Karnataka High Court
M/S Tilaknagar Industries Ltd vs M/S Anupama Wine Distributors on 8 November, 2022
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 8TH DAY OF NOVEMBER 2022
BEFORE
THE HON'BLE MR. JUSTICE R.NATARAJ
WRIT PETITION NO.23978 OF 2014 (GM-CPC)
BETWEEN:
M/S. TILAKNAGAR INDUSTRIES LTD.,
A COMPANY REGISTERED UNDER
THE COMPANIES ACT,
HAVING ITS REGD. OFFICE AT
TILAKNAGAR,
TAL-SHRIRAMPUR,
DIST: AHMEDNAGAR,
MAHARASHTRA-413720
AND HAVING ITS CORPORATE OFFICE
AT INDUSTRIAL ASSURANCE BUILDING,
III FLOOR, CHURCHGATE,
MUMBAI - 400 020
AND AT NO.24, 12TH MAIN,
OPP. TO WATER TANK, I STAGE,
BTM LAYOUT, BANGALORE
REPTD. BY ITS
AUTHORISED SIGNATORY
DR. KESHAB NANDY
...PETITIONER
(BY SRI. M.S.RAJENDRA, ADVOCATE)
AND:
1. M/S ANUPAMA WINE DISTRIBUTORS
A REGISTERED PARTNERSHIP FIRM
NO.1313, 9TH CROSS, 27TH MAIN,
1ST PHASE, J.P. NAGAR
BANGALORE,
2
REPTD. BY ITS
MANAGING PARTNER
SRI. K. ANAND RAO
2. M/S. THE UGAR SUGAR WORKS LIMITED
A COMPANY REGISTERED UNDER
THE COMPANIES ACT,
HAVING ITS REGD. OFFICE
WORKS, UGARKHURD-591316
ATHANI TALUK, DIST. BELGAUM,
KARNATAKA, PIN-591316.
3. M/S. NETRAVATHI DISTILLERIES PRIVATE LTD.,
A COMPANY REGISTERED UNDER
THE COMPANIES ACT,
HAVING ITS REGD. OFFICE
NO.1-3C 2E KUMPALA,
DERALAKATTE POST, Respondents
MANGALORE-570160. 2 to 5 are
deleted vide
4. THE KARNATAKA STATE BEVERAGES Court order
CORPORATION LTD., dated
A COMPANY REGISTERED UNDER 24.06.2021
THE COMPANIES ACT,
HAVING ITS REGD. OFFICE AT NO.78,
SEETHALAKSHMI TOWERS,
MISSION ROAD,
BANGALORE.
REPRESENTED BY ITS
DIRECTOR
5. VIJAYA BANK
GANDHI BAZAR BRANCH,
BANGALORE
REPRESENTED BY ITS MANAGER
6. ANUPAMA DISTRIBUTORS
A REGISTERED PARTNERSHIP FIRM
NO.1313, 9TH CROSS, 27TH MAIN,
IST PHASE, J.P. NAGAR,
BANGALORE
REPTD. BY ITS MANAGING PARTNER
SRI. K. ANAND RAO
3
7. MR. K. ANAND RAO
S/O MR. K. RATTAIAH
64 YEARS,
HAVING OFFICE AT NO.1313,
9TH CROSS, 27TH MAIN
IST PHASE, J.P. NAGAR,
BANGALORE.
8. MR. RAJENDRA RAO
S/O MR. K. ANANDA RAO
MAJOR
HAVING OFFICE AT NO.1313,
9TH CROSS, 27TH MAIN
IST PHASE, J.P. NAGAR,
BANGALORE.
9. MR. RATAN RAO
S/O MR. K. ANANDA RAO
MAJOR
HAVING OFFICE AT NO.1313,
9TH CROSS, 27TH MAIN
IST PHASE, J.P. NAGAR,
BANGALORE.
