M/S Ace Innovators Pvt Ltd vs Hewlett Packard India Sales Pvt ...
2013 Latest Caselaw 4591 Del

20# $
*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+                I.A. No. 15446/2013 in CS(OS) 1712/2012

%                                           Decided on: 4th October, 2013

M/S ACE INNOVATORS PVT LTD                      ..... Plaintiff
                 Through: Ms. Swega Agarwal, Advocate.

                                   versus

HEWLETT PACKARD INDIA SALES
PVT LTD & ORS                                ..... Defendants
                  Through: Mr. P.V. Dinesh, Advocate for
                           Defendant No. 1.
                           Mr. Vikas Mehta, Mr. Rajat Sehgal
                           and Ms. Vandana Anand, Advocates
                           for Defendant No. 2.
                           Mr. Anil Airi, Ms. Shreya Bhandari
                           and Mr. Hemant Manjani, Advocates
                           for Defendant No. 3.
CORAM:
HON'BLE MS. JUSTICE MUKTA GUPTA


MUKTA GUPTA, J (ORAL)

I.A. No. 15446/2013 (u/Order VII Rule 11 and Order 1 Rule 10 CPC by
Defendant No. 3) in CS (OS) No. 1712/2012


1.

Learned counsel for the Defendant No. 3/the applicant contends that the Defendant No. 3 is neither a necessary nor proper party to the present suit and thus be deleted from the array of parties. The contract was entered into between the Plaintiff and the Defendant No. 1/Defendant No. 2. The

Defendant No. 3 is only an agent and when the principal is known no suit would be maintainable against the agent. Referring to Section 23 of the Indian Contract Act it is contended that the agent is not personally bound by the acts of the principal and no presumption arises against the agent. Reliance is placed on Prem Nath Motors Limited vs. Anurag Mittal, 2009 (16) SCC 274 and Tristar Consultants vs. M/s Customer Services India Pvt. Ltd. and another, AIR 2007 Delhi 157.

2. Learned counsel for the Plaintiff on the other hand contends that the Defendant No. 3 is a necessary and proper party. Defendant No. 3 delivered the goods and the delivery was found to be short and thus the cause of action arises against the Defendant No. 3 and hence he cannot be deleted from the array of parties.

3. I have heard learned counsel for the parties.

4. The facts pleaded in the plaint are that the Plaintiff which is a private limited company incorporated under the Companies Act, 1956 undertook the project awarded to it by the Unique Identification Authority of India (UIDAI) for data capture of residents of Delhi and their enrollment process for facilitating the process of issuance of ADHAAR cards by Delhi Government. For the execution of the project the Plaintiff required computer equipments which would adhere to the requirements/guidelines as stipulated and provided by the UIDAI. One of the mandatory requirements in the check list was that the laptops used for the project should be „32 BIT operating system‟ and not „64 BIT operating system.‟ Thus the Plaintiff purchased various computer products/equipments/its peripherals etc. of Defendant Nos. 1 and 2 during the period June, 2011 to September, 2011. The Defendant Nos. 1 and 2 are sister concerns wherein the Defendant No. 1

is involved in selling various electronic/computer products/peripherals relating to the information technology under the mark of Hewlett Packard (HP) and Defendant No. 2, offers/gives finance/funding facility of payment of bills to its customers to facilitate the purchase of computer equipments/products. The Defendant No. 3 is one of the authorized distributor/supplier of the products of HP Company. In September/October, 2011 the Plaintiff approached the Defendant No. 2 for availing of Rs. 1,57,59,012.22 for finance/funding facility for purchase of computer equipments/products/peripherals required by the Plaintiff with specific condition on the Plaintiff by the Defendant No. 2 that it would be mandatory for the Plaintiff to purchase 50% products of Defendant No. 1. The Plaintiff placed orders for purchase of 215 laptops of brand HP to Defendant No. 1 on 3rd October, 2011 which was also financed/funded by the Defendant No. 2. The Plaintiff signed a master rental and finance agreement dated 19th October, 2011 with the Defendant No. 2 along with all other necessary documents annexed with the aforesaid agreement. As mandated by the Defendant No. 2 the Plaintiff also furnished the bank guarantee for a sum of Rs.44,62,125/- and issued 24 post dated cheques of Rs. 7,82,751/- each in favour of the Defendant No. 2. That out of the aforesaid 215 laptops only 127 HP laptops were delivered to the Plaintiff on 28 th October, 2011 by the Defendant No. 3 and the remaining 88 laptops were not delivered at all to the Plaintiff. Further the aforesaid 127 HP laptops were neither in consonance with the specifications of the purchase orders and had 65 Bit operating system installed in them instead of 32 Bit operating system. The Plaintiff vide its email dated 29th October, 2011 apprised the facts to the representative of the Defendant No. 2 Mr. Rohit Kumar and requested him to

