Accrual of Miniscule cause of action and Jurisdiction
Introduction:The case of Sterling Agro Industries Ltd. v. Union of India & Ors. [(2011) 10 GSTR 20 : (2011) 43 VST 375 : 2011 SCC OnLine Del 3162], decided by a five-judge Larger Bench of the Delhi High Court on August 1, 2011, is a pivotal decision clarifying the scope of territorial jurisdiction under Article 226 of the Constitution of India. The case arose from a reference questioning the correctness of the Full Bench decision in New India Assurance Co. Ltd. v. Union of India [AIR 2010 Delhi 43], which had held that the situs of an appellate or revisional authority alone conferred jurisdiction on the Delhi High Court, treating it as the sole cause of action. The Larger Bench, comprising Chief Justice Dipak Misra and Justices Vikramajit Sen, A.K. Sikri, Sanjiv Khanna, and Manmohan, overruled this view, emphasizing the doctrine of forum conveniens and the nuanced understanding of cause of action.
Detailed Factual Background: The factual matrix pertains to multiple writ petitions, with the primary focus on W.P. (C) No. 6570 of 2010 filed by Sterling Agro Industries Ltd., a company based in the Industrial Area, Q-5-6, Ghirongi, District Bhind, Malanpur, Madhya Pradesh. The petitioner challenged Order No. 214-15/10-Cus., dated July 9, 2010, issued by the Revisionary Authority, Government of India, Ministry of Finance, Department of Revenue, located in Delhi. This order dismissed the petitioner’s revision application, upholding the Commissioner (Appeals-I), Customs and Central Excise, Indore’s decision, which affirmed the Assistant Commissioner of Customs, ICD, Malanpur’s order dated May 30, 2009. The Assistant Commissioner had denied the petitioner drawback facilities under the Central Excise Drawback Rules, 1995, citing violations of Rule 19(2) of the Central Excise Rules, 2002, and conditions in Notifications No. 68/2007-Cus. (N.T.) and No. 103/2008-Cus. (N.T.) due to the procurement of duty-free inputs.
The petitioner’s industry and the initial adjudicating authority (Assistant Commissioner) were located in Madhya Pradesh, with the appellate authority in Indore. The revisional authority, the Joint Secretary to the Government of India, was situated in Delhi. The petitioner invoked the Delhi High Court’s jurisdiction under Article 226, contending that the revisional authority’s location in Delhi constituted a sufficient cause of action, relying on New India Assurance Co. Ltd. v. Union of India. The connected petitions (W.P. (C) Nos. 8399/2009, 2447/2010, 2448/2010, and 6953/2010) raised similar jurisdictional issues, prompting a consolidated hearing to resolve the conflict over the Delhi High Court’s territorial jurisdiction.
Detailed Procedural Background: The procedural history begins with a Division Bench’s doubt regarding the correctness of New India Assurance Co. Ltd. v. Union of India [AIR 2010 Delhi 43], which held that the Delhi High Court had jurisdiction solely because the appellate authority was located in Delhi, treating its order as the sole cause of action. The Division Bench referred the matter to a Full Bench, which deemed it necessary for a Larger Bench to reconsider the issue, leading to the constitution of the five-judge bench. The Larger Bench heard the petitions analogously, focusing on W.P. (C) No. 6570 of 2010 for convenience.
In W.P. (C) No. 6570/2010, the petitioner challenged the revisional order dated July 9, 2010, after the Assistant Commissioner’s order (May 30, 2009) and the Commissioner (Appeals)’s affirmation. The petitioner filed the writ petition in the Delhi High Court, asserting jurisdiction based on the revisional authority’s Delhi location. The court noted the absence of respondents’ counsel in W.P. (C) No. 6953/2010 but proceeded with arguments from counsels for other petitions and amicus curiae Atul Nanda. The reference centered on whether the Delhi High Court could entertain writ petitions solely because the appellate or revisional authority was located in Delhi, necessitating a re-examination of New India Assurance’s ratio in light of Article 226’s legislative history and judicial precedents.
