Calcutta High Court
Laxmi Niwas Mittal vs Lindsay International Private Limited ... on 16 January, 2018
Equivalent citations: AIRONLINE 2018 CAL 690
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
The Hon'ble JUSTICE SANJIB BANERJEE
And
The Hon'ble JUSTICE SABYASACHI BHATTACHARYYA
APO No. 527 of 2017
GA No. 3733 of 2017
In
CS No. 2 of 2017
LAXMI NIWAS MITTAL
-VERSUS-
LINDSAY INTERNATIONAL PRIVATE LIMITED AND OTHERS
For the Appellant: Mr P.Chidambaram, Sr Adv.,
Mr Siddhartha Datta, Adv.,
Mr Bodhisatta Biswas, Adv.,
Ms Suhani Dwivedi, Adv.,
Ms Surabhi Binani, Adv.
For the Respondent Nos. 1 to 3: Mr S. K. Kapur, Sr Adv.,
Mr Joy Saha, Sr Adv., Ms Dhrubo Ghosh, Sr Adv., Mr Ravi Kapur, Adv., Mr Shaunak Mitra, Adv., Ms Priyanka Prasad, Adv., Mr A. Roy, Adv., Mr S. R. Kakrania, Adv., Mr Sanjeeb Seni, Adv., Mr Arkadeb Biswas, Adv., Ms Ritika Shroff, Adv.
For the respondent No. 43: Mr Rishad Medora, Adv.,
Mr Pratik Ghose, adv.,
Mr Sourish Banerjee, Adv.
Hearing concluded on: January 10, 2018.
Date: January 16, 2018.
SANJIB BANERJEE, J. : -
In this seemingly David and Goliath standoff, iron and steel baron Laxmi Niwas Mittal complains of being needlessly impleaded in a frivolous action and insists that he should be relieved of being detained till the trial by the plaint pertaining to the suit being rejected as against him. The appeal is directed against the dismissal of the first defendant's application in such regard.
2. The principal contention of the first defendant appellant is that only an illusion of a cause of action has been spun against him in the plaint; and, that a meaningful reading of the drudgery spread over nearly hundred pages, would not reveal any legal cause having been espoused against him. The appellant asserts that a 1996 oral agreement that he is alleged to have entered into with the second plaintiff brother-in-law is downright fanciful and imaginary; and, even if it is taken at face value, the subsequent agreements as pleaded in the plaint and as evident from the documents pertaining thereto would destroy the edifice of the claim against him. The appellant says that though a maze of allegations has been stitched to rope in the appellant, the plaint does not disclose the thinnest thread of any cause of action that can be pursued against the appellant.
3. At the outset it must be recorded that though the order impugned was pronounced on September 18, 2017, the very day that the commercial division in this court was inaugurated in the morning, the plaintiffs have unreservedly accepted that the appeal may be treated as one under the Letters Patent since the hearing on the appellant's demurrer had been concluded long prior to the commercial division starting in this court.
4. It may also be profitable to notice the story that is narrated in the plaint, not by setting it out in its entirety or by referring to stray lines or phrases from it out of context, but by reflecting on what the plaint seeks to say on a bare reading thereof. This is necessary in the light of the tests that have to be applied to assess the appeal, not the least of them being that the court of the first instance has already found a semblance of a cause of action against the appellant for the suit to progress to trial, even against the appellant.
5. The first plaintiff is a company. The second plaintiff is the husband of the third plaintiff and he is the brother of the appellant's wife. According to the plaint, after the appellant prospered in an iron and steel venture in Indonesia, the appellant slowly consolidated his position as the head of one of the world's largest conglomerates in the iron and steel business with interests panning out all over the world and across almost all continents. The plaint makes out that in the upswing of the appellant's remarkable journey to his present colossal status, he offered to the second plaintiff, in course of a meeting at Mumbai in 1996, that the second plaintiff and his wife be associated with the appellant in a company that would be set up in India for the purpose of routing all of the supplies for the appellant's global empire procured from India.
