Bombay High Court
Sumant Kathpalia, Managing Director ... vs Subrahamanian Iyer And Anr on 7 May, 2025
Author: N.J. Jamadar
Bench: N.J. Jamadar
2025:BHC-AS:21141
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 10671 OF 2023
Shri Sumant Kathpalla }
Managing Director and Chief }
Executive Officer, Indusind Bank }
Limited, General Thimayya Road } .....Petitioner
(Cantonment) Pune - 411 001 } (Orig. plaintiff)
V/s.
Shri C.S. Subrahamanian Iyer }
residing at Flat No. 5, Vishwamahal }
co-operative Housing Society }
Limited, TLK-N 84, Keshavrao }
Khandkar Marg, Tilak Nagar, }
Dombivali (E), Taluka-Kalyan, Dist: }
Thane-421 201. }
2. IndusInd Bank Limited, a }
Schedule Commercial Bank }
governed by the provisions of the }
Banking Regulation Act, 1949 and is }
a company incorporated under the }
provisions of the Companies Act, }
1956 having its registered office at }
....Respondents
General Thimayya Road }
(Cantonment) Pune 411 001. }
-------------------
Mr. Girish Godbole, Senior Advocate with Mr. Ravitej Chilumuri, Jigar
Parmar, Radhika Kulkarni I.by Khaitan and Co, for the petitioner.
Mr. Sagar Joshi, for the respondent.
---------------------
CORAM : N.J. JAMADAR, J.
RESERVED ON : 26TH FEBRUARY 2025
PRONOUNCED ON : 07TH MAY 2025
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JUDGMENT:
1. Rule.
2. Rule made returnable forthwith and, with the consent of
the counsel for the parties, heard finally.
3. The petitioner assails the legality, propriety and correctness
of an order dated 6th September 2022 passed by the learned Civil
Judge, Kalyan whereby an application filed by the
petitioner/defendant no. 2 to delete him from the array of defendants
in Special Suit No. 201 of 2020, under the provisions of Order I Rule
10 and 13 of the Code of Civil Procedure Code, 1908 (the Code), came
to be rejected.
4. Shorn of superfluities, the background facts can be stated
as under:
4.1 The petitioner is the Managing Director and Chief
Executive Officer of the IndusInd Bank Limited (the bank), the
defendant no. 1.
4.2 The respondent instituted a suit against the Bank and the
petitioner for a declaration that, the action of confiscating and selling
the plaintiff's pledged share was bad in law and illegal, a direction to
restore status quo ante with regard to the pledged shares and to pass a
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decree against the defendant no. 1 and 2 to jointly and severally pay to
the plaintiff the sum of Rs. 50 lakhs towards exemplary damages.
4.3 The plaintiff asserted that, the then Manager of Bank-defendant
no. 1, induced the plaintiff to accept an over-draft facility upto the
limit of Rs. 20 Lakh, against the pledge of plaintiff's securities. It was
specifically agreed that, the margin requirement would be capped at
20% and the amount overdrawn by the plaintiff would be returned
with interest at the rate of 11% p.a. Yet, while issuing the sanction
letter, it was wrongly stipulated that, the margin requirement would be
between 20% to 60%, depending upon the type of securities.
4.4 The plaintiff remonstrated. However, Mr. Prabhu, the then
Manager of the Dombivali Branch of the Bank assured the plaintiff that
the margin requirement would always remain 20%. Yet, bank
unilaterally increased the margin to 40% or thereabout without
assigning any reason or notice to the plaintiff. The bank thereafter sold
the securities pledged by the plaintiff and made him pledge more
securities on the ground that, the margin had fallen below the
threshold.
4.5 The plaintiff, thus, asserted that, the defendant No.1's officials
with a common motive and intention conspired with each other and
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with the connivance of petitioner - defendant no. 2, caused a wrongful
loss of Rs. 16,01,856/- to the plaintiff. Hence, the suit for a
declaration, mandatory injunction and a money decree.
4.6 The defendant no. 2 appeared and filed an application to
delete him from the array of the defendants. It was, inter alia,
contended that there was no cause of action qua defendant no. 2. The
sanction letter dated 17th December 2016 clearly stipulates that the
margin money will vary from 20 to 60%, depending on the type of
securities. The sale of securities for not maintaining the margin was in
accordance with the terms of the contract. There are no averments in
the plaint qua the defendant no. 2. In any event, the defendant no. 2
was in no way concerned with the transaction in question and day to
day micro- business activities by a particular branch of the Bank-
defendant no. 1. The defendant no. 2 is the highest officer of the Bank-
defendant no. 1 and cannot be made to face the rigor of long drawn
court proceedings, when no relief could be granted against the
defendant no. 2. Hence the name of the defendant no. 2 be struck off
from the array of the defendants under the provisions of order I rule
10 (2) of the Code.
