M/S Spread Info Tech Consultants ... vs M/S Zte Kangxun Telecom Company ...
2011 Latest Caselaw 4852 Del

           IN THE HIGH COURT OF DELHI AT NEW DELHI

+ IA NO. 13244/2010 (u/O 7 Rule 11 r/w Section 151 CPC) in
CS(OS) 1184/2007
*

                               Reserved on: 23rd August, 2011

                               Delivered on: 29th September, 2011

M/S SPREAD INFO TECH CONSULTANTS
PVT. LTD.                                             .......Plaintiff

                         Through:    Mr. Gaurav Mitra and
                                     Mr. Saurabh Seth, Advs.
                         Vs.

M/S ZTE KANGXUN TELECOM COMPANY
INDIA PVT. LTD. & ANOTHER                             ...Defendants

                         Through:    Mr. Rajiv Nayar, Sr. Adv. with
                                     Mr. Bishwajit Dubey and
                                     Ms. Anushree Tripathi, Advs.


Coram:
HON'BLE MR. JUSTICE A.K. PATHAK

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

       2. To be referred to Reporter or not?          No

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

A.K. PATHAK, J.

1. By this application under Order 7 Rule 11 read with Section

151 of the Code of Civil Procedure, 1908 (CPC for short) defendants

have prayed that the plaint be rejected.

2. Plaintiff has filed this suit against the defendants for recovery

of `3,66,85,008/- together with pendente lite and future interest @

15% per annum.

3. Briefly stated, facts of the case as averred in the plaint and

relevant for the purpose of disposal of this application are that

plaintiff entered into a Cooperation Agreement dated 12th August,

2004 with the defendants; Agreement was executed on 14th August,

2004. In terms of the Agreement, plaintiff was required to make all

necessary arrangements and various other activities with the

customers mainly Atlas Interactive India (Pvt.) Ltd. (for short AIIPL)

for successful bid for the defendants' project. Defendants had agreed

to pay a total 7% of FOB price towards fee of the plaintiff for the said

work. Initially, it was agreed that the defendant No. 2 will pay to the

plaintiff the fee equal to 3.5% FOB value of the order within 30 days

of the receipt of contract order. The balance 3.5% was payable

within 30 days after defendant No. 2 recovered payment from the

bank. It was further agreed that the aforesaid fees and conditions

were applicable in respect of all future contracts with AIIPL. Plaintiff

procured orders for defendants from AIPL and a contract mainly No.

AIIPL/ADSL/01-04 dated 16th August, 2004 was entered into

between AIIPL and defendant no.2 and obligation of plaintiff towards

the Cooperation Agreement dated 12th August, 2004 stood

completed. Thereafter, plaintiff sent fee bill to defendants by email

with an invoice No. 2004/03-05 dated 1st October, 2004 for US$

324414 towards fee at 3.5% of total contract price of US$ 10587632.

Subsequently, on 18th March, 2005 amendment to the main

agreement was entered into between the plaintiff and defendant No.

2 whereby contract price was fixed at US$ 92688971. Amendment

was also made in respect of Clause 6 pertaining to payment to the

cooperator whereby it was agreed that fee shall be paid by the

defendants to plaintiff in two parts i.e. 3.3% of the total contract

price within next 30 days of the signing of the Amendment

Agreement and balance fee of 3.7% will be payable within 30 days

after defendant No. 2 recovers payment from the bank, as per

delivery schedule of AIIPL. As per the purchase order and contracts

of 2nd December, 2004 placed by AIIPL, goods were delivered by

defendant No. 2 by the end of March, 2005, thus, even the balance

payment of 3.7% became due within 30 days of delivery.

Accordingly, plaintiff raised two bills on 19th April, 2005 and 1st May,

2005 respectively. However, defendants did not make payments

despite repeated requests of the plaintiff. Legal notice dated 5th

February, 2007 was served but payment was not made. Hence the

suit for recovery.

4. Para 19 of the plaint relates to "cause of action" and reads as

under:

"That the "cause of action" arose on 14th August, 2004 when the defendants had entered into an Agreement with the plaintiff company and promised to pay the aforesaid commission. The cause of action arose when as per Agreement,

to the customers mainly Atlas Interactive India (P) Ltd. The cause of action arose when the official of the defendants had asked for the details of the bills from the plaintiff, which were duly furnished and whatever was required to be done was done by plaintiff. The cause of action further arose on each date, when the plaintiff demanded the amount as mentioned, but the defendant failed to pay the same. The cause of action further arose when the plaintiff issued legal notices dated 5th February, 2007 and 31st March, 2007 to the defendants which were duly received by them, but they have failed to pay the same and the cause of action is continuing one, as the defendants have failed to pay the said amount."

5. It may be noted here that after defendants filed their written

statement, plaintiff had moved an application under Order 12 Rule 6

for judgment on admission, which has been dismissed by this court

vide order dated 9th August, 2010.

6. Defendants have now filed this application seeking rejection of

plaint on the ground that plaint does not disclose any cause of

action, inasmuch as, plaintiff has suppressed material facts.