6. The plaint narrates that the second plaintiff took up the appellant's offer and an oral agreement was entered between the second plaintiff and the appellant, where the appellant represented the many companies worldwide that were controlled by him, to establish the plaintiff company with its registered office in Calcutta. The company was born with the second plaintiff and one Rajan Tandon as the first subscribers to the memorandum and articles of association of such company. The company and its business were always to be controlled by the appellant and certain terms as to profit-sharing and transfer of revenue were agreed to. The company was formed on the basis of the pre-incorporation agreement entered into between the second plaintiff and the appellant in 1996 and, immediately on its formation, the plaintiff company started receiving requests for quotations (RFQs) for divers products needed by the appellant's companies worldwide. The plaintiffs claim to have developed and groomed a host of Indian suppliers from whom such supplies would be obtained and exported to the appellant's companies and concerns all over the world; with the plaintiff company being entitled to retain only five per cent of the value of the sales as profit and even the additional profits, if generated, being required to be transmitted to the appellant.
7. According to the plaint, shortly after the incorporation of the plaintiff company, 75 per cent of the paid-up capital in such company stood in the name of one Benhill Finance Limited, a Mauritius company completely controlled by the appellant, with the second plaintiff and wife third plaintiff holding the balance 25 per cent shares therein. The plaintiffs make out that even though Benhill exited the plaintiff company by making a gift of its shares to the second and third plaintiffs in 2002, the arrangement that had been set up in terms of the oral agreement of 1996 continued and the plaintiff company remained the single source for the procurement of supplies from India by the appellant's concerns all over the world.
8. The further narrative in the plaint is that in 2008, "it was decided by the first defendant (appellant) that for the further development of the purchasing and procurement business conducted by and through the plaintiff company in India as aforesaid a written agreement should be made". A French company within the ArcelorMittal group, by which name the appellant's business had, by then, come to be known worldwide, was "nominated" by the appellant "for the purpose of entering into such formal agreement with the plaintiff company". The collaboration agreement of August 12, 2008 with the French company, according to the plaint, continued the arrangement as before with the "French company acting as the agent of the entire group of AM Companies." As per the plaint, the collaboration agreement with the French company provided that "the plaintiff company would continue [as it had been doing all along] to the act as the sole and exclusive purchasing representative of all the AM Companies, on substantially the same terms and conditions ..."
9. The further case in the plaint is that towards the end of 2009, "the first defendant informed the plaintiffs that he proposed to substitute the collaboration agreement and in its place and stead he had decided that a Shareholder's Agreement (SHA) would be made concerning the plaintiff company to which the third defendant would be eo nomine the party representing the first defendant and the AM companies." The third defendant is said to have been incorporated at the instance of the first defendant in July, 2008 as a fully-owned subsidiary of the second defendant which is controlled by the appellant herein.
10. The shareholders' agreement was executed on January 21, 2010 and it envisaged the purchase of 25 per cent of the capital of the plaintiff company by the third defendant. The collaboration agreement of 2008 was to be formally terminated and, notwithstanding the clauses in the agreement being of more restrictive import, the case made out in the plaint is that the agreement of 2010 "unequivocally reaffirmed the hitherto exclusive arrangements subsisting between the Plaintiff Company and AM Companies for supply of goods and services from India ..." The plaint claims that such agreement provided "that its duration would be in perpetuity; and that the rights to procure goods or services for and on their (AM companies') behalf in India would be exclusively and irrevocably vested in the plaintiff company for such length of time as and until the dissolution of the plaintiff company might lawfully be brought about ..." According to the plaintiffs, the agreement of 2010 contains an implied negative covenant to the effect that none of the companies under the control of the appellant would issue any RFQs for procurement of materials or services from India to any vendors or suppliers other than the plaintiff company and further that none of them would procure any material or service from India other than through the plaintiff company under any circumstances.
