Delhi High Court

The Saraswati Industrial ... vs M/S Overseas Infrastructure ... on 20 August, 2009

Author: Rekha Sharma

                                                            REPORTABLE

*       IN THE HIGH COURT OF DELHI AT NEW DELHI


              I.A. No.13366/2008 in CS(OS) No.1368/2008


                                       Date of Decision: August 20, 2009



        THE SARASWATI INDUSTRIAL SYNDICATE LTD
                                                 ..... Plaintiff
                     Through Mr. P.V.Kapur, Senior Advocate
                     with Ms. Anuradha Dutt, Ms. Ekta Kapil,
                     Mr. Gaurav Chauhan and Ms. Chetna,
                     Advocates

                        versus


        M/S OVERSEAS INFRASTRUCTURE ALLIANCE(I) PVT. LTD &
        ANR                                  ..... Defendants
                      Through Mr. Arun Bhardwaj, Sr. Advocate
                      with Mr. Manish Sharma, Advocate for D-1.
                      Mr. Sunil Gupta, Sr. Advocate with
                      Mr. Jatin Zaveri, Advocate for proposed
                      defendant No.3.
                      Mr. P.P.Malhotra, ASG with Mr. Sudarsh
                      Menon, Advocate for proposed defendant
                      No.4.

        CORAM:
        HON'BLE MISS JUSTICE REKHA SHARMA

1.      Whether the reporters of local papers may be allowed to see the
        judgment? Yes
2.      To be referred to the reporter or not? Yes
3.      Whether the judgment should be reported in the „Digest‟? Yes

REKHA SHARMA, J.

Three applications, one under Order 6 Rule 17 read with Order

1 Rule 10, another under Order 39 Rules 1 & 2 and the third under

Order 39 Rule 4 of the Code of Civil Procedure (hereinafter referred

to as the Code) seemingly simple have been a witness to marathon

sessions of arguments. Mercifully, arguments on the application

under Order 6 Rule 17 read with Order 1 Rule 10 of the Code have

concluded and though the other two applications are still to see

conclusion of arguments, I am proceeding with the order on the

application seeking amendment of the plaint and impleading of two

new parties namely Walchandnagar Industries Ltd. and the

Export-Import Bank of India (hereinafter referred to as the EXIM

Bank). But first, the background.

The Government of Ethiopia proposes to set-up sugar factories

at Addis Ababa. The project is being funded by the Government of

India through EXIM Bank to the tune of US $ 122,000,000 (Dollars

one hundred twenty two million) on certain terms and conditions

which were reduced into writing by means of a Dollar Credit-line

Agreement dated October 04, 2007 between the Government of the

Federal Democratic Republic of Ethiopia and EXIM Bank. In order to

give effect to the project, defendant No.2, namely, Tendaho Sugar

Factory Project which is a company incorporated under the laws of

Ethiopia and is owned and controlled by the Government of the

Federal Democratic Republic of Ethiopia, invited tenders for Juice

Extraction Plant, Steam Generation Plant, Power Generation Plant,

Process Home Plant and related modernization packages. The

plaintiff and some other companies including defendant No.1, namely,

M/s. Overseas Infrastructure Alliance (India) Pvt. Ltd. responded to

the invitation of tenders by submitting their respective bids. The bid

of the plaintiff, after some negotiations, was accepted for Steam

Generation Plant vide a communication from defendant No.2, dated

September 17, 2007. In so far as defendant No.1 is concerned, it

succeeded in procuring two contracts, namely, Juice Extraction Plant

and Power Generation Plant. This acceptance of two bids of defendant

No.1 brought into play the „EXIM Bank Disbursement Schedule‟,

under which it was necessary to proceed through a single

Engineering, Projects Management and Construction (hereinafter

called the EPC) Contract method. As per this method, any bidder who

won two or more bid packages became eligible to act as a `Single EPC

Contractor". Since defendant No.1 had won two bids, it was

appointed to act as `Single EPC Contractor‟. The plaintiff was

informed about this appointment of defendant No.1 by defendant No.2

through a communication dated December 07, 2007. The plaintiff

was also informed that, "being a winning bidder of Steam Generation

Plant, it will be retained as a sub-contractor to the main EPC

Contractor without any alteration in the agreed technical and

commercial aspects including the time schedule, as already

negotiated and finalized." On the same date defendant No.2 also sent

a letter to defendant No.1 intimating it about its appointment as

„Single EPC Contractor‟, with the stipulation that the winning bidders

of other packages were to be retained as sub-contractors without any

alteration in the agreed technical and financial aspects as already

finalized with individual bidders.

It is thus the case of the plaintiff that it was to act as a

sub-contractor to the EPC contractor, that is, defendant No.1 without

any alterations in the agreed financial and technical aspects which, as

per it, stood already finalized with defendant No.2. It is also its‟ case

that in order to finalize the type of contract agreement to be signed

between the EPC contractor and the winning bidders of other

packages, a joint meeting between the plaintiff, defendant No.1 and

defendant No.2 was held on 19th & 20th December, 2007 at Addis

Ababa in which it was categorically agreed that a contract would be

entered into between defendant No.1 and the sub-contractors which

would be seamless and address all issues as per the original tender

documents including General Conditions of Contract, Special

Conditions of Contract and other financial conditions. Thereafter, as

per the plaintiff, a 'Contract Agreement' dated February 20, 2008 was

executed between defendant No.1 and defendant No.2 and one of the

clauses of the said contract agreement was that the appendices listed

in the attached list of appendices shall be deemed to form an integral

part of the agreement. Referring to Appendix-5, it is pointed out that

it contained a list of approved sub-contractors where the name of the

plaintiff appeared at serial No.2 against „Steam Generation Plant‟ and

it was mentioned therein that, "the Contractor, to the extent possible,

shall have seamless contracts with the sub-contractors."

