Full Text
HIGH COURT OF DELHI
CM(M) 261/2022
SHREYSHA TEXTILES PVT. LTD. ..... Petitioner
Through: Mr. Anuj Kumar Gupta and Ms. Iti Aggarwal, Advs.
Through: Mr. Shiv B. Chetry, Adv. for R-1 & R-2.
28.10.2022
JUDGMENT
1. CS (Comm) 51/2020 was instituted by the petitioner as plaintiff against five defendants. Respondents 1 and 2, M/s Viss Incorporation and Mr. Sekhar Balasubramanium, proprietor of Viss Incorporation (hereinafter “Viss”) were Defendants 1 and 2 in the suit. By the impugned order dated 22nd December 2021, the learned District Judge (Commercial Court) (“the learned Commercial Court”), has allowed the application of Respondents 1 and 2, preferred under Order I Rule 10 of the Code of Civil Procedure, 1908 (CPC) for deletion of their names from the array of parties in the suit.
2. Aggrieved thereby, the petitioner, as the plaintiff in the suit, has approached this Court under Article 227 of the Constitution of India.
3. Quite obviously, the issue of whether Respondents 1 and 2 were necessary parties in the suit would have to be gleaned from the averments in the suit.
4. CS (Comm) 51/2020 sought recovery, from the defendants jointly and severally of USD 103333.28. The plaint averred that the petitioner was engaged in the manufacturing and export of textile made ups. In 2015-2016, it was alleged that Viss the Respondent 1 approached through its proprietor Respondent 2 (“Sekar”, hereinafter), pursuant to which Purchase Orders were placed on the petitioner by Respondent 3. Pursuant thereto, according to the plaint, the fabric purchased from Viss was fabricated by the petitioner into cushion covers as per the Purchase Orders issued by Respondent 3. In the process, according to the plaint, the petitioner availed bank loan of ₹ 1,00,00,000/-.
5. The plaint further averred that the cushion covers manufactured by the petitioner were approved by Sekar and, thereafter, supplied through Respondent 3 to the US. 13 such shipments were alleged have been made during the period 2nd June 2015 to 7th November 2015, valued at USD 329891.53. Against these shipments, the plaint averred that interim payments were made by the respondents in respect of which the petitioner maintained a running account. According to the plaint, the respondents had made a total payment of US$ 226558.25, leaving an amount of USD 10333.28 outstanding. At the said amount being not liquidated by the respondents despite repeated requests by the petitioner, the petitioner instituted the aforementioned suit.
6. The averment involving Respondents 1 and 2 are to be found in the following passages of the aforementioned suit:
7. During the pendency of the suit, Viss and Sekar moved applications before learned Commercial Court under Order 1 Rule 10 CPC for deletion of their names from the array of parties of the suit. The said application stands allowed vide order dated 22nd December 2021, aggrieved by which the petitioner has approached this Court.
8. I have heard Mr. Anuj Gupta, learned Counsel for the petitioner and Mr. Shiv B. Chetry, learned Counsel for the respondent at length and have perused the material placed on record.
9. The learned Commercial Court, in passing the impugned order, has proceeded on the premise that Viss and Sekar were merely agents of Respondents 3 to 5. It is observed in the impugned order that there is no allegation, in the suit, of any money outstanding against Viss and Sekar, or of Viss and Sekar having any personal interest in the transactions with the petitioner. The outstanding payments, even as per the plaint, were due from Respondents 3 to 5. The learned Commercial Court has referred to Sections 182, 186 and 203 of the Indian Contract Act, 1882 as well as the judgment of High Court of Bombay in Midland Overseas v. M.V. “CMBT Tana”1.
10. The learned Commercial Court has further referred to Section 230 of the Indian Contract Act, which delineates the circumstances in which an agent would be personally liable towards the third party, for acts committed on behalf of the principal. It is further observed in the impugned order that the assurance held out by Sekar, as per the emails exchanged with the petitioner were only on behalf of Respondents 3 to
5. Para 6 of the impugned order concludes thus: “6.[6] In the circumstances, it is clear that the applicants/defendants No. I and 2 were merely acting as agents of defendants No. 3 to 5. Though it has been alleged in the plaint that all the defendants in connivance with each other had committed fraud upon the plaintiff but a reading of the plaint suggests that the present suit has been filed for the recovery of the balance amount due upon defendants No. 3 to 5 for the work done by the plaintiff on their behalf. In such circumstances, there cannot be a personal liability or joint or several liabilities of the applicants/defendants No. 1 and 2, they being mere agents of defendants No. 3 to 5. Hence, this Court is of the view that they have wrongly been arrayed as co-defendants in the present suit. AIR 1999 Bom 401 6.[7] For the foregoing discussion, the application of defendants No. I and 2 is allowed and their names are directed to be deleted from the array of the parties. Application stands disposed of.”