11. According to the case made out in the plaint, since the inception of the plaintiff company and till March, 2016, "there was not a single sale to any of the AM Companies from India save through the plaintiff company." The plaint, then, dwells at length on what happened in the year 2016 after the appellant is said to have informed the plaintiffs that he desired an amendment to some of the clauses in the shareholders' agreement. In the exact words of the plaint, the "plaintiffs who had no option as always save to comply with the mandatory instructions of the first defendant, agreed to the amendments" and an appropriate document in such regard was executed between the plaintiffs and the third defendant on February 29, 2016. The plaintiffs maintain that notwithstanding the contents of the shareholders' agreement or the restrictive clauses in the amendment thereto, the "arrangements that were already in place between the AM Companies (including the third defendant) and the plaintiff company which had been subsisting since 1996" remained unchanged. Indeed, the plaint specifically refers to a clause in the amendment of February 29, 2016 to imply quite the opposite of what appears therefrom in its ordinary sense. The relevant clause provided that if an offer or contract presented by the plaintiff company to an ArcelorMittal company was not technically satisfactory or commercially competitive then it was open to the concerned ArcelorMittal company to consult the Indian market or source its desired products or services directly from an alternative supplier. The other part of the clause provided that in the event the ArcelorMittal companies were not satisfied with an offer from the plaintiff company, the ArcelorMittal company would be free to take an alternative direct offer. The plaint seeks to turn the clause on its head to suggest that no alternative supply could be procured in India by the AM companies or an alternative offer obtained without reference to the plaintiff company.
12. The disputes started, according to the plaint, from the month of April, 2016 when the appellant and the ArcelorMittal companies "wrongfully decided to renege and resile from all the existing irrevocable agreements with the plaintiff company and began to subvert the same and they also secretly and surreptitiously adopted various illegal and prohibited purchasing procedures to source goods, machinery and materials from Indian parties in flagrant breach and violation of all the aforesaid existing agreements with the plaintiff company including the terms of the SHA ...".
13. The plaint arrays the appellant herein as the first defendant and 37 companies from the ArcelorMittal group and four Indian suppliers, with whom the plaintiff company had exclusive arrangements to obtain supplies for the onward transmission thereof to the relevant ArcelorMittal companies, as the other defendants.
14. Several pages of the plaint are expended on how the Indian suppliers - the defendant Nos. 39 to 42 - were directly approached by the AM companies in breach of what is said to the subsisting arrangements between the plaintiffs on the one hand and the appellant and the AM companies on the other. A case is also made out of the Indian suppliers acting contrary to their agreements or arrangements with the plaintiff company to directly quote offers to the AM companies or even effect supplies to such companies. A cause of action in the nature of procuring breach of contract is sought to be made out by referring to several individual transactions.
15. Finally, it is alleged that the AM companies have withheld over Rs.79 crore on account of sales and delivery already made to them by the plaintiff company and there is a reference to a petition instituted under Section 9 of the Arbitration and Conciliation Act, 1996, AP 1034 of 2016, in this court by the third defendant against the plaintiff company on the basis of "fraudulent misrepresentations ... grossly misleading and/or untrue ... allegations ..." The plaintiffs also refer to the stand taken by the third defendant in such proceedings that the shareholders' agreement had been terminated at the instance of the third defendant. The plaintiffs assert that "such purported termination is illegal and wrongful and without any just cause whatsoever". The plaint laments that "Right from its inception, the plaintiff company was geared to only carry on business as the sole procurement representative of the AM Companies", that the "pre- incorporation agreement between the plaintiff no. 2 and the first defendant for establishing the plaintiff company is wrongfully and illegally threatened with extinction" and that "by reason of the aforesaid breaches of agreement and other wrongful acts and misconduct of the defendant Nos. 1 to 38 and each of them the business of the plaintiffs has been gravely impaired already and the plaintiffs have thereby suffered substantial loss and damage" in addition to the claim on account of price of goods sold and delivered made against the appellant and the AM companies.
16. The first and primary relief claimed in the plaint is as follows:
"(a) A decree in favour of the plaintiffs for specific performance of the pre-incorporation agreement pleaded in paragraph 6 of the plaint against the defendant Nos. 1 to 38 and/or each of them;"
17. The plaint is unmistakably in the voice of the second plaintiff who pleads an oral agreement of 1996 to be the basis for the plaintiff company to be established and the third plaintiff to be associated with the second plaintiff in the business. In essence, what the plaint says is that pursuant to the oral agreement of 1996 between the second plaintiff and the appellant, the plaintiff company was set up and it continued its business of exclusively procuring and supplying all purchases by the AM companies in India; that whether or not the appellant was directly a shareholder or in control of the management of the plaintiff company whether by himself or through his companies or nominees, it was the appellant who always called the shots in the plaintiff company, its distributions of profits and sharing of revenue; that notwithstanding the collaboration agreement coming only in 2008 and the shareholders' agreement replacing the collaboration agreement in 2010, the plaintiff company has been the sole source for the AM companies procuring goods and services from India; and, that the arrangement was abruptly discontinued in April, 2016 which has resulted in substantial damages being suffered by the plaintiffs. There is also a case of procuring breach of contract which is sought to be made out against the appellant and the AM companies qua the Indian suppliers and the parallel case of the Indian suppliers acting contrary to their exclusive agreements with the plaintiff company. The further cause espoused in the plaint is of the plaintiff company being entitled to the balance price of goods sold and delivered to the AM companies.
