Gujarat High Court
Birttania Staem Ship Insurance ... vs Gokul Agro Resources Limited on 29 April, 2022
Author: N.V.Anjaria
Bench: N.V.Anjaria
C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 6866 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE SANDEEP N. BHATT
==========================================================
1 Whether Reporters of Local Papers may be allowed to see the Yes
judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law as to No
the interpretation of the Constitution of India or any order made
thereunder ?
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BIRTTANIA STAEM SHIP INSURANCE ASSOCIATION LIMITED
Versus
GOKUL AGRO RESOURCES LIMITED
==========================================================
Appearance:
MR MIHIR JOSHI, SR.ADVOCATE with MR DHAVAL D VYAS(3225) for the
Petitioner(s) No. 1
NAVIN PAHWA, SR.ADVOCATE with MS.SIDDHI VADODARIYA for
THAKKAR and PAHWA ADVOCATES(1357) for the Respondent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE SANDEEP N. BHATT
Date :29/04/2022
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Whether the Commercial Suit instituted by the respondent herein before the Commercial Court, Gandhinagar is founded on legal cause of action rendering the plaint liable to be rejected Page 1 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 under Order VII Rule 11 of the Code of Civil Procedure, 1908, is the moot question.
1.1 The following pointed observation of the Supreme Court in T.Arivandandam Vs. T.V.Satyapal and Another [(1977) 4 SCC 467], whether stand true in this case is to be appreciated.
"The learned Munsif must remember that if on a meaningful-not formal-reading of the plaint it is manifestly vexatious, and meritless, in the sense of not disclosing a clear right to sue, be should exercise his power under Or. VII r. 1 1 C.P.C. taking care to see that the ground mentioned therein is fulfilled. And, if clever, drafting has created the illusion of a cause of action, nip it in the bud at the first hearing by examining the party searchingly under Order X C.P.C. An activist Judge is the answer to irresponsible law suits. The trial court should insist imperatively on examining the party at the first bearing so that bogus litigation can be shot down at the earliest stage."
(para 5)
2. It is in such context that the challenge to order dated 11.02.2021 below application Exhibit 62 passed by learned Principal Senior Civil Judge, Gandhidham - Kachchh in Commercial Civil Suit No. 56 of 2019, arises. By the said impugned order, the Commercial Court disallowed the application of the petitioner - defendant under Order VII Rule 11, CPC and refused to reject the plaint.
2.1 Noticing the case of the plaintiff revealing from the plaint, the plaintiff - respondent herein, instituted Commercial Civil Suit against the petitioner- the Britannia Steam Ship Association Limited seeking decree for a sum of US$ 1,70,489/- with interest at 18%. It was also the prayer in the suit to direct the Page 2 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 respondent to extend the Bank Guarantee till final disposal of the suit. The plaintiff company averred in the plaint that it had entered into a contract dated 29.09.2015 with one Noble Resource S. A., Switzerland for import of Crude Degummed Soyabean Oil of edible grade in bulk from the Port of San Lorenzo, Argentina which was to be delivered at the Port Kandla, Gujarat. The seller transported the said goods through the vessel named M. T. Box belonging to one Shell Tankers Pvt. Ltd. The sole defendant - the petitioner herein happened to be a Protection and Indemnity (P & I) club based in London, UK and happens to be merely the protection and indemnity insurer of the owners of the above named vessel through which the goods were transported.
3. It was the case of the plaintiff that at the time of loading the oil at the Load Port, a survey was undertaken and surveyor report dated 27.07.2016 indicated that the Free Fatty Acid value (FAA) was 0.80% which was moderate. This value is measure of amount of fatty acids liberated by hydrolysis on account of moisture, temperature etc. It was stated that upon the inspection of consignment on board the vessel at the discharge port at Kandla it was found that the oil was contaminated with water. It was averred that when the surveyor of the plaintiff inspected the ship tanks at Kandla port, shockingly the contamination was found. It was alleged that when the goods were loaded, they were in perfect condition. The plaintiff stated that it intimated the said facts on 12.08.2016 to the seller, the owner of the vessel and the surveyor of the vessel. It was further averred that the surveyors appointed by the insurer of the plaintiff removed the water from the tanks, the samples of the contaminated water from the oil tanks were drawn and were Page 3 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 sent for analysis to the laboratory. Details were given in the plaint about the analysis report.
