Contract of Personal Service : Not Enforceable in law being in Restraint of Trade : Delhi High Court Rules

Justice Amit Bansal
Delhi High Court

Justice Amit Bansal recently [in Global Music Junction P. Ltd. v. Annapurna Films P. Ltd. - Neutral Citation No. 2023/DHC/000064] delivered a judgment examining the law relating to restraint of trade under S. 27 of the Indian Contract Act, 1872. The Court was examining the claim of a Plaintiff who was seeking restraint on an artist from breaching exclusivity clauses in the agreements signed between the parties. The Court held that such clauses in agreements would tantamount to a restraint of trade and would fall foul of S. 27 of the Indian Contract Act, 1872. The relevant findings of the Court are as under:

15. Before proceeding further, I wish to analyse the legal position with regard to enforcement of negative covenants in contracts of personal service and grant of interim injunction.

16. At the outset, a reference may be made to Section 27 of the Indian Contract Act, 1872:

"27. Agreement in restraint of trade void.--Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. 

Exception 1.--Saving of agreement not to carry on business of which goodwill is sold.--One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein:

Provided that such limits appear to the Court reasonable, regard being had to the nature of the business."

17. Senior counsel appearing on behalf of the plaintiff company has extensively relied upon the judgment of the Supreme Court in Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. Ltd., (1967) 2 SCR 378, in support of his submission that reasonable restrictions can be imposed for the protection of the covenantee during the period of the contract. Attention of the Court has been drawn to the reference made to the judgment of Warner Brothers Pictures v. Nelson, (1937) 1 KB 209, in Niranjan Shankar Golikari (supra), where a film artist despite entering into a contract to render her exclusive service to the plaintiff during the period of the contract, entered into a contract with a third person in breach of the provisions of the contract and in these circumstances an injunction was granted.

18. The dicta of Niranjan Shankar Golikari (supra) is contained in paragraph 17, which is set out below:

"17. The result of the above discussion is that considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the termination of the contract than those in cases where it is to operate during the period of the contract. Negative covenants operative during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade and therefore do not fall under Section 27 of the Contract Act. A negative covenant that the employee would not engage himself in a trade or business or would not get himself employed by any other master for whom he would perform similar or substantially similar duties is not therefore a restraint of trade unless the contract as aforesaid is unconscionable or excessively harsh or unreasonable or one- sided as in the case of W.H. Milsted & Son Ltd. Both the trial court and the High Court have found, and in our view, rightly, that the negative covenant in the present case restricted as it is to the period of employment and to work similar or substantially similar to the one carried on by the appellant when he was in the employ of the respondent Company was reasonable and necessary for the protection of the company's interests and not such as the court would refuse to enforce. There is therefore no validity in the contention that the negative covenant contained in clause 17 amounted to a restraint of trade and therefore against public policy."

19. In Niranjan Shankar Golikari (supra), since the employee was still in employment of the respondent company, the grant of injunction was upheld by the Supreme Court. However, in the present case, the situation is entirely different as the contract has been terminated by the Artist. What needs to be examined is if the said termination by the Artist was valid or not.

Rejection of Highest Bid in Tender Matters : The Law

Justice G.S. Singhvi
Supreme Court of India

The Supreme Court in Himachal Pradesh Housing And Urban Development Authority Vs. Universal Estate, has examined the question whether a body can reject the highest bid received by it pursuant to a tender process. The Supreme Court while answering the question in the affirmative, has held as under;

16. We shall now consider whether the action of the Chief Executive Officer to reject the bid of respondent No.1 was arbitrary, unfair, unreasonable and amounted to violation of Article 14 of the Constitution, but before doing that we deem it proper to observe that the scope of judicial review in such matters is very limited and the Court will exercise its discretion only when it is satisfied that the action of the public authority is detrimental to public interest. In Air India Ltd. v. Cochin International Airport Ltd. (2000) 2 SCC 617, the Court while dealing with a matter involving award of contract, made it clear that the public authority is free not to accept the highest or the lowest offer and the scope of judicial review is confined to the scrutiny of decision making process, which can be annulled if the same is found to be vitiated by malafides, arbitrariness or total unreasonableness. Some of the observations made in the judgment are extracted below: 

