National Thermal Power ... vs Spectrum Power Generation Co. ...
2002 Latest Caselaw 1619 Del

JUDGMENT

S.K. Agarwal, J.

1. This order will dispose of the application of the plaintiff, under Order 23 Rule 1(3)(b) read with Section 151 of the Code of Civil Procedure, 1908 (for short, "CPC").

2. Facts necessary for the disposal of this application in brief are: that on 23.7.1992, plaintiff entered into Memorandum of Understanding (MOU) with defendant No.3 (STUSA), for setting up a 208 M.W. Gas based power project, and in pursuant thereto a company by the name of Spectrum Power Generation Ltd. (SPGL)--defendant No.1 was incorporated; that on 29.6.1993 a Promoters Agreement was entered into between the plaintiff (NTPC), the defendant No.2- Jaya Food Industries Pvt. Ltd. (for short, "JFIL") and defendant No.3 (STUSA). The disputes arose between NTPC, SPGL and JFIL and their directors, as a result of which plaintiff (NTPC) filed the above noted suit, seeking a decree for specific performance of the promoters Agreement and for other mandatory injunctions and declarations for enforcing their rights under this agreement against other promoters, their directors, the company and several other, who are also imp leaded in the suit as defendants. The plaintiff (NTPC) also moved application for interim relief and for appointment of receiver of defendant No.1 company (SPGL), to ensure compliance to the said agreement, and the same was dismissed on 5.11.1997. Plaintiff's appeal (FAO No. 267/97), was also dismissed on 7.7.2000. The plaintiff, thereafter, filed Special Leave Petition (SLP No. 14864/2000), before Supreme Court. While SLP was pending, on 9.4.2001 the plaintiff entered into Compromise and settled its differences with defendant Nos.1 (SPGL) and defendant No.2 (JFIL). However, there was no settlement with defendant No.3 (STUSA) and the defendants 14 to 18. The Compromise Agreement dated 9.4.2001 was taken on record by the Supreme Court and the SLP was disposed of, reserving rights of the affected parties to challenge the validity of the agreement, at the appropriate forum. As per the Compromise Agreement SPGL agreed to pay Rs. 41.57 crores along with interest from 1.1.1999 to Plaintiff (NTPC), (which comes to about Rs. 52 crores) in 12 Installments. Mr. Kishan Rao, on behalf of SPGL and JFIL as well as on his individual capacity agreed and furnished bank guarantees in terms of the agreement.

3. By this application plaintiff is seeking to withdraw the suit against all defendants, with liberty to institute a fresh suit, in the eventuality of breach of any of the terms of the Compromise Agreement dated 9th April, 2001 or the Undertakings given by non-contesting defendants, before Supreme Court or the Compromise Agreement being declared illegal, null or void. The defendants have chosen not to file any reply. I have heard the learned counsel for the parties and have been taken through the record.

4. Learned counsel for the plaintiff argued that in terms of compromise dated 9th April, 2001 defendants (Nos. 1 & 2), have paid Rs. 52 crores to the plaintiff towards full and final settlement and Mr. Kishan Rao has furnished bank guarantees on behalf of SPGL, JFIL and also in his individual capacity. That on 18.4.2001 defendant No.3 (STUSA) filed a suit (Suit No. 765/2000), challenging the Compromise Agreement dated 9.4.2001, seeking injunction against defendant No.1 (SPGL) from making any payment to plaintiff (NTPC) under the agreement. The interim injunction was refused and appeal was also dismissed by the Division Bench and that the agreed amount was paid by the defendant Nos. 1 and 2 to the plaintiff. He further argued that Industrial Development Bank of India (for short, "IDBI"), a financial institution which advanced loan to the company SPGL has also filed a suit (Suit No. 904/2002), challenging the legality and validity of the Compromise Agreement inter alia pleading that the amount received by the plaintiff could not be paid to them out of the company's account. These suits are pending adjudication. On these facts, learned counsel argued that in the eventuality of any of the said suits being decreed, and the plaintiff (NTPC) is made to return the said amount, the plaintiff would like to assert its right under the Promoters Agreement, therefore, application for withdrawal of the suit with the permission to file the fresh suit should be allowed.

5. Mr. Chidambaram, learned senior advocate for defendant Nos.1 and 2 (SPGL and JFIL) in reply, argued that technically liberty to institute a fresh suit on the same cause of action is not required; however, he did not oppose that application and relief being granted to the plaintiff. Mr. Manmohan learned counsel for defendant No.3 (STUSA), opposed the applications and argued that the plaintiff's earlier application under Order 23 Rule 3, seeking disposal of the suit, in terms of the compromise agreement was dismissed as withdrawn, as this defendant raised the issue of legality and validity of the Compromise Agreement. Thereafter, the application seeking withdrawal of the suit with liberty to institute afresh on the same cause of action has been filed, only to circumvent the adjudication of the legality or validity of the Compromise Agreement, which is not sustainable.