3.1 In Para 9 of the plaint the following averments were made, "Thus, it is clear that the FFA which was 0.80% at the Load Port increased to limits much more than acceptable limits. In other words, the transported oil became contaminated to such an extent that it was impossible for the Plaintiff to use the said oil without removing the water and carrying out extra processing of the oil so as to make it commercially usable by the Plaintiff. Accordingly, the Plaintiff, in presence of the Defendant's Surveyor removed the water content and as a result, there was loss in the quantity of oil than the original quantity transported/shipped by the seller. It is stated and submitted that the contamination of oil is solely due to the failure of Defendant in fulfilling its obligation to transit the goods in proper condition. It is clear that the goods were in absolutely proper condition at the time of loading at the load port. The goods were however, found to be contaminated at the discharge port. Therefore, it is clear that the said contamination has occurred when the goods were in transit and thus, the Defendant is solely responsible for the said contamination and is under a lawful obligation to compensate the Plaintiff for the loss incurred by the Plaintiff on account of contamination of goods."
3.2 The petitioner as protection and indemnity club of the vessel/owner had furnished security for the alleged claim of the respondent against the vessel. An undertaking dated 14.08.2016 was given in that regard which was subsequently substituted by the Bank Guarantee. It appears that there are further exchanges between the parties for settling the dues claimed by the owners of the vessel. Without prejudice to the inter se rights, the Page 4 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 respondent finally issued notice 13.01.2017 calling upon the petitioner to pay the sum of US$ 1,45,287/-, which according to the respondent - plaintiff was the loss suffered by it and disputed by the vessel owners. The respondent revised its claim to US$ 1,70,489/- by corrigendum dated 08.03.2017. The undertaking dated 14.08.2016 and the Bank Guarantee given by the petitioner are referred to hereinafter.
3.3 The plaintiff thereafter instituted the Commercial Suit seeking to recover the amount from the petitioner - defendant. The suit was founded on the undertaking and the Bank Guarantee extended from time to time provided as security by the petitioner relating to the claim of the plaintiff - respondent which may be adjudged from the owner of the vessel M. T. Box. In the said suit, the petitioner Britannia Steam Ship Association Limited - original defendant filed application Exhibit 62 under Order VII rule 11(a) and Rule 11(d) seeking rejection of the plaint. The averments in the plaint were referred to and it was contended that the suit was instituted in the basis of Bank Guarantee furnished by the defendant and that as per the ban guarantee, the liability of the defendant was to arise only if the claim of the plaintiff was proved and the amount was finally adjudicated by the competent court against the owner- supplier.
3.3.1 It was submitted that there was no fructification of liability any to be arising for the defendant and that therefore there was no cause of action for the plaintiff to institute the suit. It was also contended that the liability of the defendant was not arising pursuant to any contract with the plaintiff but it was based on the outcome of the dispute between the plaintiff the M.T. Box, which was not party in the suit nor any legal proceedings between them were instituted or pending. In any Page 5 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 case it was submitted that no legal cause of action had arisen for the plaintiff to maintain the suit to seek the damages against the petitioner.
4. Assailing the impugned order, learned Senior advocate Mr. Mihir Joshi assisted by learned advocate Mr.Dhaval Vyas submitted that on the reading of the plaint, the same was manifestly vexatious and it did not disclose any right in law for the plaintiff to sue the defendant. It was submitted that by clever drafting and making vague pleadings an illusion of cause of action was created. Attention of the court was invited to the relevant averments in the plaint to submit that even otherwise the claim against the owner of the vessel - M.T. Box was barred by limitation and that a misconceived claim was lodged against the petitioner- defendant on the basis of letter of undertaking and Bank Guarantee.
