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OUT OF COURT

Outdated laws and lack of clarity spawn jurisdictional battles.

The question of jurisdiction of the courts is one of the preliminary points of law that is in the armoury of any lawyer. This is becoming all the more common and complicated as trade and business have lost geographical boundaries as never before. Even when there is a specific clause in the contract about the country where the disputes will be resolved, the issue is still taken to the court in another country. The case decided by the Supreme Court last week in Mayar (H K ) Ltd vs Owners & Parties, Vessel Fortune Express, was bedevilled further by archaic admiralty laws and several provisions of the Civil Procedure Code.

Although there are general rules that govern where a lawsuit must be filed, sometimes the location is inconvenient for the witnesses or parties. If a party makes an adequate showing of inconvenience, the principle of "forum non conveniens" (inconvenient forum) allows a judge to decline to hear, or to transfer, a case even though the court is an appropriate one for the case. However, the principle is not that simple to follow in practice as the present judgement showed.

In this case, the ship owned by a Singapore company sailed to the Kolkata port with wooden logs sent by a Hong Kong company to Indian buyers. The logs were loaded on the deck of the ship. When the ship arrived at the Kolkata port, most of the logs were missing. The Hong Kong company then moved the Calcutta high court invoking its admiralty jurisdiction. Incidentally, this field of law is covered by an ancient piece of legislation called the Colonial Courts of Admiralty Act, 1890.

The Hong Kong company alleged that the Singapore carrier acted in breach of the charter party agreement. As the cargo was not delivered in full, it demanded proportionate value and expenses on account of the losses and interest at the rate of 24 per cent. It also wanted the arrest of the ship. The single judge of the high court passed an order in those terms. It noted that the ship in question was a foreign vessel and did not have any assets within the jurisdiction of the high court. If it was allowed to leave the port, any decree against it could not be enforced. If the ship furnished a bank guarantee, the court would consider it. On furnishing such a guarantee from Punjab National Bank, the ship was released.

The Singapore firm, however, moved the division bench of the high court, pointing out that according to the bill of lading, the court having jurisdiction to entertain any suit was the country of the carrier's and the Indian court had no jurisdiction to entertain this suit. The high court now allowed the petition asserting that according to the terms in the bill of lading, the disputes should be decided in the country where the carrier has its "principal place of business" and, therefore, in this case they should be decided only by a court in Singapore. The law there with regard to the discharge of liability was different, and the Hague Rules, 1924, on this point have been modified by that country.

However, the Supreme Court took a different view on the jurisdictional issue. It put the onus on the Singapore firm to plead and prove that the Indian court had no jurisdiction. It must establish that it has its "principal place of business" at Singapore. Mere assertion that it was carrying on business there would not be enough, according to the Supreme Court. As long as it was not done, the Kolkata High Court can claim jurisdiction.

What is the principal place of business? It would be "where the governing power of the corporation is exercised or the place of a corporation's chief executive offices, which is typically viewed as the nerve centre or the place designated as the principal place of business of the corporation in its incorporation under the various statutes," according to the judgement. Apart from this, Kolkata was the convenient place in terms of expense and availability of witnesses. There was no evidence on record to show that trial at Singapore would be more convenient and less expensive to the parties.

The differing views of judges in the Indian courts is a point for consideration by international jurists. They have to evolve uniform and harmonious rules that are in tune with the fast-moving globalisation of trade and commerce. This is an arduous task and the slow march of arbitration and conciliation laws is an indicator of the number of hurdles the international community has to encounter in the search for uniformity and clarity in commercial laws.