11. Mr. Chetry has taken me through the averments in the plaint, in an effort to convince me that there were no independent allegations against Viss and Sekar and that, the allegations of fraud etc. were vague and merely raised in terrorem. Such vague allegations, he submits, could not be made a justifiable basis to involve Viss and Sekar in the litigative dispute between the petitioner and Respondents 3 to 5. No exception, he submits, can be taken to the impugned order passed by the learned Commercial Court.
12. Having heard learned Counsel and perused the material on record, I am unable to subscribe to the view expressed by Mr. Chetry, which is also reflected in the impugned order.
13. A holistic reading of the plaint, especially the passages extracted in paras 3, 6, 7, 8, 10, 13, 16, 17 and 18 (supra), there are specific allegations of involvement of Respondents 1 and 2 in the exercise to allegedly deprived the petitioner of the payments due to it. Whether these allegations are true or false or whether they have any substance, would have to be decided by the Court concerned with the matter, consequent on trial. It cannot, however, be said that the plaint is silent regarding the individual role played by Respondents 1 and 2 in the matter.
14. A party against whom allegations of mala fides, or connivance, are levelled, has necessarily to be impleaded in the proceedings. In State of Bihar v. P.P. Sharma[2], it was held thus: “It is a settled law that the person against whom malafides or bias was imputated should be impleaded eo nomine as a party respondent to the proceedings and given an opportunity to meet those allegations. In his/her absence no enquiry into those allegations would be made. Otherwise it itself is violative of the principle of natural justice as it amounts to condemning a person without an opportunity.” This enunciation was extracted, with approval, in Girias Investment Pvt. Ltd. v. State of Karnataka[3]. Bald, frivolous and apparently unsubstantiated allegations of mala fides or connivance which deserve rejection outright ex facie may, in a given case, not require impleadment of the person against whom such allegations are made. Had, for example, in the present case, the plaintiff merely averred, as in para 16 of the plaint, that the respondents were connivance with each other, perhaps, it could be said that the impleadment of Viss and Sekar was not necessary. The plaint, however, does not rest with the allegation of connivance contained in para 16, insofar as the Viss and Sekr are concerned. There are specific averments regarding communications made by them as well as their inter relationship, familial and otherwise, and the fact that many of the transactions took place at the premises of Viss and Sekar.
15. The extent to which Viss and Sekar could, in these circumstances, be mulcted with liability as already noted, is a matter of trial. Nonetheless, in view of the said allegations, it cannot be said that Viss and Sekar were unnecessarily impleaded as parties in the proceedings.
16. The impugned order does not address these aspects. It proceeds on the sole premise that Viss and Sekar were merely agents of Respondents 3 to 5. Indeed, in my considered opinion, while adjudicating on an application under Order I Rule 10 of the CPC, the learned Commercial Court ought not, perhaps, to have returned the findings contained in para 6 regarding lack of complicity of Viss and Sekar. Findings on merits are not justified while examining an application under Order I Rule 10. The cardinal test, governing Order I Rule 10, is whether the presence of the parties is necessary to effectively adjudicate on the real controversy in issue in the proceedings. Any a priori observation on the merits of the controversy would, therefore, ordinarily be inapposite. The learned DJ could, therefore, have allowed the application of Viss and Sekar by observing that their presence was not necessary for adjudicating on the controversy before him (though, on merits, as this judgement holds, such a finding would not be justified). He ought not, however, to have returned a finding, while doing so, that Viss and Sekar were not complicit in any manner, as that would amount to deciding, against the petitioner, one of the allegations in the plaint without trial or hearing. The complicity, or otherwise, of Viss and Sekar, is an aspect which would have to be examined consequent on evidence being led in the matter and arguments being heard.
17. As these findings constitute the basis of the allowing, by the learned Commercial Court, of the application of Viss and Sekar, moved under Order I Rule 10 CPC, the impugned order cannot sustain. It is, accordingly, quashed and set aside. The application filed by Respondents 1 and 2 under Order I Rule 10 of the CPC stands dismissed.
18. The present petition is accordingly allowed, with no order as to costs.
C.HARI SHANKAR, J OCTOBER 28, 2022