Pepsico India Holdings Ltd. vs Scholle Europe B.V.

D.K. Jain, J.—In this suit for recovery of Rs. 135,696,956.56 the defendant has filed this application under Order VII Rule 11 read with Section 151 of the Code of Civil Procedure, praying for the rejection of the plaint on the ground that this Court does not have territorial jurisdiction to try the suit because no cause of action has arisen at Delhi. It is pleaded that the order for supply of goods was placed at Breda County, Netherlands; the amount was payable at the said place; the defendant does not reside or work for gain at Delhi. Moreover, as per Clause 11(2) of the terms and conditions printed on the back of order confirmation, dated 5 March 1996 (also on the back of revised order confirmation, dated 20 March 1996, commercial invoice dated 5 April 1996 and the invoice dated 10 April 1996) all disputes arising between the parties are to be submitted to a competent civil court in the Breda County, Netherlands, for adjudication. The case of the plaintiff, as set out in the plaint, is as follows:

M/s. Pepsi Foods Limited, hereinafter referred to as Pepsi, an associate company of the plaintiff, was using aseptic metallised drum bags for packaging tomato paste. On 22 November 1995, by means of a fax, Pepsi made enquiry from the defendant, namely, Scholle Europe B.V.(hereinafter referred to as ''Scholle''), if they could supply aseptic bags suitable for packaging chilly paste and if so to submit their quotation for 16000 aseptic bags. By a fax dated 29 November 1995, Scholle informed Pepsi that its metallised drum bags will be suitable for storing and packing chilly paste. By its fax dated 1 December 1995, Pepsi again required Scholle to confirm that the bags specified by them would be suitable for chilly paste packing. It was duly confirmed by Scholle by their fax dated 5 December 1995. By their fax dated 7 December 1995, Pepsi sent draft purchase order to Scholle for the supply of the said aseptic bags. On 8 December 1995 Pepsi received a fax from Scholle clarifying that total transport cost of the bags would be US $ 3600 instead of US $ 2700 mentioned in the draft purchase order. Accepting the said change, as suggested by Scholle, on 8 December 1995 Pepsi sent the final purchase order to Scholle. Since in the meanwhile some restructuring had been carried out between Pepsi and the plaintiff, namely, Pepsico India Holding Limited (hereinafter referred to as the ''Pepsico''), Scholle was informed about the change and the same was confirmed by them vide faxes dated 22 February 1996 and 26 February 1996.

By their fax dated 4 March 1996 Pepsico sent a revised purchase order bearing the date of 8 December 1995 and incorporating the additional quantity of bags, which was accepted by Scholle, who signed the same and returned the signed copy thereof under the cover of their fax dated 4 March, 1996. According to Pepsico, the terms and conditions of the contract were contained in the said purchase order.

Sometime in April 1996, Scholle supplied the said aseptic bags and submitted the requisite documents for payment by Pepsico at New Delhi through their local bank, namely, Deutsche Bank. Pursuant thereto, Pepsico paid a sum of US$ 115724.60, being the entire price of the said bags. Some time in October 1997, Pepsico found that some of the aseptic bags, filled with chilly paste in 1996, had started de-metallising and delaminating and the metallised layer of the said bags had started wearing off at different places indicating disintegration of the said bags. On Pepsico''s request, a joint inspection was carried out by the local representatives of Scholle. By their letter dated 31 December 1997, Pepsico called upon Scholle to pay a sum of US$ 1.95 millions towards the cost of chilly paste packed in the said bags. Thereafter, some correspondence ensued between the parties. By their letter dated 28 August 1998, while stating that certain level of aluminum contamination was found in the chilly paste, Scholle offered to pay to Pepsico an amount of US$ 1,65,000, being the cost of the bags and related costs. The offer was rejected by Pepsico by their letter dated 1 September 1998. By its latter dated 17 September, 1998. Pepsico lodged a claim of US$ 3,294,000 with Scholle. However, in supersession of this letter, vide letter dated 28 December 1998, the claim was revised to Indian Rs. 135,696,956.60. Having failed to receive the said amount, the present suit was filed.

The suit is resisted by Scholle by filing a written statement. In the written statement a preliminary objection has been raised that the suit is not maintainable before this Court for lack of territorial jurisdiction as it had been agreed between the parties that any matter relating to the present contract would be submitted only to a judge in Breda County, Netherlands in terms of Clause 11(2) of the general terms and conditions printed on the back of the order confirmation dated 20 March 1996 and on the back of revised order confirmation dated 20 March 1996. It is stated that each order by Scholle is confirmed with a standard Scholle document Form KSD-2.3.5 which is used for order confirmation, commercial invoice and invoice. It is pleaded that an invoice containing the general terms and conditions was sent on 10 April 1996 and, therefore, Pepsico had sufficient notice of the aforesaid Clause 11(2) of the general terms and conditions and Pepsico, by accepting the same are bound by these conditions. The claim of the Pepsico that there was breach of the terms of the contract is also refuted in the written statement.