It is alleged that notwithstanding the obligation cast upon

defendant No.1 to enter into an agreement with the plaintiff without

effecting any changes in the financial and technical aspects of its bid

which stood already accepted by defendant No.2 and inspite of having

agreed to abide by those terms and conditions in the joint meeting of

19th & 20th December, 2007 and in the contract agreement dated

February 20, 2008, referred to above, defendant No.1 insisted upon

the plaintiff to reduce its price by 15%, on the pretext that it was

required to be paid to it to discharge its obligation of a lead

contractor. In other words, as per the plaintiff, defendant No.1

attempted to re-negotiate the contract price which it legally could not

do and that when it refused to give in to the alleged illegal demand of

defendant No.1, it threatened to introduce a new sub-contractor in its

place. It is this threat which has given birth to this suit for perpetual

and mandatory injunction wherein the plaintiff has pleaded that it has

a concluded contract with defendant No.2 and that defendant No.1 is

bound to and liable to give effect to the concluded contract. It is also

pleaded that the status of defendant No.1 is no better than that of the

plaintiff, as the tenders of both the plaintiff and defendant No.1 have

been accepted by defendant No.2 with the only difference that

defendant No.1 has been described as an EPC or a lead contractor,

for the sole reason that it succeeded in securing two contracts. The

plaintiff, thus, has alleged that defendant No.1 by threatening to

introduce another sub-contractor in its place is tortuously interfering

in its contract with defendant No.2. Accordingly, it has prayed for the

following reliefs:-

"(a) grant a decree of perpetual injunction restraining defendant No.1 from interfering in the contract/award of contract between plaintiff and defendant No.2 as contained in letter dated September 17, 2007 including appointing any third party;

(b) grant perpetual injunction restraining defendant No.1 from committing a breach of the negative covenant enumerated in para 18 of the plaint and restrain defendant No.1 from modifying any technical and/or commercial terms including price agreed/finalized between the plaintiff and defendant No.2;

(c) grant a decree of mandatory injunction directing defendant No.1 to execute the obligation of signing a formal contract with the plaintiff in accordance with the terms and conditions agreed between the plaintiff and defendant No.2 as contained in letter dated September 17, 2007;

                (d)     costs; and

                (e)    pass any further order/orders as this Court may

deem fit and proper in the facts and circumstances of the case."

Along with the suit, the plaintiff also filed an application under

Order 39 Rules 1 & 2 of the Code, on which a learned Single Judge of

this Court passed an order dated July 23, 2008 restraining defendant

No.1 from taking any measures to introduce a third party in respect of

the tender floated by defendant No.2 for Steam Generation Plant for

which the plaintiff has been accepted by defendant No.2 as a

successful bidder.

In response to the summons, defendant No.1 has filed written

statement while defendant No.2 has chosen to remain absent despite

service of summons upon it.

It is alleged by defendant No.1 that there is no concluded

contract between the plaintiff and defendant No.2, as the detailed

terms and conditions governing the construction of the plant were

never settled and they never entered into any formal contract. It is

further alleged that as the plaintiff was delaying the finalization of the

terms of the sub-contract to be awarded in its favour this was brought

to the notice of defendant No.2 who authorized defendant No.1 to

write a letter to the sub-contractors giving them a last chance to

finalize the contract agreement between the EPC contractor and the

sub-contractors within a week and submit the document on

June 28, 2008 failing which defendant No.1 could approach defendant

No.2 with an alternative sub-contractor. The case of defendant No.1 is

that in furtherance of the said direction given by defendant No.2, it

addressed an e-mail dated June 21, 2008 to the plaintiff informing it

that defendant No.2 had given a dead line of June 27, 2008 as the

date by which it was expected to resolve all the pending issues as well

as signing of the contract. As per defendant No.1, the plaintiff failed

to meet the dead-line and settle the terms of the said contract and as

a result defendant No.1 entered into a „Memorandum of

Understanding‟ dated July 08, 2008 with Walchandnagar Industries

Ltd. for the construction of 'Steam Generation Plant' followed by a

sub-contract agreement dated July 12, 2008. It is also the case of

defendant No.1 that the plaintiff was fully aware of said sub-contract

agreement and that it obtained the ex-parte ad-interim order dated

July 23, 2008 by suppressing this fact from the court. It may not be

out of place to mention here that defendant No.1 has also challenged

the territorial jurisdiction of this court not only on the ground that

the project is to be executed outside the territorial limits of this court

but also on the ground that no part of action has arisen at Delhi.

Of-course, it is further alleged that as per clause-6 of the General

Conditions of Contract contained in the EPC Contract document, any

dispute of any kind whatsoever between the employer and the

contractor in connection with or arising out of the contract shall be

referred in writing by either party to an Arbitrator. It is further stated

that the reliefs claimed are in the nature of enforcement of specific

performance of a contract and cannot be granted in view of Sections

41(e) & 41(h) of Specific Relief Act, 1963.