"The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene." (emphasis supplied) 

In Jagdish Mandal v. State of Orissa (2007) 14 SCC 517, a two- Judge Bench, after taking note of the propositions laid down in Sterling Computers Ltd. v. M & N Publications Ltd. (1993) 1 SCC 445, Tata Cellular v. Union of India (1994) 6 SCC 651, Air India Ltd. v. Cochin International Airport Ltd. (supra) and B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. (2006) 11 SCC 548 observed: 

"Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction.  

Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions: 

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached"; 

(ii) Whether public interest is affected. 

If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action." 

Meerut Development Authority v. Association of Management Studies (2009) 6 SCC 171 is a case arising out of the demand of the respondent for allotment of land. Initially, the respondent had given tender for allotment of plot measuring 37,000 square meters at the rate of Rs.500 per square meter. The appellant offered the plot at the rate of Rs.690 per square meter because other parties were prepared to take the land at that price. Later on, the Authority decided to issue open tender-cum-auction notice. Officer's Class Housing Society of the Canal Colony offered to pay Rs.775 per square meter. At that stage, the respondent indicated its willingness to purchase the land at Rs.690 per square meter. The appellant did not accept the respondent's prayer for transfer of land at that rate. Thereupon, the respondent filed writ petition for issue of a direction to the appellant to allot land at the rate of Rs.690 per square meter. By an interim order dated 7.5.2002, the High Court allowed the appellant to allot the land pursuant to advertisement dated 15.4.2002 but made it subject to the decision of the writ petition. Shri Pawan Kumar Agarwal gave an offer of Rs.1365 per square meter. This was accepted by the appellant. But, after some time, the allotment made in favour of Pawan Kumar Agarwal was cancelled. The High Court allowed the writ petition filed by the respondent and dismissed the one filed by Pawan Kumar Agarwal. This Court allowed the appeal and reversed the order of the High Court insofar as it related to the respondent and observed that the decision taken by the appellant was neither arbitrary nor vitiated due to mala fides and the respondent did not have any right to be allotted land. The Bench relied on the principles laid down in several decisions and reiterated the following observations in Kasturi Lal Lakshmi Reddy v. State of J&K (1980) 4 SCC 1: 

"... It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost of the State; such an action would be both unreasonable and contrary to public interest. The Government, therefore, cannot, for example, give a contract or sell or lease out its property for a consideration less than the highest that can be obtained for it, unless of course there are other considerations which render it reasonable and in public interest to do so." 

Obligation of Person Enjoying Benefit of Non-Gratuitous Act : The Law

Justice Jain

Justice V.K. Jain of the Delhi High Court has examined the law relating to the Obligation of a person enjoying benefit of non-gratuitous act as contemplated under S. 70 of the Indian Contract Act, in M/S. S.N.Nandy & Co. vs M/S. Nicco Corporation Ltd. While enunciating the law on the subject, the Court held as under;

17. Assuming, however, that the extra works claimed by the plaintiff were not authorized by the defendant and, therefore, the defendant is under no contractual obligation to pay for those works, the plaintiff is entitled to get reasonable payment for these works in view of the provisions contained in Section 70 of the Contract Act, 1872, which reads as under:-

"70. Obligation of person enjoying benefit of non-gratuitous act. Where a person lawfully does anything for another person, or delivers anything to him not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered."

18. A bare perusal of the above referred Section would show that three conditions need to be fulfilled before benefit of this provision can be invoked by a person. The first condition is that the claimant should either lawfully do something for another person or deliver something to him. The second condition is that while doing or delivering something, the claimant must not be acting gratuitously and thirdly, the person for whom something is done or to whom something is delivered must enjoy the thing done for or delivered to him as the case may be.