Learned Senior Counsel has contended that the plaintiff's case is

based (a) on the Cooperation Agreement dated 12th/14th August

2004, entered into between the plaintiff and defendants, (b)

Amendment Agreement dated 18th March, 2005. Both these

Agreements are null and void and unenforceable. As on 12th August,

2004 plaintiff company was not in existence. Certificate of

Incorporation clearly shows that it has been incorporated only on 3rd

September 2004. Plaintiff cannot claim any money pursuant to the

Agreement, which had been executed even before its incorporation.

Reliance has been placed on Andhra Pradesh Tourism

Development Corporation Ltd. Vs. Pampa Hotels 2010 (4) SCALE

195. As regards Amendment Agreement dated 18th May, 2005, it is

contended that the same is an unsigned document having no legal

force. In nutshell, contention of learned Senior Counsel is that suit

is without any cause of action and deserves to be rejected. By

placing reliance on Abdul Gafur and another vs. State of

Uttrakhand (2008) 10 Supreme Court Cases 97 it has been

canvassed that a meritless and vexatious litigation should be nipped

in the bud.

7. Per contra, learned counsel for the plaintiff has contended that

Cooperation Agreement dated 12th/14th August, 2004 was executed

by Ravi Chauhan, Promoter of the plaintiff-company, thus, is binding

between the parties. Even though company had been formally

incorporated on 3rd September, 2004 all the agreements executed by

the Promoter of the plaintiff-company would bind parties to such

Agreement(s) after company was formally incorporated in the month

of September, 2004. Thus, defendants cannot be allowed to wriggle

out from their obligations arising out of the Cooperation Agreement.

Reliance has been placed on the Weavers Mills Ltd., Rajapalayam

vs. Balkis Ammal and Ors. AIR 1969 Mad 462, The Sree

Meenakshi Mills, Limited vs. Calliangee and Sons and Ors. AIR

1935 Mad 799 and Asian Hotels Ltd. and Bhikaji Cama Place

vs. DDA Vikas Minar, I.P. Estate, New Delhi 1998 IV AD (Delhi)

708. As regards Amendment Agreement dated 18th March, 2005, it

is contended that in reply to I.A. No. 16879/2009 defendants have

admitted the existence of this document, though in the written

statement they have disputed this agreement and have alleged that

the same was never executed. Thus, it is subject matter of trial as to

whether Amendment Agreement was executed between the parties or

not in view of the contradictory stand taken by the defendants in this

regard. At this stage, Amendment Agreement cannot be ignored. It is

further contended that plaintiff has placed on record emails

exchanged between Mr. Ravi Chauhan, Promoter of the plaintiff and

defendants' employee, with regard to payment of plaintiff's fee.

Categorical averments have been made in the plaint in this regard

which clearly indicate that plaint discloses sufficient cause of action

for filing the suit for recovery.

8. It would be worthwhile to state here that an application under

Order 7 Rule 11 of the CPC for rejection of plaint has to be decided

on perusal of plaint and documents filed along with it. A plaint

cannot be rejected on the basis of allegations made by the defendant

in his written statement or in an application for rejection of the

plaint. The court has to peruse the plaint as a whole to find out

whether it discloses a cause of action or not. If the plaint discloses

cause of action it cannot be rejected by the court exercising the

powers under Order 7 Rule 11 of the Code. Whether the plaint

discloses cause of action is a question of fact which has to be

gathered on the basis of averments made in the plaint and taking

those averments to be correct as a whole together with the

documents filed along with the plaint. If the case is based on

documents the same have also to be read along with the averments

made in the plaint to find out if there is any cause of action for filing

the suit.

9. In Hardesh Ores Pvt. Ltd. vs. M/s. Hede and Company,

(2007) 5 SCC 614, Supreme Court has held as under:-

"25. The language of Order 7 Rule 11 CPC is quite clear and unambiguous. The plaint can be

rejected on the ground of limitation only where the suit appears from the statement in the plaint to be barred by any law. Mr. Nariman did not dispute that "law" within the meaning of clause

(d) of Order 7 Rule 11 must include the law of limitation as well. It is well settled that whether a plaint discloses a cause of action is essentially a question of fact, but whether it does or does not must be found out from reading the plaint itself. For the said purpose the averments made in the plaint in their entirety must be held to be correct. The test is whether the averments made in the plaint, if taken to be correct in their entirety, a decree would be passed. The averments made in the plaint as a whole have to be seen to find out whether clause (d) of Rule 11 of Order 7 is applicable. It is not permissible to cull out a sentence or a passage and to read it out of the context in isolation. Although it is the substance and not merely the form that has to be looked into, the pleading has to be construed as it stands without addition or subtraction of words or change of its apparent grammatical sense. As observed earlier, the language of clause (d) is quite clear but if any authority is required, one may usefully refer to the judgments of this Court in Liverpool & London S.P. & I Assn. Ltd. V. M.V. Sea Success I, 2004(9) SCC 512 and Popat and Kotecha Property v. State Bank of India Staff Association, (2005) 7 SCC 210."

