ ANALYSIS

Emergence of technology and its growth has changed the working of trade in India, with growing
e-commerce industry and increasing use of internet/ computer for conducting day to day
activities and contracts. Such growth has led to increasing scope of law in the E- contracts with
its legality and its enforcement under law has to be done. Contracts are a most basic document
for any commercial transactions. With the growth of the business in virtual space, they are now
executed in e-formats. The principal laws governing rights and obligations under the contracts
are the Indian Contract Act, 1872 (“Contract Act”) and the Specific Relief Act, 1963 for specific
performance of the contracts. Within the charter of the Act, parties are free to contract on any
terms, they choose. The contracting parties themselves decide the rights and duties. E-Contract
now provides for execution of the contract within the virtual space itself saving valuable time.
Affixation of the digital signature further helps in authentication of an electronic copy of the
contract. E-contracts are now recognized across the globe. With the execution of e-contracts, the
Information Technology Act (“IT Act”) comes into play alongside the principal Acts.

In present case the dispute of jurisdiction arose between the parties since the laws pertaining to
acceptance and receiving of an offer in a letter or telephonic agreement are different from the
working of an E-contract.

The common legislative and judicial intent appears to be clear that any legally valid acts that are
ordinarily performed would continue to be valid even if performed electronically or digitally, as
long as such electronic/digital performance consists of all the attributes of legally valid contract,
as may be prescribed under the applicable laws.

Finally the judgement by the Allahabad clarifies the issue of jurisdiction subject to the agreement
between the parties, however in the absence of any agreement between the parties Section 13 of
The Information technology shall be applicable under which the place where the cause of action
arose would be deemed to be where the originator has his place of business and where the
addressee has his place of business.