Article 226(2) - Supreme Court Explains Tests To Determine If Cause Of Action Has Arisen Within Jurisdiction Of High Court

In a notable judgment explaining the concept of 'cause of action' under Article 226(2) of the Constitution of India, the Supreme Court held that only those facts, which are relevant to the grant of the relief, will give rise to 'cause of action'. 

Applying this principle, the Court held that a company cannot challenge a GST notification issued by one state before a High Court located in another State only on the ground that it has office there.

The Supreme Court was considering the appeals filed by the State of Goa against a decision of the Sikkim High Court that it has jurisdiction to entertain a petition filed by a company challenging the notification issued by the Goa Government. The writ petition was filed by a lottery company challenging a notification issued by the Goa Government under the GST Act.

The petitioner claimed that a part of the cause of action had arisen in Sikkim and hence the Sikkim High Court has jurisdiction to decide the matter. The High Court held the writ petitions as maintainable on the ground that the petitioners are also challenging a notification issued by the Centre under the CGST Act. Although State of Goa filed an application for its deletion from the array of respondents, the High Court refused to do so, against which the State appealed to the Supreme Court.

The Supreme Court noted that there is no pleading in the writ petition as to how the cause of action has arisen in Sikkim, except a statement that both the petitioners and the respondents are located within the territorial jurisdiction of the High Court.

In this context, the Court delved into the meaning of the word "cause of action" and referred to the classic definition in Cooke vs. Gill  -"cause of action means every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court".

Guiding tests to determine cause of action

The Court said that in the context of a writ petition, what would constitute such ‘cause of action’ is the material facts which are imperative for the writ petitioner to plead and prove to obtain relief as claimed. Such pleaded facts must have a nexus with the subject matter of challenge based on which the prayer can be granted. Those facts which are not relevant or germane for grant of the prayer would not give rise to a cause of action conferring jurisdiction on the court.

Here, tax has been levied by the Government of Goa in respect of a business that the petitioning company is carrying on within the territory of Goa. Such tax is payable by the petitioning company not in respect of carrying on of any business in the territory of Sikkim.

The immediate civil consequence, if at all, arising from the impugned notification is that the petitioning company has to pay tax @ 14% to the Government of Goa. The liability arises for the specific nature of business carried on by the petitioning company within the territory of Goa. The pleadings do not reflect that any adverse consequence of the impugned notification has been felt within the jurisdiction of the Sikkim High Court

"Here, tax has been levied by the Government of Goa in respect of a business that the petitioning company is carrying on within the territory of Goa. Such tax is payable by the petitioning company not in respect of carrying on of any business in the territory of Sikkim", a bench comprising Justices S Ravindra Bhat and Dipankar Datta observed.

"Hence, merely because the petitioning company has its office in Gangtok, Sikkim, the same by itself does not form an integral part of the cause of action authorizing the petitioning company to move the High Court", the bench added.  

Concept of forum conveniens

Even if a part of cause of action is assumed to have arisen within the State of Sikkim, the High Court ought not to have entertained the writ having regard to the principle of forum conveniens.

"As held by this Court in Kusum Ingots Vs. Union of India and Ambica Industries Vs. CCE, even if a small part of the cause of action arises within the territorial jurisdiction of a high court, the same by itself could not have been a determinative factor compelling the High Court to keep the writ petitions alive against the appellant to decide the matter qua the impugned notification, on merit".

The Court held that the High Court ought not to have entertained the writ petitions as against the State of Goa.

Case Title : State of Goa vs Summit Online Trade Solutions (P) Ltd and others

Citation : 2023 LiveLaw (SC) 184

Constitution of India - Article 226(2) - Guiding tests to determine whether part of cause of action has arisen within the territorial jurisdiction of a High Court- In the context of a writ petition, what would constitute such ‘cause of action’ is the material facts which are imperative for the writ petitioner to plead and prove to obtain relief as claimed- Determination of the question as to whether the facts pleaded constitute a part of the cause of action, sufficient to attract clause (2) of Article 226 of the Constitution, would necessarily involve an exercise by the high court to ascertain that the facts, as pleaded, constitute a material, essential or integral part of the cause of action - In so determining, it is the substance of the matter that is relevant- It, therefore, follows that the party invoking the writ jurisdiction has to disclose that the integral facts pleaded in support of the cause of action do constitute a cause empowering the high court to decide the dispute and that, at least, a part of the cause of action to move the high court arose within its jurisdiction- Such pleaded facts must have a nexus with the subject matter of challenge based on which the prayer can be granted- Those facts which are not relevant or germane for grant of the prayer would not give rise to a cause of action conferring jurisdiction on the court - Para 15

Constitution of India - Article 226(2) - Tax has been levied by the Government of Goa in respect of a business that the petitioning company is carrying on within the territory of Goa- Such tax is payable by the petitioning company not in respect of carrying on of any business in the territory of Sikkim- Merely because the petitioning company has its office in Gangtok, Sikkim, the same by itself does not form an integral part of the cause of action authorizing the petitioning company to move the High Court- Para 16

Constitution of India - Article 226(2) -Concept of forum conveniens- Even if a small part of the cause of action arises within the territorial jurisdiction of a high court, the same by itself could not have been a determinative factor compelling the High Court to keep the writ petitions alive against the appellant to decide the matter qua the impugned notification, on merit - Para 18

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