10. In Abdul Gafur's case (supra), Supreme Court has held that

plaint must contain material facts. When the plaint read as a whole

does not disclose material facts giving rise to a cause of action which

can be entertained by a civil court, it may be rejected in terms of

Order 7 Rule 11 of the Code. Similarly, a plea of bar to jurisdiction

of a civil court has to be considered having regard to the contentions

raised in the plaint. For the said purpose, averments disclosing

cause of action and the reliefs sought for therein must be considered

in their entirety and the court would not be justified in determining

the question, one way or the other, only having regard to the reliefs

claimed dehors the factual averments made in the plaint.

11. In the backdrop of above settled legal position, overall reading

of plaint shows that the case is based mainly on two documents i.e.

Cooperation Agreement dated 12th/14th August, 2004 and

Amendment Agreement dated 18th March, 2005. As per the plaintiff,

it is entitled to suit amount, in terms of these two documents. Apart

from the above agreements, reliance has also been placed on certain

emails allegedly exchanged between the representatives of the

parties. Emails exchanged between the parties would be relevant

only if fee can be said to be payable to plaintiff, in terms of

Cooperation Agreement read with Amendment Agreement. In case

both these Agreements are nonest and unenforceable in the eyes of

law then no relevance can be attached to the emails. The whole case

of the plaintiff stands on the foundation of Cooperation Agreement

and Amendment Agreement. It is not in dispute that plaintiff-

company came into existence only on 3rd September, 2004. This fact

is also evident from the Certificate of Incorporation. Admittedly,

Cooperation Agreement in this case is dated 12th/14th August, 2004,

that is, much prior to the date when plaintiff-company came into

existence. In Andhra Pradesh Tourism Development Corporation

(supra), company was incorporated on 9th April, 2003; whereas Lease

Agreement, and Management Agreement reliance whereupon was

placed to contend that there was an Arbitration Agreement between

the parties, was executed on 13th March, 2002. In these facts,

Supreme Court held "admittedly the respondent was not in existence

on that date, as it was incorporated more than a year thereafter on

9th April, 2003; and that when it is alleged that the parties to the

petition had entered into contracts which contained Arbitration

Agreements on 30th March, 2002 and one of the parties thereof had

not even come into existence on that date, obviously there was no

contract much less any Arbitration Agreement between the parties."

12. In this case also Cooperation Agreement is dated 12th/14th

August, 2004; whereas plaintiff-company was incorporated on 3rd

September, 2004 and was not in existence at the time when the

Agreement was executed, thus, it can safely be concluded that the

agreement is nonest in the eyes of law and will not bind the

defendants. Perusal of Cooperation Agreement clearly shows that it

has been executed by the plaintiff-company through its Director Ravi

Chauhan. It has no where been mentioned that the agreement was

being executed by Ravi Chauhan as promoter of M/s. Spred Info

Tech Consultants Pvt. Ltd., under incorporation. Judgments

referred and relied upon by the plaintiffs' counsel are in the context

of different facts and are not applicable to the facts of the present

case. In Asian Hotels (supra), bid for purchase of flat was made by

the promoter on behalf of the company under incorporation. In

Weavers Mills's case (supra) also immovable properties were

purchased by the promoters of company under incorporation. In

the present case, perusal of agreement in no uncertain terms makes

it clear that agreement was executed by the plaintiff-company

through its Director and not by the promoter of company under

incorporation. Thus, Cooperation Agreement will not give rise to any

cause of action for recovery of amount claimed in the suit.

13. As regards Amendment Agreement dated 18th March, 2005 is

concerned, the same is an unsigned document. During the course of

hearing counsel for the defendants has admitted that signed

agreement is not in possession of plaintiff. However, in view of the

specific averments made in the plaint regarding execution of the

Amendment Agreement and admission by the defendants in reply to

the I.A. No. 16879/2009 this document cannot be ignored at this

stage; even though, in the written statement execution of this

document has been disputed. Whether Amendment Agreement was

executed or not, in view of the shifting stand taken by the defendants

in the written statement vis-à-vis reply to the application is subject

matter of trial. In the reply defendants have stated "even the

amendment effected in the Cooperation Agreement on 18th March,

2005 did not alter the obligations posed on the plaintiff/applicant,

even though it altered the payment obligation/structure of the fees to

the plaintiff/applicant by defendant no.1." It is true that while

disposing of the application under Order 7 Rule 11 CPC the court

has only to look averments made in the plaint and the documents

filed along with it and have not to take into account defence of the

defendants and the averments made in the application under Order

7 Rule 11 CPC but at the same time, the admissions made by the

parties cannot be ignored. Thus, the Amendment Agreement dated

18th March, 2005 cannot be taken out of consideration at this stage,

being an unsigned document.

14. For the foregoing reasons, it cannot be said that plaint does

not disclose any cause of action and deserves to be rejected.

15. Application is dismissed.

A.K. PATHAK, J.

September 29, 2011 ga