Vr Wonder Electricals And ... vs C -Quest Capital Green Ventures ...
2012 Latest Caselaw 4210 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                              CS(OS) No.1923/2012

%                                                           17th July, 2012


VR WONDER ELECTRICALS AND ELECTRONICS                     ..... Plaintiff
                 Through: Mr. Arvind K. Nigam, Sr. Adv. with Mr.
                          Jagdish Safar, Mr. Praveen Kr. Jain and Mr.
                          Malay Dwivedi, Advocates.

                      versus


C -QUEST CAPITAL GREEN VENTURES PVT LTD & ORS                          .... Defendants
                   Through
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

    To be referred to the Reporter or not?


VALMIKI J. MEHTA, J (ORAL)

1.

This suit came up for admission on 6.7.2012. On that date, after

hearing the senior counsel for the plaintiff at length, two issues were put to him.

First was that the suit, in substance, whatever be the form, is a suit seeking to

enforce contractual rights, and since the plaintiff-partnership firm is not registered,

the suit would be barred by Section 69 (2) of the Partnership Act, 1932. The

second issue raised was that the contract in question between the plaintiff and the

defendant no.2 dated 10.2.2011 contains Clause-11, and which is a clause which

requires parties to settle their disputes by arbitration in Washington D.C under the

aegis of the International Chambers of Commerce with its applicable rules of

arbitration. On 6.7.2012, on instructions, the learned senior counsel for the

plaintiff stated that plaintiff-partnership firm is registered under Section 69 of the

Partnership Act, 1908, the certificate of registration under Section 69 has already

been couriered to the counsel by the plaintiff, and, that the certificate will be filed.

The suit was therefore adjourned to 26th July, 2012.

2. A fresh application filed by the plaintiff under Order 6 Rule 17 is

listed today before the next date of 26.7.2012 to which the suit was adjourned.

The main matter is therefore taken up today for hearing. By this application, the

plaintiff takes up a stand that on 6.7.2012 by error it was said that the partnership

firm was registered, actually however the plaintiff partnership firm is not

registered, yet it is contended that the suit still lies as what is being enforced

through the suit are not contractual rights but rights under law of torts. Reliance is

placed upon eleven judgments, and to which judgments I need not refer to,

because, the proposition of law cannot be disputed that Section 69 (2) of the

Partnership Act does not bar the suit where the rights are claimed de-hors the

contract, the suit being barred only where a plaintiff-partnership firm sues to

enforce rights under a contract.

3. In order to understand as to whether the suit really seeks enforcement

of contractual rights, or rights under law of torts, it will have to be seen as to

whether during trial of the case, the plaintiff will have to rely upon the contract

dated 10.2.2011 which is entered into between the parties so as to prove its causes

of action and the reliefs claimed. We will have to examine the plaint to find out

that whether in the plaint for the foundation of the case , relevant averments qua

the causes of action are or are not based on the contractual document dated

10.2.2011 titled as "Habsiguda CPA Financing Agreement". This agreement is an

agreement between the plaintiff and the defendant no.2, plaintiff in effect being the

seller and defendant no.2 in effect the buyer. As will be dilated on hereinafter,

these two parties are really the only two necessary parties to the suit.

4. I will also in the present judgment, by which I am essentially

dismissing the suit under Section 69(2) of the Partnership Act,1932 will refer to the

fact that really there is no cause of action against the defendant no.1 which is only

a group company of the defendant no.2 and to whom goods were to be delivered

for the defendant no.2 only with which there is a contract, and admittedly, there is

no contract entered into between the plaintiff and the defendant no.1 and thus no

privity of contract between the plaintiff and the defendant no.1. Also, the

defendant no.3 authority is really in the position of a garnishee only i.e. if the

plaintiff succeeds in the suit, possibly, the plaintiff may seek to get its rights

enforced by execution thereafter against defendant no.3, inasmuch as, the

defendant no.3 would have with it or is capable of controlling the assets/monies of

the defendant no.2, and to which, monies or „carbon credits‟ the plaintiff would

have legal rights. Learned senior counsel for the plaintiff on 6.7.2012 had

extensively referred to various clauses of this agreement dated 10.2.2011, and

some of which clauses I will refer to hereinafter.

5. The facts of the case are that the plaintiff claims to have entered into

the subject agreement dated 10.2.2011 with the defendant no.2 by which the

plaintiff agreed to supply Compact Fluorescent Lamps (CFSLs), for a project

undertaken by defendant no.1 in Andhra Pradesh for substituting normal lights

with CFLs. The contract was with defendant no.2, and delivery was to be made to

the defendant no.1. Though the contract is called „a financing contract‟, yet, there

can be no manner of doubt that plaintiff is a seller, defendant no.2 is a buyer and

the point of delivery is the defendant no.1. There is a Kyoto Protocol as per which

by use of CFLs, under a detailed procedure which is in place being followed,

„carbon credits‟ are earned. These carbon credits are tradable and have monetary

value. Under the Agreement dated 10.2.2011, the plaintiff agreed to supply and

finance CFLs numbering 526500. There are various clauses in the contract which

pertain to how the „carbon credits‟ will be allocated to the plaintiff and the

defendant no.2 respectively i.e 78% to the plaintiff and 22% to the defendant no.2.