Issues Involved in the Case: The case raised the following issues: Whether the Delhi High Court has territorial jurisdiction under Article 226 to entertain a writ petition solely because the appellate or revisional authority passing the impugned order is located in Delhi? Whether the situs of the appellate or revisional authority constitutes the sole cause of action, compelling the Delhi High Court to entertain the petition, or whether the doctrine of forum conveniens applies. Whether the concept of cause of action under Article 226(2) includes only material, essential, or integral facts, and how it interacts with the discretionary nature of writ jurisdiction. Whether the merger of the original order into the appellate order makes the appellate authority’s location the forum conveniens?Whether the Delhi High Court can refuse to exercise jurisdiction beyond cases of mala fide invocation, considering factors like forum conveniens and the nature of the lis?
Petitioner's submission: The petitioners argued that the Delhi High Court had jurisdiction because the revisional authority’s order, passed in Delhi, constituted the cause of action. They relied on New India Assurance Co. Ltd. v. Union of India [AIR 2010 Delhi 43], asserting that the Joint Secretary’s location in Delhi was sufficient to invoke jurisdiction under Article 226(2). The petitioners contended that the revisional order was the sole cause of action, as it superseded earlier orders, and the Delhi High Court, having superintendence over tribunals in Delhi under Article 227, was duty-bound to entertain the petition. They cited Sri Nasiruddin v. State Transport Appellate Tribunal [(1975) 2 SCC 671], arguing that even a part of the cause of action (the revisional order) conferred jurisdiction, and as dominus litis, they could choose their forum conveniens. The petitioners further argued that refusing jurisdiction would contravene Article 226’s expanded scope post the Fifteenth Amendment, which introduced the cause of action concept.
Respondents' Submission: The respondents challenged the Delhi High Court’s jurisdiction, arguing that the cause of action primarily arose in Madhya Pradesh, where the petitioner’s industry and initial orders were located. They contended that the revisional authority’s Delhi location was an insignificant part of the cause of action, and the doctrine of forum conveniens favored the Madhya Pradesh High Court, where material facts occurred. The respondents cited Kusum Ingots and Alloys Ltd. v. Union of India [(2004) 6 SCC 254] and Alchemist Ltd. v. State Bank of Sikkim [(2007) 11 SCC 335], emphasizing that only material, essential, or integral facts constitute the cause of action under Article 226(2). They argued that entertaining the petition in Delhi risked conflicting judgments and jurisdictional overreach, advocating for a balanced approach considering convenience, expenses, and the lis’s nexus with Madhya Pradesh. The respondents also highlighted the discretionary nature of Article 226, urging the court to refuse jurisdiction absent a substantial cause of action in Delhi.
Amicus Curiae's submission: The amicus curiae, assisted the court by analyzing the legislative history of Article 226 and judicial precedents. He argued for a nuanced interpretation of cause of action, aligning with Oil and Natural Gas Commission v. Utpal Kumar Basu [(1994) 4 SCC 711], which defined cause of action as the bundle of facts necessary for the petitioner to prove. He emphasized that while the revisional order’s Delhi location constituted a part of the cause of action, the court’s discretion under Article 226 allowed refusal based on forum conveniens, as seen in Ambica Industries v. CCE [(2007) 213 ELT 323]. He cautioned against an absolute rule tying jurisdiction to the appellate authority’s situs, advocating for case-specific scrutiny of the lis’s nexus and practical considerations.
Detailed Discussion on Judgments and Citations: The Larger Bench extensively analyzed precedents to resolve the jurisdictional question. Below is a detailed discussion of each judgment cited, its complete citation, and its context in the case:
Election Commission of India v. Saka Venkata Rao, AIR 1953 SC 210: Cited to trace the pre-amendment strict construction of Article 226, this Supreme Court decision held that jurisdiction depended on the presence of the person or authority within the High Court’s territorial limits, not the cause of action. The court used it to highlight the limitations before the Fifteenth Amendment introduced the cause of action concept.
Lt. Col. Khajoor Singh v. Union of India, AIR 1961 SC 532: This Supreme Court decision, cited for historical context, reiterated that Article 226’s original text required the authority’s physical presence within the High Court’s territory, rejecting cause of action as a jurisdictional basis. The court noted its obsolescence post the Fifteenth Amendment, which expanded jurisdiction to include partial cause of action.
K. S. Rashid and Son v. Income-tax Investigation Commission, AIR 1954 SC 207 : (1954) 1 SCC 69 : [1954] 25 ITR 167:Referenced alongside Election Commission, this Supreme Court decision supported the pre-amendment view that jurisdiction hinged on the authority’s location, not cause of action. The court used it to contrast with the post-amendment framework under Article 226(2).