...RESPONDENTS
(BY SRI. S.V.RAJESH, ADVOCATE FOR RESPONDENT NO.1;
VIDE ORDER DATED 24.06.2021 RESPONDENT NOS.2 TO 5 ARE
DELETED
NOTICE/S IS/ARE SERVED ON RESPONDENT NOS.6 TO 9)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE ORDER DATED 18.01.2014 PASSED BY THE CITY CIVIL AND
SESSIONS JUDGE, BANGALORE (CCH-28) IN O.S.NO.8311/2007
ON I.A.NO.6 (ANNEXURE-E) AND ALLOW I.A.NO.6.
THIS PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 26.08.2022 AND COMING ON FOR
PRONOUNCEMENT OF ORDER THIS DAY, THE COURT MADE THE
FOLLOWING:-
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ORDER
1. The defendant No.1 in O.S. No.8311/2007 on the file of XIV Additional City Civil Judge, Bengaluru, (CCH.No.28) and which suit is now registered as Com.O.S. No.8311/2007 and pending consideration before the Court of LXXXII Additional City Civil and Sessions Judge, Bengaluru (CCH-83), has filed this writ petition challenging the correctness of the Order dated 18.01.2014, by which an application (I.A. No.6) filed by it to implead M/s. Anupama Distributors, Mr. K. Ananda Rao, Mr. Rajendra Rao and Mr. Ratan Rao as plaintiff Nos.2 to 5 in the proceedings was rejected.
2. The suit in O.S. No.8311/2007 was filed for recovery of a sum of Rs.7,31,10,153/- along with interest at 18% per annum from the defendant No.1.
3. The plaintiff claimed that it was appointed as a distributor of the defendant No.1 for marketing its products in the State of Karnataka in the year 1986. The plaintiff promoted sale of the products of the defendant 5 No.1 which resulted in expansion of the business of the defendant No.1. The plaintiff claimed that till the year 1990, the defendant No.1 used to supply its products to the plaintiff by raising a bill against it. However, the goods invoices were sent to the bonded warehouse of the Excise Department from where the plaintiff used to take delivery of the goods after paying the excise duty. The plaintiff alleged that during the year 1989, the State Government constituted Mysore Sales International Limited (for short 'MSIL') as the nodal agency for the purpose of selling liquor and collecting excise duty and sales tax.
4. The plaintiff claimed that it used to pay the excise duty, additional excise duty, import fees payable in respect of alcoholic beverages to MSIL on behalf of defendant No.1. During the year 2003, the State Government constituted the defendant No.4 as the nodal agency for the purpose of selling alcoholic beverages, collecting excise duty, additional excise duty, tax etc. by virtue of which defendant No.4 used to collect excise duty and import fee 6 from the plaintiff and used to sell the alcoholic products/beverages of defendant No.1 to wholesale dealers and used to collect from them the price of alcoholic products. The plaintiff used to raise debit note in respect of the excise duty and additional excise duty paid by it and also in respect of the commission to which it was entitled which used to be paid by the defendant No.1. After the defendant No.4 was constituted, the plaintiff found that there was a severe scarcity of the products in the State of Karnataka as the manufacturing unit of the defendant No.1 was located in Maharashtra. Thus, the plaintiff represented to the defendant No.1 that it would tie up with local Companies having valid manufacturing licence in Karnataka and therefore, requested the defendant No.1 to entrust the process of manufacturing, bottling and supplying alcohol beverages within the State of Karnataka. Consequently, the plaintiff, defendant No.1 entered into an understanding with defendant No.2 for manufacture and bottling the products of defendant No.1 in the State of Karnataka in the year 2004. Later in 2007, a similar tie up 7 was entered into with defendant No.3. Thus, defendant Nos.2 and 3 were manufacturing and bottling the products for and on behalf of defendant No.1 which were marketed under the brand name through marketing agents. The plaintiff claimed that it was the sole marketing agent for the defendant No.1 in the State of Karnataka. It was agreed between them that whenever excise duty and additional excise duty is payable by defendant Nos.2 and 3 to the Department of Excise, it shall be paid in advance by the plaintiff to the credit of defendant Nos.2 and 3 for and