Silgan White Cap Southeast Asia vs Vimoni India Private Limited And ...
2012 Latest Caselaw 5979 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                  Judgment Reserved on: May 1, 2012
%                               Judgment Pronounced on: October 5, 2012

+                      I.A. No.6450/2008 in CS (OS) No.1535/2007
       Silgan White Cap Southeast Asia                 ..... Plaintiff
                   Represented by: Mr.Darpan Wadhwa, Adv. with
                                     Mr.Nikhil Rohatgi and Ms.Jaishree
                                     Shukla, Advs.

                       Versus

       Vimoni India Private Limited And Anr.          ..... Defendants
                   Represented by: Mr.Harsh Kaushik, Adv. with
                                     Mr.Abhinav Tandon, Adv.

       CORAM:
       HON'BLE MR. JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.

1. By this order I shall dispose of I.A. No.6450/2008 filed by the defendant under Order 1 Rule 10 CPC seeking impleadment of M/s Amcor White Cap Deustchland GMBH (hereinafter referred to as AWCG) as a party to the present suit. The defendant prays that the said AWCG may be directed to become plaintiff in the present proceedings. The brief facts leading up to filing of the present application are enunciated as under:

a) The plaintiff namely Silgan White Cap Southeast Asia (formerly known as Amcor White Cap Southeast Asia Inc) (hereinafter referred as AWCSEA) has filed a suit for recovery seeking a recovery of sum of `1,78,00,000 equivalent to USD 437,446.75 which as per the plaintiff is the sum due to the plaintiff towards the performance of the contractual obligation as per the agreement dated 4th December, 2002

entered into between the plaintiff herein AWCSEA and the defendant herein.

b) It is averred in the plaint that the agreement was entered into on 4th December, 2002 between AWCSEA Inc and defendant herein whereunder, the defendant was to act as distributor of the plaintiff's products which include vacuum metal and plastic closures sealing equipments and auxiliaries. Pursuant to the said agreement, there were purchase orders placed by the defendant between the year 2004 to 2005 (the dates of the said purchase orders find mention in para 7 of the plaint).

c) It is stated in the application that AWCG had also entered into a contract with the defendant herein which is dated 20th April, 2005 and named as technology and sub license agreement. It is stated that the defendant had raised some purchase orders under the said agreement as well, which are not claimed by the plaintiff as the plaintiff was not the party to the said agreement.

d) It is further averred in the plaint that the plaintiff sent reminders to the defendant in the year 2006 to pay the said sum, but the defendant did not give any response to the same though it is mentioned that the defendant did respond to the communication of the plaintiff vide reply dated 18th February, 2006 and 24th March, 2006.

e) Therefore, the plaintiff has filed the present suit seeking to recover the said sum.

2. Pursuant to Summons, the defendant appeared and filed the written statement. The defence raised in the written statement can be outlined as under:

a) That the suit is bad on account of non joinder of necessary and proper party Amcor White Cap Deutschland GMBH. It is stated that the said company is not made party deliberately in order to defeat the defendant's right to file counter claim against the plaintiff.

b) This Court should direct that AWCG may be impleaded in the present suit as a plaintiff. AWCG is necessary and proper party. It is stated that the defendant has incurred lots of expenditure under the TSA agreement, of which the distribution agreement forms one of the parts of the parcel. The defendant has the readjustment claims against AWCG which has not been made party by the plaintiff deliberately and thus, the same may be directed to be made a party.

c) There are various clauses of TSA agreement, which have been discussed by the defendant in its written statement to contend as to how the defendant has incurred the expenses under the said agreement of which the distribution agreement is one of its part by virtue of Article 9 Clause 6 of TSA agreement. Therefore, the defendant is entitled to adjustment of the amounts so claimed by the plaintiff towards the pricing of the products mentioned in the plaint.

d) It is also stated that as per the said TSA agreement, the plaintiff was obliged to supply equipment and the defendant was obliged to buy the same. The said obligations were contingent upon the sales contract. Thus, in short, the plaintiff is insisting TSA indirectly which cannot be enforced as AWCG is itself at default. Consequently, no liability of the defendant arises under the distribution agreement. There are other defences raised in the written statement. However, I have to see the case of the parties on the basis of what has been stated in

application under Order I Rule 10 CPC, therefore the other defences in the written statement are not reproduced for the sake of brevity.