4.7. The plaintiff resisted the application.
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4.8 By the impugned order, the learned Civil Judge was persuaded to
reject the application observing, inter alia, that whether the plaintiff is
entitled to the reliefs claimed, and the defendant no. 2 was liable to
satisfy the claim of the plaintiff would be a matter of trial. Thus, it
cannot be said that the defendant no. 2 has been improperly
impleaded as a party defendant to the suit. The learned Civil Judge,
however, ordered that for a just decision of the case, the Branch
Manager of Dombivali Branch and Manjunath S. Prabhu, the then
Manager, be impleaded as party defendants to the suit.
5. Being aggrieved, the defendant no. 2 has invoked the writ
jurisdiction.
6. I have heard Mr. Girish Godbole, the learned Senior
Advocate for the petitioner and Mr. Joshi, the learned counsel for the
respondents, at some length. With the assistance of the learned
counsel for the parties, I have perused the material on record,
especially the averments in the plaint.
7. Mr. Godbole, learned Senior Advocate for the petitioner
would submit that, the learned Civil Judge did not properly appreciate
the issue of unnecessary joinder of defendant no. 2 as a party
defendant to the suit. Apart from some stray and bald allegations
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against the defendant no. 2, the plaint is conspicuously silent about the
role of defendant no. 2 in the entire transaction. Mr. Godbole would
urge that, if the Chief Managing Director and Chief Executive Officer of
a Scheduled Commercial Bank is impleaded as a party defendant in
connection with a transaction which takes place at a particular branch,
for the only reason that the person holds the said position, such person
would suffer incalculable harm as he would be required to go through
the long drawn process of the trial which, in a sense, would be futile.
Mr. Godbole took the Court through the averments in the plaint, to
buttress the submission that, the defendant no. 2 is neither a necessary
nor a proper party. That is the test for impleading him as a party to the
suit.
8. Mr. Godbole would urge that, general and bald assertions
have been made in the plaint that : (i) the defendant no 2 is the
principal officer, or the key Managerial person of the bank (d-1) and is
in-charge of and responsible for all day to day management of Bank-
defendant no. 1, and all the business/officers/ staffs of bank (d-1) are
under the overall control and supervision of the defendant no. 2.
(ii) The officers of the Bank in connivance with the Defendant
No.2 have caused wrongful loss of Rs.16,01,856/- to the Plaintiff.
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9. Mr. Godbole would urge that, these averments in the plaint
are not sufficient to make the defendant no. 2 to undergo the rigors of
trial. Evidently, there was no representation by the defendant no. 2.
Nor the defendant no. 2 was concerned with the transactions in
question, in any other manner. Thus, the learned civil judge ought to
have applied the classic test of a necessary or proper party to
determine whether the name of the defendant no. 2 deserves to be
struck off from the array of the defendants. Instead, the learned Civil
Judge rejected the application by observing that, it cannot be said that
the defendant no. 2 has been improperly impleaded as a party
defendant to the suit.
10. Mr. Joshi, learned counsel for the respondent,
endeavoured to support the impugned order. It was submitted that the
defendant no. 2, being the Chief Executive Officer of the bank, was
liable for the fraudulent actions which caused wrongful loss to the
plaintiff and wrongful gain to the bank. Whether a decree can be
passed against the defendant no. 2 would be a matter of evidence and
trial. Therefore, at this stage, defendant no. 2 cannot be deleted from
the array of defendants.
11. In light of the aforesaid submissions, the core question that
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arises for consideration is, whether the impleadment of defendant no.
2 as a party defendant is justifiable. A useful reference, in this context,
can be made to the relevant provisions contained in the Code.
12. Order I Rule 3 prescribes who may be joined as defendants.
It reads as under :
"3. Who may be joined as defendants. - All persons may be
joined in one suit as defendants where -
(a) any right to relief in respect of, or arising out of, the same act or
transaction or series of acts or transactions is alleged to exist against
such persons, whether jointly, severally or in the alternative; and
(b) if separate suits were brought against such persons, any common
question of law or fact would arise."
13. Order II Rule 3 which regulates the joinder of causes of
action, reads as under :
"3. Joinder of causes of action -
(1) Save as otherwise provided, a plaintiff may unite in the same
suit several causes of action against the same defendant, or the same
defendants jointly; and any plaintiffs having causes of action in
which they are jointly interested against the same defendant or the
same defendants jointly may unite such causes of action in the same
suit.
(2) Where causes of action are united, the jurisdiction of the Court
as regards the suit shall depend on the amount or value of the
aggregate subject-matters at the date of instituting the suit."