on behalf of defendant No.1 and thereafter defendant Nos.2 and 3 used to supply the stocks to the defendant No.4. It contended that the commission payable to it was paid by the defendant No.1 against the debit notes raised by the plaintiff. With the consent of defendant No.1, the plaintiff claimed the commission in the names of two Firms i.e., M/s.Anupama Wine Distributors and M/s.Anupama Distributors with effect from 01.10.2003. The defendant No.1 by its letter dated 07.09.2004 sought from the plaintiff a refundable interest free deposit of 8 Rs.50,00,000/- which was to be refunded within 12 months. Consequently, the plaintiff deposited Rs.50,00,000/- by way of cheques dated 11.10.2004 and 09.12.2004 with the defendant No.1 and additional Rs.50,00,000/- was paid by the plaintiff at the request of the defendant No.1 by way of a cheque dated 22.11.2005. The defendant No.1 again requested for an additional interest free deposit of Rs.4,00,00,000/- stating that it would be refunded within 12 months. The plaintiff claimed that it paid a sum of Rs.3,00,00,000/- to the defendant No.1 by cheques dated between June 2006 and August 2006 through three instalments of Rs.1,00,00,000/- each. Since the plaintiff had raised a loan from Vijaya Bank to pay the deposit to the defendant No.1 and wanted to raise another Rs.1,00,00,000/-, Viaya Bank sought for a letter of comfort from the defendant No.1. Accordingly, defendant No.1 furnished a letter of comfort dated 20.06.2006 to Vijaya Bank for a sum of Rs.4,00,00,000/- and promised that they would repay it within 48 equated instalments of Rs.8,33,333/- starting from 12 months after 9 the date of full disbursement and Vijaya Bank by its letter dated 11.12.2006 intimated the defendant No.1 that it required certified copy of the resolution passed by the Board of Directors authorizing the defendant No.1 to accept interest free deposit of Rs.5,00,00,000/- from the plaintiff. The same was furnished by the defendant No.1 to accept interest free deposit of Rs.5,00,00,000/- from the plaintiff. Since the defendant No.1 had purportedly passed a resolution, the plaintiff parted with Rs.1,00,00,000/- to complete the deposit of Rs.5,00,00,000/-. However, the defendant No.1 did not send the certified copy of the resolution despite lapse of time for repayment of Rs.4,00,00,000/-. The defendant No.1 in terms of the letters dated 10.04.2006 and 03.05.2006, appreciated the attempts made by the plaintiff for enhancing the sales of the products of the defendant No.1 to one million cases in the financial year 2005-06. The plaintiff claimed that the defendant No.1 was liable to pay the commission on the products sold in the State. However, the defendant No.1 informed the plaintiff 10 that the commission payable to it was reduced. Due to various correspondences demanding the payment of commission, the defendant No.1 unilaterally terminated the contract which compelled the plaintiff to file the suit for recovery of Rs.9,28,85,153/- out of which a sum of Rs.1,97,75,000/- was paid by the defendant No.1 and therefore, the total outstanding amount payable by defendant No.1 was Rs.7,31,10,153/-.
5. The defendant No.1 contested the suit claiming that it had entrusted all operations in relation to payment of excise duty and the marketing of Indian Made Foreign Liquors ('IMFL') to the plaintiff. In August 2007, when it conducted an internal audit, it came to know that over the years, the plaintiff was indulging in various irregularities such as overcharging the defendant No.1 in respect of the excise duty, finance charges connected with the excise duty that was purportedly being paid by the defendant No.1 as well as overcharging in respect of marketing, freight and advertising expenses etc. It alleged that the 11 plaintiff was making claims for the same expenses and charges twice by raising debit notes in its name as well as in the name of its sister concern, namely, M/s.Anupama Distributors. With these and many other allegations, the defendant No.1 contended that the plaintiff was liable to pay a sum of Rs.11,93,16,733/-. The defendant No.1 therefore raised a counter claim to recover the said sum of Rs.11,93,16,733/- along with interest at 18% per annum from the date of filing the counter claim till the date of payment.