Invocation of Section 70 of the Contract Act was disputed by learned counsel for the defendant on the ground that the plaintiff has not pleaded essential requirement of the Section. In support of his contention that pleading ingredients of Section 70 is a pre-condition for its invocation, the learned counsel for the defendant has referred to Kotah Match Factory Kotah v. State of Rajasthan, AIR 1970 Rajasthan 118, Hansraj Gupta & Co. v. Union of India, AIR 1973 SC 2724, Union of India v. Sita Ram Jaiswal, AIR 1977 SC 329 and Devi Sahai Palliwal v. Union of India and another, AIR 1977 SC 2082.

19. In Kotah Match Factory (supra), the Rajasthan High Court noted that the plaintiff did not raise the plea for compensation under Section 70 of the Contract Act nor was any issue framed, nor were the parties given an opportunity to lead any evidence on the point. It was found that the case of the appellant before the Court was based upon an agreement. It was held that since the parties had not gone on trial on the question of compensation under Section 70 of the Contract Act, if the benefit of the aforesaid provision is allowed at this stage, it would amount to taking the opposite party by surprise. In Hansraj Gupta & Co.(supra), the Supreme Court was of the view that the conditions for the applicability of the Section 70 must at least be set out in the pleadings and proved. In Sita Ram Jaiswal (supra), the Supreme Court, inter alia, observed as under:-

"6. The three ingredients to support the cause of action under Section 70 of the Indian Contract Act are these: First, the goods to be delivered lawfully or anything has to be done for another person lawfully. Second, the thing done or the goods delivered is so done or delivered "not intending to do so gratuitously." Third, the person to whom the goods are delivered "enjoys the benefit thereof." It is only when the three ingredients are pleaded in the plaint that a cause of action is constituted under Section 70 of the Indian Contract Act. If any plaintiff pleads the three ingredients and proves the three features the defendant is then bound to make compensation in respect of or to restore the things so done or delivered."

In Devi Sahai Palliwal (supra), the Supreme Court found that there was no allegation in the plaint to support any pleading in proceeding under Section 70 of the Indian Contract Act. Relying upon its earlier decision in Sitaram Jaiswal (supra), it was held that in the absence of proper pleadings under Section 70 of the Indian Contract Act, the plaint should not be entertained.

20. The learned counsel for the plaintiff on the other hand has referred to State of West Bengal v. M/s B.K. Mondal and Sons, AIR 1962 SC 779, V.R. Subramanyam v. B. Thayappa and others, 3 SCR 663 and Food Corporation of India & Others v. Vikas Majdoor Kamdas Sahkari Mandli Ltd., 2007 (13) Scale 126. In the case of B.K. Mondal and Sons (supra), the Supreme Court, after reiterating the three conditions, which need to be satisfied before invoking Section 70 of the Contract Act, was of the view that when these conditions are satisfied, Section 70 imposes upon the person for whom something is done or to whom something is delivered, the liability to make compensation in respect of or restore the thing done for or delivered to him. During the course of the judgment, the Court, inter alia, observed as under:-

"14 .If a person delivers something to another it would be open to the latter person to refuse to accept the thing or to return it; in that case S. 70 would not come into operation. Similarly, if a person does something for another it would be open to the latter person not to accept what has been done by the former; in that case again S. 70 would not apply. In other words, the person said to be made liable under S. 70 always has the option not to accept the thing or to return it. It is only where he voluntarily accepts the thing or enjoys the work done that the liability under S. 70 arises. Taking the facts in the case before us, after the respondent constructed the warehouse, for instance, it was open to the appellant to refuse to accept the said warehouse and to have the benefit of it. It could have called upon the respondent to demolish the said warehouse and take away the materials used by it in constructing it; but, if the appellant accepted the said warehouse and used it and enjoyed its benefit then different considerations come into play and S. 70 can be invoked. Section 70 occurs in Chapter V which deals with certain relations resembling those created by contract. In other words, this chapter does not deal with the rights or liabilities accruing from the contract. It deals with the rights and liabilities accruing from relations which resemble those created by contract .Therefore, in cases falling under S. 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract nor ask for damages for the breach of the contract for the simple reason that there is no contract between him and the other person for whom he does something or to whom be delivers something. All that Section 70 provides is that if the goods delivered are accepted or the work done is voluntarily enjoyed then the liability to pay compensation for the enjoyment of the said goods or the acceptance of the said work arises. Thus, where a claim for compensation is made by one person against another under S. 70, it is not on the basis of any subsisting contract between the parties, it is on the basis of the fact that something was done by the party for another and the said work so done has been voluntarily accepted by the other party. That broadly stated is the effect of the conditions prescribed by S. 70."