3. The defendant filed I.A. No.6450/2008 under Order I Rule 10 CPC seeking impleadment of AWCG as a party to the present proceedings. In the said application, the defendant has averred the following in order to seek impleadment of AWCG as a party to the present proceedings

a) That the Defendant had entered into a Distributorship and Agency Agreement on 4th December, 2002 with M/s Amcor White Cap Southeast Asia Inc as a subsidiary of AWCG and it was understood between the parties that the defendant was to act as an agent and distributor for the lug caps manufactured by AWCG and supplied by AWCSEA. Accordingly, the presence of AWCG is necessary in order to determine the real controversy between the parties.

b) There was a technology and sub license agreement which was entered into between AWCG on its behalf and on behalf of AWCSEA and the defendant which replaced the earlier distributorship agreement. Both the agreements were understood by the parties as a single document for the purposes of business relationship of AWCSEA and AWCG and the defendant. Therefore, the presence of AWCG is necessary in order to determine real controversy between the parties.

c) The said technology and sub licence agreement was terminated by AWCG illegally to which the defendants have certain claims, the plaintiff has deliberately not arrayed AWCG as a party to the present proceeding in order to deprive the defendant from raising the counter claim against the plaintiff by filing the suit in the present form.

d) The plaintiff itself admitted in the plaint that the TSA is connected with the distributorship agreement and both the agreements are

inseparable from each other rather than independent to each other. This is evident from the fact that the plaintiff itself mentioned the said agreements in the plaint and also annexes the same in the documents. Therefore, the plaintiff cannot be allowed to contend to the contrary by stating that the two agreements are independent to each other and AWCSEA and the plaintiff herein are separate legal entities than AWCG of which AWCSEA is the subsidiary.

e) It is also stated by the defendant/applicant that the defendants had claims against AWCG and due to the adjustment of the said claims, no liability towards AWCSEA or for that matter to the current plaintiff accrues. Therefore, till the time AWCG is directed to join the present proceedings, no effective adjudication of the present dispute can take place. AWCG is accordingly a proper party and necessary party to the present proceedings.

4. In view of the aforementioned grounds, the defendant prays that the AWCG may be directed to be joined as the plaintiff in the present proceedings as per the prayers made in the application in order to enable the defendant to prefer a counter claim.

5. The plaintiff has filed the reply to application wherein the plaintiff has responded to the grounds in the application in the following manner:

a) It is urged by the plaintiff that the AWCG and AWCSEA are two distinct legal entities. The distributorship agreement dated 4th December, 2002 was entered with AWCSEA which is a separate legal entity from AWCG. The said agreement nowhere establishes any kind of relation between AWCG and the defendant herein. The technology and sublicense agreement is a contract between AWCG and the defendant herein wherein AWCSEA is not the party. The said two

contracts are distinct and separate from each other. It is contended by the plaintiff that the defendant cannot club two agreements on the sole basis that AWCG is the subsidiary of AWCSEA when both the entities are separate in the eyes of law and distinct relationships are established by way of the said agreements.

b) The plaintiff contended that the parties never understood that the AWCG and AWSEA are the same and the distributorship agreement and technology agreement are one agreement. It is argued that the technology and sub licence agreement might have been an extension of the distributorship agreement. However, the complaint of the plaintiff in the present suit is confined to the recovery of the sums arising out of the losses incurred by the plaintiff due to the breach of the obligations under the said distributorship agreement between the year 2004 to 2005 when only the distributorship agreement was in existence between the parties to the present proceedings. Therefore, AWCG which was not the party to the said distributorship agreement dated 4th December, 2002 is neither the necessary party to the proceedings nor it is a proper party without which, the effective adjudication cannot take place in the present suit. The application is liable to be dismissed as the ingredients of Order I Rule 10 CPC are not satisfied.

c) The plaintiff responded to the defendant's plea that the plaintiff has deliberately not arrayed AWCG as a party to the proceedings so as to deprive the defendant to prefer a counter claim by contending that the defendant, if at all, has any claim against AWCG, the same can be addressed by preferring the separate suit and not in the present suit. The said claims may arise from the different agreement and can be

addressed in separate proceedings in the suit and in the manner stated by the defendant applicant.