Having provided with the necessary background, let me revert

back to the application of the plaintiff under Order 6 Rule 17 and

under Order 1 Rule 10 of the Code. The plaintiff alleges therein that

the so-called „Memorandum of Understanding‟ dated July 08, 2008

between defendant No.1 and Walchandnagar Industries Ltd. and

pursuant thereto the alleged definite contract signed between them

on July 12, 2008 are forged and fabricated documents which have

been antedated to frustrate and over-reach the above-referred interim

order passed by this Court on July 23, 2008 which was served on

defendant No.1 on July 24, 2008. It is further stated that the

fabrication and forgery committed by defendant No.1 in connivance

with Walchandnagar Industries Limited can be seen through from the

fact that though the alleged „Memorandum of Understanding‟ dated

July 08, 2008 was to remain valid for a period of 30 days, yet, within

just four days of the signing of the „Memorandum of Understanding‟, a

purported definite contract was, allegedly, signed on July 12, 2008.

As for the sub-contract dated July 12, 2008 allegedly entered into

between defendant No.1 and Walchandnagar Industries Limited, it is

stated that it makes even those documents to be part of the contract

which had not been finalized and were only proposed, such as,

"Minutes of Package Negotiations meeting (proposed) to be held

between the Employer and Sub-contractor (WIL) for the Package

Facilities on technical aspects", showing thereby, that the

sub-contract was prepared after receiving the ex-parte order

passed by this Court. That the said documents are forged is further

sought to be proved from the fact that as late as on August 05, 2008

in a meeting held between defendant No.1 and defendant No.2, there

was no mention that a definite contract had been signed with

Walchandnagar Industries Ltd. Reference in this regard has been

made to the Minutes of the meeting dated August 05, 2008 which, it is

alleged, go to show that defendant No.1 merely informed defendant

No.2 that only negotiations were being conducted with

Walchandnagar Industries Limited. Reference has also been made to

a letter dated August 05, 2008 from defendant No.1 to defendant

No.2, though its authenticity is being disputed. It is stated that as per

this letter, assuming the same to be correct, it was on

August 05, 2008 that defendant No.1 had accepted the proposal of

defendant No.2 to substitute Walchandnagar Industries Limited,

showing again, that the alleged „Memorandum of Understanding‟

dated July 08, 2008 and the purported definite contract dated

July 12, 2008 are forged documents. In nut-shell, the case of the

plaintiff is that defendant No.1 in concert with defendant No.2 and

Walchandnagar Industries Limited is clandestinely introducing

Walchandnagar Industries Ltd. as a sub-contractor in its place when

the said proposed defendant had not even participated in the tender

process. It is in these circumstances that the plaintiff is seeking to

implead Walchandnagar Industries Ltd.

The impleadment of EXIM Bank as defendant No.4 is sought on

the ground that defendant No.2 is proceeding with modernization

essentially financed by credit line from the EXIM Bank of India and

that the said Bank being State is bound to act fairly and not in

violation of the order of this Court.

The aforementioned facts contained in the application for

„amendment-cum-impleadment‟ are sought to be incorporated in the

original plaint by adding paragraphs 18-A to 18-L after paragraph 18.

The said paragraphs run as under:-

18A. That this Hon‟ble Court on 23.07.2008, passed an Order that, "having regard to the facts of the case and taking the consideration the documents placed on the record, till the next date of hearing, the defendant no. 1 shall not take any measures to introduce a third party in respect of the tender floated by defendant No.2 for Steam Generating Plant for which the plaintiff has been accepted by the defendant No.2 as the successful bidder". The said order was duly served on the defendant No.1 on 24.07.2008 and has also been served on Defendant no.2. The defendant No.1 has filed its written statement on 04.08.2008 wherein it has alleged in paragraph 1 of the Preliminary objections that the defendant No.1 has already signed a definite contract with defendant No.3 for execution of the power project as a Sub contractor for construction of the steam generation plant for the Tendaho Sugar Factory Project (purportedly just about 11 days before the passing of the

exparte injunction order). Therefore, in light of the said development, it has been alleged that the said suit filed by the plaintiff has become infructuous. A copy of the purported sub-Contract Agreement between defendant No.1 and the said defendant no. 3 has been filed by the defendant no. 1.

18B. The said purported sub-Contract Agreement is clearly antedated and has been fabricated with a view to frustrate the injunction order dated 23.07.2008 and/or to overreach the Order dated 23.07.2008 passed by this Hon‟ble Court.

18C. The first telltale sign is in the written statement itself where in Para 7, it has been alleged that a Memorandum of Understanding (MOU) was signed between Defendant No.1 and defendant no.3 on 8 th July, 2008 and thereafter, a definite purported contract was signed on 12th July, 2008, i.e. within 4 days of the MOU despite the MOU being valid for a period of 30 days - seemingly, a tearing hurry indeed. However, the Defendant no.1 proposed the name of defendant no.3 to defendant no.2 long after 12th July, 2008.

18D. It is also relevant to note that in the alleged sub- Contract Agreement dated 12th July, 2008 filed by the Defendant no.1, defendant nos. 1 and 3 have purported to create a definition of "contract documents" which includes documents that have not yet been finalized but are only „proposed‟. One of the documents forming part of Contract document is "Minutes of package Negotiations meeting (proposed) to be held between Employer and Sub- contractor (WIL), for the Package Facilities on technical aspects". Firstly, there cannot be a meeting or minutes of a meeting which are qualified as "proposed". Secondly, there cannot be minutes of a meeting which is yet "to be held". It is obvious that the documents have been prepared in a hurry only to be produced before this Hon‟ble Court with a view to mislead this Hon‟ble Court and to frustrate and over-reach the orders of this Hon‟ble Court.