In their replication, while denying that there had been any agreement between the parties for submission of the disputes only to a judge of the Breda County, it is stated that purported Clause 11(2) of the alleged general terms and conditions referred to and relied upon by Scholle, allegedly printed on the back of the purported order confirmation dated 5 March 1996 or 20 March 1996 or the purported invoices of 5 April and 10 April 1996 is not applicable as the contract between the parties was concluded on 4 March 1996. It is asserted that any post contract condition cannot be looked into. It is, however, stated that under the cover of Scholle fax dated 19 March 1996 Pepsico had received an order confirmation purporting to be dated 5 March 1996 without any such terms and conditions as are now sought to be relied upon by Scholle. Finally, it is stated that in any case, Clause 11(2) of the general terms and conditions, being relied upon by Scholle, does not confer exclusive jurisdiction to the Court in Breda County, Netherlands as the said clause is not exclusive because of the absence of exclusionary words, like "alone", "only" or "exclusive".

In support of their respective claims, additional affidavits have been filed by both the parties.

In the affidavit, dated 5 May 2000, while reiterating that Pepsico is not aware of any general practice of Scholle relating to contracts, it is stated that in the present case the contract was in the form of a purchase order dated 8 December 1995, duly signed and exchanged by both the parties by fax dated 4 March 1996 after negotiations, which exhaustively contained the terms and conditions agreed to between the parties; during the course of negotiations and until the signing of the contract/purchase order dated 8 December 1995 by both the parties on 4 March 1996 and even thereafter, the alleged unilateral terms and conditions printed on the reverse of the alleged Form KSD 2.3.5 of Scholle were neither received by Pepsico nor included in the terms and conditions of the contract neither were these intended to be included in the terms and conditions of the contract executed between the parties.

In the affidavit, dated 27 July 2000, filed by Scholle on 27 October 2000 in opposition to Pepsico''s aforementioned affidavit, while highlighting that they had long course of dealings with Pepsico since 1992 as they had supplied aseptic bags to them in terms of agreements entered into between both of them in the years 1992 to 1995, it is asserted that Pepsico was fully aware of the general terms and conditions printed at the reverse/back of the confirmation and commercial invoice.

In yet another affidavit filed by Pepsico on 2 December 2000, while terming the previous transactions of the years 1992 to 1995 as wholly irrelevant, immaterial and inadmissible to the present controversy, it is stated that it was for the first time that contract in question for supply of bags suitable for chilly paste was entered into between the parties. It is pleaded that Scholle cannot be permitted to set up any such alleged terms and conditions on the reverse of a document, which were never brought to the notice of Pepsico and there was never any consensus ad-idem between the parties in respect of the alleged terms and conditions on the reverse of Form KSD 2.3.5 in respect of the contract in question as the said forms never formed part of the contract between the parties.

In Scholle''s second affidavit filed on 27 April 2001, it is asserted that Pepsico was further made aware of Scholle''s terms and conditions when they received the commercial invoice dated 5 April 1996 and final invoice dated 10 April 1996, wherein the reference to the terms and conditions was conspicuously present and visible on the front of the documents, to which no objection was ever raised by Pepsico.

I have heard Mr. Kapil Sibal, learned senior counsel for Pepsico and Mr. Ashwani Kumar, learned senior counsel for Scholle at some length. On conclusion of hearing, parties were permitted to file written submissions, which has been done after seeking extension of time for the said purpose.

Mr. Ashwani Kumar, while asserting that revised purchase order dated 8 December 1995, filed by Pepsico refers to the invoice of Scholle, which in turn carries on its face at the bottom right corner reference to general terms and conditions of sale as stated on its reverse/back, contends that the said terms, which were essential, are deemed to be incorporated by reference as the agreed terms of contract of sale of aseptic bags. Relying on a decision of the Supreme court in M/s. Rickmers Verwaltung GMB H Vs. The Indian Oil Corporation Ltd., learned Counsel submits that a contract comes into existence only when parties have agreed upon the essential terms of contract. Inviting reference to Scholle''s fax dated 29 November 1995 and Pepsico''s fax dated 1 December 1995, whereby they had asked for a copy of the invoice to be sent by mail also, which is claimed to have been complied with, learned Counsel submits that at no point of time, prior to these proceedings. Pepsico had ever contended that the said pro form a invoice was not received by mail, as requested and, therefore, Pepsico cannot now be permitted to take a stand that they had no knowledge of the general terms of contract of sale. In support of the proposition that the general terms and conditions of Scholle formed part of the binding contract between the parties, reliance is placed on M. Dayanand Reddy Vs. A.P. Industrial Infrastructure Corporation Limited and others, Alimenta S.A. Vs. National Agricultural Co-operative Marketing Federation of India Ltd. and Another, and Bihar State Electricity Board, Patna and Others Vs. Green Rubber Industries and Others, Learned senior counsel would also urge that because of Pepsico''s continuous business relationship with Scholle since 1992, they were aware of general conditions of contract, which included the forum selection clause.

