Individual contracts cannot restrict the jurisdiction of statutory forums: Calcutta High Court
The Calcutta High Court observed on Wednesday that parties are prohibited from drafting individual contracts that limit the jurisdiction of statutory bodies or override statutory requirements. Judge Sabyasachi Bhattacharyya said these contracts were “ex facie prohibited”, “Although there may be a provision in the contract for unilateral termination by opposing parties …
The High Court of Calcutta Wednesday noted that parties are prohibited from drafting individual contracts that limit the jurisdiction of statutory bodies or override statutory requirements. End these contracts as “ex facie prohibited”, Judge Sabyasachi Bhattacharyya observed,
“Although there may be a provision in the contract providing for unilateral termination by the opposing parties in the event of certain incidents, a simple agreement cannot confer jurisdiction and / or restrict the jurisdiction of a statutory forum. Parties cannot avoid legal requirements through individual contracts. ”
In the present case, the appeals tribunal had refused to exercise its jurisdiction to uphold the arbitrator’s decision under the West Bengal Cooperative Societies Act 2006 (2006 Act) in which the dispute had been decided in favor of the respondents.
Essentially, the respondents had unilaterally terminated the construction contract entered into by the two parties and consequently refused to pay for the work already carried out by the applicants. Counsel for the respondents argued that such a power of unilateral termination was provided for in the contract itself.
In addition, the appellate court found that the present action was not sustainable on the grounds that Section 69 of the Partnerships Act, 1932 prohibits the bringing of proceedings to assert a contractual right unless the general partnership is registered.
The Court observed that the Appeal Tribunal had based its decision on several misconceptions of the law. While no lawsuit is sustainable at the request of an unregistered firm, there is no bar for individual firm partners to pursue individual legal action, the court added.
Thus, the prohibition listed in section 69 of the 1932 Act is not applicable in the present case.
Referring to the facts of the case, the Court noted,
“It emerges from the construction contract annexed to the request for revision, allegedly terminated unilaterally by the opposing parties, that the construction contract was concluded between the opposing party no. 1-society and the builders, i.e. Asit Hembram, Sankar Ganguly and Uttam Mondal, by name, qualified only by the rider that they operated under the name and style of M / s. Ma Tara Entreprise, a partnership company. Even the complaint was not lodged by the company, but by the individual petitioners, the logic behind which is also confirmed by the description of the contractual parties in the construction contract in question. ”
Rejecting the respondents’ assertion that unilateral termination of the contract is permitted, the Court reiterated that parties cannot substitute legal requirements for individual contracts.
“In view of the 2006 law, this statutory power cannot be restricted by individuals by their agreements. Any agreement contrary to the law is ex facie prescribed“, said the Court.
Further, the Court held that the exercise of the unilateral termination power was sanctioned by the appellate court without regard to the specific provisions of Sections 202 and 204 of the Indian Contract Act, 1872.
The Court also noted that the applicants had invested a huge amount of money and resources in the construction. Consequently, the right acquired in favor of the applicant could not be withdrawn unilaterally by the respondents whatever the terms of the contract.
Ruling on the limitation of the jurisdiction of statutory courts, the Court observed,
“Limitation of the jurisdiction of courts and / or tribunals or other bodies by agreement is not valid under the law. As such, there was no obstacle to the arbitrator and / or the cooperative tribunal ruling on the merits of the disputes.. ”
As a result, the court quashed the impugned order of September 18, 2019 of the West Bengal Cooperative Court and referred the case back to the Cooperative Court for a new decision on the merits. The Court also cautioned the Tribunal from dismissing the action for “technical reasons” by observing,
“The Tribunal rules on the substance of the dispute and decides so, and does not prevent the parties from addressing it on the technical grounds as advanced in the judgment under appeal.. “
Lawyer Sabyasachi Chatterjee and lawyer Pintu Karar appeared on behalf of the petitioners.
Case title: Ajit Hembram and others v. Sergeant of Co-operative Housing Society Limited et al.
Click here to read / download the order