14. Order I Rule 10 (2) of the Code vests discretion in the
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Court to strike out or add parties, it reads as under:
"10(2) Court may strike out or add parties - The Court may at
any stage of the proceedings, either upon or without the
application of either party, and on such terms as may appear
to the Court to be just, order that the name of any party
improperly joined, whether as plaintiff or defendant, be
struck out, and that the name, of any person who ought to
have been joined, whether as plaintiff or defendant, or whose
presence before the Court may be necessary in order to
enable the Court effectually and completely to adjudicate
upon and settle all the questions involved in the suit, be
added."
15. Rule 13 of Order 1 mandates that all objections as to the
non joinder or mis-joinder of parties shall be taken at the earliest
possible opportunity. It reads as under.
"13. Objections as to non-joinder or mis-joinder. - All
objections on the ground of non-joinder or mis-joinder of
parties shall be taken at the earliest possible opportunity and,
in all cases where issues are settled, at or before such
settlement, unless the ground of objection has subsequently
arisen, and any such objection not so taken shall be deemed
to have been waived."
16. A conjoint reading of the aforesaid provisions would
indicate that, though the plaintiff is dominus litis and may implead the
parties as defendant to the suit, against whom the plaintiff perceives to
have cause of action, the plaintiff does not have an unfettered choice.
The primary question that comes to the fore is, whether a party already
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impleaded or sought to be added, is a necessary or proper party, to the
suit. A person who has no semblance of right or interest in the subject
matter of the suit, nor the decree passed in the suit has the effect of
affecting his rights or liabilities, can be impleaded as a party defendant
to the suit. The general rule of dominus litis is thus subject to the
provisions of order 1 Rule 10(2) of the Code, which provides for
striking out or addition of the parties.
17. It is well recognized that, the deletion or addition of the
parties to the suit is not a matter of initial jurisdiction, but that of
judicial discretion. Such discretion is required to be exercised keeping
in view all the circumstances. Under the provisions of sub-Rule 2 of
Rule 10 of Order 1, the Court is empowered, at any stage of the suit, to
add or delete a party. From the phraseology of sub-Rule (2) of Rule 10
of Order 1, it becomes evident that, the person who can be added as a
party to the suit ought to be either (a) a person who ought to have
been joined as Plaintiff or defendnat, but not impleaded or (b) any
person whose presence before the Court may be necessary in order to
effectively and completely adjudicate upon, and settle the questions
involved in the suit.
18. In the case of 'Mumbai International Airport Private Limited Vs.
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Regency Convention Centre and Hotels Private Limited and Ors. 1. the
Supreme Court, expounded the distinction between a necessary party
and a proper party in the following term:
"15. A `necessary party' is a person who ought to have
been joined as a party and in whose absence no effective decree
could be passed at all by the Court. If a `necessary party' is not
impleaded, the suit itself is liable to be dismissed. A `proper
party' is a party who, though not a necessary party, is a person
whose presence would enable the court to completely,
effectively and adequately adjudicate upon all matters in
disputes in the suit, though he need not be a person in favour of
or against whom the decree is to be made. If a person is not
found to be a proper or necessary party, the court has no
jurisdiction to implead him, against the wishes of the plaintiff.
The fact that a person is likely to secure a right/interest in a suit
property, after the suit is decided against the plaintiff, will not
make such person a necessary party or a proper party to the suit
for specific performance."
19. The Supreme Court also expounded the nature of the
jurisdiction exercised by the Court in the matter of addition or deletion
of the parties under Order 1 Rule 10(2) as under:
"22. Let us consider the scope and ambit of Order I of Rule 10(2)
CPC regarding striking out or adding parties. The said sub-rule is
not about the right of a non-party to be impleaded as a party, but
about the judicial discretion of the court to strike out or add
parties at any stage of a proceeding. The discretion under the
sub-rule can be exercised either suo moto or on the application of
the plaintiff or the defendant, or on an application of a person
who is not a party to the suit. The court can strike out any party
who is improperly joined. The court can add anyone as a plaintiff
or as a defendant if it finds that he is a necessary party or proper
party. Such deletion or addition can be without any conditions or
1 (2010) 7 SCC 417
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subject to such terms as the court deems fit to impose. In
exercising its judicial discretion under Order 1 Rule 10(2) of the
Code, the court will of course act according to reason and fair
play and not according to whims and caprice.
(emphasis supplied)
20. Thus, the essential test to add a person as a party
defendant to the suit, is whether in the absence of such person no
effective decree can be passed in the suit, meaning thereby a necessary
party, or though no relief is claimed against a person, the presence of
such person, would assist the Court in completely and effectually
adjudicating the suit, meaning thereby a proper party. The concept of
joinder of a party is inextricably interlinked with the joinder of causes
of action. A party can be added to a proceeding, if there is any cause of
action against such party as well.