The stand of learned Counsel is that Article 11(2) of the general terms, which clearly stipulates that as far as an action against Scholle was concerned it would only lie in the Breda court within whose jurisdiction the said company is established, has to be read into the contract and therefore, there is no cause for Pepsico to file suit in this Court. The plea of Pepsico that since Article 11(2) does not use the words "only", "exclusive", etc., this is a non-exclusive clause, is sought to be repelled on the strength of a decision of the Apex Court in A.B.C. Laminart Pvt. Ltd. and Another Vs. A.P. Agencies, Salem, For the proposition that Pepsico cannot be permitted to resile from the clear implication of the wordings of the contract on the basis of a plea of "forum non-convenience", reliance is placed on a recent decision of the Apex Court in Modi Entertainment Network and Another Vs. W.S.G. Cricket PTE. Ltd., Replying on Bhatia International Vs. Bulk Trading S.A. and Another, Globe Transport Corporation Vs. Triveni Engineering Works and Another, and some other cases, it is contended by learned senior counsel that it is always open for the parties to a contract to vest jurisdiction in any one of the Courts which otherwise has jurisdiction to entertain a lis or to select a particular forum and even exclude the other forums in regard to claims which one party may have against the other under a contract.

On the contrary, the main thrust of Mr. Kapil Steal''s argument is that the question whether the alleged terms and conditions on the reverse of the proforma invoice or any other document, which allegedly contained Article 11(2), were brought to the notice of Pepsico is essentially an issue of fact that would need trial and, therefore, the plaint cannot be rejected at the threshold. Learned Counsel has vehemently urged that the question of territorial jurisdiction in the present case is a mixed question of fact and law and cannot be decided as a preliminary issue without evidence being led by the parties on various points urged by one side and denied by the other. In support of the argument reliance is placed on Major S.S. Khanna Vs. Brig. F.J. Dillon, . Anjini Devi and Others Vs. V.S.T. Industries Ltd., Naresh Chandra Das Vs. Gopal Chandra Das, and Madhabananda Ray and Another Vs. Spencer and Company Ltd.,

In the alternative, learned Counsel has contended that even assuming that Pepsico was made aware of Clause 11(2), still the said clause does not oust the jurisdiction of this Court as it does not vest exclusive jurisdiction upon the Court in Breda County because the words "alone", "exclusive", "only" have not been used in the said clause. Learned Counsel would urge that since the said clause stipulates that Scholle may bring an action in any other Court shows that the parties never intended to confer exclusive jurisdiction on Breda Court. The proposition is sought to be supported by placing reliance on two decisions of the Apex Court in A.B.C. Laminart Pvt. Ltd. and Another Vs. A.P. Agencies, Salem, and R.S.D.V. Finance Co. Pvt. Ltd. Vs. Shree Valllabh Glass Works Ltd., The stand of learned senior counsel is that just as the parties cannot by an agreement confer jurisdiction upon a Court which it otherwise does not have, by a private contract, parties cannot take away the jurisdiction which is vested in the Courts.

Having considered the rival contentions in the light of the pleadings and on the touchstone of the principles governing an application under Order VII Rule 11 CPC, I am of the view that the application merits rejection.

A bare reading of the provisions contained in Rule 11 of Order VII CPC, providing for rejection of the plaint in four specific cases envisaged therein, makes it clear that the provision is mandatory. Principles governing an application under Order VII Rule 11 CPC are well settled by a catena of cases. It is settled that the plaint should be taken as it is and the application under Order VII Rule 11 has to be considered on the basis of the averments in the plaint itself and no external aid is available to the Court for the purpose. Since rejection of a plaint at the threshold entails serious consequences for the plaintiff, the Court should be rather reluctant to exercise jurisdiction under the said provision. The power should be exercised in exceptional circumstances when the Court is absolutely sure that the matter in issue falls within the four corners of the requirement of the statute. While exercising the power of rejecting the plaint, the Court has to act with utmost caution and not casually. The following observations in Dyson Vs. Attorney General (1911) 1 KB 410 at 419, could be a useful guide for judging the prayer for rejection of the plaint:

It is evident that our judicial system would never permit a plaintiff to be "driven from the judgment seat" in this way without any Court having considered his right to be heard, excepting in cases where the cause of action was obviously bad and almost incontestably bad.