Collector of Customs v. East India Commercial Co. Ltd., AIR 1963 SC 1124: Cited by the Full Bench in New India Assurance, this Supreme Court decision was used to support jurisdiction based on the appellate authority’s location. The Larger Bench clarified that it did not establish an absolute rule, as it involved specific facts where the cause of action partly arose in the High Court’s territory.
Sri Nasiruddin v. State Transport Appellate Tribunal, (1975) 2 SCC 671: This Supreme Court decision, heavily relied on by the petitioners, held that an appellate or revisional order constitutes a part of the cause of action, conferring jurisdiction on the High Court where it is passed. The court affirmed its relevance but clarified that it does not mandate jurisdiction solely based on the authority’s situs, emphasizing forum conveniens.
Kusum Ingots and Alloys Ltd. v. Union of India, (2004) 6 SCC 254 : (2004) 120 Comp Cas 672: This Supreme Court decision was central to the respondents’ case, holding that only material, essential, or integral facts constitute the cause of action under Article 226(2). The court applied it to reject the notion that the revisional authority’s location alone was sufficient, stressing forum conveniens and discretionary refusal.
Navinchandra N. Majithia v. State of Maharashtra, AIR 2000 SC 2966:Cited by the Full Bench and petitioners, this Supreme Court decision affirmed that Article 226(2) allows jurisdiction where any part of the cause of action arises. The Larger Bench agreed but emphasized that such jurisdiction is discretionary and subject to forum conveniens, not automatic.
Kishore Rungta v. Punjab National Bank, (2003) 151 ELT 502 (Bom):This Bombay High Court decision, relied on by the Full Bench, supported jurisdiction based on a partial cause of action (appellate order in Mumbai). The Larger Bench clarified that it did not mandate jurisdiction solely on the authority’s situs, requiring scrutiny of the lis’s nexus.
Indian Institute of Technology v. Dr. P. C. Jain, (1991) 45 DLT 42:This Delhi High Court decision, cited by the Full Bench, was used to support jurisdiction based on the appellate authority’s location. The Larger Bench found it context-specific and not determinative of an absolute rule, given the doctrine of forum conveniens.
Ambica Industries v. CCE, (2007) 213 ELT 323 : [2009] 20 VST 1 (SC): This Supreme Court decision, cited by the respondents, held that even a small fraction of the cause of action confers jurisdiction, but the doctrine of forum conveniens must be considered. The court applied it to advocate a balanced approach, allowing discretionary refusal.
Bombay Snuff P. Ltd. v. Union of India, (2006) 194 ELT 264 (Del): Cited by the single judge in New India Assurance, this Delhi High Court decision dismissed a writ petition for lack of substantial cause of action in Delhi. The Larger Bench used it to support the need for material facts to establish jurisdiction.
Rajkumar Shivhare v. Assistant Director of Enforcement, (2008) 154 DLT 28:This Delhi High Court decision, relied on by the single judge, emphasized that a significant part of the cause of action must arise within the court’s jurisdiction. The Larger Bench agreed, reinforcing the material facts requirement.
West Coast Ingots P. Ltd. v. CCE, (2007) 209 ELT 343 (Del):Cited by the single judge, this Delhi High Court decision supported dismissing petitions lacking substantial cause of action in Delhi. The Larger Bench used it to highlight the importance of integral facts over peripheral ones.
Alchemist Ltd. v. State Bank of Sikkim, (2007) 11 SCC 335 : (2007) 136 Comp Cas 665:This Supreme Court decision, pivotal to the respondents’ argument, clarified that only material, essential, or integral facts constitute the cause of action. The court adopted its ratio to reject the Full Bench’s view that the appellate order alone was the sole cause of action.
A. B. C. Laminart P. Ltd. v. A. P. Agencies, AIR 1989 SC 1239: Cited in Alchemist, this Supreme Court decision defined cause of action as the bundle of facts necessary for relief. The court used it to reinforce that peripheral facts, like the authority’s location, do not suffice for jurisdiction.
Union of India v. Oswal Woollen Mills Ltd., (1984) 2 SCC 646 : (1985) 58 Comp Cas 139:Referenced in Alchemist, this Supreme Court decision emphasized material facts for jurisdiction. The Larger Bench applied it to scrutinize the cause of action’s nexus with Delhi.
