Jurisdiction Dispute in Arcadia Shipping Ltd. vs. Tata Steel: Supreme Court Verdict Explained

The case of Arcadia Shipping Ltd. vs. Tata Steel Ltd. revolves around a complex dispute regarding territorial jurisdiction under the Code of Civil Procedure, 1908. The Supreme Court was called upon to decide whether the Delhi High Court had jurisdiction over the matter, given that the dispute involved multiple transactions spanning different locations.

Background of the Case

The case stemmed from a contract for the supply and shipment of 400 MT of galvanized steel corrugated sheets. Bhushan Steel & Strips Ltd. (now merged with Tata Steel Ltd.) supplied the goods, which were ordered by TYO Trading Enterprises, an Ethiopian company. The order was placed at Delhi, and the shipment was undertaken by Arcadia Shipping Ltd. from Mumbai to Djibouti, Ethiopia.

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The crux of the dispute arose when Bhushan Steel did not receive payment for the shipped goods. Despite the issuance of a Letter of Credit by the Commercial Bank of Ethiopia, the bank refused to encash it, citing discrepancies. Meanwhile, Arcadia Shipping released the goods to TYO Trading, allegedly based on an endorsed Bill of Lading from the Bank of Ethiopia. Bhushan Steel filed a suit claiming that either the bank or Arcadia Shipping was liable for the unpaid amount.

Arguments by the Petitioner (Arcadia Shipping Ltd.)

• The company contended that the case should not be heard in Delhi, as the shipment originated from Mumbai and was destined for Djibouti.
• They argued that their involvement was limited to transportation and had no direct connection with the contractual obligations related to the supply and payment.
• Arcadia Shipping claimed that the Delhi High Court had no territorial jurisdiction as no part of the shipping transaction took place in Delhi.

Arguments by the Respondent (Tata Steel Ltd.)

• Tata Steel argued that the order for the goods was placed in Delhi, and payments were also to be made in Delhi, making the jurisdiction of the Delhi High Court valid.
• They contended that the transactions, including the issuance of the Letter of Credit, were interconnected and could not be treated in isolation.
• The respondent emphasized that since Arcadia Shipping was involved in unauthorized release of goods, their actions were part of a larger transaction that was initiated in Delhi.

Supreme Court’s Analysis and Judgment

The Supreme Court ruled against Arcadia Shipping Ltd. and upheld the decision of the Division Bench of the Delhi High Court, stating that territorial jurisdiction was indeed valid in Delhi. The Court reasoned that:

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• Under Section 20(c) of the Code of Civil Procedure, a suit can be filed where the cause of action, wholly or in part, arises. Since the supply contract and payment obligations were linked to Delhi, a part of the cause of action originated there.
• Order I Rule 3 of the CPC allows for multiple defendants in a case where their actions are interconnected. Since Bhushan Steel was seeking relief against multiple parties, including Arcadia Shipping, it was permissible to file a single suit involving all of them.
• Order I Rule 7 permits a plaintiff to include multiple defendants in case of uncertainty about which party is liable. Given the contradictory positions taken by the defendants, this provision was applicable.
• The Bill of Lading, which played a crucial role in the unauthorized release of goods, was directly linked to the financial transaction originating in Delhi.

Conclusion

The Supreme Court dismissed Arcadia Shipping’s appeal, affirming that the Delhi High Court had the territorial jurisdiction to hear the case. This ruling underscores the principle that jurisdiction is not solely determined by the location of an event but also by the interconnected nature of business transactions.

Petitioner Name: Arcadia Shipping Ltd..
Respondent Name: Tata Steel Limited.
Judgment By: Justice Sanjiv Khanna, Justice Dipankar Datta.
Place Of Incident: Delhi.
Judgment Date: 16-04-2024.

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