Karnataka High Court Reiterates Part Cause Of Action Gives Bengaluru Jurisdiction In Crochet Case

On 28 April, the Karnataka High Court reiterated that a suit for specific performance can be filed where part of the cause of action arises, including where the agreement is executed or the company has its registered office.

A Division Bench of Chief Justice Vibhu Bakhru and Justice C.M. Poonacha allowed an appeal by Crochet Industries and set aside a Commercial Court order that had returned a plaint for lack of territorial jurisdiction in a Rs. 42.5 crore share purchase dispute involving LN Breweries Pvt Ltd. It held:

“It is also stated that the Agreement was entered into in Bengaluru and the registered office of respondent No.4 (arrayed as defendant No.4 in the suit) is also situated in Bengaluru. Thus, situs of the shares of defendant No.4 which is a subject matter of the Agreement between the parties, is also in Bengaluru. Since the suit is for a specific performance of an Agreement executed in Bengaluru, it cannot be disputed that the part of the cause of action has arisen in Bengaluru.”

The dispute arose from a Memorandum of Agreement dated 9 April 2024, under which Crochet Industries agreed to purchase 100% equity shares of LN Breweries from Banashankari Chemicals and others for Rs. 42.5 crore.

The Commercial Court had returned the plaint on the ground that the underlying immovable property was situated outside its territorial jurisdiction, and therefore it lacked jurisdiction to entertain the suit.

Before the High Court, Crochet Industries submitted that the agreement was executed in Bengaluru and that LN Breweries also had its registered office there. It contended that these factors established Bengaluru as the situs of the shares and constituted part of the cause of action.

The Bench accepted these submissions and noted that the respondents did not dispute that the suit for specific performance gave rise to a cause of action in Bengaluru and was not confined to the location of the immovable property alone.

Accordingly, the High Court set aside the impugned order and allowed the appeal, permitting the suit to proceed before the Commercial Court in Bengaluru in accordance with law.

For Appellant: Advocate A. Mahesh Chowdhary

For Respondents: Advocate Vikhar Ahmed B