21 Dec 2009

Suit maintainable against liaison office: High Court

In a recent decision the Delhi High Court has held that a party can be prosecuted in India even though it is operating through liaison office in India. The High Court was dealing with a suit for non-performance of various obligations where it was argued on behalf of the defendant that "since it only has a liaison office in New Delhi, this Court lacks territorial jurisdiction to try this suit in terms of Section 20 (a)" of the Code of Civil Procedure. It was argued that the Reserve Bank of India had allowed the defendant only to operate as a liaison office in India. The High Court, after taking note of the various decisions on the issue, held as under;
19. Section 20(a) CPC envisages that every suit shall be instituted in a court within the local limits of whose jurisdiction the Defendant “actually and voluntarily resides, or carries on business, or personally works for gain”. In the context of the present case, the Plaintiff has to show that the Defendant No.1 “carries on business” within the local limits of this Court‟s jurisdiction. 
The question really is whether in view of RBI‟s letter dated 18th February 1997 Defendant No.1 can be said to be carrying on business within the jurisdiction of the court. The said letter no doubt restrains Defendant No.1 “from negotiating any commercial activity and functioning purely as a liaison office without transacting any type of banking business”. However, in terms of the law explained in Re Oriel Ltd. and South India Shipping Corp. Ltd., it cannot be said that Defendant No.1 does not carry on business within the jurisdiction of this Court. The question whether service could be effected on Defendant No.1 by serving notice upon it at its office in New Delhi should, in the considered view of this Court, be answered in the affirmative. As pointed out in Re Oriel Ltd., one test is about the physical location of a business at a specific place also “a degree of permanence or recognisability as being a location in the office business”. On that parameter, it is safe to assume that there would certainly be a name board outside the representative office of Defendant No.1 at New Delhi and business enquiries are not precluded from being made at the said office. It cannot, therefore, be said that the Defendant No.1 does not carry on a business activity within the jurisdiction of this Court. Jurisdiction for the purposes of Section 20 (a) CPC is certainly attracted.

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