21. In V.R. Subramanyam (supra), the Court reiteratd the settled proposition of law that if a party of a contract rendered service to other not intending to do so gratuitously and another person had obtained some benefit, the former is entitled to compensation for the value of the services rendered by him. It was further held that even if a person has failed to prove an express agreement in this regard , the Court may still award him compensation under Section 70 of the Contract Act and such a decree for compensation would be under the statute and not under a contract.

22. In Food Corporation of India (supra), the Supreme Court, inter alia, observed as under:-

"12 ..A person who does work or who supplies goods under a contract, if no price is fixed, is entitled to be paid a reasonable sum for his labour and the goods supplied. If the work is outside the contract, the terms of the contract can have no application; and the contractor is entitled to be paid a reasonable price for such work as was done by him.

13. If a party to a contract has done additional construction for another not intending to do it gratuitously and such other has obtained benefit, the former is entitled to compensation for the additional work not covered by the contract. If an oral agreement is pleaded, which is not proved, he will be entitled to compensation under Section 70. Payment under this section can also be claimed for work done beyond the terms of the contract, when the benefit of the work has been availed of by the defendant."

Specific Performance of Contracts : Concept of "Readiness and Willingness"

Justice Sathasivam

The Supreme Court, in M/S J.P.Builders & Anr. vs A.Ramadas Rao & Anr., has examined one of the most crucial aspects involved in a suit for specific performance. To succeed in a suit for specific performance the Plaintiff must show that he is ready and willing to perform the contract and that he has sufficient means to honour his obligations under the contract. Reiterating the aforesaid settled principles, the Supreme Court has observed as under;

Readiness and Willingness

8) Section 16(c) of the Specific Relief Act, 1963 provides for personal bars to relief. This provision states that specific performance of a contract cannot be enforced in favour of a person,

a) who would not be entitled to recover compensation for its breach; or

b) who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or

c) who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant.

Explanation.- For the purposes of clause (c),- (i) where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the court; (ii) the plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction."

Among the three sub-sections, we are more concerned about sub-section(c). "Readiness and willingness" is enshrined in clause (c) which was not present in the old Act of 1877. However, it was later inserted with the recommendations of the 9th Law Commission's report. This clause provides that the person seeking specific performance must prove that he has performed or has been ready and willing to perform the essential terms of the contract which are to be performed by him.

9) The words "ready" and "willing" imply that the person was prepared to carry out the terms of the contact. The distinction between "readiness" and "willingness" is that the former refers to financial capacity and the latter to the conduct of the plaintiff wanting performance. Generally, readiness is backed by willingness.