State of Rajasthan v. Swaika Properties, AIR 1985 SC 1289:Cited in Alchemist and Kusum Ingots, this Supreme Court decision clarified that jurisdiction requires a substantial cause of action. The court used it to advocate for forum conveniens over automatic jurisdiction.
Oil and Natural Gas Commission v. Utpal Kumar Basu, (1994) 4 SCC 711:This Supreme Court decision, relied on by the amicus curiae, defined cause of action as the bundle of facts the petitioner must prove, assessed on pleadings alone. The court adopted its test to evaluate jurisdiction based on material facts.
CBI, Anti-Corruption Branch v. Narayan Diwakar, (1999) 4 SCC 656: Cited in Alchemist, this Supreme Court decision supported the material facts requirement for jurisdiction. The Larger Bench used it to reject the Full Bench’s sole cause of action theory.
Union of India v. Adani Exports Ltd., (2002) 1 SCC 567:This Supreme Court decision, cited by the respondents, held that facts lacking nexus with the lis do not confer jurisdiction. The court applied it to emphasize that the revisional authority’s location alone was insufficient.
National Textile Corporation Ltd. v. Haribox Swalram, (2004) 9 SCC 786:Referenced in Alchemist, this Supreme Court decision clarified that peripheral facts (e.g., business location) do not constitute the cause of action. The court used it to reject jurisdiction based solely on the authority’s situs.
Chand Kour v. Partab Singh, (1889) 16 ILR Cal 98:Cited in ONGC and Kusum Ingots, this Privy Council decision defined cause of action as the grounds for relief, independent of defenses. The Larger Bench adopted it to assess jurisdiction based on pleaded facts.
Rajendran Chingaravelu v. R. K. Mishra, (2010) 1 SCC 457:This Supreme Court decision held that a part of the cause of action (e.g., initiating actions in Hyderabad) conferred jurisdiction. The court distinguished it, noting that Sterling’s cause of action was primarily in Madhya Pradesh, with only a peripheral Delhi nexus.
Musaraf Hossain Khan v. Bhagheeratha Engg. Ltd., (2006) 3 SCC 658 : (2006) 130 Comp Cas 390:This Supreme Court decision emphasized that jurisdiction requires a nexus with the lis and endorsed forum conveniens. The Larger Bench relied on it to overrule the Full Bench’s absolute rule.
Damomal Kausomal Raisinghani v. Union of India, AIR 1967 Bom 355:Cited in Kishore Rungta, this Bombay High Court decision supported jurisdiction based on partial cause of action. The Larger Bench clarified its context-specific application.
Sita Ram Singhania v. Bank of Tokyo-Mitsubishi Ltd., AIR 1999 SC 2180:Referenced in Kishore Rungta, this Supreme Court decision supported jurisdiction where part of the cause of action arose. The court noted its alignment with Article 226(2) but stressed discretionary refusal.
Bhagat Singh Bugga v. Dewan Jagbir Sawhany, AIR 1941 Cal 670:Cited in Kusum Ingots, this Calcutta High Court decision supported forum conveniens. The Larger Bench used it to advocate discretionary refusal based on convenience.
Madanlal Jalan v. Madanlal, AIR 1949 Cal 495 : (1945) 49 CWN 357:Referenced in Kusum Ingots, this Calcutta High Court decision endorsed forum conveniens. The court applied it to balance jurisdictional flexibility with practical considerations.
Bharat Coking Coal Ltd. v. Jharia Talkies and Cold Storage P. Ltd., [1997] CWN 122:Cited in Kusum Ingots, this Calcutta High Court decision supported discretionary refusal based on forum conveniens. The Larger Bench used it to emphasize case-specific scrutiny.
S. S. Jain and Co. v. Union of India, [1994] CHN 445:Referenced in Kusum Ingots, this Calcutta High Court decision endorsed forum conveniens. The court applied it to reject automatic jurisdiction based on the authority’s location.
New Horizons Ltd. v. Union of India, AIR 1994 Delhi 126 : (1997) 89 Comp Cas 785:Cited in Kusum Ingots, this Delhi High Court decision supported discretionary refusal based on forum conveniens. The Larger Bench relied on it to overrule the Full Bench’s rigid rule.
Mayar (H. K.) Ltd. v. Owners and Parties, Vessel M. V. Fortune Express, (2006) 3 SCC 100:Referenced in Musaraf Hossain, this Supreme Court decision emphasized forum conveniens in jurisdictional disputes. The court used it to advocate a balanced approach.