18. The appellant suggests that the plaint does not disclose any cause of action against him. The appellant says that even if the alleged agreement of 1996 is taken at face value, it is evident from the plaint that it is the overwhelming assertion therein that the appellant is the principal person in control of the AM companies. The appellant does not seek to hide behind technicalities and owns up that he may be the principal person in control of the AM companies. The appellant maintains that even if the plaint case is accepted and it is also assumed that it is really the appellant who is to be substituted for his companies in respect of the transactions with the plaintiffs or the plaintiff company, the pre-incorporation agreement would not survive the collaboration agreement or the subsequent shareholders' agreement which, together with its 2016 amendment, as appended to the plaint, have to be regarded as the final repository of the rights and obligations of the plaintiffs on the one hand and the appellant and the AM companies on the other.
19. The appellant refers to several clauses from the shareholders' agreement of January 21, 2010, including the items of supply being limited to those listed in the seventh schedule thereto, the right of the third defendant to unilaterally amend such schedule, the termination clause and the specific clauses providing that the entirety of the agreement between the parties was contained in such document in supersession of "all previous agreement/discussion between the parties relating to these transactions." The substance of the appellant's submission is that if the plaintiffs' case were to be taken as correct and the appellant seen to be the contracting party in place of the third defendant, by virtue of the clauses contained in such agreement of January 21, 2010, the previous agreements, if at all, between the parties, were undone. The appellant refers to the even more stringent clauses of the amendment to the shareholders' agreement executed on February 29, 2016, particularly the call option granted thereby to the Dalmias and the put option of the third defendant.
20. The appellant submits that there are six events which derogate from the pre-incorporation agreement (qua the plaintiff company) pleaded at paragraph 6 of the plaint: the memorandum and articles of association of the plaintiff company carry no reference to the alleged pre-incorporation agreement: even if Benhill could be regarded as the appellant's nominee controlling the majority shares in the plaintiff company shortly after its incorporation, Benhill exited the plaintiff company in 2002 and there was no presence of the appellant in any manner or form as a shareholder of the plaintiff company till the shareholders' agreement culminated in the third defendant acquiring a minority shareholding in the plaintiff company; there was no apparent association of the appellant with the plaintiff company between 2002 and 2008 till a French company in the AM group entered into the collaboration agreement with the plaintiff company in 2008; the entry of the third defendant as a shareholder of 25 per cent of the capital of the plaintiff company in 2010; the specific clauses of the shareholders' agreement of 2010 and the recognition therein that such agreement was the entirety of the agreement pertaining to the transactions covered thereby; and, the amendment in 2016 to the shareholders' agreement that permitted the Dalmias to call upon the third defendant to sell its shares to the Dalmias and also gave an option to the third defendant to exit the plaintiff company by offering its shareholding to the Dalmias.
21. The appellant has placed the plaint in large sections and claims that the pleading therein is ambiguous at the best, if not downright contradictory at most places. In particular, the perceived contradictions or ambiguity in the averments at paragraphs 6, 9 and 14 of the plaint have been emphasised on. As to the several causes of action pleaded in the plaint, the appellant asserts that the pre-incorporation agreement, if at all, stood wiped out upon the exit of Benhill from the plaintiff company and, at any rate, upon the collaboration agreement and, thereafter, the shareholders' agreement eclipsing the pre-incorporation agreement. As to the cause of action of procuring breach of contract, the appellant seeks to make out that a specific contract has to be demonstrated and its breach indicated for a cause of action in such regard to be meaningfully made out. The appellant says that there is not a single specific contract between the plaintiff company and a third party which is identified or the breach thereof alleged to have been procured by the appellant. As to the claim of the plaintiff company as an unpaid seller, the appellant submits that such cause of action has to be only against the specific AM companies who allegedly owe money to the plaintiff company and the allegation cannot be carried to the door of the appellant notwithstanding the appellant being the principal person in control of the concerned company or companies.
