1981 SCMR 494

Present : Anwarul Haq, C. J. and Muhammad Afzal Zullah, JJ

MESSRS BRADY & Co. (PAKISTAN) LTD.--Appellant

Versus

MESSRS SAYED SAIGOL INDUSTRIES LTD.-Respondent

Civil Appeals Nos. 51 and 52 of 1975, decided on 21st January, 1980.

(On appeal from the judgments and orders dated 5-3-1974 of the Lahore High Court at Lahore in
Civil Revisions Nos. 127 and 128 of 1974, respectively).

(a) Constitution of Pakistan (1973)-

-- Art. 185(3)-Leave to appeal-Omission to raise plea-Plea though urged before High Court but
not pressed at leave stage nor leave granted for its consideration-No compelling reason existing
for considering plea at leave to appeal stage-Plea (on which leave granted) being regarding non-
liability of defendant on ground of no privity of contract existing with plaintiff and such plea not
pressed but instead locus stands of plaintiff regarding its identity challenged Such plea neither
pressed in High Court nor urged at leave stage nor leave granted on such point-No justification,
held, to deal with such plea either.

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

-- S. 20, Explanation II-Suits by or against Corporation-Local jurisdiction-Corporation can be
said to be carrying on business at head office, or at place where its branch exists in respect of a
cause of action arising wholly or in part at place where its branch office situated-No part of cause
of action arising at place of branch office, Corporation, held, cannot be said to transact business
at such place.[Jurisdiction-Cause of action].

Bhola Nath Aggarwal and another v. the Empire of India Life Assurance Co. Ltd. A I R 1948
Lah. 56 and Messrs Rahmania Trading Company v. Messrs Eagle Star Insurance Company Ltd.
P L D 1960 S C 202 ref.

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

-- S. 20, Explanation 11-Suit by or against Corporation-Jurisdiction-Explanation 11-Does not

control cl. (c) and relates to cls. (a) & (b) only-Conjunction "or"--Separates all three (a), (b) &
(c) of S. 20-Situation in a particular case not being covered by cis. (a) & (b), suit could be
instituted by virtue of (c) at place where cause of action wholly or in part arose-Party choosing
to institute suit at place where only a subordinate office of Corporation exists, would have
initially to show cause of action having at is there Location of subordinate office-Does not give
plaintiff a choice to institute suit at such place--Law, held, did not recognize location of a
subordinate office of Corporation to be converted through a deeming clause into a place where
Corporation "carries on business" and such could be only under a limitation, via. where cause of
action arose and Corporation also maintained a subordinate office at such place-Combination of
such two factors, held further, becomes equal to "carrying on business"-[Registered Firm
Sheikhan Industries, Quetta v. West Pakistan Industrial Development Corporation, Karachi P L
D 1976 Quetta 94; Messrs Rahmapia Trading Company v. Messrs Eagle Star Insurance
Company Ltd. P L D 1960 S C 202 and Messrs Gharibwal Cement Ltd., Lahore v. Messrs
Universal Traders, Gakhar Mandi P L D 1977 Lah. 481 held not applicable].-Jurisdiction-[Words
and phrases].

Registered Firm Sheikhan Industries, Quetta v. West Pakistan industrial Development

Corporation, Karachi P L D 1976 Quetta 94; Alessrs Rahmania Trading Company v. Messrs
Eagle Star Insurance Company Ltd. P L D 1960 S C 202 and Messrs Gharibwal Cement Ltd.,
Lahore v. Messrs Universal Traders, Gakhar Mandi P L D 1977 Lah. 481 held not applicable.

Bhola Nath Aggarwal and another v. The Empire of India Life Assurance Co. Ltd. A I R 1948
Lah. 56; Central Warehousing Corporation, New Delhi v. Central Bank of India Ltd., Hyderabad
and another A I R 1973 Andh. Pra. 387; Peoples Insurance Co. Ltd. v. Benoy Bushan Bhawmik
and others A I R 1943 Cal. 199 and The Light of Asia Insurance Co. Ltd. v. Bai Chanchal A I R
1932 Bom. 392 ref.

Noor Ahmed Noorl, Advocate-on-Record for Appellants (in both the Appeals).

Raja Muhammad Akram, Advocate Supreme Court and Muhammad Afzal Siddiqi, Advocate-on-
Record for Respondent (in both the Appeals).

Dates of hearing : 22nd and 23rd December, 1979.

JUDGMENT

MUHAMMAD AFZAL ZULLAH, J.-These two appeals through special leave are being
disposed of together as the questions involved are the same.

