JSL LIMITED v. M/S ARIBA INDIA PVT. LTD & ANR.

1. Whether Reporters of local papers may be allowed to see the judgment? No

2. To be referred to the Reporter or not? No

3. Whether the judgment should be reported No in Digest? V.K. JAIN, J I.A. No. 3562/2010 in CS(OS) No. 660/2009 and I.A. NO. 3529/2010 in CS(OS) No. 650/2009

1. Both these applications have been filed by Ariba Inc under Order VII rule 11 of the Code of Civil Procedure for rejecting the plaint on the ground that it does not 2010:DHC:5526 disclose any cause of action against defendant no. 2. It has been stated in the applications that on a bare perusal of the plaint it cannot be said that the applicant/defendant No.2 is in anyway concerned with the subject matter of the present suit and that there is no privity of contract between the plaintiff and Applicant/defendant No.2. It has been further stated that in the application that it is plaintiff‟s own contention that all the representations were made by the officials of Defendant No. 1 and that the applicant has been impleaded as a party only with a view to pressurize Defendant No.1 to withdraw all its claims against the plaintiff.

2. A perusal of the documents filed by the plaintiff would show that there was an agreement between the plaintiff M/s. Jindal Stainless Ltd., which is now known as M/s. J.S.L. Ltd. and M/s. Ariba India Pvt. Ltd. /defendant No.1. Admittedly, Ariba India Pvt. Ltd. is a subsidiary of applicant/defendant No. 2 i.e. Ariba Inc of USA.

3. The learned Counsel for the plaintiff has drawn my attention to clause 17.[6] of the agreement which reads as under: “Notices. All notices under this Agreement („Written Notice‟) must (a) be in writing and in the English language; (b) be delivered by certified or registered mail, postage prepaid, return receipt requested or by an overnight courier services with delivery receipt; and (c) (in the case of a notice to Ariba) be sent to the attention of the “Chief Financial Officer” of Ariba at the address set forth on the Order Form to which the matter relates, with a copy to Ariba‟s General Counsel and (in the case of a notice to Customer) shall be sent to the address set forth in the address block in an applicable Order Form or to any other address Customer specify in writing.”

4. Clause 17.[7] of the agreement is another provision relied upon by the learned Counsel for the plaintiff and the same reads as under: “Informal Dispute Resolution. The parties will attempt to resolve any dispute relating to this Agreement through the informal means described in this Section

17.7. This informal dispute resolution process may be initiated at the written request of either party. Upon receipt of such a request, both parties shall appoint a senior management representative who does not devote substantially all of his or her time to performance under this Agreement. The representatives may furnish to each other non privileged information with respect to the dispute that such representative believes to be appropriate and germane. The representatives will negotiate in an effort to resolve the dispute without the necessity of any formal proceeding. Formal proceedings for the resolution of the dispute may not be commenced until the earlier of: (i) the designated representatives conclude jointly in writing that resolution through continued negotiation does not appear likely; or (ii) thirty (30) calendar days have passed since the initial written request to negotiate the dispute was sent; provided, however, that a party may file earlier to avoid the expiration of any applicable limitations period to preserve a superior position with respect to other creditors, or to apply for interim or equitable relief. A request for use of this informal dispute resolution process shall be sent in accordance to the notice requirements of Section 17.[6] and must indicate that it is a request for informal dispute resolution under Section 17.[7] of the Agreement. ”

5. It was pointed out by the learned counsel for the plaintiff that in terms of the Clause 17.[7] of the Agreement, defendant no. 1 had appointed the Vice President and Managing Director (APAC) of defendant No.2 as its Senior Management Representatives. The contention is that requirement of copy of every notice being sent to defendant no.2 and nomination of its Vice President and Managing Director (APAC) as a Senior Management Representatives of Defendant No.1 shows that defendant no.2 has also been connected with the transactions of the plaintiff company with Defendant No.1.

6. Defendant no. 1 is a separate legal entity being incorporated in India under the Companies Act, whereas defendant no. 2 is a foreign company. The agreement in question is executed only between the plaintiff and the defendant no.1. Defendant no.2 is not a party to the agreement. No provision of Companies Act, making the Holding Company liable for the breach of a contract by its Indian subsidiary has been brought to my knowledge. Therefore, if there has been any breach of contract by defendant no.1, the plaintiff can have its cause of action only against defendant no.1.

7. The learned Counsel for the plaintiff has referred to the decision of this Court i.e. Omvati Verma Vs. Sehdav Singh Tomar & Ors. 147 (2008) Delhi Law 81, where a Learned Single Judge of this Court relying upon the decision of a Division Bench in this Court in Inspiration Clothes & U Vs. Colby International Ltd., 88 (2000) DLT 769 held that while considering of application under Order VII Rule 11 CPC, the Court can examine the plaint and the documents placed on by the plaintiff in support of its contents. The Division Bench of this Court in the case of Inspiration Clothes & U (Supra) interalia observed that the plea of the defendant that there was no cause of action did not amount to the plea that the plaint did not disclose any cause of action and that a distinction must always be drawn between a plea that plaint does not disclose a cause of action and the plea that the plaintiff has no cause of action to sue. It was further observed that the power to reject the plaint can be exercised only if the Court come to the conclusion that even if all the allegations are taken to be proved, the plaintiff would not be entitled to any relief whatsoever.It was also observed that where the plaint is based on a document, the Court will be entitled to consider the said document also to ascertain if a cause of action is disclosed in the plaint, but, the validity of the document cannot be considered at this stage. The Court in order to enable it a Court to reject a plaint, should look at the plaint and documents accompanying the plaint only and nothing else. The Court, however, cannot look at the defence of the defendant or the documents relied upon by the defendant.

8. The learned Counsel for the plaintiff has also referred to the decision of a Division Bench of this Court in Avtar Singh Narula & Anr. Vs. Dharambir Sahni & Anr. 150 (2008) DLT 760 (DB), where the Court reiterated the settled proportion of law that the power to reject the plaint has to be exercised sparingly and cautiously, though, in a proper case, the Court does have the power to reject the plaint.

9. Thus, the legal proposition in the matter is well settled. The Court while considering an application for rejection of the plaint can look into only the avernments made in the plaint and the documents filed by the plaintiff. The defence taken by the defendant is not to be considered while examining such an application and validity of the documents filed by the plaintiff also cannot be examined at this stage.

10. A careful examination of the averments made in the plaint, in the light of and alongwith the agreement annexed to be plaint makes its amply clear that there is no privity of contract between the plaintiff. The allegation made in the plaint, when scrutinized alongwith the documents filed by the plaintiff, do not disclose any cause of action against the applicant company. If the contract is between two legal entities a third entity cannot be made liable for the breach of contract on the part of one of the parties to the agreement.

11. The agreement has been signed only on behalf of the plaintiff and defendant no. 1. That this is a contract between two companies is evident not only from the signatories to the document but also from use of the terminologies such as „either‟, which is used when only two persons are involved. The fact that the applicant/defendant no.2 is not a party to the contract is obvious not only from the document but also from the correspondence between the parties. The plaintiff itself has placed on record documents such as the letter dated 30.09.2008 sent by it to the defendants wherein it has referred to an agreement between Ariba India Pvt. Ltd. and Jindal Stainless Pvt. Ltd. Thus, this is a bilateral and not a multilateral agreement.