4.1 Highlighting the contents and nature of the Bank Guarantee, learned senior advocate for the petitioner pressed into service the decision of the Supreme Court in State Bank of India Vs. Mula Sahakari Sakhar Karkhana Ltd [(2006) 6 SCC 293]. In that case, the Bank Guarantee document was viewed by the Supreme Court in light of its contents to be the document of indemnity and not the document of the guarantee. Thereunder the appellant was to indemnify the co-operative society against all losses and damages which may be suffered by it. He next relied on another decision of the Supreme Court in Shravan Kumar Jaipuriya Vs. Krishna Nandan Singh [(2020) 16 SCC 594] and on the basis of paras 8 and 9 of the judgment, it was submitted that there was no legal right with the plaintiff to seek relief.
Page 6 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 4.1.1 Decision of this court in Maharaj Shri Manvendrasinhji Jadeja Vs. Rajnath Vijaykunverba [(1998) 2 GLH 823] was referred to for its paras 14 to 19 to highlight the scope of provisions of Order VII Rule 11(a), CPC that the suit in the instant case did not disclose the cause of action. On the basis of the decision in Ambala Sarabhai Enterprises Vs. International Asset Reconstruction Company Private Limited as upheld by the Supreme Court in SLP No.34741 of 2021 that similarly worded Bank Guarantee in the context of availability of right to suit in filing of company petition was considered and the court dismissed the petition as premature.
4.2 On the other hand, learned senior advocate Mr. Navin Pahwa with learned advocate Ms.Siddhi Vadodariya for Thakkar and Pahwa Associates supported the impugned order to submit that what is contemplated in Order VII Rule 11 (a) and (d), CPC is that the plaint can be rejected where the cause of action is not disclosed or that the suit is barred by any law. He submitted that it meant that there was no cause of action at all and that it was not open to assess the merits of the cause of action. He further submitted that the misjoinder and non-Joinder of the parties was not to be the ground covered under this provision. He highlighted that as per the provisions of order VII Rule 11 (a) and (d), the suit must appear from the statement in the plaint to be barred by any law.
4.2.1 Learned senior advocate for the respondent then proceeded to explain the plaintiff's case inter alia that the plaintiff has entered into a contract with one Noble Resource - the seller for import of crude soyabean oil, that samples were drawn from the goods when they were transported through the vessel. He further submitted that when the goods reached the Page 7 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 destination port Kandla, the oil was found to have been contaminated with water which was revealed as survey and testing were undertaken. He then submitted that the defendant had given undertaking as well as Bank Guarantee to compensate the plaintiff for the loss suffered up to the amount of US$ 2,50,000 /- as per the Bank Guarantee. It was submitted that the plaintiff suffered the loss was US$ 1,70,489/- which was prayed to be recovered by instituting the suit against the petitioner. He further submitted that the issue whether the suit was barred by limitation could be decided only after leading of evidence.
4.2.2 In support of his various submissions, learned senior advocate for the respondent relied on the decision of the Supreme Court in Prem Lala Nahata Vs. Chandi Prakash Sikarwar [(2007) 2 SCC 551] for canvassing proposition that in an application under Order VII Rule 11, CPC, plaint cannot be rejected on the ground of misjoinder of parties or even misjoinder of cause of action. He sought to explain general rule with regard to the impleadment of parties and that the plaintiff is dominus litis, with reference to the decision in Mumbai International Airport Pvt. Ltd. Vs. Regency Conventional Centre and Hotels Pvt. Ltd [(2010 7 SCC 417]. On the basis of decision in Church of Christ Charitable Trust and Educational Charitable Society Vs. Ponniaman Educational Trust [(2012) 8 SCC 706], it was submitted that cause of action has no relation to the defence which may be set up by the defendant not does it depend upon the nature of relief prayed.
4.2.3 Learned advocate for the respondent then proceeded to submit from the decision of this court in Bhupendrabhai Hasmukhbhai Dalwadi Vs. Savitriben Ganumal Krishnani and others [(2010) SCC online Guj 9741] that what is to be Page 8 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 considered is whether the plaint discloses any cause of action and not whether the plaintiff has any cause of action. He also submitted that courts have to see only averments in the plaint. By pressing into service, what was laid down in Chottanben Vs. Kiritbhai Jalkrushbhai Thakkar [(2018) 6 SCC 422], it was next submitted that it is open for a party to initiate proceedings against the guarantor without borrower. By relying on yet another decision of the Supreme Court in Radhey Shyam Vs. Chhabi Nath and Others [(2015) 5 SCC 423], it was submitted that Article 227 of the Constitution would attract for challenging order of civil court.