10) In N.P. Thirugnanam vs. Dr. R. Jagan Mohan Rao & Ors., (1995) 5 SCC 115 at para 5, this Court held: ".....Section 16(c) of the Act envisages that plaintiff must plead and prove that he had performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than those terms the performance of which has been prevented or waived by the defendant. The continuous readiness and willingness on the part of the plaintiff is a condition precedent to grant the relief of specific performance. This circumstance is material and relevant and is required to be considered by the court while granting or refusing to grant the relief. If the plaintiff fails to either aver or prove the same, he must fail. To adjudge whether the plaintiff is ready and willing to perform his part of the contract, the court must take into consideration the conduct of the plaintiff prior and subsequent to the filing of the suit alongwith other attending circumstances. The amount of consideration which he has to pay to the defendant must of necessity be proved to be available. Right from the date of the execution till date of the decree he must prove that he is ready and has always been willing to perform his part of the contract. As stated, the factum of his readiness and willingness to perform his part of the contract is to be adjudged with reference to the conduct of the party and the attending circumstances. The court may infer from the facts and circumstances whether the plaintiff was always ready and willing to perform his part of the contract." 11) In P.D'Souza vs. Shondrilo Naidu, (2004) 6 SCC 649 paras 19 and 21, this Court observed:

"It is indisputable that in a suit for specific performance of contract the plaintiff must establish his readiness and willingness to perform his part of contract. The question as to whether the onus was discharged by the plaintiff or not will depend upon the facts and circumstance of each case. No strait-jacket formula can be laid down in this behalf.... The readiness and willingness on the part of the plaintiff to perform his part of contract would also depend upon the question as to whether the defendant did everything which was required of him to be done in terms of the agreement for sale."

12) Section 16(c) of the Specific Relief Act, 1963 mandates "readiness and willingness" on the part of the plaintiff and it is a condition precedent for obtaining relief of grant of specific performance. It is also clear that in a suit for specific performance, the plaintiff must allege and prove a continuous "readiness and willingness" to perform the contract on his part from the date of the contract. The onus is on the plaintiff. It has been rightly considered by this Court in R.C. Chandiok & Anr. vs. Chuni Lal Sabharwal & Ors., (1970) 3 SCC 140 that "readiness and willingness" cannot be treated as a straight jacket formula. This has to be determined from the entirety of the facts and circumstances relevant to the intention and conduct of the party concerned. It is settled law that even in the absence of specific plea by the opposite party, it is the mandate of the statute that plaintiff has to comply with Section 16(c) of the Specific Relief Act and when there is non- compliance with this statutory mandate, the Court is not bound to grant specific performance and is left with no other alternative but to dismiss the suit. It is also clear that readiness to perform must be established throughout the relevant points of time. "Readiness and willingness" to perform the part of the contract has to be determined/ascertained from the conduct of the parties.

Jurisdiction and Ouster Clauses in Agreements : The Law

The Delhi High Court recently examined the law relating to ouster clauses in Agreements vis-a-vis jurisdiction of a Court to try and entertain a matter. Very often, one finds agreements which contain specific ouster clauses, limiting the jurisdiction of courts to try a matter. Per contra, agreements may contain clauses which actually confer jurisdiction on courts, which otherwise do not have jurisdiction to entertain a matter.

The law on this aspect is fairly well settled.The Supreme Courts in its judgment in ABC Laminart Pvt. Ltd. v. A.P. Agencies, Salem has upheld the validity of contracts ousting or conferring jurisdiction on courts. The findings may be summarised as under;

(a) Ousting jurisdiction of a court, which otherwise would have jurisdiction, by a contract, is void.

(b) Conferring jurisdiction on a court, which otherwise does not have any jurisdiction, by a contract, is void.

(c) Where 2 or more courts have jurisdiction to try a matter, then limiting the jurisdiction to a particular court is valid. However, such contract should be clear, unambigous and specific. Ouster clauses may use the words 'alone', 'exclusively' and 'only' and the same pose no difficulty in interpretation. Even in the absence of such words, the ouster may be inferred from the terms of the contract.

Following the above Judgment, the Delhi High Court in Khosla Machines Pvt. Ltd. v. Deepak Verma, while dealing with two interim applications has held;

17. Having considered the submissions of the counsel for the parties, it appears to this Court that the defendant will succeed in these applications. The question of jurisdiction has to be decided on the facts and circumstances of every case. In A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem, Supreme Court in para 21 explained the position concerning the ouster clause as under (SCC @ p.175-76): "From the foregoing decisions it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other Courts. When the clause is clear, unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other courts should avoid exercising jurisdiction. As regards construction of the ouster clause when words like 'alone', 'only, 'exclusive' and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim 'expressio unius est exclusio alterius' - expression of one is the exclusion of another - may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed."