22. The appellant makes a distinction between himself and his companies and submits that the present endeavour is not to have the plaint rejected as a whole or the plaint rejected against the AM companies, but it is confined to the plaint being rejected as against the appellant on the ground that it discloses no cause of action against the appellant.
23. Several authorities have been brought by the parties to bear on the matters in issue at this stage. The appellant first relies on a judgment reported at (2012) 8 SCC 706 (Church of Christ Charitable Trust and Educational Charitable Society v. Ponniamman Educational Trust) for the proposition that it is permissible to order the rejection of the plaint as against one or some of the defendants. Paragraph 9 of the report formulates the points for consideration in such case and the first question covers the issue. The issue arose before the Supreme Court in the context of Order VII Rule 14 of the Code and the court clearly held, at paragraph 30 of the report, that the "Single Judge of the High Court has correctly concluded that in the absence of any cause of action shown as against the first defendant, the suit cannot be proceeded either for specific performance or for the recovery of money advanced which according to the plaintiff was given to the second defendant in the suit and rightly rejected the plaint as against the first defendant."
24. It must be noticed in this context that the plaintiffs have relied on three judgments for the proposition that a partial rejection of the plaint is impermissible. In the judgment reported at (1982) 3 SCC 487 (Roop Lal Sathi v. Nachhattar Singh Gill), the Supreme Court considered the propriety of a High Court order directing the striking out of certain paragraphs from an election petition. It observed, in such context, that "Where the plaint discloses no cause of action, it is obligatory upon the court to reject the plaint as a whole under Order VII, Rule 11(a) of the Code, but the Rule does not justify the rejection of any particular portion of a plaint ..." In similar vein, a judgment reported at (1999) 3 SCC 267 (D. Ramachandran v. R. V. Janakiraman) has been cited by the plaintiffs, again a case considering whether a portion of the pleading could be struck out under Order VII Rule 11 of the Code. The court referred to the judgment in Roop Lal Sathi and held that such provision "enjoins the Court to reject the plaint where it does not disclose a cause of action. There is no question of striking out any portion of the pleading under this Rule."
25. The plaintiffs also place a recent judgment reported at (2017) SCC Online SC 1000 (Sejal Glass Limited v. Navilan Merchants Private Limited) where it was observed at paragraph 6 of the report that "the provision refers to the 'plaint' which necessarily means the plaint as a whole." In that case a money claim was lodged against a company and three of its directors. On an application filed under Order VII Rule 11 of the Code, the High Court held that the plaint had to be bifurcated as it disclosed no cause of action against the directors of the defendant company; but the suit could continue against the defendant company. Such bifurcation of the plaint to reject the same against some of the defendants and not as a whole was expressly disapproved by the Supreme Court and the order set aside.
26. The appellant contends that the dictum in Sejal Glass Limited is per incuriam as the later two-judge Bench of the Supreme Court did not refer to the earlier two-judge Bench verdict in Church of Christ Charitable Trust.
27. Though nothing may turn on such question in this case, it appears that the traditional view in the interpretation of Order VII Rule 11 of the Code has uniformly been that a plaint has to be rejected either as a whole or not at all. While it is permissible for the name of any party improperly joined as a defendant to be struck out under Order I Rule 10(2) of the Code and the effect, in such a case, may be the same as the rejection of the plaint against such defendant, where the suit survives but no case is discovered to have been made out against a particular defendant or some of them, the name or names of such defendants ought to be struck out rather than the plaint being rejected as against them. It pertains to the form of the order and not to the substance thereof.