At the same time, we cannot lose sight of the observations of their Lordship of the Supreme Court in the case of T. Arivandandam Vs. T.V. Satyapal and Another, to the effect that if on a meaningful - not formal - reading of the plaint, it is manifestly found to be vexatious and meritless, in the sense of not disclosing a clear right to sue, the Court must exercise its power of rejection of plaint under this Rule, taking care to see that the ground mentioned therein id fulfilled, since bogus litigation ought to be shot down at the earliest stage.

Bearing in mind these broad principles, I revert to the facts in hands to determine the question, whether the present case falls within the ambit of Clause (a) of Rule 11 of Order VII CPC, namely, whether the plaint does not disclose a cause of action? For this purpose, it would be necessary to notice the relevant averments in the plaint. Para 22 of the plaint reads as follows:

By its fax order 04-03-1996, the Plaintiff sent a revised purchase order bearing the date of 08-12-1995, and incorporating the additional quantify of the said 4600 bags. The said purchase order, dated 8.12.95 and sent with the fax dated 04-03-1996 was duly accepted by the Defendant, who signed the same and returned the signed copy thereof under cover of its fax dated 04-03-1996. Thus, upon acceptance of the said purchase order dated 08-12-1995 and return by the Plaintiff to the Defendant under cover of its fax dated 04-03-1996, a concluded and binding contract came into existence between the parties whereby the Defendant undertook the obligation, inter-alia, to supply aseptic drumbags suitable for aseptic packing of chilli paste. The terms and conditions of the said contract were duly contained in the purchase order itself.

It would thus, appear from the afore-extracted paragraph of the plaint that the clear stand of Pepsico has been that the contract concluded on 4 March 1996, when Scholle signed and returned to them copy of the purchase order dated 8 December 1995 under cover of their fax dated 4 March 1996. Though at this juncture, for the purpose of deciding the present application, it may not be relevant to look at the stand of Scholle in the written statement but to put the matter beyond the pale of doubt, reply of Scholle to the said paragraph may be noticed. It reads as under:

That the contents of para 22 of the plaint are matters of record. However, it is denied that the Defendant Company, at any time, represented the Plaintiff Company that its product is suitable for aseptic packing of chilly paste.

Therefore, there is no specific denial by Scholle to what is stated by Pepsico in para 22 of the plaint. Nonetheless, from the afore-noted preliminary objection raised by Scholle it appears that their stand is that the contract was concluded on 5 March 1996, when order was confirmed or on 20 March, 1996, when revised order was allegedly confirmed. Be that as it may, a material fact having been affirmed by Pepsico and denied by Scholle shall form the subject of a distinct issue, pre-eminently a matter for trial. To decide whether the stand of Pepsico is on terra firma, evidence would be required. In any event, on a plain reading of the plaint, I find it difficult to hold that it does not disclose a cause of action as is sought to be pleaded in the application under consideration or that it manifestly appears to be vexatious and meritless, warranting rejection at this stage itself.

Moreover, as noted above, the factum of receipt of Scholle''s terms and conditions containing Clause 11 is by itself in serious contest, which again is a question of fact. Again answer to the issue whether Article 11(2) ousts the jurisdiction of this Court, though an issue of law, would depend upon the decision on the former issues. Furthermore, the cause of action being a bundle of facts, taken with the law applicable to them, the plea taken by Pepsico in paras 25 and 26 of the plaint in support of their stand that cause of action had arisen within the territorial jurisdiction of this Court cannot, at this stage, be said to be without any substance, particularly when Scholle has not pleaded lack of inherent jurisdiction of this Court. I say no more at this stage, lest it may cause prejudice to either of the parties. I am, therefore, of the opinion that Scholle has failed to make out a case for rejection of the plaint under Order VII Rule 11 CPC.

For the view taken above, it is unnecessary to go into the afore-noted other legal issues, on which learned senior counsel for the parties have addressed me so eloquently. Resultantly, the application, being misconceived, is dismissed with costs, quantified as Rs. 20,000/-. Out of the said amount. Rs. 10,000/- shall be deposited by the applicant with the Delhi Legal Services Authority, Room No. 1, Patiala House, New Delhi within a week from today.

The suit shall now be listed before the appropriate Court for further proceedings on 22 September 2003.