The case of Sterling Agro Industries Ltd. v. Union of India & Ors. [(2011) 10 GSTR 20 : (2011) 43 VST 375 : 2011 SCC OnLine Del 3162], decided by a five-judge Larger Bench of the Delhi High Court on August 1, 2011, is a pivotal decision clarifying the scope of territorial jurisdiction under Article 226 of the Constitution of India.

The case arose from a reference questioning the correctness of the Full Bench decision in New India Assurance Co. Ltd. v. Union of India [AIR 2010 Delhi 43], which had held that the situs of an appellate or revisional authority alone conferred jurisdiction on the Delhi High Court, treating it as the sole cause of action. The Larger Bench, comprising Chief Justice Dipak Misra and Justices Vikramajit Sen, A.K. Sikri, Sanjiv Khanna, and Manmohan, overruled this view, emphasizing the doctrine of forum conveniens and the nuanced understanding of cause of action. 

Detailed Factual Background:
The factual matrix pertains to multiple writ petitions, with the primary focus on W.P. (C) No. 6570 of 2010 filed by Sterling Agro Industries Ltd., a company based in the Industrial Area, Q-5-6, Ghirongi, District Bhind, Malanpur, Madhya Pradesh. The petitioner challenged Order No. 214-15/10-Cus., dated July 9, 2010, issued by the Revisionary Authority, Government of India, Ministry of Finance, Department of Revenue, located in Delhi.

This order dismissed the petitioner's revision application, upholding the Commissioner (Appeals-I), Customs and Central Excise, Indore's decision, which affirmed the Assistant Commissioner of Customs, ICD, Malanpur's order dated May 30, 2009. The Assistant Commissioner had denied the petitioner drawback facilities under the Central Excise Drawback Rules, 1995, citing violations of Rule 19(2) of the Central Excise Rules, 2002, and conditions in Notifications No. 68/2007-Cus. (N.T.) and No. 103/2008-Cus. (N.T.) due to the procurement of duty-free inputs.

The petitioner's industry and the initial adjudicating authority (Assistant Commissioner) were located in Madhya Pradesh, with the appellate authority in Indore. The revisional authority, the Joint Secretary to the Government of India, was situated in Delhi. The petitioner invoked the Delhi High Court's jurisdiction under Article 226, contending that the revisional authority's location in Delhi constituted a sufficient cause of action, relying on New India Assurance Co. Ltd. v. Union of India. The connected petitions (W.P. (C) Nos. 8399/2009, 2447/2010, 2448/2010, and 6953/2010) raised similar jurisdictional issues, prompting a consolidated hearing to resolve the conflict over the Delhi High Court's territorial jurisdiction.

Detailed Procedural Background

• The procedural history begins with a Division Bench's doubt regarding the correctness of New India Assurance Co. Ltd. v. Union of India [AIR 2010 Delhi 43], which held that the Delhi High Court had jurisdiction solely because the appellate authority was located in Delhi.
• The Division Bench referred the matter to a Full Bench, which then referred it to a Larger Bench.
• The five-judge Larger Bench heard the petitions analogously, focusing on W.P. (C) No. 6570 of 2010.
• In W.P. (C) No. 6570/2010:
  • The petitioner challenged the revisional order dated July 9, 2010.
  • The earlier orders were from the Assistant Commissioner (May 30, 2009) and Commissioner (Appeals).
  • The petition was filed in the Delhi High Court asserting jurisdiction based on the revisional authority's Delhi location.
  • Arguments proceeded with the assistance of amicus curiae Atul Nanda.
  • The reference required re-examination of New India Assurance's ratio in light of Article 226's legislative history and precedents.

Issues Involved in the Case

• Whether the Delhi High Court has territorial jurisdiction under Article 226 solely because the appellate/revisional authority is in Delhi?
• Whether the situs of the appellate or revisional authority is the sole cause of action or whether forum conveniens applies?
• Does Article 226(2)'s cause of action include only material, essential, or integral facts?
• Does the merger of the original order into the appellate order justify jurisdiction based on the appellate authority's location?
• Can the Delhi High Court refuse jurisdiction considering factors like forum conveniens and nature of the lis?