Clause 5 of the contract also contains the expected prices or the transaction prices

with respect to the "carbon credits". Learned senior counsel for the plaintiff has

also taken me through appendices „C‟ and „D‟ to the contract dated 10.2.2011

which give percentages of distribution of the "carbon credits" from the year 2011

till the year 2019.

6. A reading of the plaint makes it more than abundantly clear, and it

being settled law that what has to be looked into is the substance and not merely

the language or form which is employed, that really the plaintiff in fact claims

monetary reliefs and other consequential reliefs like injunctions etc being its share

of „carbon credits‟ which it would have earned by supply of the CFLs. Such

causes of action and reliefs can never be established without relying upon the

contract dated 10.2.2011. To understand this further, it is necessary to reproduce

the prayer clauses of the plaint and which read as under:-

"PRAYER

28. It is respectfully prayed that the Hon‟ble Court be pleased to grant the following reliefs to the Plaintiff:

(a) A decree of permanent injunction restraining Defendants Nos.1 and 2 from diverting any remaining CFLs supplied by the Plaintiff to the said Defendants to any place outside the

Habsiguda CPA Project or for any purpose other than the purposes of the said project;

(b) A decree of permanent injunction against Defendant No.3 restraining the said Defendant from approving the issue of any CERs to Defendants Nos. 1 and 2 or any other person for the 95,253 CFLs, diverted by Defendants Nos. 1 and 2 and for any other CFLs supplied to Defendants Nos. 1 and 2 for the Habsiguda Project but used elsewhere, or the approval of issue of CERs in respect of any project other than the Habsiguda Project where any CFLs supplied by the Plaintiff have been utilized;

(c) A decree of `2,61,13,308 in favour of the Plaintiff and against Defendants Nos. 1 and 2 as damages including punitive damages equal to the value of loss of CERs caused by them to the Plaintiff;

(d) an order requiring Defendants Nos. 1 and 2 to render up this Hon‟ble Court their Accounts of profits attributable to the use of all CFLs supplied by Plaintiff to Defendants Nos. 1 & 2 and diverted to other use, and awarding the same to the Plaintiff

(e) An order directing Defendants Nos. 1 and 2 to deliver up all records, papers and accounts whether in physical or in digital format and including all recording formats including but not limited to hard disks, pen drives, Compact Disks and the like, pertaining to the diversion of the Plaintiff‟s CFLs from the Habsiguda project, and all unused CFLs with all labels and containers, to the Plaintiff.

(f) Grant leave to Plaintiff under Order 2 Rule 2(3) CPC to sue for contractual relief if and when any cause of action arises in respect of the same;

(g) Award the costs of the present suit and legal expenses including counsel‟s fee in favour of the Plaintiff and against Defendants Nos. 1 and 2;

AND

That this Hon‟ble Court may be pleased to pass such further orders, if any, as it may deem fit and proper in the facts and circumstances of the present case."

7. Surely none of the reliefs claimed above and the causes of action on

the basis of which they are claimed can at all be established except through the

contract dated 10.2.2011. The case of the plaintiff in the plaint is that the defendant

no.1 has wrongly transferred some of the CFLs which were to be used in

Habsiguda in Andhra Pradesh to its other projects and consequently, there would

be loss of carbon credits for the plaintiff. Though there are prayer clauses claiming

injunctions etc against defendant no.1 and 2 from diverting the remaining CFLs

with them i.e. 95253 in number to any other person or any other project, in my

opinion, the primary relief and the real entitlement of the plaintiff (who

euphemistically is called as financier in the contract dated 10.2.2011) is to monies

as a seller who has sold CFLs to the defendant no.2. If a person to whom goods

are transferred, fails to pay consideration for the same, then, the right of a person

such as the plaintiff in this case is to basically recover either the price of the goods

or the consequential monetary amounts being the carbon credits in this case and for

which Clause 5 of the Agreement in fact specifies the expected transaction prices

of the different years from 2011 to 2017. The prayer Clause(C) also shows that

decree is sought for a sum of `2,61,13,308/- with respect to the value of such

CERs i.e "carbon credits‟. The further prayers with respect to injunction,

rendering of accounts and delivery of records etc are all those which arise pursuant

to breach of the contract dated 10.2.2011. In my opinion, shorn of the frills, the

plaint really seeks enforcement of contractual rights arising from the contract dated

10.2.2011 entered into between the plaintiff and the defendant no.2. Surely, and it

cannot be doubted, that, at every step, plaintiff will have to rely upon and prove the

terms of the contract dated 10.2.2011 with respect to claiming of the reliefs prayed

in the present suit.