The appellant's case is that it is a public Limited Company incorporated in Pakistan with sole
registered office at Karachi and that at the relevant time it had a branch office at Manchester (IJ.
K). As the business of the Company was to act as indenting agents o introduce local customers to
foreign manufacturers, Messrs Kohinoor Textile Mills Liaqatabad, District Mianwali-a project of
Kohinoor Industries Limited, asked the appellant through letter dated 25-5-1969 (in Appeal No.
51) to send quotations as to costs and freight (Karachi rates) of certain spare parts. The appellant
through letter dated 2-7-1960 sent a pro forma invoice showing details of prices, C & F, Karachi
and advised the Mills that the goods could be imported "on their opening a letter of credit" in
favour of the appellant. The manufacturers were mentioned as Leosona Limited U. K. The letter
of credit was "accordingly opened" by the Mills in favour of the appellant (Branch office U. K.)
"for onward payment to manufacturers" through letters dated 8-7-1569 and 21-7-1960. The
appellant admitted that the transaction did not materialise, therefore, respondent "M/s. Sayed
Saigol Industries Ltd. (Kohinoor Textile Mills) Liaqatabad" then filed suits for damages at
Mianwali. As stated in para 10 of the petition for leave, the appellant filed written statement and
besides refuting the various allegations contained in the plaint and raising other legal objections
raised four preliminary legal objections which were as follows :-
 "(a) That since the petitioner/defendant was a Limited Company with its sole registered
office at Karachi without having its any branch in West Pakistan, the suit at Mianwali
could not be filed under section 20, Explanation (II) of Civil Procedure Code and only the
at Courts Karachi have the exclusive jurisdiction to try the suit.

(b) That the plaint was not properly signed in terms of Order XXIX, rule 1, C. P. C., and
Order VI, rule 15(1), C. P. C. as amended by Law Reforms Ordinance, 1972. The plaint
as such was liable to be rejected.

(c) That the transaction was between Messrs Brady & Co. (Pakistan) Ltd., Manchester
and Messrs Kohinoor Textile Mills, and not between petitioners and respondents and
therefore respondents had no right to sue on the basis of the said transaction.

(d) That the suit was barred by time."

The issues framed on these objections were:

"(i) Has this Court the jurisdiction to try the suit? O. P. D.

(ii) Is the plaint liable to be rejected as contended in objection (b) of the written
statement? O. P. D.

(iii) Has the plaintiff got no locus standing to institute the suit? O. P. D.

(iv) Is the suit barred by limitation? O. P. D.

After examining one witness from each side, the learned trial Judge, at Mianwali, vide his orders
dated 14-3-1973 decided these issues against the appellant and proceeded to try the suits on
merits. The appellant challenged these orders in two revision petitions. A learned Single Judge of
the Lahore High Court dismissed the same in limine on 5-3-1974 with the finding that the
Mianwali Court has jurisdiction as a part of cause of action arose there. Leave to appeal was
granted to examine the appellant's contentions "that since the petitioner, defendant was a limited
company with the sole registered office at Karachi without having its any branch in West
Pakistan, the suit at Mianwali could not be filed under section 20 Expl. (ii) of Civil Procedure
Code and only the Courts at Karachi have the exclusive jurisdiction try the suit"; and "that
inasmuch as the goods were to be supplied by the manufacturers, Messrs Leosons Ltd., United
Kingdom, there was no privity of contract between the petitioners and the respondents".

Learned counsel for the appellant has contended that: Explanation II to section 20, C. P. C.,
relates to clauses (a), (b) and (c) thereof; hence the place where the cause of action or part
thereof arose would not by itself determine the question of territorial jurisdiction where the
defendant is a Corporation-reliance has been placed on Registered Firm, Sheikh Industries,
Quetta v. West Pakistan Industrial Development Corporation, Karachi (P L D 1976 Quetta 94)
and Bhola Nath Aggarwal and another v. The Empire of India of Assurance Co. Ltd. (A I R 1948
Lab. 56), while reference was also made to Messrs Rahrnania Trading Company v. Messrs Eagle
Star Insurance Company Ltd. (P L D 1960 S C 202) and Messrs Gharibwal Cement Ltd., Lahore
v. Messrs Universal Traders, Gakhar Mandi (P L D 1977 Lab. 481), that the cause of action or its
part did not arise at Liaqatabad Mianwali; and that "Sayed Saigol Industries Limited" the
respondent/ plaintiff could not sue the appellant because nothing was said in the plaint or in the
evidence as to what was its connection with "Kohinoor Textile Mills Limited"-thus it had no
locus stands in the matter. Leached counsel for tie respondent submitted that the points regarding
accrual of cause of action at Liaqatabad and the identity of the plaintiff were not raised before
the High Court nor were they pressed at the leave stage. Otherwise, also he controverted them
and gave the explanation as also necessary particulars about the plaintiff's locus standi. On the
question of jurisdiction he contended that the Lahore cases of Bhola Nath Aggarwal and Messrs
Gharibwal Cement Ltd., Lahore support the view taken in the impugned order. He also referred
to a foreign case of Central Warehouring Corporation, New Delhi v. Central Bank of India Ltd.,
Hyderabad and another (A I R 1973 Andh. Pra 387). Reference was also made to Peoples
Insurance Co. Ltd. v. Benoy Bhusan Bhawmid and others (A I R 1943 Cal. 199) and The Light
of Asia Insurance Co. Ltd. v. Bai Chanchal (A I R 1932 Bom. 392).