change all the laptops. The emails were replied by Mr. Rohit Kumar Arora on 31st October, 2011 assuring to resolve the issue by reloading and installing 32 Bit operating system on the said 127 HP laptops. It is further contended that despite assurance the needful was not done and after lot of persuasion 127 laptops were finally picked up by the representative of the Defendant No. 3 on 23rd November, 2011 after an assurance of the representative of the Defendant No. 1 that they shall replace the 127 laptops immediately with new laptops in conformity with the purchase orders. It is contended that since out of 215 laptops only 127 laptops were supplied the Defendant No. 2 did not have the right to invoke the bank guarantee of Rs. 44.62.125/- and/or to encash the post dated cheques. Thus the Plaintiff by the present suit claims damages against the Defendants.

5. It is well settled that for deciding the application under Order VII Rule 11 CPC r/w Order I Rule 10 CPC the averments made in the plaint have to be read by way of demurrer. The only averments in the entire plaint against the Defendant No. 3 is that the Defendant No. 3 is the authorized distributor and supplied the products of HP company, that the Defendant No. 3 delivered to the Plaintiff 127 HP laptops instead of 215 HP laptops, did not deliver the remaining 88 laptops and finally after great persuasion 127 HP laptops were picked up by the representative of the Defendant No. 3 on 23 rd November, 2011. Admittedly there is no privity of contract between the Plaintiff and the Defendant No. 3. Further admittedly the Defendant No. 3 is an agent of Defendant no. 1 Company, its authorized distributor/supplier. It is in the light of these averments it is to be seen whether the Defendant No. 3 is a necessary party or not. Section 230 of the Indian Contract Act (in short „Contract Act‟) provides as under:

230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal.- In the absence of any contract to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.

Presumption of contract to contrary.- Such a contract shall be presumed to exist in the following cases: - (1) Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad;

(2) Where the agent does not disclose the name of his principal;

(3) where the principal, though disclosed, cannot be sued."

6. It is thus evident that in terms of Section 230 of the Contract Act, in the absence of any contract to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by him. Further there is no presumption to the contrary as the name of the principal is known to the Plaintiff. In the present case, the agent, that is Defendant No. 3 has not entered into the contract with the Plaintiff and thus cannot be sued for the damages for breach of contract by Defendant No.

1. In Prem Nath Motors Limited (supra) the Hon‟ble Supreme Court held:

"7. Section 230 of the Contract Act categorically makes it clear that an agent is not liable for the acts of a disclosed principal subject to a contract of the contrary. No such contract to the contrary has been pleaded. An identical issue was considered by this Court in the case of Marine Contained Services South (P) Ltd. v. Go Go Garments, where a similar order passed under the Consumer Protection Act was set aside by this Court. It was held that by virtue of Section 230 the agent could not be sued when the principal had been disclosed. A

similar view has been expressed by a three judge Bench of this Court in Civil Appeal 6653/2005 arising out of S.L.P. (C) No. 19562/2004."

This court in Tristar Consultants (supra) held:

"26. A perusal of Section 230 of the Indian Contract Act 1872 shows that unless an agent personally binds himself, an agent is not personally liable for contracts entered into by him on behalf of his principal.

27. I may note an exception. The exception is that where an agent has contracted on behalf of a principal who is unnamed and undisclosed, on properly constituted pleadings and on so establishing, such an agent who acts on behalf of a undisclosed principal may be personally liable for a contract entered into by him.

28. To interpret the law as is sought to be projected by the petitioner would mean negation of the concept of a company being limited by its liability as per the memorandum and articles of association of the company. Other than where directors have made themselves personally liable i.e. by way of guarantee, indemnity etc. liabilities of directors of a company, under common law, are confined to cases of malfeasance and misfeasance i.e. where they have been guilty of tort towards those to whom they owe a duty of care i.e. discharge fiduciary obligations. Additionally, qua third parties, where directors have committed tort. To the third party, they may be personally liable.

29. For example by making false representations about a company, a director induces a third party to advance a loan to the company. On proof of fraudulent misrepresentation, a director may be personally liable to the third party.

30. But this liability would not flow from a contract but would flow in an action at tort. The tort being of misrepresentation of inducement and causing injury to the third party having induced the third party to part with money."

7. In the facts of the case, though the plaint is not liable to be rejected for mis-joinder of Defendant No. 3 however, the Defendant No. 3 is liable to be deleted from the array of parties as he is neither a proper party nor a necessary party.

Application is disposed of deleting the Defendant No. 3 from the array of parties.

(MUKTA GUPTA) JUDGE OCTOBER 04, 2013 'vn'