28. The appellant next refers to an unreported judgment rendered by a single judge of the Bombay High Court in Suit No. 192 of 2017 (Pramod Premchand Shah v. Ratan N. Tata) on July 10, 2017 to demonstrate what ought to be the contents of a plaint. Paragraph 8 of the decision emphasises that every suit has three components: "the first is the right or liability, breach or accrual of which is complained of in the suit; the second is the injury or grievance resulting from any actual breach or accrual on the part of the opponent; and the third is the relief that is claimed in the suit." This judgment has been brought by the appellant to contend that the facts as pleaded must necessarily lead to the right to obtain the relief sought for such facts being permitted to be established in course of a trial. According to the appellant, since the pre-incorporation agreement pleaded in paragraph 6 of the plaint stood substituted by the collaboration agreement of 2008 and, later, by the shareholders' agreement of 2010 and its amendment in 2016, once the plaintiffs are found to not be entitled to the primary relief directed against the appellant in the suit, there is no question of the appellant being detained to suffer the trial in this suit. It is, thus, the primary submission of the appellant that even if the pre- incorporation agreement as pleaded in the plaint is proved at the trial, it would not entitle the plaintiffs to any relief since such pre-incorporation agreement stood obliterated by the subsequent written agreements. The lesser case suggested by the appellant is that, at any rate, since specific performance of the pre-incorporation agreement cannot be obtained on one ground or the other, there is no justification or necessity for the pre- incorporation agreement to be proved at all.
29. The plaintiffs retort that it is not necessary that if the relief as sought in the plaint cannot be granted, the plaint would be liable to be rejected. The plaintiffs take the example of a claim for specific performance of an agreement which is ultimately declined by the court and contend that it is still possible for the claimant in such action to seek and obtain damages. The point that the plaintiffs make is that the relief claimed in the suit is not integral to the claim or an assessment of the present nature since the reliefs can always be moulded and need not be granted in the exact form in which they are sought.
30. The appellant next refers to Sections 91 and 92 of the Evidence Act, 1872 to emphasise that the pre-incorporation agreement - if there was one at all
- can no longer be urged or taken cognisance of in the light of the express clauses to the contrary in the shareholders' agreement as amended. The appellant maintains that once an agreement between the parties is reduced to writing, it is not open to plead evidence of certain oral terms not expressly included in the agreement. In support of such proposition a judgment reported at (1946) Bom LR 723 (Ramjohn Mehomoodin v. Yahyabhai Abdul Kayum) is placed where the court noticed that it was possible to give evidence of a subsequent oral contract.
31. The appellant next cites the famous judgment reported at AIR 1977 SC 2421 (T. Arivandandam v. T. V. Satyapal) to exhort that the court must embark on an exercise to read the plaint meaningfully and guard against the illusion of a cause of action that may be made out therein by clever drafting. The plaintiffs agree with the proposition that the plaint must be read meaningfully and not mechanically, but point out that in course of discerning the cause of action as pleaded in the plaint it must be remembered that there cannot be any compartmentalisation, dissection, segregation or inversion of the language used in the plaint. In such light, the plaintiffs rely on a judgment reported at (2004) 3 SCC 137 (Sopan Sukhdeo Sable v. Assistant Charity Commissioner) and place paragraphs 15 to 17 of the report. The court observed in that case that the "real object of Order VII Rule 11 of the Code is to keep out of courts irresponsible law suits" but cautioned that a piecemeal reading of the plaint was impermissible as "it is the substance and not merely the form that has to be looked into ..."
32. The appellant has referred to a single bench judgment of this court reported at AIR 2017 Cal 98 (Smt. Sumana Venkatesh Nee Sur v. Susanta Kumar Sur) at some length to indicate the modern approach in assessing a demurrer. Paragraphs 12 and 16 of the report may be of some relevance in the present context:
"12. The limited inquiry that a court may make upon receiving a challenge to a plaint on the ground that it does not disclose any cause of action is to ascertain from the documents appended to or relied upon in the plaint. If such inquiry requires an interpretation of the document, such interpretation must follow and only if the cause of action pleaded passes muster upon such interpretation, will the plaint survive the challenge."
"16. It is true that there is a view that an involved question should not engage a court at a stage prior to the trial, or, at least, on an application for rejection of the plaint on the ground that it does not disclose any cause of action. The original view was that only if the meanest mind could not discern a cause of action from a plaint, would the plaint be liable for rejection on a defendant's preliminary challenge. But it must be remembered that these views were of a day and age when a suit would be disposed of in months and not languish for decades without end as they do now. Crafty drafting and convoluted pleadings sometimes create the illusion of a cause of action where none exists and the modern approach is to read the plaint meaningfully to discover if there really is any cause of action apparent therefrom. Subsequent events are now also taken into account at the preliminary stage to ascertain whether the suit has become infructuous or the cause of action as pleaded overtaken by a subsequent event. The approach of a court has to be more meaningful than pedantic, more discerning than pedagogic."