6. The Law in this regard is well-settled. The leave envisaged in Sub-rule (3) of Rule 1 of Order 23 is at the discretion of the court but it has to be exercised judiciously with caution and circumspection. The court should be satisfied that there is sufficient grounds for allowing the plaintiff to institute a fresh suit on the same claim or part of the claim or on same cause of action, after taking into consideration the relevant aspects of the case. Reference in this regard can be made to the Supreme Court decision in K.S. Bhoopathy and Ors. v. Kokila and Ors., , wherein it was held:

"The provision in Order XXIII Rule 1 CPC is an exception to the common law principle of non-suit. Therefore, on principle an application by a plaintiff under Sub-rule (3) cannot be treated on a par with an application by him in exercise of the absolute liberty given to him under Sub-rule (1) In the former it is actually a prayer for concession from the court after satisfying the court regarding existence of the circumstances justifying the grant of such concession. No doubt, the grant of leave envisaged in Sub-rule (3) of Rule 1 is at the discretion of the court but such discretion is to be exercised by the court with caution and circumspection. The legislative policy in the matter of exercise of discretion is clear from the provisions of Sub-rule (3) in which two alternatives are provided; first where the court is satisfied that a suit must fail by reason of some formal defect, and the other where the court is satisfied that there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of a suit or part of a claim. Clause (b) of Sub-rule (3) contains the mandate to the court that it must be satisfied about the sufficiency of the grounds for allowing the plaintiff to institute a fresh suit for the same claim or part of the claim on the same cause of action. The court is to discharge the duty mandated under the provision of the Code on taking into consideration all relevant aspects of the matter including the desirability of permitting the party to start a fresh round of litigation on the same cause of action."

7. Before applying above principles to the facts of this case, it would be appropriate to consider the scope and the reliefs, claimed by the plaintiff (NTPC) in the suit No. 1905/1996 which is sought to be withdrawn and in the suit filed by defendant No.3 (STUSA) (Suit No. 765/2001) opposing the application for withdrawal.

NTPC in its suit has inter alia prayed for a decree of specific performance, against the contesting defendants to perform their obligations under the Promoters Agreement dated 29.6.93 and for decree of mandatory injunction directing defendant No.1-SPGL, to issue and deliver 77.7 lacs equity shares by accepting its contribution for the same and for composition of the Board in terms of the Promoters Agreement. In short, the plaintiff is seeking to assert its rights emerging from the Promoters Agreement between the plaintiff, JFIL and STUSA.

8. Whereas STUSA in its suit was inter alia prayed for declaration that the Compromise Agreement dated 9.4.2001, between the defendants i.e. NTPC and JFIL is illegal, null and void and it runs counter to the terms of the Promoters Agreement dated 26.3.93. It is inter alia pleaded:

"60. The only way NTPC would withdraw from the project is by first acquiring equity in SPGL and thereafter invoking Clause 19(1) of the Promoters Agreement in terms of which any of the parties withdrawing its shareholding in SPGL by way of transfer or sale in accordance with the provisions of the Agreement is entitled so to do, keeping alive the Promoters Agreement with reference to the rights and obligations of the other two co-promoters. In that eventuality, the transfer of sale or shares would first have to be offered to JFI and STUSA in equal proportion. Either of the parties may refuse, in which case the transfer would be in favor of the party willing to purchase the NTPC equity. The impugned agreement conceived of between SPGL and NTPC robs the plaintiff of this right. The impugned agreement runs counter both to the spirit and the specific terms of the Promoters Agreement, 5; 59H

61. It is the Plaintiff's contention that the impugned Agreement is fraudulent and is liable to be set aside. The intent of the impugned Agreement is only to defeat the rights and obligations which have accrued in favor of the plaintiff under the Promoters Agreement. It is also not understood as to on what basis SPGL has agreed to pay a sum of Rs. 41.57 crores Along with 9% simple interest to NTPC....."

9. To repeat the suit filed by NTPC against JFIL and STUSA is for enforcement of its rights in the company SPGL, on the basis of the Promoters Agreement dated 29.6.93; and STUSA in its suit was challenged the Compromise Agreement between the defendants NTPC and JFIL dated 9.4.2001, as it runs counter to the sprit of the Promoters Agreement. Thus Promoters Agreement is the common factor in both the suits. For the purpose of determining, whether the Compromise Agreement is illegal, null and void, the rights flowing from Promoters Agreement would necessarily require adjudication, therefore, the issues involved in both the suits are inter-connected and inter-dependent. The contesting party in both the suits are the same. The suits are at initial stages. Issues have not yet been framed. The outcome of both the suits would depend upon the documentary evidence led by each and oral evidence may not even be required. In my considered view, it would be in the interest of justice that both the suits should be tried and decided simultaneously, and it is not desirable to permit the plaintiff to withdraw the suit the liberty, to start a fresh round of litigation on the same cause of action after the outcome of suits filed by STUSA or IDBI.

For the foregoing reasons, I find no merits in the application and the same is dismissed.