6. In view of the aforementioned reply, the plaintiff contended the application filed by the defendant ought to be dismissed.

7. The matter came up for hearing when Mr. Darpan Wadhwa, learned counsel appeared on behalf of the plaintiff and Mr. Harsh Kaushik, learned counsel appeared on behalf of the defendant, both have made their submissions in consonance with the averments made in the application and the reply thereof. Therefore, the said submissions are not repeated for the sake of brevity.

8. I have gone through the application filed by the defendant under Order I Rule 10 CPC, reply filed by the plaintiff and also perused the documents filed by the parties in the present proceedings. I shall now proceed to discuss the matter in view of the rival submissions advanced by the parties.

9. First and foremost thing, according to me which needs to be seen in the instant case is that the cause of action as pleaded in the suit giving rise to the present suit. The plaintiff has mentioned in the plaint that the defendant had entered into the distribution agreement with the plaintiff and pursuant to the same, the defendant has placed the orders upon the plaintiff between the year 2004 and 2005 which were duly executed by the plaintiff, but the defendant did not pay the bills towards performance of the said obligations. The cause of action in the instant suit is thus confined to the recovery of the sum which was due to the plaintiff from the arrangement carried out by the parties under the distributorship agreement in the year 2004 and 2005. It is a matter of fact that the technology and sub licence agreement was entered

into between AWCG and the defendant herein in the year 2005 which is clear from the date of the agreement which is 20th April, 2005.

10. In the backdrop of the cause of action of the instant suit, let me now evaluate the clauses of the agreements in order to find out whether any such nexus exists between the two agreements which make AWCG as a necessary or proper party.

11. It is contended by the applicant/defendant that the distributorship agreement has although been entered into between AWCSEA and the defendant herein but it was understood by the parties that there is a clear involvement of AWCG in the said agreement and therefore, the AWCG is a necessary and/or proper party to the present proceedings. Let me evaluate the said aspect by going through the distribution agreement.

12. A closer reading of distributorship agreement would reveal that the said agreement has been entered into between AWCSEA and Vimoni India Pvt. Ltd. wherein AWCSEA is the principle company and Vimoni is the distributor. There is no whisper in the agreement regarding the involvement of AWCG. There is no participation in the agreement of AWCG so far it relates to the distribution agreement. Even no part of consideration is moving from AWCG in order to establish any such privity between the AWCSEA and AWCG. Accordingly, the said distribution agreement which is the basis of the present suit nowhere provides for the reference of any such company which is AWCG and clearly the said agreement has been bilateral in nature which is between AWCSEA and the defendant herein.

13. The technology cum licence agreement dated 20th April, 2005 has been entered into between AWCG and the defendant herein where under there is a reference of Amcor White Cap Inc but not of AWCSEA. The said agreement also deals with the rights of the obligations of the respective

parties who entered in to the contract. The defendant however, relies upon clause 9 (6) in order to establish some nexus between the two agreements.

14. Before the end of first 10 years period, AWCG has the right to ask licensee to create a joint venture to develop jointly the Indian market, until such a JVC is formed, AWCG agreed on behalf of itself and its subsidiaries and affiliates not to set up a competing business in the contractual territory. The parties, however, agree that the distributorship agreement between AWCSEA and Licensee dated 4th December 2002 shall continue to remain in force according to the terms thereof. It will be a constituent part of this agreement.