33. The appellant relies on a passage from Ramaiya's Guide to the Companies Act (18th Ed) page 520 to demonstrate that the effect of a pre-incorporation agreement qua the concerned company is different under the Specific Relief Act, 1963 as there is a marked deviation therein from the principles of common law. Sections 15(h) and 19(e) of the Act of 1963 have been placed in such context. The appellant submits that not only must the pre- incorporation agreement be warranted by the terms of incorporation of the concerned company, e.g. by inclusion in its articles of association, it is also necessary that the company must have accepted the contract after its incorporation and communicated such acceptance to the other party to the contract. The appellant claims that since the pre-incorporation agreement pleaded at paragraph 6 of the plaint does not find any reference in the memorandum or articles of association of the plaintiff company it can scarcely be accepted that the plaintiff company was set up on the basis of such oral agreement or to carry on the business that is alleged to have been agreed to by the pre-incorporation agreement. Though the appellant initially sought to give a very constricted meaning to the word 'warranted' appearing both in Sections 15(h) and 19(e) of the Act of 1963, the appellant has conceded by referring to a judgment reported at (2006) 7 SCC 756 (Jai Narain Parasrampuria v. Pushpa Devi Saraf) that such word only implies that the business envisaged by the pre-incorporation agreement must not be ultra vires the purpose for which the company was incorporated.
34. The next focus of the appellant is on what, prima facie, appears to be the needless inclusion of a case of procuring breach of contract. The appellant makes two principal points in such regard to attack the plaint: that for a cause of action of procuring breach of contract to be made out, the relevant contract must be identified with sufficient clarity; and, that the cause of action does not lie in respect of anticipated contracts which are not entered into at the behest of the procurer. For such purpose the appellant first relies on paragraphs 51-03 and 51-05 from Bullen and Leake and Jacob's Precedents of Pleadings (14th Ed). The venerable text speaks of a two-fold requirement in a case of procuring breach of contract: "that the procurer acted with the requisite knowledge of the contract and with the intention to interfere with its performance". There is also a line in the text that it is only the breach of an existing contract which is the fundamental requirement of such tort and there is no tort of wrongfully inducing a person not to enter into a contract.
35. Two English judgments have also been placed on behalf of the appellant on such score: (1972) ICR 435 (Midland Cold Storage Ltd. v. Steer) for the proposition that there cannot be an action in tort against a person inducing another to not enter into a contract with the claimant; and (1993) ICR 612 (Middlebrook Mushrooms Ltd. v. Transport and General Workers' Union) for the principle that a case has to be made out against a specific contract and an omnibus charge would not do.
36. The plaintiffs needlessly contest such propositions by referring to a judgment reported at LR (1969) 2 Ch 106 (Torquay Hotel Co. Limited v. Cousins) where it was held that an injunction in an action for procuring breach of contract may not only be issued in respect of a present contract but may also be issued in respect of a future executed contract.
37. The parties are clearly at cross purposes on the permissible extent of such tort. Both the appellant and the plaintiffs are right in their stand. A contract not entered into cannot be made the subject-matter of a claim for procuring breach of contract since there cannot be any breach unless the contract is first in place. Equally, if any injunction is issued in respect of an existing contract, a quia timet action would also be maintainable in respect of a contract that is anticipated to be executed: not for the purpose of preventing the procurer from not letting the contract being entered into, but only to prevent the procurer from inducing its breach upon such contract being in place.