18E. That even as late as on 5th August, 2008, in the meeting between the defendant no.1 and defendant no.2, there is no mention that a definite contract had been signed with defendant no. 3. In fact defendant no.1 informed defendant no.2 that only negotiations were being conducted with defendant no.3.

18F. Further and in any event, the defendant no.2 has not been shown to have ever authorized appointment of the said defendant no.3 as a Sub-Contractor in substitution of the plaintiff. This is apparent from the letter dated 30.06.2008 written by defendant no.2 to its Board of Management on 30.06.2008 along with the legal opinion and the opinion of the consultant which clearly reveal that the minutes dated 19.06.2008 and 20.06.2008 and the letter dated 12.06.2008 sought to be relied upon by the defendant no.1 did not constitute any approval of substituting the plaintiff as alleged by the defendant no.1. The defendant no.1 is clearly suppressing all material facts as the aforesaid documents are within the knowledge of defendant no.1 who has chosen to conceal the same from this Hon‟ble Court. Neither the negotiations nor the minutes and/or any alleged MOU can be given effect to in teeth of the order dated 23.07.2008 passed by this Hon‟ble

Court and the defendant no.1 ought not to be permitted to defeat the bonafide rights of the plaintiff and/or overreach this Hon‟ble Court.

18G. It is relevant to note that in a similar contract, which relates to another Govt. of Ethiopia company known as Wonji Shoa Sugar Factory, the plaintiff had a bid for a Juice Extraction plant. The EPC Contractor in that case is one M/s. Uttam Sucrotech International Pvt. Ltd. The said M/s. Uttam Sucrotech International Pvt. Ltd. has signed a Sub- contract with the plaintiff without making any demand for 15% of contract price for discharge of its obligations as a lead EPC/Contractor. It has not come to the knowledge of the plaintiff that defendant no.1 was not even entitled to become the EPC contractor and the defendant no.1 and 2 have manipulated records to make defendant no.1 become the EPC contractor who is demanding unreasonable and absolutely uncalled for 15% of the contract price from plaintiff and other similarly placed sub-contractors. That defendant nos. 1,2 and the said Walchandnagar Industries Ltd. are acting in concert and are attempting to defeat the order of this Hon‟ble Court and perpetrate a fraud which they cannot be permitted to do.

18H. In fact, defendant no.1 has itself subsequently filed a letter dated 5th August, 2008 purportedly issued by defendant no.2 permitting the defendant no.2 to substitute the plaintiff (the authenticity of the said letter is denied). Clearly the said letter dated 5th August, 2008 shows that there could be no contract between defendant no. and the said defendant no.3 prior thereto and further that defendant no.1 and 2 were acting in concert and in teeth of the order dated 23rd July, 2008 passed by this Hon‟ble Court which is in force even till date.

18I. The attempt of defendant no.1 of clandestinely introducing the purported Sub-Contractor who did not even participate in the tender, is not only contrary to the entire tender process but is also malafide and an attempt to over- reach this Hon‟ble Court. Further, till date no termination of plaintiff‟s sub-contract has even been communicated.

18J. The aforesaid facts clearly reveal that the purported sub-contract Agreement dated 12th July, 2008 which was allegedly entered into within four days of signing the Memorandum of understanding which was valid for 30 days is clearly ante dated with a view to defeat the injunction order passed by this Hon‟ble Court. The said purported sub-contract Agreement cannot be permitted to be implemented and be proceeded with and being in teeth of the order dated 23rd July, 2009 is void ab initio. Even the purported permission dated 5th August, 2008 cannot be acted upon and is void ab initio as defendant no.2 was also informed of the order dated 23rd July, 2008.

18K. As stated in the plaint, the defendant no.2 is proceeding with modernization essentially financed by credit line from the EXIM Bank of India. The said EXIM Bank of India being State is bound to act fairly and not to act in violation of the order of Hon‟ble Court. In any event, EXIM Bank of India being a banking institution has a duty of care and cannot allow fraud to be perpetrated by defendant no.1 and/or 2 and cannot approve substitution of the plaintiff by the said defendant no.3 contrary to the order of this Hon‟ble Court.

18L. That defendant nos.1,2 and 3 are acting in concert and are attempting to defeat the order of this Hon'ble Court and perpetrate a fraud which they cannot be permitted to do.

The plaintiff is also seeking to amend paragraph 2 of the

original plaint. It relates to defendant No.2, i.e. Tendaho Sugar

Factory Project. In the original plaint, it is stated that defendant No.2

is a proper party and is being sued as such and that no relief

whatsoever is being sought against it. This paragraph is now sought

to be substituted by the following paragraph:-

"Defendant No.2 is acting malafide and is acting in concert with other defendants to perpetrate a fraud on the plaintiff and defeat and disobey the orders of this Hon‟ble Court."

The plaintiff is further seeking to add prayers (d), (e), (f), (g) &

(h) after prayer (c) of the original plaint while prayers (d) & (e) of the

original plaint are sought to be renumbered as (i) & (j). The proposed

amended prayers run as under:-

"(d) grant a decree of declaration that the purported sub-contract Agreement dated July 12, 2008 between defendant No.1 and defendant No.3 is invalid and void ab initio,

(e) grant a decree of perpetual injunction restraining defendants No.1, 2 & 3 from proceeding with and/or acting upon in any manner whatsoever on the purported sub- contract Agreement dated July 12, 2008 or on any subsequent date;

(f) grant a decree of declaration that the purported permission granted vide letter dated August 05, 2008 issued by defendant No.1 to defendant No.2 is invalid and/or void ab initio;

(g) grant a decree of permanent injunction restraining defendants No.1, 2 & 3 from taking any action pursuant to the purported letter dated August 05, 2008;

(h) grant a decree of perpetual injunction restraining defendant No.4 from granting any approval to substitute the plaintiff and/or proceed with any funding of the project of Steam Generation Plant floated by defendant No.2 without the plaintiff."

