M J Antony: Curb on forum shopping

OUT OF COURT

The Supreme Court has restricted the movement of litigants in search of favourable courts.

A litigant often faces the problem of choosing the appropriate forum to move his petition as there are numerous courts, tribunals and other quasi-judicial forums dealing in specialised subjects. Several factors determine the choice. The place where a company is registered is one. The locality where the cause of action occurred is another. A lawyer helps the litigant to choose the right forum. A clever attorney might do better and also advise his client to choose a 'convenient' forum which has earlier given a favourable answer to his problem. This is a skilful move and could succeed if it escapes the notice of the judiciary. Such deft legal strategies have been made in the fields of income tax, customs duty and central excise in recent times. However, a recent judgement of the Supreme Court has brought some order into this forum shopping forays (M/s Ambica Industries vs Commissioner of Central Excise).

Certain appellate tribunals are conferred with jurisdiction over several states. There are high courts in each state. Therefore, the question arises as to which high court the litigant would go on appeal if the tribunal gives an adverse decision. The Ambica Industries case was a typical instance. It carried on its business at Lucknow. It was assessed for central excise there. However, the dispute over the assessment was decided in New Delhi where the Central Excise and Service Tax Appellate Tribunal sits. The tribunal exercises jurisdiction in respect of cases arising within the territorial limits of Uttar Pradesh, Maharashtra and the National Capital Territory of Delhi.

The firm chose the Delhi high court to move its appeal. The high court decided that it had no territorial jurisdiction to hear the matter, citing an earlier judgment. Therefore, the firm moved the Supreme Court. The revenue authorities resisted it arguing that the firm should move the high court in the territory where the assessment was made. It cannot move the high court which has jurisdiction over the place where the tribunal sits, which is Delhi in this case. The Supreme Court agreed with the department's view and dismissed the firm's appeal.

This is because approving of the firm's choice of forum would lead to "some sort of judicial anarchy", as the Supreme Court put it. The tribunal in this case exercises jurisdiction over all the three states. In all these states, there are high courts. In the event the aggrieved person is given a free choice, and he chooses one or the other high court, the decision of that high court would be binding only on the authorities that are within its jurisdiction. It will have only persuasive value on the authorities functioning under a different jurisdiction.

If the binding authority of a high court does not extend beyond its territorial jurisdiction and the decision of one high court would not be a binding precedent for other high courts, there would be judicial confusion.

For instance, a firm affected by an order of assessment made in Mumbai might invoke the jurisdiction of the Allahabad high court to take advantage of the law laid down by it and which might suit the firm. Thus the firm would be able to successfully evade the law laid down by the Bombay high court.

The law-makers might have thought of one particular high court while making the provision for appeal. When tribunals were set up to tackle the arrears and speed up the proceedings, they were given jurisdiction over several states. However, parliamentarians never intended to enable an aggrieved party to move appeals before different high courts "at its sweet will", the judgement emphasised. There is another reason for restricting the forum-hunting. An appeal may have to be filed by the commissioner of central excise. His office may be located in a different state. If he has to prefer an appeal before the high court, he would be put to great inconvenience, whereas the assessee firm would not be.

This problem has been arising in other fields too, and the Supreme Court noticed that the decisions of the high courts were not uniform. The Madras high court dealt with the issue in the context of the income tax law in CIT vs S Sivaramakrishna Iyer and the Delhi high court in Seth Banarsi Das vs CIT. The Delhi high court discussed the problem in the background of customs tribunals in Suraj Woollen Mills vs Collector of Customs. So also, the Karnataka high court in Big Apple Computers vs Commissioner of Customs. The Supreme Court examined the question with reference to the Company Law Board in Stridewell Leathers vs Bhankerpur Simbhaoli Beverages. The problem is bound to persist as there are too many tribunals with extended territorial jurisdictions and companies doing business in several states, let alone canny counsel who know where the winds blow favourable.