5. Before proceeding further to appreciate the rival merits, noticing the provision of Order VII in the CPC, which falls under the Order titled 'Plaint'. Rule 1(e) of Order VII speaks that the plaint shall contain inter alia the facts constituting cause of action. As per Rule 11, the plaint is liable to be rejected in the cases, as per sub-clause (a), where it does not disclose a cause of action. Sub clause (d) of Order 11 is yet another ground pleaded by the defendant- petitioner in the present case, which speaks that the plaint shall be rejected where the suit appears from the statement in the plaint to be barred by any law.
5.1 It is well settled that cause of action bundle of facts which taken with the law applicable to them gives the plaintiff the right to relief against the defendant. A cause of action would have to include some act done by the defendant and in absence of such act which may give rise to the plaintiff to sue the defendant, it could not be said that a cause of action has accrued.
5.1.1 In Dahiben Vs. Arvindbhai Kalyanji Bhanushali [(2020) 7 SCC 366] the cause of action was explained thus Page 9 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 while observing that provisions of Order VII Rule 11, CPC is mandatory since it states that the plaint 'shall be rejected if any of the grounds specified in clauses (a) to (e) are not made out. The cause of action was described thus, "Cause of action" means every fact which would be necessary for the plaintiff to prove, if traversed, in order to support his right to judgment. It consists of a bundle of material facts, which are necessary for the plaintiff to prove in order to entitle him to the reliefs claimed in the suit." Therefore, the cause of action is an assemblage of material facts which the plaintiff is required to be proved thereby to be entitled to seek and entitled to a decree getting the relief claimed in the suit.
5.2 In light of above basic premises operating in law regarding idea of cause of action, it is to be appreciated from the averments in the plaint and from the total case pleaded by the plaintiff as to whether the plaintiff has got 'a right to suit' and whether the pleadings created an illusion of cause of action on the basis of which relief is sought which could not be granted.
5.2.1 In Liverpool & London S.P. & I Assn. Ltd. Vs. M.V. Sea Success [(2004) 9 SCC 512], it was explained thus, "Whether a plaint discloses a cause of action or not is essentially a question of fact. But whether it does or does not must be found out from reading the plaint itself. For the said purpose, the averments made in the plaint in their entirety must be held to be correct. The test is as to whether if the averments made in the plaint are taken to be correct in their entirety, a decree would be passed." (Para 139) 5.2.2 Recollecting therefore the basic facts pleaded, the plaintiff- Gokul Agro Resources Limited prayed for a decree 'for Page 10 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 damages' against the defendant to the tune of UD$ 170,489. The petitioner came to be arraigned as defendant describing it as 'Brittania Steam Ship Insurance Association Limited through Pandi Correspondents Private Limited having its office at.' The total case put forth in the plaint has been that under contract entered into in the year 2015 between the plaintiff and one Noble Resources S.A., Switzerland for import of crude soyabean oil, the goods were transported through the vessel- M.T. box which vessel belonged to one Shell Tankers Private Limited. When the cargo was unloaded at the discharge port Kandla, the oil was found contaminated with water. The plaintiff alleged that the survey reports suggested that goods were in orderly condition when transported from the load port but in the transit, got contaminated, for which the sole defendant- the petitioner was liable to compensate the plaintiff for the loss. The petitioner was Protection and Indemnity Club arrayed as principal party and sole defendant.
5.2.3 The following were the averments inter alia made in the plaint in paragraph 9, "Plaintiff entered into a contract dated September 29, 2015 with one Noble Resources S.A. Switzerland for import of Crude Degummed Soyabean Oil of Edible Grade in bulk from the port of San Lorenzo Argentina which was to be delibered to the port at Kandla, Gujarat India. As per the agreement the seller transported the said goods through the vessel M.T.Box belonging to Shell Tankers Pvt. Ltd. Since the goods i.e. oil was contaminated with water, the plaintiff refused to accept the cargo. However, upon intervention and request by the defendant (on behalf of P & I Club), the plaintiff agreed to discharge the cargo upon appropriate undertaking and Bank Guarantee to be given by the Defendant. The plaintiff was thereafter following up with the defendant for payment of the Page 11 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 loss/damage as undertaken by the defendant, through various emails as well as telephone calls. However, there was no response from the defendant's and except indicating that the P & I Club at London is looking into the matter and that they would revert shortly."
