Jsl Limited vs M/S Ariba India Pvt. Ltd & Anr.
2010 Latest Caselaw 5189 Del

         THE HIGH COURT OF DELHI AT NEW DELHI

%                        Judgment Pronounced on: 15.11.2010

+           CS(OS) No. 650-660/2009

JSL LIMITED                                      .....Plaintiff

                               - versus -

M/S ARIBA INDIA PVT. LTD & ANR.                .....Defendants

Advocates who appeared in this case:
For the Plaintiff: Mr Ravi Gupta, Sr. Adv. with Ms Shally B.
                   Maheshwari and Ms Suman Kukrety
                   Advs.

For the Defendant: Mr. Mukul Talwar, Sr. Adv. with Mr.
                   Sradhananda Mohapatra, Adv.
                   Mr. Pt. Rajesh Arya, Adv. for Defendant
                   No.5.
CORAM:-
HON'BLE MR JUSTICE V.K. JAIN

1.

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

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

3. Whether the judgment should be reported No in Digest?

V.K. JAIN, J

I.A. No. 3562/2010 in CS(OS) No. 660/2009 and I.A. No. 3529/2010 in CS(OS) No. 650/2009

1. Both these applications have been filed by Ariba

Inc under Order VII rule 11 of the Code of Civil Procedure

for rejecting the plaint on the ground that it does not

disclose any cause of action against defendant no. 2. It has

been stated in the applications that on a bare perusal of the

plaint it cannot be said that the applicant/defendant No.2 is

in anyway concerned with the subject matter of the present

suit and that there is no privity of contract between the

plaintiff and Applicant/defendant No.2. It has been further

stated that in the application that it is plaintiff‟s own

contention that all the representations were made by the

officials of Defendant No. 1 and that the applicant has been

impleaded as a party only with a view to pressurize

Defendant No.1 to withdraw all its claims against the

plaintiff.

2. A perusal of the documents filed by the plaintiff

would show that there was an agreement between the

plaintiff M/s. Jindal Stainless Ltd., which is now known as

M/s. J.S.L. Ltd. and M/s. Ariba India Pvt. Ltd. /defendant

No.1. Admittedly, Ariba India Pvt. Ltd. is a subsidiary of

applicant/defendant No. 2 i.e. Ariba Inc of USA.

3. The learned Counsel for the plaintiff has drawn my

attention to clause 17.6 of the agreement which reads as

under:

"Notices. All notices under this

Agreement („Written Notice‟) must (a) be in writing and in the English language;

(b) be delivered by certified or registered mail, postage prepaid, return receipt requested or by an overnight courier services with delivery receipt; and (c) (in the case of a notice to Ariba) be sent to the attention of the "Chief Financial Officer" of Ariba at the address set forth on the Order Form to which the matter relates, with a copy to Ariba‟s General Counsel and (in the case of a notice to Customer) shall be sent to the address set forth in the address block in an applicable Order Form or to any other address Customer specify in writing."

4. Clause 17.7 of the agreement is another provision

relied upon by the learned Counsel for the plaintiff and the

same reads as under:

"Informal Dispute Resolution. The parties will attempt to resolve any dispute relating to this Agreement through the informal means described in this Section 17.7. This informal dispute resolution process may be initiated at the written request of either party. Upon receipt of such a request, both parties shall appoint a senior management representative who does not devote substantially all of his or her time to performance under this Agreement. The representatives may furnish to each other non privileged information with respect to the dispute that such representative believes to be appropriate and germane. The representatives will negotiate in an effort to resolve the dispute without the necessity of any formal proceeding.

Formal proceedings for the resolution of

the dispute may not be commenced until the earlier of: (i) the designated representatives conclude jointly in writing that resolution through continued negotiation does not appear likely; or (ii) thirty (30) calendar days have passed since the initial written request to negotiate the dispute was sent; provided, however, that a party may file earlier to avoid the expiration of any applicable limitations period to preserve a superior position with respect to other creditors, or to apply for interim or equitable relief. A request for use of this informal dispute resolution process shall be sent in accordance to the notice requirements of Section 17.6 and must indicate that it is a request for informal dispute resolution under Section 17.7 of the Agreement. "

5. It was pointed out by the learned counsel for the

plaintiff that in terms of the Clause 17.7 of the Agreement,

defendant no. 1 had appointed the Vice President and

Managing Director (APAC) of defendant No.2 as its Senior

Management Representatives. The contention is that

requirement of copy of every notice being sent to defendant

no.2 and nomination of its Vice President and Managing

Director (APAC) as a Senior Management Representatives of

Defendant No.1 shows that defendant no.2 has also been

connected with the transactions of the plaintiff company

with Defendant No.1.

6. Defendant no. 1 is a separate legal entity being

incorporated in India under the Companies Act, whereas

defendant no. 2 is a foreign company. The agreement in

question is executed only between the plaintiff and the

defendant no.1. Defendant no.2 is not a party to the

agreement. No provision of Companies Act, making the

Holding Company liable for the breach of a contract by its

Indian subsidiary has been brought to my knowledge.

Therefore, if there has been any breach of contract by

defendant no.1, the plaintiff can have its cause of action

only against defendant no.1.