Petitioner's Submission

• Delhi High Court had jurisdiction as the revisional order was passed in Delhi.
• Relied on New India Assurance Co. Ltd. v. Union of India [AIR 2010 Delhi 43].
• Argued the revisional order superseded earlier orders.
• Claimed superintendence under Article 227 required the Delhi High Court to entertain the petition.
• Cited:
  • Sri Nasiruddin v. State Transport Appellate Tribunal [(1975) 2 SCC 671]
• Emphasized dominus litis and the Fifteenth Amendment's expanded scope of Article 226.

Respondents' Submission

• Argued that cause of action primarily arose in Madhya Pradesh.
• Revisional authority's Delhi location was insignificant.
• Relied on:
  • Kusum Ingots and Alloys Ltd. v. Union of India [(2004) 6 SCC 254]
  • Alchemist Ltd. v. State Bank of Sikkim [(2007) 11 SCC 335]
• Warned against jurisdictional overreach and emphasized forum conveniens.
• Highlighted discretionary nature of Article 226.

Amicus Curiae's Submission

• Analyzed legislative history of Article 226.
• Emphasized nuanced interpretation of cause of action.
• Relied on:
  • Oil and Natural Gas Commission v. Utpal Kumar Basu [(1994) 4 SCC 711]
  • Ambica Industries v. CCE [(2007) 213 ELT 323]
• Warned against an absolute rule on appellate authority's situs.

Detailed Discussion on Judgments and Citations

• Election Commission of India v. Saka Venkata Rao, AIR 1953 SC 210:
  • Used to show pre-amendment jurisdiction based on location of authority.
• Lt. Col. Khajoor Singh v. Union of India, AIR 1961 SC 532:
  • Confirmed jurisdiction required authority's physical presence before the amendment.
• K. S. Rashid and Son v. Income-tax Investigation Commission, AIR 1954 SC 207:
  • Supported pre-amendment view emphasizing authority's location.
• Collector of Customs v. East India Commercial Co. Ltd., AIR 1963 SC 1124:
  • Used to clarify jurisdiction based on specific facts and not a general rule.
• Sri Nasiruddin v. State Transport Appellate Tribunal, (1975) 2 SCC 671:
  • Held that appellate/revisional order can form part of the cause of action.
• Kusum Ingots and Alloys Ltd. v. Union of India, (2004) 6 SCC 254:
  • Central to respondent's case; stressed material and integral facts only.
• Navinchandra N. Majithia v. State of Maharashtra, AIR 2000 SC 2966:
  • Supported jurisdiction where part of cause of action arises.
• Kishore Rungta v. Punjab National Bank, (2003) 151 ELT 502 (Bom):
  • Upheld jurisdiction based on partial cause of action.
• Indian Institute of Technology v. Dr. P. C. Jain, (1991) 45 DLT 42:
  • Supported jurisdiction due to appellate authority's location but case-specific.
• Ambica Industries v. CCE, (2007) 213 ELT 323:
  • Highlighted discretion and relevance of forum conveniens.
• Bombay Snuff P. Ltd. v. Union of India, (2006) 194 ELT 264 (Del):
  • Dismissed for lack of substantial cause of action in Delhi.
• Rajkumar Shivhare v. Assistant Director of Enforcement, (2008) 154 DLT 28:
  • Required significant part of cause of action within jurisdiction.
• West Coast Ingots P. Ltd. v. CCE, (2007) 209 ELT 343 (Del):
  • Emphasized material over peripheral facts for jurisdiction.
• Alchemist Ltd. v. State Bank of Sikkim, (2007) 11 SCC 335:
  • Clarified material, essential facts define cause of action.

Detailed Reasoning and Analysis of Judge:
Court meticulously analyzed the legislative history of Article 226, from its original strict territorial requirement to the expanded scope under the Fifteenth Amendment, which introduced the cause of action concept via clause (1A), later renumbered as clause (2). The court traced the shift from Election Commission and Khajoor Singh, which limited jurisdiction to the authority's physical presence, to the post-amendment framework allowing jurisdiction where the cause of action, wholly or in part, arises.

