Hiralal Patani v. Sri Kalinath, AIR 1962 SC 199

The dispute arose when Seth Hiralal Patni engaged Sri Kali Nath to negotiate the purchase of shares in John Mills at Agra. The transaction concluded, but a commission dispute of Rs. 1 lakh led to a suit being filed before the Bombay High Court’s Original Side after obtaining leave under Clause 12 of the Letters Patent.

The defendant, Hiralal Patni, contested the suit on grounds of lack of territorial jurisdiction, arguing that no part of the cause of action arose in Bombay. However, the matter was referred to arbitration before Mr. W.E. Pereira. The arbitrator ruled in favour of Sri Kali Nath, awarding Rs. 75,000 plus 6% interest. The Bombay High Court upheld the award and dismissed objections to the arbitration.

When execution proceedings were initiated in Agra, Hiralal Patni again challenged the jurisdiction of the Bombay High Court, arguing that its decree was void due to lack of jurisdiction.

The Supreme Court held that objections to territorial jurisdiction do not affect the inherent jurisdiction of a court and, therefore, can be waived. It emphasized that once a party consents to arbitration, they forfeit the right to challenge jurisdiction later. The judgment drew a distinction between: Competence of a court (which cannot be waived) and Territorial jurisdiction (which can be waived through participation in proceedings).

Citing Ledgard v. Bull (1886 LR 13 IA 134), the court noted that while consent cannot cure inherent lack of jurisdiction, territorial jurisdiction is procedural and can be waived. The Supreme Court dismissed the appeal, holding that a party who has agreed to refer the matter to arbitration through court is deemed to have waived any objection to territorial jurisdiction.