Individual Contracts Can't Curtail Jurisdiction Of Statutory Forums: Calcutta High Court

The Calcutta High Court on Wednesday observed that parties are precluded from drawing up individual contracts that curtail the jurisdiction of statutory forums or overrule statutory requirements. Terming such contracts to be 'ex facie barred', Justice Sabyasachi Bhattacharyya observed,

"Although there might have a provision in the contract for unilateral termination by the opposite parties in the event of certain incidents happening, mere agreement cannot confer jurisdiction and/or curtail jurisdiction of a statutory forum. The parties cannot contract out of statutory requirements by individual contracts."

In the instant case, the appellate tribunal had refused to exercise jurisdiction in affirming the decision of the Arbitrator under the West Bengal Co-operative Societies Act, 2006 (2006 Act) wherein the dispute was decided in favour of the respondents.

Essentially, the respondents had unilaterally terminated the building contract entered into by both the parties and accordingly refused to make any payment for the work already done by the petitioners. The counsel for the respondents had contended that such a power of unilateral termination was envisaged in the contract itself.

Further, the appellate tribunal had opined that the instant suit was not maintainable on the ground that Section 69 of the Partnership Act, 1932 bars the institution of suits to enforce a contractual right unless the partnership firm is registered.

Observations:

The Court observed that the appellate tribunal had based its decision on several misconceptions of law. Although no suit is maintainable at the instance of an unregistered firm, there is no bar on individual partners of the firm to institute legal action in their individual capacities, the Court added.

Thus the bar enumerated under Section 69 of the 1932 Act would not be applicable in the instant case.

Referring to the facts of the instant case, the Court noted,

"It is seen from the building contract annexed to the revisional application, which was purportedly terminated by the opposite parties unilaterally, the building contract was entered into between the opposite party no. 1-society and the builders, that is, Asit Hembram, Sankar Ganguly and Uttam Mondal, by name, only qualified by the rider that they were carrying on business under the name and style of M/s. Ma Tara Enterprise, a partnership firm. Even the complaint was lodged not by the firm, but by the petitioners in their individual capacities, the logic behind which is also borne out by the description of the contractual parties in the building contract in question."

Rejecting the contention of the respondents that unilateral termination of the contract is permissible, the Court reiterated that parties cannot supersede statutory requirements through individual contracts.

"In view of the Act of 2006, such statutory power cannot be curtailed by individuals by their agreements. Any agreement against the law is ex facie barred", the Court opined.

Further, the Court held that the exercise of the power of unilateral termination was sanctioned by the appellate Tribunal without taking note of the specific provisions of Sections 202 and 204 of the Indian Contract Act, 1872.

The Court also noted that the petitioners had invested a huge amount of money and resources into the construction. As a result, the vested right in favour of the petitioner could not be unilaterally taken away by the respondents regardless of the clauses in the contract.

Opining on the curtailment of the jurisdiction of statutory forums, the Court observed,

"The curtailment of the jurisdiction of courts and/or tribunals or other forums by agreement is not valid in the eye of law. As such, there was no bar for the Arbitrator and/ or the cooperative Tribunal to enter into the merits of the disputes."

Accordingly, the Court set aside the impugned order dated September 18, 2019 of the West Bengal Co-operative Tribunal and remanded the matter back to the Cooperative Tribunal for fresh adjudication on merits. The Court also cautioned the Tribunal from dismissing the suit on 'technical grounds' by observing,

"The Tribunal shall enter into the merits of the dispute and decide the same, and not preclude the parties from approaching it on the technical grounds as advanced in the impugned judgement."

Advocate Sabyasachi Chatterjee and Advocate Pintu Karar appeared on behalf of the Petitioners.

Case Title: Ajit Hembram and others v. Sergeant of Co-operative Housing Society Limited and others

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