The court scrutinized New India Assurance's ratio, which held that the appellate authority's Delhi location constituted the sole cause of action and that declining jurisdiction was a failure of duty. The Larger Bench found this view flawed, as it ignored the doctrine of forum conveniens and the nuanced understanding of cause of action as comprising material, essential, or integral facts (Alchemist Ltd., Kusum Ingots). The court adopted ONGC's definition of cause of action as the bundle of facts necessary for relief, assessed on pleadings, and emphasized that peripheral facts, like the authority's location, do not automatically confer jurisdiction (Adani Exports).

The court acknowledged that the revisional order's Delhi location constituted a part of the cause of action (Sri Nasiruddin), but held that this alone did not compel the court to entertain the petition. The discretionary nature of Article 226, coupled with forum conveniens, allowed refusal based on convenience, expenses, and the lis's nexus (Ambica Industries). The court rejected New India Assurance's absolute merger doctrine, which treated the appellate order's location as the forum conveniens, noting that jurisdiction depends on the case's factual matrix (Musaraf Hossain).

The court clarified that while a minuscule part of the cause of action suffices for jurisdiction (Kusum Ingots), the court may refuse to exercise it if a more appropriate forum exists, considering factors like the location of material facts, parties, and evidence (Rajendran Chingaravelu). The restriction of refusal to mala fide cases was deemed too narrow, as Article 226's discretionary power encompasses broader considerations (New Horizons). The court concluded that New India Assurance's rigid rule risked jurisdictional overreach and potential conflicts, advocating a balanced approach rooted in judicial discretion and practical convenience.

Final Decision:
On August 1, 2011, the Delhi High Court's Larger Bench partially overruled New India Assurance Co. Ltd. v. Union of India [AIR 2010 Delhi 43], holding that the situs of the appellate or revisional authority does not automatically confer jurisdiction or constitute the sole cause of action. The court clarified that while a part of the cause of action (e.g., the revisional order) makes a writ petition maintainable, the High Court may refuse to exercise jurisdiction based on forum conveniens, considering the lis's nexus, convenience, and material facts. The court directed the matters to be listed before the appropriate Division Bench for further consideration, answering the reference by modifying New India Assurance's findings.

Law Settled in the Case:
The case established the following legal principles: Territorial jurisdiction under Article 226(2) exists where the cause of action, wholly or in part, arises, but the situs of the appellate or revisional authority alone does not constitute the sole cause of action. The cause of action comprises material, essential, or integral facts, not peripheral ones like the authority's location, as per Alchemist Ltd. and Kusum Ingots.The doctrine of forum conveniens applies to writ proceedings, allowing the High Court to refuse jurisdiction if a more appropriate forum exists, considering convenience, expenses, and the lis's nexus.

The merger of the original order into the appellate order does not automatically make the appellate authority's location the forum conveniens; jurisdiction depends on case-specific facts.The discretionary power under Article 226 is not limited to refusing jurisdiction only in mala fide cases but extends to broader considerations like forum conveniens and the nature of the cause of action.High Courts must scrutinize the factual matrix to determine jurisdiction, balancing Article 226(2)'s flexibility with judicial discretion to avoid jurisdictional overreach.Any contrary decisions stand overruled, reinforcing a nuanced approach to territorial jurisdiction in writ proceedings.

Sterling Agro Industries Ltd. Vs. Union of India: August 1, 2011:W.P. (C) Nos. 8399/2009:2011 SCC OnLine Del 3162:High Court of Delhi:Hon'ble Judges Shri Dipak Misra, C.J., Vikramajit Sen, A.K. Sikri, Sanjiv Khanna, Manmohan, JJ.

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Written By: Advocate Ajay Amitabh Suman, IP Adjutor - Patent and Trademark Attorney
Email: ajayamitabhsuman@gmail.com, Ph no: 9990389539