21. A profitable reference, in this context, can be made to the
decision of the Supreme Court in the case of 'Iswar Bhai C. Patel alias
Bachu Bhai Patel vs. Harihar Behera and Anr.2 wherein the Supreme
Court enunciated that the simple principle is that, a person is made a
party in a suit because there is a cause of action against him and when
causes of action are joined, the parties are also joined. The
observations in para Nos. 11 to 14 read as under :
"11. Order 1 Rule 3 as provides as under :
2 (1993) 3 SCC 457
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(extracted above)
12. This Rule requires all persons to be joined as defendants
in a suit against whom any right to relief exists provided that such
right is based on the same act or transaction or series of acts or
transactions against those persons whether jointly, severally or in
the alternative. The additional factor is that if separate suits were
brought against such persons, common questions of law or fact
would arise. The purpose of the Rule is to avoid multiplicity of
suits.
13. This Rule, to some extent, also deals with the joinder of
causes of action inasmuch as when the plaintiff frames his suit, he
impleads persons as defendants against whom he claims to have a cause
of action. Joinder of causes of action has been provided for in Order 2
Rule 3 which provides as under :-
(extracted above)
14. These two provisions, namely, Order 1 Rule 3 and Order 2
Rule 3 if read together indicate that the question of joinder of parties also
involves the joinder of causes of action. The simple principle is that a
person is made a party in a suit because there is a cause of action against
him and when causes of action are joined, the parties are also joined."
22. In view of the aforesaid exposition of law, whenever
defendant seeks deletion of his name from the array of the defendants,
the Court is required to pose unto itself the question as to whether the
said defendant can be said to be either a necessary or proper party to
the suit. The said determination, would undoubtedly, hinge upon the
averments in the plaint and the documents annexed with it. If there is
slightest material to show the existence of a cause of action against
such person, he cannot be deleted from the array of the defendants for
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the only reason, that, the plaintiff does not claim whole of relief
against such person. However, the necessary nexus between the
defendants and the lis ought to be, prima facie, evident.
23. If the averments in the plaint are appreciated on the
aforesaid touchestone, it becomes abundantly clear that the plaintiff
does not claim that he had ever entered into any transaction with the
defendant no. 2. On the contrary, Mr. Manjunath Prabhu and Mr.
Sachin Pravin Sharma have been specifically named as the persons
with whom the plaintiff had dealt with . The representations were
allegedly made by Mr. Manjunath Prabhu the then manager of
Dombivali Branch, (D-1). The only allegation against the petitioner is
that being the principal officer or the key Managerial person of the
bank (D1), the petitioner was in-charge of and responsible for day to
day management of Bank and all the businesses/officers/staff of the
defendant bank (D1) was under overall control and supervision of
defendant no. 2. In addition, in para nos. 26 and 27 of the plaint, it is
averred that, the officers of the bank in connivance with defendant no.
2 caused wrongful loss to the plaintiff and being the principal
Officer/Key Managerial person the defendant no. 2 was responsible for
the wrongful act of the officers of the bank and for wrongful loss
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caused to the plaintiff.
24. I am afraid, the aforesaid general allegations are sufficient
to sustain the impleadment of defendant no. 2 as a party defendant to
the suit. In the backdrop of the averments in the plaint, the defendant
no. 2 does not appear to be either a necessary or a proper party to the
suit. If the submissions on behalf of the respondent are countenanced
the Chief Managing Director/Chief Executive Officer of the Corporate
entities would be dragged into numerous proceedings sans any cause
of action qua such officer.
25. The learned Civil Judge , having directed the impleadment
of Manjunath Prabhu and the Manager of Dombivali Branch of the
Bank, could not have declined to exercise the discretion to strike out
the defendant no. 2 from the array of the defendants. A clear case of
misjoinder of defendant no. 2 was made out.
26. The conspectus of aforesaid consideration is that, the
petition deserves to be allowed.
27. Hence, the following order:
ORDER
i) The petition stands allowed
ii) The impugned order to the extent, the learned Civil
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Judge declined to strike out the defendant no 2 from
the array of the defendants stands quashed and set
aside.
iii) The application (Exhibit-11) stands allowed.
iv) The defendant no. 2 stands deleted from the array
of the defendants in Special Civil Suit No. 201 of 2020.
v) The plaintiff shall carry out the necessary
amendment within three weeks of the uploading of this
order.
vi) Rule made absolute to the aforesaid extent.
No costs.
(N.J. JAMADAR, J)
Signed by: S.S.Phadke
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Designation: PS To Honourable Judge
Date: 08/05/2025 19:18:41