It is time now to come straight to the application for

„amendment and impleadment‟. Should it be allowed? As far as the

prayer for amendment is concerned, it need not detain me for long

and the reason is that after the application had suffered lengthy

arguments, for and against, the learned counsel for defendant No.1

conceded that the amendments sought could be allowed subject to

liberty to it to raise such objections as may be available to it and to

this, it may be noted, the learned counsel for the plaintiff had no

objection. Keeping this in view and keeping also in view the nature of

the amendments and so also the fact that the amendments have their

seed in subsequent developments, the amendments sought are

allowed. Of-course, it would be open to defendant No.1 to take in

response to the amendments, the pleas legally open to it. With the

question of amendment over, the next question which craves for an

answer relates to the impleadment of Walchandnagar Industries Ltd.

and the Exim Bank. Should not the impleadment follow the

amendments?

Before I venture to answer it, let us have a look at the power of

the Court to strike out or add a party in an ongoing proceeding. The

power as we all know flows from Order 1 Rule 10(2) of the Code.

It says that "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." This

then is the fountain head of all the power. We also know that a

necessary party is one without whom no order can be made effectively

and, a proper party is one in whose absence an effective order can be

made but whose presence is necessary for a complete and final

decision on the question involved in the proceeding. [ See Udit

Narain Singh Malpaharia Versus Additional Member Board of

Revenue, Bihar and another reported in AIR 1963 Supreme Court

786]. In a relatively recent judgment of the Apex Court in the case of

Kasturi Versus Iyyamperumal and others , 2005(6) Supreme Court

Cases 733, two tests have been laid down to determine who is a

necessary party. These tests are that (1) there must be a right to

some relief against such party in respect of controversies involved in

the proceedings, and (2) no effective decree can be passed in the

absence of such party. Reference may also be made to a judgment of

this court in the case of Madhupuri (Ms.) and another v. Sh. Moti Lal

Puri and others reported in 2005 VIII AD (Delhi) 737. "It says that Order

1 Rule 10 of the Code has been expressly provided in the Code to meet with

situations so as to implead all the parties which may be affected by any litigation so

that the rendering of justice is not hampered. It further says that plaintiff is

dominus-litus and he is bound to sue every possible adverse claimant to avoid

multiplicity of suit and needless expenses."

The principle is thus clear and it is that while deciding whether a

person ought to be made a party to the suit, what needs to be

examined is, whether the controversy raised in the plaint can be

effectively and finally set at rest in the absence of the person sought to

be impleaded and if not, then that person must necessarily be

impleaded as a party or else it will leave scope for further litigation and

may also lead to multiplicity of proceedings.

The law of impleadment being what has been noticed above, are

Walchandnagar Industries Ltd. and EXIM Bank necessary and proper

parties in the suit? I shall first deal with Walchandnagar Industries Ltd.

but before I do that, let me notice the objections raised by it to its

impleadment. It says that it is a stranger to the proceedings. It has no

privity of contract with the plaintiff and that it has entered into an

independent contract with defendant No.1 dated July 12, 2008 with

which the plaintiff has no right to interfere. It further says that the

foundation of the original suit is the alleged concluded contract

between the plaintiff and defendant No.2 and that the plaintiff by way

of an application for „amendment-cum-impleadment‟ cannot be

allowed to change the contours of the original plaint where it does not

figure at all. As per it, it is not the relief sought against it which should

form the basis for its impleadment but the averments made in the

plaint. Those averments, it is stated, give rise to disputes, if any,

between the plaintiff, defendant No.1 and defendant No.2. It has also

taken an objection that assuming there is an agreement between the

plaintiff and defendant No.1, such an agreement is not capable of

being specifically enforced and that the only remedy available to the

plaintiff is to sue for the alleged breach of the contract. Hence, it is

argued that it is neither a necessary or a proper party, and in support,

reliance was placed on Anil Kumar Singh Vs. Shivnath Mishra alias

Gadasa Guru reported in (1995) 3 Supreme Court Cases 147. The

facts of that case were that one Daulat Singh, father of the petitioner

filed a suit for specific performance of an agreement of sale of some

land said to have been executed in his favour by one Shiv Nath Mishra.

Pending decision in the suit, Daulat Singh died. The petitioner came

on record as legal representative of Daulat Singh. He filed an

application under Order 6 Rule 17 of the Code seeking leave to amend

the plaint and seeking to implead the respondent also as a party-

defendant in the suit. The contention of the petitioner was that

Shivnath Mishra, the vendor, had colluded with his sons and wife and

had obtained a collusive decree in a suit under Section 229-B of the

U.P. Zamindari Abolition and Land Reforms Act and by operation of the

said decree, they became co-sharers of the property to be conveyed

under the „Agreement to Sell‟ and, therefore, the respondent was a

necessary and proper party to effectuate the ultimate decree of the

specific performance that may be granted in favour of the petitioner.