18. In the instant case, the agreement to sell as well as the Non Compete Agreement both dated 19th November 2003 contain an identical clause which reads as under:-

"That both the parties irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts in Chandigarh."

19. What is significant is that an undertaking was given by the defendant not to design or develop a similar prototype/machine as was "an essential and fundamental condition of this agreement" and formed the basis of the present suit. Mr. Lal tried to impress upon the court that even irrespective of such an agreement to sell containing a negative covenant, the plaintiff would still be able to sue the defendant for violation of copyright. In a given case such a contention could be accepted. However, in the present case, the plaintiff has itself placed these documents on record and has come to the court claiming violation of the agreements by the defendant. The plaintiff cannot be heard to say that the court should now ignore the said two documents in determining whether the court has jurisdiction to try the suit.

20. The next contention of Mr. Lal is that a part of the cause of action arose within the jurisdiction of this court and therefore in terms of Section 20(c) CPC this Court has jurisdiction to entertain the suit. It requires to be noticed that the only averment in this regard is that the defendant has received a purchase order from Fena Pvt. Ltd., which has its office in Delhi. It is not in dispute that the allegedly offending machine made in Mohali to be delivered at Surajpur (UP). Mr. Lal states that this Court should not go by the place from where the machine is dispatched or even the place where it is delivered, it should only go by the address of the company which purchased the machine from the defendant.

21. There are two difficulties in the way of the plaintiff. The first is that by accepting the above plea of the plaintiff, this Court would be turning a blind eye to the two documents which have been included by the plaintiff in the list of documents being relied upon by it. Both these documents contain clauses, which have been inserted obviously at the instance of the plaintiff itself, conferring on the exclusive jurisdiction on the courts in Chandigarh. In light of the law explained by the Supreme Court in A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem, the wording of the ouster clause is unambiguous particularly when it uses words like "exclusive". In those circumstances, no option is left to the court to still assert its jurisdiction. Once an ouster clause is clear that it is only the court in Chandigarh that will have the jurisdiction, it is not possible to ignore such a clause and still say that since a part of the cause of action has arisen within the territorial jurisdiction of this court, this suit should be entertained. This is what distinguishes the judgments of this Court in LG Corporation v. Intermarket Electroplasters (P) Ltd., Pfizer Products, Inc. v. Rajesh Chopra and of the Madras High Court in Base International Holdings N.V. Hockenrode 6 v. Pallava Hotels Corporation Ltd. in their application to the present case. Those cases seem to find jurisdiction on the basis that either a sale or a threatened sale was to take place within the jurisdiction of this Court. None of those decisions were rendered in cases where there was an ouster clause which conferred exclusive jurisdiction on some other court.

22. As regards the plea of estoppel, this Court is unable to appreciate how the plaintiff can seek to take advantage of the defendants averments in its written statement. The submission of Mr. Lal was that unless the defendant admitted the genuineness of the two documents which contained the ouster clause, the ouster clause cannot be used to estop the plaintiff from approaching the court. In the first place, this Court does not have to look into the written statement to see whether the suit is maintainable. At this stage this Court has to determine whether on the basis of the averments in the plaint, this Court has jurisdiction or not. The plaint has to be examined along with the documents for that purpose. It is incumbent on the plaintiff to satisfy the court that it has jurisdiction to entertain the suit. In the considered view of this Court, the question of estoppel does not arise. It is the plaintiff that maintains that its case on the basis of the two documents which are part of its reliance. As long as these documents remain on the record, it is not possible for this Court to ignore them. Therefore, it is not possible to accept the plea of the plaintiff that this Court has territorial jurisdiction to entertain the suit.

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