15. The defendant attempted to argue that the last two lines of the said clause 9 (6) makes the liability under the distributorship agreement dependent upon the liability under the technology and sub license agreement. I find that the same is not so as the clause reads that the distribution agreement shall continue to remain in force according to the terms thereof. The said wordings make it apparent that the agreement shall continue to be in force as per its own terms and conditions. Thereafter, if there is one line added which is that it will be a constituent part of this agreement would not make the liability of one agreement contingent upon the other. Rather, the said wordings indicate that the distribution agreement and its terms shall be read as part of the technology and sub licence agreement and there shall be no contradictions between the two. Thereafter, there is no other clause in the technology and sub license agreement which further clarifies on this aspect as to whether there shall be adjustment of liabilities under the distributorship agreement with that of the technology and sub licence agreement. In the absence of any such clause in the technology and sub license agreement, no such nexus between the two

agreements can be established more so when clause 9 (6) provides explicitly that the distributorship agreement shall remain valid as per its own terms. Relevant clause 9(6) of the agreement reads as under:

"6. Before the end of the first 10 years period, AWC has the right to ask Licensee to create a Joint Venture Company (JVC) to develop jointly the Indian market. Until such a JVC is formed, AWC agrees on behalf of itself and its subsidiaries and affiliates not to set up a competing business in the Contractual Territory. The parties, however, agree that the Distributorship Agreement between Amcor White Cap Southeast Asia, Inc. and Licensee dated 4 December 2002 shall continue to remain in force according to the terms thereof. It will be a constituent part of this agreement."

16. In any case, the submission of the defendant is misplaced due to the reason that the suit of the plaintiff pertains to the demands which were made by the plaintiff for the sum due to the defendant in the year 2004 and 2005. The technology and sub license agreement was entered into on 20th April, 2005. In the absence of any clear clause in the later agreement providing for the adjustments of the previous liabilities, it cannot be assumed on a priority basis that the later agreement shall also take care of the liabilities under the earlier agreement. Therefore, it cannot be said that the demands and sum due to under the distributorship agreement vanished as soon as the technology and sub license agreement was entered into and the defendant performed certain obligations under the latter agreement. The disputes under the distributorship agreement and technology and sub license agreement shall be governed by the two agreements separately and shall be decided between the respective parties to the agreements and not in the manner attempted to be done by the defendant.

17. Even the later correspondence between the plaintiff and the defendant would reveal that the plaintiff's stand has been very categorical when the

plaintiff made a demand of the sum due from the defendant by way of letter dated 23rd January, 2006 and 13th February, 2006 that the said sum of USD 437,446.75 is due from the defendant under the distributorship agreement. It is only the defendant who has sought to establish such kind of nexus between the two agreements by raising some grievances with the plaintiffs. Therefore, it would not be wise to state that the parties have always understood that both the agreements are related to each other. The said submission of the defendant is accordingly rejected being without merit.

18. Let me now discuss the law relating to impleadment of the parties so as to see whether AWCG is proper or necessary party to the proceedings. For doing the same, Order I Rule 10 of the Code of Civil Procedure, 1908 is reproduced hereinafter:

"10. Suit in name of wrong plaintiff

(1) Where a suit has been instituted in the name of the wrong person as plaintiff or where it is doubtful whether it has been instituted in the name of the right plaintiff, the Court may at any stage of the suit, if satisfied that the suit has been instituted thought a bona fide mistake, and that it is necessary for the determination of the real matter in dispute so to do, order any other person to be substituted or added as plaintiff upon such terms as the Court thinks just.

(2) Court may strike out or add parties.-

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.

(3) No person shall be added as a plaintiff suing without a next friend or as the next friend of a plaintiff under any disability without his consent.

(4) Where defendant added, plaint to be amended-

Where a defendant is added, the plaint shall, unless the Court otherwise directs, be amended in such manner as may be necessary, and amended copies of the summons and of the plaint shall be served on the new defendant and, if the Court thinks fit, on the original defendant.

(5) Subject to the provisions of the Indian Limitation Act, 1877 (15 of 1877), section 22, the proceedings as against any person added as defendant shall be deemed to have begun only on the service of the summons."