We do not agree with the learned counsel for the respondent that the point about accrual of cause
of action at Liaqatabad was not raised in the High Court. It was not only raised and pressed but
was also adequately dealt with in the impugned order. It is, however, correct that it was not
pressed at the leave stage, nor leave was granted for consideration of the same. We do not find
any compelling reason for considering it now. About the locus stands of the plaintiff also, the
point raised in the petition for special leave to appeal (and on which leave was granted was that
the defendant is not liable in the matter because it had no privity of contract with the plaintiff.
This point has not been pressed now at the appeal stage. Instead the locus standi of the plaintiff
regarding its identity has been challenged. It was not pressed in the High Court and was not
urged in this Court at the leave stage nor leave was granted on the point. We do not find any
justification for dealing with it now.

The real controversy between the parties relates to the territorial jurisdiction of the trial Court at
Mianwali. A part of cause of action having accrued at Liaqatabad the learned Courts below have
held, that it has jurisdiction to try the suit. Section 20 of the Civil Procedure Code reads as
follows :-

"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 action, wholly or in part, arises.

Explanation I-Where a person has a permanent dwelling at one place and also a temporary
residence at another place, he shall be deemed to reside at both places in respect of any cause of
action arising at the place where he has such temporary residence;

Explanation II.-A corporation shall b;, deemed to carry on business at its sole 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."
The role of the explanation as discussed in the Lahore case of Bhola Nath Aggarwal was
approved by this Court in the case of Messrs Rehmania Trading Company. It was observed that
"an Explanation is enacted by the Legislature to explain what otherwise would be doubtful or
ambiguous. To the extent that it explains a stipulated situation its function is definitive inasmuch
as it clarifies or defines the legal position in a supposed state of facts . . . . Of the cases cited by
the appellant none is in point except Bhola Nath Aggarwal and another v. The Empire of India
Lift Assurance Co. Ltd. but it goes against his own contention and supports the view we are
taking. Khosla, J. observed there

It is therefore, clear that the corporation can be said to carry on business at the head office or at
the place where it has a branch in respect of a cause of action which arises, wholly or in part, at
the place where the branch office is situated. If no part of action arises at the place of the branch
office, the corporation cannot be said to transact business at that place. This is the only possible
interpretation of Explanation II, and not a single case cited before me has taken the contrary
view. Therefore, the Courts at Lahore, can only have jurisdiction if it can be shown that the cause
of action, wholly or in part, arose within the jurisdiction of the Lahore Courts, otherwise the suit
must be instituted at Bombay where the head office -- is situated or at some place where the
cause of action, wholly or in part, arose

We consider this to be a correct, statement of the function of the Explanation."