8. Learned senior counsel for the plaintiff sought to rely upon various

judgments to argue that a suit which is filed claiming infringement of tortious

rights, cannot be barred under Section 69 of the Partnership Act, 1932. As already

stated above, there can be no quibble to this legal proposition, but here in reality

the suit is based on the contract dated 10.2.2011 and no law of torts. The suit

cannot be said to be enforcing rights under law of torts merely because cosmetic

averments to that effect have been made in the plaint. There has to be a

meaningful, and not a cursory, reading of the plaint. However so the plaintiff may

want to disguise the plaint, a thorough reading of the same shows that the suit

seeks enforcement of contractual rights. Though, para 22 of the plaint make

averments with respect to the rights/remedy arising in tort, but, there can be no

manner of doubt that all the rights arise from the contractual relationship viz under

the Agreement dated 10.2.2011. If a person to whom CFLs are given wrongly

„converts‟ the same, and though in a way it may be argued that there is a tort of

„conversion‟, really and actually what the plaintiff will be entitled to is the price of

CFLs which are said to be 95253 in number as also the other CFLs which the

defendant nos. 1 and 2 may have converted for use through other projects, besides

the price/value of the carbon credits which the plaintiff alleges it has lost and the

related reliefs of injunctions etc, and all of which spring from the contract dated

10.2.2011. The tortious actions which do not fall under Section 69 of the

Partnership Act, 1932 are really those actions which have absolutely no co-relation

to any contractual matter i.e they spring totally independent of contractual terms.

Once the main and almost the entire basis of the plaint is a contract, averments

made merely to camouflage the real nature of the suit by pleading that there is a

tort of conversion with regard to CFLs, cannot take away from the fact that really

and undoubtedly contractual rights are sought to be enforced, and I hold

accordingly.

9. I for one, with all humility, have failed to understand the attitude of

the plaintiff, as I have repeatedly put to its counsels that there should hardly be

difficulty in getting the partnership firm registered under Section 69 of the

Partnership Act, 1932 , and then filing the suit, and in fact from 6.7.2012 till today,

the partnership firm may even have been got registered under Section 69 of the

Partnership Act, 1932, yet, learned senior counsel for the plaintiff on instructions

states that the present suit is being pressed.

10. So far as the defendant no.1 is concerned, merely because at the

instance of the contracting party; being the defendant no.2-company and only with

whom the plaintiff has a contract with respect to CFLs; the deliveries have to be

made to it, there is no right of the plaintiff which will arise against the said

defendant no.1 with whom there is no privity of contract. Obviously, any relief

which may be granted in favour of the plaintiff will be binding not only against the

defendant no.2 but also its agents, servants, employees etc. i.e. including the

defendant no.1. Also, under Section 2(d) of the Contract Act, 1872 since

consideration to a contract need not flow only to a party to a contract, therefore

merely the delivery point person (assuming for arguments sake that delivery is

consideration under the contract and which it is not) is a person different from the

contracting party cannot /will not mean that such a person who takes delivery will

become a party to the contract. Therefore, really the defendant no.1 was not a

necessary party at all to this suit. I have a doubt that the object of adding the

defendant no.1 (as also the defendant no.3) really is to avoid the arbitration clause

in the contract dated 10.2.2011, for contending that the suit disputes cannot/ought

not to be referred to arbitration as the defendant nos. 1 and 3 are not parties to the

contract containing the arbitration clause.

11. So far as the defendant no.3 is concerned, the defendant no.3 authority

has been made a party to the suit so that injunction as prayed can be claimed

against it from not releasing the carbon credits to the defendant no.2. Really

therefore, the defendant no.3 authority is sued only as a garnishee i.e. a person who

would have control of the monies and assets of a debtor. The debtor in this case

would be the defendant no.2. A garnishee comes into play ordinarily only after a

decree is passed against the debtor, or if at all so during the pendency of the suit,

only limited to the aspect of interim proceedings whether under Order 38 or under

Order 39 CPC. Such a garnishee has no part in the cause of action to the suit and a

party to an interim proceedings cannot be a necessary party to the suit. In fact such

garnishee need not even be made a party to the suit and all that is required is that it

would be heard on the direction qua interim orders. I have already stated that the

object of adding the defendant no.3 (as also defendant no.1) is to get out of the

arbitration clause which requires the parties to settle their disputes by arbitration in

Washington D.C under the aegis of the International Chambers of Commerce. I

need not say anything further on the aspect of arbitration because I am dismissing

the suit on account of bar of Section 69(2) of the Partnership Act, 1932 and

defendants no. 1 & 3 not being required as parties to the suit. Of course, learned

senior counsel for the plaintiff is right in theoretically contending that defendant

no.2 may waive the arbitration clause, but, all I can say is that that would only be

known in due course of time. I must also note that prior to the filing of suit there

have been no attempt with respect to settlement of the disputes between the parties

by negotiations, and which is one of the requirement of Clause 11 of the contract

dated 10.2.2011.

12. In view of the above, I have no option but to dismiss the suit on

account of bar of Section 69 (2) of the Partnership Act, 1932. Defendant nos. 1 and

3 are unnecessary parties to the suit and the suit against them does not lie. The suit

is accordingly dismissed.

13. Since the suit is dismissed, all pending applications are also dismissed

accordingly.

14. The date fixed i.e. 26.7.2012 stands cancelled.

JULY 17, 2012                                         VALMIKI J. MEHTA, J.
ib