Piramal Healthcare Ltd. v. Diasorin (MANU/DE/2099/2010)

Facts of the Case

The dispute arose from a terminated commercial agreement involving an Indian and an Italian company.

• Piramal Healthcare Limited (Plaintiff, Indian company) and Diasorin (Defendant, Italian company) had a distributorship agreement for the supply of diagnostic products within India.

• The agreement included a clause specifying exclusive jurisdiction for Italian courts.

• The defendant terminated the agreement, which the plaintiff sought to challenge in the Delhi High Court.

• The plaintiff argued that despite the clause, the Indian court should entertain the suit since the contract's performance and the resulting cause of action occurred within India.

Issue

Can the Indian court entertain and try the suit despite the exclusive jurisdiction clause favouring Italian courts?

Rule

Courts must generally honor contractual jurisdiction clauses unless there are compelling reasons (e.g., strong public policy concerns or proceedings being vexatious/oppressive) to do otherwise. The principle of foreseeability is crucial: circumstances that were foreseeable to the parties at the time of contract formation (like inconvenience or cost of foreign litigation) are usually insufficient to override a jurisdiction clause.

Held

The Delhi High Court:

• Affirmed Contractual Binding: Emphasized that where a contract explicitly includes a jurisdiction clause, the parties are generally bound by their agreement. Contracts designating foreign courts (even neutral ones) are valid unless they eliminate court recourse entirely. [Image illustrating the concept of party autonomy in a contract where the parties have mutually selected a neutral foreign court for jurisdiction]

• Discretion of Courts: While the Civil Procedure Code (CPC) guides whether an action is validly instituted in India, courts retain the discretion to enforce jurisdiction clauses based on principles of equity and contract sanctity.

• Foreseeability Overrides Inconvenience: Cited precedents (Modi Entertainment Network and British Aerospace Plc v. Dee Howard Co.) to reinforce that the argument of inconvenience (e.g., higher legal costs, difficulty of travel) in litigating in Italy was a foreseeable risk at the time of signing the contract and cannot, therefore, justify ignoring the clause.

• Lack of Compelling Reasons: Found that the arguments put forth by the plaintiff were insufficient to constitute a compelling reason to override the express contractual choice. The fact that the defendant had no assets or office in India, and that a part of the cause of action arose in Italy, further supported the foreign forum.

• Conclusion: The Court decided not to entertain the suit in India, upholding the contractual intention of the parties to litigate in Italy.

The plaint was ordered to be returned to the plaintiff for filing in the appropriate court (the designated Italian court).