The Apex Court declined the relief on the ground that the suit of the

plaintiff was based on the „Agreement to Sell‟ said to have been

executed by the vendor and that the person who was sought to be

impleaded as a respondent had acquired interest in the property by an

independent decree which decree was not the subject matter of the

suit and hence, without assailing the validity of the decree, those who

acquired the right through the decree could not be dragged into the

litigation.

Reliance was also placed on Sarvinder Singh Vs. Dalip Singh and

others reported in (1996) 5 Supreme Court Cases 539. In the said case

Sarvinder Singh had already obtained a decree of declaration, that he

was the owner of the suit property on the basis of a registered Will

executed by his mother. In that suit the daughters of Hira Devi, were

impleaded as defendants. One of the daughters was Rajinder Kaur.

Subsequent to that decree which had became final, Sarvinder Singh

filed another suit for declaration of his ownership on the basis of the

same Will against the heirs of Rajinder Kaur. Since the said heirs of

Rajinder Kaur alienated the self same lands to X and Y, the said X and

Y moved an application under Order 1 Rule 10 of the Code for being

impleaded as defendants. The Supreme Court observed that though it

may be open to the heirs of the Rajinder Kaur to resist the suit on any

legally available or tenable grounds, those grounds were not available

to the applicants. It was further made clear that the earlier decree on

the basis of the Will having become final and as the applicants were

claiming title only through the heirs of Rajinder Kaur who was a party

to that decree they could not legally challenge the legality and validity

of the said Will. It was for these reasons that the applicants were held

to be neither necessary nor proper parties to the suit.

As would be borne out from above both the judgments relied

upon by learned counsel for Walchandnagar Industries Ltd. bear no

parallel to the facts of the present case.

Having regard to the facts of the present case as borne out from

the plaint as well as from the amendments which, I have allowed,

some of the issues which are likely to fall for consideration are, firstly,

whether the plaintiff and defendant No.2 had a concluded contract and

if so, could defendant No.1 renegotiate the price with the plaintiff in

contravention of alleged express understanding arrived at between the

plaintiff, defendant No.1 and defendant No.2 in the joint meeting held

on 19th & 20th December, 2007 and in contravention of the alleged

contract-agreement dated February 20, 2008 between defendant No.1

and defendant No.2; and secondly, was defendant No.1 authorized by

defendant No.2 or even otherwise legally entitled to oust the plaintiff

from the project and induct in its place another sub-contractor,

namely, Walchandnagar Industries Ltd.? Not only this, the

amendments sought to be introduced in the plaint challenge the

existence, legality and validity of the so called binding contract with

Walchandnagar Industries Ltd. vide "Memorandum of Understanding"

dated July 08, 2008 and the sub-contract dated July 12, 2008. It may

be recalled that as per the application for amendment the said

documents were forged and fabricated by defendant No.1 in concert

with defendant No.2 and Walchandnagar Industries Ltd.

This certainly is not the stage to go into merits. That stage has

not yet come. At this stage, what is to be seen is whether in view of

what is pleaded, a person sought to be impleaded is a necessary or a

proper party or not and whether the totality of the averments made

against the person sought to be impleaded give rise to a cause of

action against that person and if they do, should that person be not

treated as a necessary or proper party? This being the position, should

Walchandnagar Industries Ltd. be kept out of the proceedings? Should

it be heard to say that it had entered into an independent contract with

defendant No.1 and that the plaintiff has no right to challenge its

contract? The effect of the alleged contract with Walchandnagar

Industries Ltd. on the alleged rights of the plaintiff is obvious. It has

the effect of ousting the plaintiff from the project of setting-up Sugar

Factory at Addis Ababa by Walchandnagar Industries Ltd. The plaintiff

has challenged not only the very existence of that contract but its

legality and validity too. Whether the plaintiff had a concluded

contract with defendant No.2 and if so, whether it was wrongly ousted

by defendant No.1 and rightly replaced by Walchandnagar Industries

Ltd., who is a direct beneficiary from the ouster of the plaintiff are

questions which have been raised and these questions will have to be

determined. And, if so, and it being so, Walchandnagar Industries Ltd.

becomes a necessary party. The loss of the plaintiff is the gain of

Walchandnagar Industries Ltd. It has allegedly stepped into the shoes

of the plaintiff. It cannot be allowed to watch the proceedings from the

side-lines. It must enter the fray and justify its induction, more so,

when it is being accused of making its way to the contract by forging

and fabricating documents. More than the plaintiff, it will be in its own

interest to do so, for in case, it remains out of the proceedings and

assuming any adverse order is passed in its absence, it may cause

irreparable loss to it and in all likelihood may lead to further litigation.

Therefore, in my opinion, Walchandnagar Industries Ltd. is a necessary

and proper party. I, therefore, allow the prayer for impleading it as a

party.

This brings me to the prayer for impleadment of EXIM Bank. As

already noticed above, the project for development of Sugar Factory at

Addis Ababa is being funded by the said bank. It has entered into an

agreement dated October 04, 2007 with the Government of Federal

Democratic Republic of Ethiopia, called the „Dollar Credit-line

Agreement‟ and it is under the terms of the said agreement that it has

to release the funds to the Government of Ethiopia who has been

described as the "Borrower".

It is the case of the EXIM Bank that the agreement dated

October 04, 2007 has been entered into between two sovereign

countries and the Bank is under legal obligation to remit the amount

to defendant No.2 by opening the line of credit. As per the Bank, it is

not at all concerned with the contract entered into between defendant

No.1 and defendant No.2 or any alleged sub-contract having been

entered into between defendant No.1 and Walchandnagar Industries

Ltd. or any dispute arising between the parties to the said contracts.