6. During the pendency of the suit, the defendant No.1 filed an application (I.A. No.6) under Order I Rule 10(2) read with Section 151 of the Code of Civil Procedure, 1908 (for short, 'the CPC') to implead (1) M/s.Anupama Distributors (2) Mr. K. Ananda Rao (3) Mr. Rajendra Rao and (4) Mr. Ratan Rao as the plaintiff Nos.2, 3, 4 and 5 in the suit. It was contended in the affidavit accompanying the application that the partners of the plaintiff were Mr. K. Ananda Rao (Managing Partner), and his sons, namely, 12 Mr.Ratan Rao and Mr.Rajendra Rao. It claimed that Mr. K. Ananda Rao had formed another partnership firm called M/s.Anupama Distributors along with his two sons, namely, Mr. Ratan Rao and Mr. Rajendra Rao. It claimed that both these firms were managed by Mr. K.Ananda Rao and his two partners and they conspired to defraud the defendant No.1 to the tune of more than Rs.11,93,16,733/-. After the defendant No.1 raised a counter claim, its executives searched the records of the transaction between the plaintiff and defendant No.1. It discovered that both M/s.Anupama Wine Distributors (plaintiff) and M/s.Anupama Distributors had raised claims in respect of the same transactions and had received payments from the defendant No.1. Therefore, the defendant No.1 contended that M/s. Anupama Distributors and its Managing Partner, namely, Sri K. Ananda Rao, and other partners, namely, Mr. Rajendra Rao and Mr. Ratan Rao were necessary parties for effective adjudication of its counter claim. It also contended that the transactions between the plaintiff, defendant No.1 and M/s.Anupama 13 Distributors were so inextricably linked that without the presence of M/s.Anupama Distributors and its partners it was impossible to adjudicate the counter claim.
7. The plaintiff objected to the application (I.A. No.6) and contended that the debit notes which were relied upon by the defendant No.1 were already the subject matter of recovery proceedings filed by M/s.Anupama Distributors against the defendant No.1 in O.S. No.4232 of 2010 before the Court of City Civil Judge, Bengaluru. It contended that the services rendered by both the entities did not overlap and they were separate and distinct. It also contended that the application filed by the defendant No.1 is contrary to law.
8. Based on the contentions urged by the plaintiff and defendant No.1, the Trial Court rejected the application on the ground that: (i) the transactions alleged between the proposed plaintiffs and the defendant No.1 are independent and distinct; (ii) if the defendant No.1 has a cause of action to recover any dues from the proposed 14 plaintiffs, it could prefer an independent and a separate suit and (iii) that there was no provision in law to implead a stranger to a suit and that the suit filed by the plaintiff could still be decided in the absence of the proposed plaintiffs.
9. Being aggrieved by the same, the present petition is filed.
10. The learned counsel for the defendant No.1/petitioner contended that the counter claim has all the trappings of a suit since the defendant No.1 has to plead the cause of action and also seek separate prayer against the plaintiff. He contended that therefore a counter claim has to be treated as a plaint in a cross-suit and therefore, the provisions of Order I Rule 10(2) of the CPC., can be invoked to implead a party to such counter claim. In this regard, he relied upon the following judgments:
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(i) Jag Mohan Chawla and Another v.
Dera Radha Swami Satsang and Others
[(1996) 4 SCC 699];
(ii) Laxmidas Dayabhai Kabrawala v.
Nanabhai Chunilal Kabrawala and others [AIR 1964 SC 11];
(iii) Messrs Anand Enterprises v.
Syndicate Bank [I.L.R 1990 KAR 745];
(iv) Sarojini Amma and Ors. v.
Dakshyani Amma and Ors.
[MANU/KE/0318/1994]; and
(v) Pulikkipoyil Salsamath Usman and
Ors. v. Pulikkipoyil Moideen Kunhi and Ors. [MANU/KE/1444/2016].
11. The learned counsel for the petitioner further contended that a counter claim need not relate to the original cause of action but can be made on an independent and a different cause of action even one which accrued to the defendant No.1 after institution of the suit.
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12. The learned counsel for the plaintiff (respondent No.1) on the other hand relied upon the judgment of the Hon'ble Apex Court in Satyender and Ors. v. Saroj and Others [Civil Appeal No.4833 of 2022 decided on 17.08.2022] and contended that a counter claim can be set up only against the claim of the plaintiffs.