Learned counsel for the appellant while stating that the basic requirement regarding territorial
jurisdiction is the accrual of cause of action contended, that there are exceptions to it-one being
the residence of the defendant. It is further argued that Explanation to section 20 is an extension
of the same exception. Thus it would cover clause (c) of the section as well and that is the reason
why the accrual of the cause of action is referred in the explanation itself. The Quetta case of
Registered Firm Sheikhan Industries undoubtedly, supports the learned counsel. It was held
therein that clause (c) of section 20 and Explanation 11 thereof "have to be read together and
given a consistent meaning. So read the law appears to be that if the defendant is a Corporation
then it can be sued at the place where its sole or principal office is situate and it can be sued
elsewhere only if a part of the cause of action bad arisen at that place and the Corporation has
also subordinate office at such placed". With respect it is pointed out that no reason was given
for subjecting clause (c) to Explanation 11. Although learned counsel for the appellant initially
thought that the Lahore case of Bhola Nath Aggarwal and another supports his contention, but on
deeper analysis of the facts and observations therein, it was found that the view taken therein
goes against him. The suit in the said case was filed against a company at Lahore. It had its head
office at Bombay and a branch officer at Lahore. On consideration of facts, it was found that the
cause of action, wholly or in part, did not arise at Lahore, therefore, the Lahore Courts had no
jurisdiction in the matter. It was further held that the Courts at Lahore would have had
jurisdiction if the cause of action wholly or in part had arisen there; "the suit must be instituted at
Bombay where the head office is situated or at someplace where the cause of action, wholly or in
part, arose" (underlining" is ours). Although this Court, it appears, by way of abundant caution
remarked in the case of Messrs Rehman Trading Company that it was not called upon to decide
the question whether a corporation can be sued in a place where the whole or a part of the cause
of action arises if it has neither its principal office nor a subordinate office there, yet, while
discussing the role of Explanation II, the Lahore view was not only approved but it was also held
that "despite the words `shall be deemed Explanation II in terms defines the words `carries on
business` used in clauses (a) and (b) of the section, and means that where the defendant is a
corporation, it is deemed to be carrying on business at its sole or principle office irrespective of
whether the cause of action has arisen there, as well as at the place where it has its subordinate
office, provided the 41cause of action arises there". In the Lahore case of Messrs Gharibwal
Cement Ltd., it was held that "the last clause (c) (of section 20, C. P. C.) allows the suit to be
instituted within the local limits of the jurisdiction of a Court where the cause of action wholly or
in part arises. Explanation II has been added only to clarify at which place a corporation can be
deemed to carry on business. It provides that it can be deemed to carry it only either at its sole or
principal office in Pakistan or at the place of its subordinate office provided in the latter case the
cause of action arises at the place where the subordinate office is situated. The explanation does
not qualify clause (c). It only provides as to where the Corporation can be deemed to carry on its
business. Since the carrying on of business is the material fact for determining territorial
jurisdiction of the Court in clauses (a) and (b) of section 20, the explanation has to be read as
pertaining to these clauses only and not to clause (c) which is independent. The mere fact that
according to the explanation a Company can be said to carry on business, even at a subordinate
office provided the cause of action arises there cannot mean that this is an explanation of clause
(c) also. Same view was taken in the Indian Full Bench case of Central Warehousing
Corporation, Calcutta, case of Peoples Insurance Co. Ltd. and the Bombay case of The Light of
Asia Insurance Co. Ltd. On the interpretation of section 20, C. P. C., however, there is no
discussion in the last mentioned two cases. They proceeded on the assumption that in cases of
corporations clause (c) thereof would operate independently of clauses (a) and (b).

It would appear from the case-law cited at the Bar that the consensus of authority is that
Explanation II to section 20, C. P. C. does not control clause (c) thereof and is relateable to
clauses (a) and (b) only. Learned counsel for the appellant was unable to cite any case other than
that Registered Firm Shelkhan Industries Quetta in support of his contention that clause (c) also
is subject to the said explanation. We regret that the view taken in the said case, on proper
analysis of section 20, C. P. C., cannot be upheld. The conjunction `or separates all the three
clauses (a), (b) and (c) of section 20. Subject to limitations, pecuniary or otherwise, referred in
the earlier provisions of the C. P. C., section 20 contains a general provision embracing all
personal actions. The plaintiff has three options thereunder to sue: where the defendant or each
of the defendants actually resides, carries on business or personally works for gain (clause `a');
or, in case there are more than one defendants, any of them besides, carries oil business or
personally works for gain (clause `b'); or, at the place where the cause.
of action, wholly or in part, arises (clause 'c'). If - the situation in a particular case is not covered
by clauses (a) and (b), the suit can be instituted by virtue of clause (c), at the place where cause
of action, wholly or in part, arises. Explanation I is not relevant for consideration in the present
case. Explanation II covers an uncertainty, if not ambiguity, with regard to the place where a
corporation is supposed to carry on business. Its subject obviously is relateable to the phrase
'carries on business' (used in clauses (a) and (b) ). It would be violation to the language of section
20 to apply Explanation II to clause (c) where under the phrase 'carries on business' would have
no meaning. Therefore, it would be unjustified to subordinate clause (c) also to Explanation II.
The mention of cause of action in Explanation II would not make any difference in this behalf,
While explaining the phrase 'carries on business' through a deeming process, the Explanation II
provided that a corporation would be considered as carrying on business at its sole or principal
office and also at its subordinate office provided in the latter case, for purpose of section 20, the
cause of action also arose there. This Court did not approve the view taken by the Dacca High
Court in the case of Messrs Rehmania Trading Company that the Explanation II is not restrictive
but has the effect of extending the liability of a corporation to be sued at a place where it has
principal office or at a place where it has a subordinate office. Explanation II can be subdivided
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 recognized 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 II 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.

We hold accordingly. The two suits in this matter were filed at Mianwali in which District a part
of cause of action arose. Clause (c) o section 20, C. P. C. clearly covers the situation. The
objections of the appellant regarding territorial jurisdiction of the trial Court having rightly been
overruled, we find no force in these appeals and the same are dismissed. The parties are left to
bear their own costs.

Appeal dismissed.