It says that its obligation to release funds to defendant No.2 is

independent of all these transactions and that the plaintiff who is a

complete stranger to the Dollar Credit Line Agreement dated

October 04, 2007 has no right to seek any injunction vis-à-vis the said

agreement. According to the counsel for defendant No.1 and the

EXIM Bank, all that the bank is required to do before it remits the

amount, is to ensure that it is done in terms of Clause 3 of the „Dollar

Credit Line Agreement‟. The Clause runs as under:-

3. Eligibility of contract to be financed out of the credit.

3.1 A contract shall not be eligible to be financed out of the Credit unless:-

(a) it is for the import of the Eligible Goods into the Borrower‟s Country and in case of any contract which includes rendering of consultancy services, it provides for sourcing consultancy services from India;

(b) the contract price is specified in Dollars and is not less than $50,000/- (Dollars fifty thousand only) or such amount as may from time to time be agreed upon between the Borrower and EXIM Bank;

(c) the contract requires the Buyer to make payment to the Seller of 100% (one hundred per cent) of FOB/CFR/CIF contract price of the Eligible Goods ( other than services), pro-rata against shipments, to be covered under an irrevocable and non-transferable letter of credit in favour of the Seller;

(d) in the case of Services to be rendered by a Seller in the Borrowers Country, or where the contract requires advance payment to be made by the Buyer to Seller which needs to be financed out of the Credit, the contract provides for the Buyer to cause the Borrower to issue a Payment Authorisation to EXIM Bank to enable the Seller to claim payment from EXIM Bank of the Eligible Value apportionable to the amount of invoice for such services or, as the case may be, the amount of advance payment;

(e) the contract contains a provision that the Eligible Goods shall be inspected before shipment on behalf of the Buyer and the documents to be furnished by the Seller to the Negotiating Bank under the letter of credit arrangement referred to in sub-clause(c) herein shall include an inspection certificate;

(f) the contract also contains a provision to the effect that EXIM Bank shall not be liable to the Buyer or the Seller for not being able to finance purchase of the Eligible Goods or any portion thereof by reason of suspension or cancellation of any undrawn amount of the Credit in terms of this Agreement;

(g) the Borrower has sent to EXIM Bank for its approval brief details of the contract in the format at Annexure-I and such other documents and information as EXIM Bank may require in this behalf, and EXIM Bank has, in writing, approved of the contract as being eligible indicating the Eligible Value thereof.

Reference was also made to the definition of Eligible Goods as

given in Clause 1 of the agreement which says "Eligible Goods" in respect

of an Eligible Contract means "any goods and services (including consultancy

services from India) relating to projects for the development of sugar industry in the

Borrower‟s Country, agreed to be financed by EXIM Bank under this Agreement, out

of which goods and services of the value of at least 85% of the contract price shall

be supplied by the Seller from India, and the remaining goods and services (other

than consultancy services) may be procured by the Seller for the purpose of the

Eligible Contract from outside India."

In view of these clauses, it was contended by the counsels that

the bank is not concerned as to who is the Contractor and will release

the funds to the Contractor whoever he may be on the instructions of

the borrower, provided the conditions laid down in the Dollar Credit

Line Agreement are found to have been fulfilled.

The plaintiff, on the other hand, has sought impleadment of

EXIM Bank as defendant No.4 on the ground that defendant No.2, i.e.

Tendaho Sugar Factory Project is proceeding with modernization

essentially financed by credit line from the EXIM Bank of India and

the said Bank being a State is bound to act fairly and not in violation

of the order of this Court. On the basis of the averments so made, the

prayer clause is also sought to be amended seeking a decree of

perpetual injunction restraining EXIM Bank from granting any

approval to substitution of the plaintiff and/or proceeding with any

funding of the project of Steam Generation Plant floated by defendant

No.2 without the plaintiff.

What needs to be noticed at this stage is that after the plaintiff

had filed the application for „amendment-cum-impleadment‟ of which

notice was issued by this Court on November 04, 2008, it also filed an

application being I.A. No.14363 of 2008 under Order 39 Rules 1 & 2

of the Code seeking an ad-interim ex-parte order restraining EXIM

Bank from taking any steps including approving the substitution of

Walchandnagar Industries Ltd. or any other party in place of the

plaintiff and/or opening the line of credit and/or disbursing any

moneys to defendant No.1 and/or 2 or Walchandnagar Industries Ltd.

for completion of „Steam Generation Plant‟ . Since no interim order

was passed on this application, the plaintiff preferred an appeal

before a Division Bench of this Court which was registered as

FAO(OS) No.472 of 2008 and was disposed of on December 17, 2008.

The Division Bench declined the relief basing itself on the submissions

of the learned counsel for the EXIM Bank which have already been

noticed above. The Division Bench also relied upon a judgment of

Bombay High Court dated October 07, 2008 in the case of M/s Uttam

Sucrotech International Pvt. Ltd. Vs. EXIM Bank (Writ Petition

Lodging No.2002/2008) where a similar prayer in relation to EXIM

Bank was made.