5.3 The contract between the plaintiff and the supplier was dated 29.9.2015. The plaintiff's assertion about its right to sue and seek relief and on which the whole suit was founded, were the letter of undertaking and the Bank Guarantee, dated 14.8.2016 and 4.1.2016 respectively. Having regard to the date of the contract for import of the goods and the letter of undertaking etc. given by the petitioner as P & I Club, the submission on behalf of the petitioner that the suit and the suit claim against the owner of the M.T. Box, who was not joined as party even, had become barred by limitation, could not be brushed aside lightly. But then availability of legal cause of action is the issue as focused by the rival parties in making their respective submission.
5.4 Adverting to the gravamen contention of the petitioner that the plaint does not disclose the cause of action, for the relief and the decree prayed for and to adjudge the defendant liable in law for the amount claimed, the plaintiff has rested its case on the Letter of Undertaking and the Bank Guarantee. The averments in the plaint show that the right to sue and to get the claimed amount is founded on such documents.
5.4.1 Para 11 of the plaint contained the following averments asserting about plaintiff's right to sue, extracting the said paragraph.
"It is stated that accordingly, the Defendant gave an undertaking dated 14.8.2016 that it Page 12 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 shall pay as may be agreed between the parties or as may be adjudged to be due to the Plaintiff from the Defendant. The Defendant has also given a Bank Guarantee dated October 4, 2016 in favour of the Plaintiff guaranting a sum of US$ 250,000 to secure the amount which would be payable to the Plaintiff on account of loss occurred to the Plaintiff due to contamination of oil. It was based on such undertaking and the Bank Guarantee that the Plaintiff had agreed to discharge the cargo, pending ascertainment of the loss and damage to be recovered on the account of the contamination."
5.4.2 The plaintiff relied on the Letter of Undertaking, the Bank Guarantee, and the survey report to put up a case that the defendant were liable to pay and compensate to the plaintiff for the loss occurred in transit due to contamination of the cargo. In para 22 it was thereafter averred that there was intention on part of the defendant of not paying legitimate dues. It was averred that the defendant was under obligation to make good the loss suffered by the plaintiff on account of defendant's failure to supply the goods in proper condition.
5.4.3 On basis of such facts, averments and the total case, the cause of action was sought to be pleaded in para 23 of the plaint.
"The cause of action to file the present Suit has arisen on (i) 12.08.2016 when the goods reached Kandla Port, (ii) on 12.08.2016 when the joint survey was carried out, (iii) on 27.08.2016 when the joint analysis report was prepared, (iv) on 14.08.2016 when the Defendant gave an undertaking to pay the price as may be adjudged to be payable to the Plaintiff on account of the Page 13 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 loss, (v) on 04.10.2016 when the Defendant gave a Bank Guarantee to the Plaintiff to the tune of USD 2,50,000 to secure the amount which would be payable to the Plaintiff on account of the loss,
(vi) on 06.09.2016 when the Plaintiff lodged a formal claim with the Defendant, (vii) on 02.12.2016 when the Defendant issued an email to the Plaintiff denying its liability and offered USD 12,000 to settle the claim, (viii) on 04.01.2017 when the Defendant offered to settle the claim and offered USD 15,000, (ix) on 31.01.2017 when Plaintiff issued a legal notice calling upon the Defendant to pay an amount of USD 1,45,287, (x) on 27.04.2017 when the Plaintiff issued a corrigendum to the Notice dated 31.01.2017 clarifying that the amount of USD 1,45,287 demanded in the notice dated 31.01.2017 was erroneously calculated and that the correct value as per the joint survey report is USD 1,70,489 and the same was demanded and
(xi) when the Defendant issued a reply dated 08.03.2017 to the legal notice dated 31.01.2017.