19. A bare reading of Order I Rule 10 (2) would show that the court may at any stage add any person as plaintiff or defendant who ought to have been joined or whose presence before the court may be necessary in order to enable the court to effectually and completely adjudicate upon and settle all the questions involved in the suit.

20. The judicial decisions decided on the applicability of Order 1 Rule 10 CPC proceed to state that the person may be ordered to be joined as a party to the suit when the said person is either a proper or a necessary party. A necessary party is one without whom no judgment or decree can be passed. A proper party is one against whom though no relief is claimed but without whose presence, the suit cannot be effectively decided by the court or whose presence is necessary in order to decide all the questions involved in the suit.

21. It is equally well settled that even after arriving at the finding of the necessary and proper party, it is still a matter of discretion of the court to order for impleading the party in the suit. This has been noticed by the Hon'ble Supreme Court of India time and again and more recently in the

case reported in (2010) 7 SCC 417, Mumbai International Airport Pvt. Ltd. Vs. Regency Convention Centre and Hotels Pvt. Ltd. and Ors., wherein Hon'ble R.V. Raveendran, J. (as his lordship then was) observed thus:

"The said sub-rule is not about the right of a non-party to be impleaded as a party, but about the judicial discretion of the court to strike out or add parties at any stage of a proceeding. The discretion under the sub-rule can be exercised either suo moto or on the application of the plaintiff or the defendant, or on an application of a person who is not a party to the suit. The court can strike out any party who is improperly joined. The court can add anyone as a plaintiff or as a defendant if it finds that he is a necessary party or proper party. Such deletion or addition can be without any conditions or subject to such terms as the court deems fit to impose. In exercising its judicial discretion under Order 1 Rule 10(2) of the Code, the court will of course act according to reason and fair play and not according to whims and caprice. This Court in Ramji Dayawala & amp; Sons (P) Ltd. vs. Invest Import- 1981 (1) SCC 80, reiterated the classic definition of `discretion' by Lord Mansfield in R. vs. Wilkes - 1770 (98) ER 327, that `discretion' when applied to courts of justice, means sound discretion guided by law. It must be governed by rule, not by humour; it must not be arbitrary, vague, and fanciful, `but legal and regular'" (Emphasis Supplied)

22. Applying the said principle of law to the facts of the present case, I do not find that the AWCG is either a necessary party or proper party to the present suit and thus no such discretion can be exercised under Order I Rule 10 of CPC. It is again reiterated that what has to be seen is the presence of the party, be it necessary or proper in order to adjudicate and settle all the questions involved in the suit. The wordings "all the questions involved in the suit" as stated under Order I Rule 10 CPC are relevant and have specific meaning as they are inserted in the provision which is that the court has to test as to whether the presence of the party to be impleaded is warranted in the light of the questions involved in the suit and not by the fact that there

may arise any other dispute which may incidentally affect the suit pending before the court though the same may not be the question involved in the suit. If that situation arises, then such party would not be a proper or necessary party to the proceedings which will enable the court to exercise any such discretion under Order I Rule 10 CPC and the same would be a jurisdictional error.

23. If the present case is tested on the principle of law governing Order I Rule 10 CPC, it is clear that the grievance of the plaintiff in the instant suit rests on a very narrow compass which is the recovery of sum of USD 437,446.75 due from the defendant between the year 2004 to 2005 under the distributorship agreement dated 4th December, 2002. The defendant may have entered into the technology and sub license agreement later on 20th April, 2005 with AWCG and may have certain dispute with the said party. But, the presence of AWCG is not necessary in order to determine the questions involved in the suit.