7. The learned Counsel for the plaintiff has referred to

the decision of this Court i.e. Omvati Verma Vs. Sehdav

Singh Tomar & Ors. 147 (2008) Delhi Law 81, where a

Learned Single Judge of this Court relying upon the

decision of a Division Bench in this Court in Inspiration

Clothes & U Vs. Colby International Ltd., 88 (2000) DLT 769

held that while considering of application under Order VII

Rule 11 CPC, the Court can examine the plaint and the

documents placed on by the plaintiff in support of its

contents. The Division Bench of this Court in the case of

Inspiration Clothes & U (Supra) interalia observed that the

plea of the defendant that there was no cause of action did

not amount to the plea that the plaint did not disclose any

cause of action and that a distinction must always be drawn

between a plea that plaint does not disclose a cause of

action and the plea that the plaintiff has no cause of action

to sue. It was further observed that the power to reject the

plaint can be exercised only if the Court come to the

conclusion that even if all the allegations are taken to be

proved, the plaintiff would not be entitled to any relief

whatsoever.It was also observed that where the plaint is

based on a document, the Court will be entitled to consider

the said document also to ascertain if a cause of action is

disclosed in the plaint, but, the validity of the document

cannot be considered at this stage. The Court in order to

enable it a Court to reject a plaint, should look at the plaint

and documents accompanying the plaint only and nothing

else. The Court, however, cannot look at the defence of the

defendant or the documents relied upon by the defendant.

8. The learned Counsel for the plaintiff has also

referred to the decision of a Division Bench of this Court in

Avtar Singh Narula & Anr. Vs. Dharambir Sahni & Anr. 150

(2008) DLT 760 (DB), where the Court reiterated the settled

proportion of law that the power to reject the plaint has to

be exercised sparingly and cautiously, though, in a proper

case, the Court does have the power to reject the plaint.

9. Thus, the legal proposition in the matter is well

settled. The Court while considering an application for

rejection of the plaint can look into only the avernments

made in the plaint and the documents filed by the plaintiff.

The defence taken by the defendant is not to be considered

while examining such an application and validity of the

documents filed by the plaintiff also cannot be examined at

this stage.

10. A careful examination of the averments made in

the plaint, in the light of and alongwith the agreement

annexed to be plaint makes its amply clear that there is no

privity of contract between the plaintiff. The allegation

made in the plaint, when scrutinized alongwith the

documents filed by the plaintiff, do not disclose any cause of

action against the applicant company. If the contract is

between two legal entities a third entity cannot be made

liable for the breach of contract on the part of one of the

parties to the agreement.

11. The agreement has been signed only on behalf of

the plaintiff and defendant no. 1. That this is a contract

between two companies is evident not only from the

signatories to the document but also from use of the

terminologies such as „either‟, which is used when only two

persons are involved. The fact that the applicant/defendant

no.2 is not a party to the contract is obvious not only from

the document but also from the correspondence between

the parties. The plaintiff itself has placed on record

documents such as the letter dated 30.09.2008 sent by it to

the defendants wherein it has referred to an agreement

between Ariba India Pvt. Ltd. and Jindal Stainless Pvt. Ltd.

Thus, this is a bilateral and not a multilateral agreement.

12. The learned Counsel for the plaintiff has also

placed reliance the provisions contained in under Order 1

Rule 3 CPC which reads as under:-

"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. In my view reliance on aforesaid provision of the

Code is wholly misplaced, when the factually matrix is

examined in the light of the agreement between the plaintiff

and the defendant no. 1.

14. Suit No. 650/2009 has been filed by the plaintiff

seeking the refund of the amount which had paid to

defendant no. 1. This is not a case of the plaintiff that any

part of this amount was paid by it to Defendant no. 2.

Therefore, the plaint in suit No. 650/2009 does not disclose

any cause of action against defendant no. 2 Ariba Inc, when

averments made therein are the met is examined in the light

of the agreement.

15. In Suit No. 660/2009, the case of the plaintiff is

that though it had contracted to purchase Stainless Steel

Scrap, the goods when they reached, India were found to be

stones and were not stainless steel scrap. Defendant no. 3

is to seller of the goods whereas defendants No. 4 and 5 are

alleged to be the agents of Defendant no. 3 in India. The

case of the plaintiff is that the sale was arranged pursuant

to the contract which had been executed between it and

defendant no. 1, though, it has also been alleged in para 73

of the plaint that defendant no.1 had defrauded the plaintiff

in connivance with other defendants. However, this

para of the plaint does not disclose how defendant no.2 had

defrauded the plaintiff company. No particulars of the

alleged fraud on the part of the applicant or any of its

managers/employees as required under Order VI Rule 4 of

CPC have been given in the plaint. On the other hand, in

para 59 of the plaint, it has been alleged that defendant

no.1 was aware of the fact mentioned in para 58 of the

plaint and inspite of that it actively concealed these facts to

induce the plaintiff into placing the Purchase Order on

Defendant No. 3 and paying money to it in order to defraud

the plaintiff. Thus, the allegations in this suit are directed

only against defendant no. 1, seller and its agents.

16. For the reasons in the proceedings of the

applications, I am of the considered of the view that plaint

does not disclose any cause of action against the

applicant/defendant no.2 Ariba Inc. The plaint, in both the

suits is, therefore, rejected to the extent its pertains to

Defendant no.2.

17. Both the applications stand disposed of.

I.A. No. 4727/2009, I.A. No. 2824/2010 in CS(OS) No. 650/2009 with CC No. 21/2010 and I.A. No.4787-

4788/2009, I.A. No. 14774/2010 in CS (OS) No. 660/2009

18. After order has been dictated in I.A. No.

3529/2010 in CS(OS) No. 650/2009 and I.A. No.

3562/2010 in CS(OS) No. 660/2009, it has been submitted

by the learned counsels for the parties that another suit

being CS (OS) No. 52/2009 filed by defendant no.1 against

the plaintiff in this case is pending in the Court of Hon'ble

Mr. Justice S. Ravinder Bhatt. It is desirable that these

suits should also be heard and decided alongwith suit No.

52/2009. Hence, the files of these suits be placed before

the Hon'ble Judge Incharge of Original Side on 25 th

November, 2010, for such order as His Lordship may deem

appropriate in this regard.

(V.K. JAIN) JUDGE

NOVEMBER 15, 2010 Savita