The relevant paragraphs of the judgment of the Division Bench

run as under:-

We may also note at this stage that the appellant has also filed Civil Contempt under Order 39 Rule 2 A of the

CPC alleging violation of orders dated 23.07.2008. It is the submission of the appellant in the said application that in spite of injunction granted by the aforesaid order, the respondent no.1 had gone ahead and had taken measures to introduce the respondent no.3 to the respondent no.2 in place of the appellant. The submission of the learned counsel for the appellant is that when there was an injunction passed on 23.07.2008 whereby the respondent no. 1 was restrained from taking any measures to introduce a third party in place of the appellant, any action taken by the respondent no.1 after 23.07.2008 and introducing respondent no.3 to the respondent no.2 and substituting it in place of the appellant is contemptuous as it constitutes violation of order dated 23.07.2008. In these circumstances, submits the counsel, the learned Single Judge, should have granted injunction as prayed for in I.A. 14363/2008.

Mr. P.P. Malhotra, Additional Solicitor General of India has appeared on behalf of the EXIM Bank. He has pointed out that an agreement has been entered into between the Government of Federal Domestic Republic of Ethiopia and the EXIM Bank, which is dated 04.10.2007. Copy of that agreement is placed before us. He submitted that in pursuance to the said agreement between the two sovereign countries, the EXIM Bank is under a legal obligation to remit the amount to the respondent no.2 by opening Letter of Credit. It was further submitted that the EXIM Bank is not at all concerned with the contract entered into by the respondent no.2 with respondent no. 1 or for that matter, any disputes which arose out of those contracts. It is not even a part to the said contracts. The obligation of the EXIM Bank qua respondent no.2 is independent of all these transactions. We find merit in this submission of Mr. Malhotra.

We may note that a similar issue had arisen in the Bombay High Court in the case of M/s. Uttam Sucrotech International Pvt. Ltd. v. EXIM Bank (Writ Petition Lodging No. 2002/2008) and vide judgment dated 07.10.2008 rendered by a Division Bench of that court, similar prayer to restrain the EXIM Bank, though in different factual context, was turned down in the following manner:-

"10. In our opinion, it is not necessary to refer the other contentions except the limited contention of respondent no.3, that the project in question is a sovereign understanding between two countries. The petitioners by the present petition, it is contended are seeking to challenge the tender process of another sovereign country or its nominee without invoking the judicial process of that country or without first seeking remedy through the procedure given in the bid document issued by that country. The bid document and the main contract dated 10th January, 2008 and the contract dated 20th February 2008 clearly provides for all disputes to be covered by the laws of Ethiopia. The petition also it is submitted does not disclose any violation of Articles 14, 19 and 21 of the Constitution of India. The issues raised are not in public interest but are purely beneficial to the petitioner and only in its self interest.

xxxxxxxx

xxxxxxxx

xxxxxxxx

The clause which requires EXIM Bank to approve the contract requires that EXIM Bank must consider whether the approved contract has become eligible and indicating the eligible value thereof. For the purpose of considering the eligibility what respondent No.1 must consider as set out in their affidavit in reply and the contract terms is to examine, whether the terms of the contract conform to the terms of the LOC agreement. In this exercise it only satisfied itself that the terms of the contract viz. such as Eligible Goods, Seller, Eligible Value, Terminal Date for Opening Letters of Credit and Terminal Date for Disbursement conforms to the terms of the LOC Agreement entered into between respondent No.1 and the Government of Ethiopia. The stand of respondent No.1 that it does not involve itself in the process of selecting the exporter, neither does it sanction the bidding process which will be conducted in our opinion is right. This is as it should be. The contracts are invited by the Government of Ethiopia and/or its agency, in the present case respondent No.2. Neither the respondent No.1 nor the respondent No.3 has any control over the said bidding process.

After noticing the aforementioned paragraphs from the

judgment of the Bombay High Court, the Division Bench further held

as under:-

The Special Leave Petition against the said judgment has also been dismissed by the Supreme Court on December 15, 2008. Therefore, in so far as restrain order sought against EXIM Bank is concerned, this relief cannot be granted to the appellant.

It was argued by learned counsel for the plaintiff that the issue

before the Bombay High Court was different and that reliance placed

on the said judgment by the Division Bench was misplaced.

A copy of the writ petition filed in the Bombay High Court

resulting in the order dated October 07, 2008 has been placed on

record. A perusal of the same goes to show that the petitioner therein

was aggrieved by the appointment of Overseas Infrastructure Alliance

(India) Pvt. Ltd. as single EPC Contractor by virtue of its having

secured two contracts, namely, Power Generation Plant and Juice

Extraction Plant and was further aggrieved by the approval granted

by the EXIM Bank to the appointment of Overseas Infrastructure

Alliance (India) Pvt. Ltd. as single EPC Contractor. The prayers made

before the Bombay High Court were as under:-

(a) this Hon‟ble Court may graciously be pleased to call for the records of the case from respondent No.1 and after examining the same issue a writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, order or direction quashing or setting-aside the approval dated 21.4.2008 granted by respondent No.1 to contract dated 28.2.2008 entered into between respondent no.2 and respondent No.3.

(b) this Hon‟ble Court may further be pleased to issue a Writ of Mandamus or any other appropriate Writ, order or direction, directing respondent No.1 to take all the necessary steps and actions to ensure that (i) the contract for Power Generation Package be awarded to petitioner No.1 being the lowest eligible bidder and (ii) respondent No.3 is removed as the Single EPC Contractor.

                (c)    pending the hearing and final disposal of the
                petition,   respondent     No.1     be    restrained    from

approving/signing of letter of credit, and/or disbursing any funds in any manner towards the said line of credit in favour of the respondent No.3 as Single EPC Contractor for Tendaho Sugar Factory Project or as a successful bidder for the Juice Extraction and Power Generation Packages.