24. The questions involved in the suit may have to be seen from the cause of action and the material facts pleaded in the suit. The questions involved in the suit cannot be substituted by the defendants by pleading something outside the suit by introduction of new facts giving rise to new cause of action and enlarging the scope of the suit. This is exactly what the defendant is attempting to do by setting up a defence that the defendant has to set of against the entity AWCG which is not even party to the distribution agreement and insisting upon this court to add AWCG as a party so that the dispute between the AWCG and the defendant herein should be decided herein when the same is not falling within the purview of the present suit. The defendant is not precluded from preferring an independent suit for agitating the said controversy. But the same cannot be done by the defendant

in the instant suit, as the cause of the action in the instant suit is confined to recovery of sum due from the defendant for the orders executed by the plaintiffs and not by AWCG which is a stranger to the contract.

25. In the case reported in AIR 2005 SC 2813, Kasturi vs. Iyyamperumal and Others after considering the provisions of Order 1 Rule 10 of the Code, the Apex Court has held that the necessary parties in a suit for specific performance of a contract for sale are the parties to the contract or if they are dead their legal representatives as also a person who had purchased the contracted property from the vendor. It is held that the contract constitutes rights and also regulates the liabilities of the parties. It is held that two tests are to be satisfied for determining the question who is a necessary party. Tests are - (1) there must be a right to some relief against such party in respect of the controversies involved in the proceedings (2) no effective decree can be passed in the absence of such party. In the said Judgment, the Apex Court has followed the Judgment in the case reported in (1996) 10 SCC 53 Vijay Pratap and Others vs. Sambhu Saran Sinha wherein it was held as under :-

"14. ..............to decide the right, title and interest in the suit property of the stranger to the contract is beyond the scope of the suit for specific performance of the contract and the same cannotbe turned into a regular title suit. Therefore, in our view, a third party or a stranger to the contract cannot be added so as to convert a suit of one character into a suit of different character." (Emphasis supplied)

26. In para 15 of the said Judgment delivered by the Apex Court, it is held as under:-

"15. That apart, from a plain reading of the expression used in sub-rule (2) Order 1 Rule 10 of the CPC "all the questions involved in the suit" it is abundantly clear that the legislature clearly meant that the controversies raised as between the

parties to the litigation must be gone into only, that is to say, controversies with regard to the right which is set up and the relief claimed on one side and denied on the other and not the controversies which may arise between the plaintiff/appellant and the defendants inter se or questions between the parties to the suit and a third party. In our view, therefore, the court cannot allow adjudication of collateral matters so as to convert a suit for specific performance of contract for sale into a complicated suit for title between the plaintiff/appellant on one hand and Respondent Nos. 2 & 3 and Respondent Nos. 1 and 4 to 11 on the other."

27. Upon testing the case of the defendant/applicant seeking to implead AWCG as a party to the present suit, the conclusion is inescapable which is that AWCG not being a party to the distributorship agreement is neither a necessary party nor a proper party in order to decide the questions involved in the present suit which is a recovery of sum due under the distributorship agreement entered into plaintiff and defendant and not with AWCG. Even the reading of Order 1 Rule 6 CPC would reveal that the plaintiff at his option can add parties liable on one contract as parties to the proceedings. In no circumstances, the parties liable under the two distinct contracts can be compelled by the court to be joined together in the same suit only due to the reason that there is a commonality between some of parties.

28. It appears to the Court that there is force in the submission of the plaintiff that the plaintiff as well as proposed plaintiff would suffer irreparable loss and injury, if the prayer made in the application is allowed. They have also argued that the main intention of the defendant is to file the counter-claim against them after the proposed plaintiff becomes a party as the defendant has reserved his right in the written statement. They submit that it is malafide on the part of the defendant to file such application as even otherwise any claim alleged by the defendant against the plaintiff and

proposed plaintiff already becomes barred by limitation. Without deciding anything on merit as alleged by them, I am of the view that the application filed by the defendants is not maintainable. Under these circumstances, the Court cannot direct the impleadment of the AWCG as plaintiff as prayed in the application. Consequently, I.A. No.6450/2008 filed by the defendant is dismissed.

CS (OS) No.1535/2007 List on 23rd November, 2012 before Roster Bench for directions.

(MANMOHAN SINGH) JUDGE OCTOBER 5, 2012