Hence this suit."
5.5 The Letter of Undertaking dated 14.8.2016 read as under, "To: Gokul Agro Resources Ltd.
Letter of Undertaking Dear Sirs, Ship: MT Box Page 14 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 Claim/Incident : Alleged cargo contamination in vessel's cargo tanks No.1 P & S for receivers Gokul Agro Resources Ltd., 89, Meghpar Borichi, Nr. Sharma Rsorts, Galapadar Road, Ta- Anjur, Gandhidham, Kutch, Gujarat, India Wide Tanker Bill of Lading no.17 to 44 Total Qty 2910 MTS.
In consideration of, and upon condition that, you refrain from arresting, attaching or otherwise detaining the MT Box or any other ship or property in the same or associated ownership or management in connection with your claim against the owners of MT Box relating to the above incident, we the Brittania Steam Ship Insurance Association Limited. hereby undertake to pay to you such sum as may be agreed between the parties to be due to you as a result of an amicable settlement or as may be found and adjudged to be due to you from the owners of the MT Box by a court or tribunal of competent jurisdiction or, if appeals are made after all appeals, provided always that our liability hereunder shall not in any circumstances exceed (including interest and costs) the sum of USD21,25,996 (US Dollars Twenty One Lac twenty five thousand nine hundred ninety six only) or the limit of liability of the owners of the cargo of CD$BO quantity 2910 MT in Vessel's tanks 1 P & S under the provisions of the applicable law whichever may be the less.
This agreement shall be governed by Indian Law and the Gujarat High Court, Ahmedabad shall have jurisdiction to hear and determine any action brought by you to enforce the provisions hereof.
We also confirm that the LOU will be replaced by Bank Guarantee within 14 working days.
Page 15 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 Yours faithfully, For the Britannia Steam Ship Insurance Association Limited. Director Tindall Riley (Britannia) Limited Managers." (emphasis supplied) 5.5.1 The text and contents of the Bank Guarantee is as under, "To: Gokul Agro Resources Ltd.
:89, Meghpar Borichi, Nr Sharma Resorts, Galapadar Road, Ta-anjur, Gandhidham, Kutch, Gujarat, India Know all men by these presents that we, Kotak Mahindra Bank L'td. Hereinafter referred to as the bank) having its registered office at 27BKC, C 27, G block, Bandra Kurla Complex, Bandra
(e), Mumbai-400051 and acting through it's branch office at 2nd floor, Bakhtawar, 229, Nariman point Mumbai 400021 Whereas Gokul Agro Resources Ltd., having their office at 89, Meghpar Borichi, Nr Sharma Resorts, Galapadar Road, Ta - anjar, Gandhidham, Kutch, Gujarat, are the receivers of cargo of 2910 Mts of CDSBO, carried on board the vessel, MT box, under tanker bills of Lading Nos. 17 to 44 dated 28 June 2016 issued by independent ship agents S.A. as agents for and on behalf of the master captain Marvin J. Villanueva.
And whereas the receivers, Gokul Agro Resources Ltd., have an alleged claim against the owners of MT box for contamination of the Page 16 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 cargo in Tank No.1 port and 1 Starboard.
And whereas in respect of the receivers' alleged claim for contamination of cargo, the Britannia Steam Ship Insurance Association Limited has issued a Letter of Undertaking dated 14th august, 2016 to the receivers, Gokul Agro Resources Ltd, for such sum as may be agreed to by the parties by virtue of amicable settlement or as may be found and adjudged to be due from the owners of MT box by a court or tribunal of competent jurisdiction i.e. High Court of Gujarat, India, and if appeals are made, after all appeals, and that the liability in any circumstances under the Letter of Undertaking dated 14th august, 2016 shall not exceed the sum of USD 250,000/- (US Dollars two hundred fifty thousand only) under the provisions of the applicable law, to preclude the receivers from arresting, attaching or otherwise detaining the MT box or any other ship or property in the same or associated ownership or management, in connection with the receivers' claim against the owners of MT box.
And whereas the Britannia Steam Ship Insurance Association Limited, under Letter of Undertaking dated 14th august, 2016 had confirmed that the Letter of Undertaking would be replaced by a Bank Guarantee within 14 working days.