13. He further relied upon a Judgment of the Apex Court in Bollepanda P. Poonacha and another v. K.M. Madappa [2008 (13) SCC 179]. He relied upon paragraph No.11 of the said judgment which is extracted below:
"11. The provision of Order 8 Rule 6-A must be considered having regard to the aforementioned provisions. A right to file counter claim is an additional right. It may be filed in respect of any right or claim, the cause of action therefor, however, must accrue either before or after the filing of the suit but before the defendant has raised his defence. The respondent in his application for amendment of written statement categorically raised the plea that the appellants had trespassed on the lands in question in the summer of 1998. Cause of action for filing the counter claim inter alia was said to have arisen at that time. It was so explicitly stated in the said application. The said application, in our opinion, was, thus, clearly not maintainable. The decision of Sri Ryaz Ahmed 17 is based on the decision of this Court in Baldev Singh v. Manohar Singh [(2006) 6 SCC 498]."
14. I have considered the contentions urged by the learned counsel for the plaintiff and defendant No.1
15. Order VIII Rule 6A of the CPC is inserted with a salutary purpose, namely, to avoid multiplicity of proceedings between the parties. For the purpose of easy reference, Order VIII Rule 6A of the CPC is extracted below:
"6A. Counter-claim by defendant.--(1) A defendant in a suit may, in addition to his right of pleading a set-off under rule 6, set up, by way of counter-claim against the claim of the plaintiff, any right or claim in respect of a cause of action accruing to the defendant against the plaintiff either before or after the filing of the suit but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of a claim for damages or not:
Provided that such counter-claim shall not exceed the pecuniary limits of the jurisdiction of the Court.
(2) Such counter-claim shall have the same effect as a cross-suit so as to enable the Court to pronounce a final judgment in the 18 same suit, both on the original claim and on the counter-claim.
(3) The plaintiff shall be at liberty to file a written statement in answer to the counter-
claim of the defendant within such period as may be fixed by the Court.
(4) The counter-claim shall be treated as a plaint and governed by the rules applicable to plaints."
The words "against the claim of plaintiff" appearing in sub- rule (1) of Order VIII Rule 6A and "cause of action accruing to the defendant against the plaintiff" are clear characteristics to indicate that a counter claim should necessarily relate to a cause of action that the defendant has against the plaintiff. The defendant cannot exploit sub-rule (2) of Order VIII Rule 6A of the CPC., to contend that a counter claim has all the trappings of a cross-suit and therefore, he can implead a non-party to the suit. The learned counsel for the defendant No.1 did not dispute the fact that M/s.Anupama Distributors has already filed a suit in O.S. No.4232/2010 on the file of XXXIV Additional City Civil and Sessions Judge, Bengaluru, for recovery of certain amounts from defendant No.1. Therefore, the 19 defendant No.1 cannot resort to Order I Rule 10(2) of the CPC to implead a non-party on the ground that there were enough pleadings in the written statement of the defendant No.1 attributing conspiracy between the plaintiff and its sister concern, namely, M/s.Anupama Distributors. Allowing the defendant No.1 to implead a non-party would result in enlarging the scope of the suit and confusion. The case laws referred by the learned counsel for the defendant No.1 do not relate to a case where the defendant chose to implead a non-party to a litigation but relate to a case where cause of action arose in favour of the defendant against the plaintiff either in respect of the same transaction or an incidental transaction or an independent transaction. In that view of the matter, the impugned Order passed by the Trial Court is just and proper and does not call for interference. Hence, the Writ Petition is dismissed.
Since it is stated at the bar that the suit in O.S. No.4232/2010 filed by M/s.Anupama Distributors against 20 the defendant No.1 / appellant herein is pending consideration before the XXXIV Additional City Civil and Sessions Judge, Bengaluru, it is appropriate that the said suit is transferred to LXXXII Additional City Civil and Sessions Judge, Bengaluru (CCH-83), where the present suit in O.S. No.8311/2007 renumbered as Com.O.S. No.8311/2007 is pending consideration so that both the suits could be disposed off by a separate Judgment. It is needless to mention that if need be, O.S. No.4232/2010 shall be numbered as Commercial Original Suit.
Sd/-
JUDGE sma