Detailed Reasoning and Analysis of Judge:Court meticulously analyzed the legislative history of Article 226, from its original strict territorial requirement to the expanded scope under the Fifteenth Amendment, which introduced the cause of action concept via clause (1A), later renumbered as clause (2). The court traced the shift from Election Commission and Khajoor Singh, which limited jurisdiction to the authority’s physical presence, to the post-amendment framework allowing jurisdiction where the cause of action, wholly or in part, arises.
The court scrutinized New India Assurance’s ratio, which held that the appellate authority’s Delhi location constituted the sole cause of action and that declining jurisdiction was a failure of duty. The Larger Bench found this view flawed, as it ignored the doctrine of forum conveniens and the nuanced understanding of cause of action as comprising material, essential, or integral facts (Alchemist Ltd., Kusum Ingots). The court adopted ONGC’s definition of cause of action as the bundle of facts necessary for relief, assessed on pleadings, and emphasized that peripheral facts, like the authority’s location, do not automatically confer jurisdiction (Adani Exports).
The court acknowledged that the revisional order’s Delhi location constituted a part of the cause of action (Sri Nasiruddin), but held that this alone did not compel the court to entertain the petition. The discretionary nature of Article 226, coupled with forum conveniens, allowed refusal based on convenience, expenses, and the lis’s nexus (Ambica Industries). The court rejected New India Assurance’s absolute merger doctrine, which treated the appellate order’s location as the forum conveniens, noting that jurisdiction depends on the case’s factual matrix (Musaraf Hossain).
The court clarified that while a minuscule part of the cause of action suffices for jurisdiction (Kusum Ingots), the court may refuse to exercise it if a more appropriate forum exists, considering factors like the location of material facts, parties, and evidence (Rajendran Chingaravelu). The restriction of refusal to mala fide cases was deemed too narrow, as Article 226’s discretionary power encompasses broader considerations (New Horizons). The court concluded that New India Assurance’s rigid rule risked jurisdictional overreach and potential conflicts, advocating a balanced approach rooted in judicial discretion and practical convenience.
Final Decision: On August 1, 2011, the Delhi High Court’s Larger Bench partially overruled New India Assurance Co. Ltd. v. Union of India [AIR 2010 Delhi 43], holding that the situs of the appellate or revisional authority does not automatically confer jurisdiction or constitute the sole cause of action. The court clarified that while a part of the cause of action (e.g., the revisional order) makes a writ petition maintainable, the High Court may refuse to exercise jurisdiction based on forum conveniens, considering the lis’s nexus, convenience, and material facts. The court directed the matters to be listed before the appropriate Division Bench for further consideration, answering the reference by modifying New India Assurance’s findings.
Law Settled in the Case: The case established the following legal principles: Territorial jurisdiction under Article 226(2) exists where the cause of action, wholly or in part, arises, but the situs of the appellate or revisional authority alone does not constitute the sole cause of action. The cause of action comprises material, essential, or integral facts, not peripheral ones like the authority’s location, as per Alchemist Ltd. and Kusum Ingots.The doctrine of forum conveniens applies to writ proceedings, allowing the High Court to refuse jurisdiction if a more appropriate forum exists, considering convenience, expenses, and the lis’s nexus.The merger of the original order into the appellate order does not automatically make the appellate authority’s location the forum conveniens; jurisdiction depends on case-specific facts.The discretionary power under Article 226 is not limited to refusing jurisdiction only in mala fide cases but extends to broader considerations like forum conveniens and the nature of the cause of action.High Courts must scrutinize the factual matrix to determine jurisdiction, balancing Article 226(2)’s flexibility with judicial discretion to avoid jurisdictional overreach.Any contrary decisions stand overruled, reinforcing a nuanced approach to territorial jurisdiction in writ proceedings.
Sterling Agro Industries Ltd. Vs. Union of India: August 1, 2011:W.P. (C) Nos. 8399/2009:2011 SCC OnLine Del 3162:High Court of Delhi:Hon'ble Judges Shri Dipak Misra, C.J., Vikramajit Sen, A.K. Sikri, Sanjiv Khanna, Manmohan, JJ.
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Written By: Advocate Ajay Amitabh Suman, IP Adjutor [Patent and Trademark Attorney], High Court of Delhi