Now these presents witnesseth and the bank both hereby stand surety to the extent of such sum as may be agreed by the parties by virtue of amicable settlement: or as may be found and adjudged to be due from the owners of MT box by a court or tribunal of competent jurisdiction, and if appeals are made, after all appeals, and that the liability in any circumstances under the Letter of Page 17 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 Undertaking dated 14th august, 2016 shall not exceed the sum of USD 250,000/- (us dollars two hundred fifty thousand only) under the provisions of the applicable indian law, india.
And whereas the said bank doth hereby agrees and undertake to forthwith pay to Gokul Agro Resources Ltd. as per the foregoing recital. We the Kotak Mahindra Bank , 2nd floor, Bakhtawar, 229, Nariman point Mumbai 400021 hereby expressly, irrevocably and unreservedly undertake and guarantee as principal obligators on behalf of the Britannia Steam Ship Insurance Association Limited that, in the event found and adjudged to be due from the owners of MT box by a court or tribunal of competent jurisdiction i.e. High Court of Gujurat, India, we will pay Gokul Agro Resources Ltd, and if appeals are made after all appeals, or as may be agreed by the parties by virtue of amicable settlement on demand and without demur, all and any sum up to a maximum of USD 250,000/- (us dollars two hundred fifty thousand only)
1. Your written demand shall be conclusive evidence to us that such payment is due under the terms of the said Bank Guarantee, we undertake to effect payment upon receipt of such written demand in the event found and adjudged to be due from the owners of MT box by a court or tribunal of competent jurisdiction i,e. High Court of Gujarat, India, and if appeals are made after all appeals, or as may be agreed by the parties by virtue of amicable settlement.
2. This guarantee is valid for a period of three years from the issue date. And it is hereby further declared that notwithstanding anything contained herein Page 18 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 above:
1. Our liability under this Bank Guarantee shall not exceed USD 250,000/- (US Dollars two hundred fitty thousand only)
2. This Bank Guarantee will be valid up to 28-
sep-2019.
3. We are liable to pay the guarantee amount or any part thereof under this Bank Guarantee only if you serve upon us a written claim or demand (and which should be received by us), on or before 28-sep- 2019 (inclusive of claim period) at Kotak Mahindra Bank Ltd 2nd Floor, Bakhtawar, 229, Nariman point Mumbai 400021 and a copy of the same to be sent to Bank Guarantee dept (BGLC team), Corporate Banking Operations (CPC), 6th floor, Kotak Infiniti, Zone 4, building No.21, Infinity Park, Off Western Express Highway, Goregaon Mulund link road, Malad E, Mumbai - 400 097 where after it ceases to be in effect in all respects whether or not the original Bank Guarantee is returned to us.
In witness whereof, we Kotak Mahindra Bank Ltd have executed this guarantee this 04" day of October 2016.
Executed this 04' day of October 2016 at Mumbai For Kotak Mahindra Bank Ltd Authorized signatories Bank seal."
(emphasis supplied) 5.5.2 In Dahiben (supra) the Supreme Court observed that under Order VII Rule 11 a duty is casts to determine whether the plaint discloses a cause of action by scrutinizing the averments in the plaint, read in conjunction with the documents Page 19 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 relied upon, or whether the suit is barred by any law. The Apex Court referred to the provision of Order VII Rule 14 (1), CPC providing for production of document in which plaintiff sues or relies, to thereafter observe, "Having regard to Order 7 Rule 14 CPC, the documents filed along with the plaint, are required to be taken into consideration for deciding the application under Order 7 Rule 11(a). When a document referred to in plaint, forms the basis of the plaint, it should be treated as part of the plaint."