38. As observed earlier, the time expended on the tortious claim of procuring breach of contract has been a red herring of sorts. If it is the plaintiffs' case that it is the appellant who is the brains and mind of all his companies, then no question arises of the appellant procuring any breach of a contract between any of the plaintiffs and the AM companies; it may only be a case of the appellant being in breach of an agreement to which he is a party since the plaintiffs seek to obliterate the distinction between the appellant and the appellant's companies. Again, on the other side of the coin, it is not the plaintiffs' simple case of the appellant or his companies procuring breach of the existing contracts between the plaintiff company and the Indian suppliers. Surely, the plaintiffs would not be satisfied with a decree that restrains the appellant or his companies from interfering with the agreements between the plaintiff company and the Indian suppliers (the defendant Nos. 39 to 42). The plaintiffs' case is much larger. The plaintiffs seek the restoration of their agreements or arrangements with the Indian suppliers for the purpose of such supplies being ultimately routed to the appellant or his companies. The grant of the first part of the order and the denial of the second would be suicidal for the plaintiffs; for they would have supplies in their hand with nowhere to send them to and no money to pay for them.
39. It then boils down to the simple question whether the plaint discloses any shred of a cause of action against the appellant for the appellant's name not to be struck out from the array of parties or, as the appellant claims, for the plaint to be rejected as against the appellant. The undeniable impression that a meaningful and complete reading of the plaint leaves one with is that the plaintiff company was established on the representation of the appellant that the supplies of the appellant's companies worldwide would be exclusively procured in India through the plaintiff company, that such business continued for nearly 21 years since the incorporation of the plaintiff company despite the appellant or his nominees or instrumentalities not being directly associated with the plaintiff company for the entire length of time and that such business has been abruptly halted in April, 2016 leaving the plaintiff company and the two other plaintiffs in control thereof in the lurch. Once so much appears from the plaint it is not necessary to probe at this stage whether the termination of such arrangement, if at all, was just or reasonable or whether the plaintiffs would succeed in a claim for damages even if the nature of the subsisting agreement may not permit the specific performance thereof. A case is made out and that is all that is necessary to be ascertained at this stage.
40. The appellant assumes that the appellant's association with the plaintiffs' claim in the suit may be limited to his role in the alleged pre-incorporation agreement pleaded at paragraph 6 of the plaint. But the plaintiffs' case against the appellant is not limited to just the pre-incorporation agreement. The plaint makes out much more of a cause of action against the appellant than the appellant gives it credit.
41. Finally, it is not necessary that the exact relief to which the plaintiffs may be entitled must be specifically indicated in the plaint. It is possible for an alternative case for damages not to be made out in an action for specific performance of a contract, and the claim for damages included by way of a subsequent amendment when it is discovered that specific performance may not be available or such relief may not be granted by the court. Indeed, Section 21(2) of the Act of 1963 mandates that, if in a suit for specific performance of a contract the court decides that specific performance ought not to be granted, but that there is a contract between that parties which has been broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly. Though Section 21(5) of the Act prohibits a court from awarding compensation under Section 21 of the Act unless the plaintiff has claimed such compensation in his plaint, the proviso to such sub-section gives authority to the court, at any stage of the proceedings, to allow the plaintiff to amend the plaint for including a claim for compensation.
42. Further, one must be alive to the possibility of the myriad reliefs that a court is authorised to grant, by moulding the reliefs originally claimed in the plaint. Contrary to what the appellant contends, the role of the reliefs claimed in a plaint may be much less in discerning whether the plaint discloses a cause of action, whether on the whole or against a particular defendant.
43. In the operative part of the order impugned dated September 18, 2017, it was appropriately held that for the purpose of assessing whether the plaint disclosed a cause of action against the appellant, the averments in the plaint had to be accepted as correct. On the basis of such test, when the court of the first instance found that a semblance of a cause of action against the appellant herein was disclosed in the plaint such that the plaint could not be rejected against the appellant, the order impugned does not call for any interference. The interlocutory court was also justified in observing in the operative part of the order impugned that once the plaint disclosed a cause of action, the court is not called upon at the stage of assessing a demurrer to decide whether the case is likely to fail; the only consideration is whether the plaint discloses a cause of action against such defendant who asserts to the contrary. However, to the extent the appellant complains of several of the judgments referred to in the judgment impugned not having been cited by the parties, there appears to be some justification in the grievance. Ordinarily, a court should not rely on precedents in its judgments without first referring the parties to the relevant authorities.
44. APO 527 of 2017 and GA 3733 of 2017 are dismissed. There will, however, be no order as to costs.
45. Urgent certified website copies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
(Sanjib Banerjee, J.) I agree.
(Sabyasachi Bhattacharyya, J.)