(para 12) 5.5.3 An attentive reading of Letter of Undertaking, which is reproduced above indicate that the petitioner has undertaken to pay to the plaintiff- Gokul Agro Resources Limited such sum as may be agreed as a result of amicable settlement, as may be found and adjudged to be due to the plaintiff from the owners of the M.T.Box by court or tribunal of competent jurisdiction and the liability shall not exceed particular amount. Similarly worded is the Bank Guarantee which indicates about alleged claim against the owners of M.T.Box for contamination of the cargo. The very words 'as may be found and adjudged to be due...' are used in the Bank Guarantee. Thus the undertaking and the Bank Guarantee given by the petitioner are in respect of an amount which has to be ascertained or adjudged by court of law in competent proceedings between the parties concerned. Admittedly, it is not the case of the plaintiff that there exists any ascertained amount recoverable by the petitioner. The amount claimed is disputed amount yet to be tested in law for its adjudgement and for holding the petitioner liable to pay.
5.5.4 It could be said to be valid contention on part of the petitioner, having regard to the language and contents of the Page 20 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 documents of Bank Guarantee, which were commercial documents that it did not reflect any contract of guarantee which may oblige the petitioner to pay the amount. The Letter of Undertaking and the Bank Guarantee were in the nature of indemnity extended provided the damage or losses is ascertained by the competent court from the owners of the M.T.Box, in which eventuality the petitioner may become liable to pay such amount. The plaintiff has not even initiated any proceedings in that regard.
5.5.5 There exists a distinction between indemnity and guarantee. The documents of Letter of Undertaking and Bank Guarantee are in the nature of indemnity and not the guarantee, as stated above. No sum is guaranteed by the petitioner to the plaintiff by executing the said documents until and unless adjudged and determined by the competent court. In HP Financial Corporation Vs. Pawna [(2015) 5 SCC 617], it was observed, "It is settled law that a contract of indemnity and / or guarantee is an independent and separate contract from the main contract. Thus, the question which they required to address themselves, which unfortunately they did not, was when does the right to sue on the indemnity arose. In our view, there can be only one answer to this question. The right to sue on the contract of indemnity arose only after the assets were sold off. It is only at this stage that the balance due became ascertained. It is at that stage only that a suit for recovery of the balance could have been filed." (para 10) 5.5.6 In Mula Sahakari Sakhar Karkhana Ltd (supra) the Supreme Court stated underlining the distinction between Page 21 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 the indemnity and guarantee, which may emanate from any commercial document, "A document, as is well known, must primarily be construed on the basis of the terms and conditions contained therein. It is also trite that while construing a document the court shall not supply any words which the author thereof did not use.
The document in question is a commercial document. It does not on its face contain any ambiguity. The High Court itself said that ex facie the document appears to be a contract of indemnity. Surrounding circumstances are relevant for construction of a document only if any ambiguity exists therein and not otherwise. The said document, in our opinion, constitutes a document of indemnity and not a document of guarantee as is clear from the fact that by reason thereof the Appellant was to indemnify the cooperative society against all losses, claims, damages, actions and costs which may be suffered by it. The document does not contain the usual words found in a Bank Guarantee furnished by a Bank as, for example, "unequivocal condition", "the cooperative society would be entitled to claim the damages without any delay or demur" or the guarantee was "unconditional and absolute" as was held by the High Court.
The High Court, thus, misread and misinterpreted the document as on scrutiny thereof, it had opined that it was a contract of guarantee and not a contract of indemnity."
(paras 22, 23, 24, 25) 5.6 In other words, the right asserted by the plaintiff to sue the defendant for the damages was by means of enforcing the alleged duty of the defendant under the Letter of Undertaking and Bank Guarantee, undisputedly there is no adjudgment of the sum. Nor the plaintiff has filed any proceedings against the Page 22 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 owner of the M.T.Box for determination of the amount payable by the owners to the plaintiff. Neither any court has found any sum payable to be due to the plaintiff by the owners of the M.T.Box by the court of competent jurisdiction, nor any such proceedings are initiated or pending. In the circumstances, it could not be said that there existed any legal right under the Letter of Undertaking and the Bank Guarantee which may entitle the plaintiff to invoke any right to recover the amount of alleged loss from the petitioner.
5.6.1 In the facts and circumstances therefore, it could not be said that right to sue was available in law to the plaintiff. As there is not right to sue, it necessarily means there stands an absence of cause of action. The cause of action is created out of the bundle of facts offering a right to sue in law. In the present case there is no enforceable obligation of the defendant to pay any amount to the plaintiff marking lack of cause of action.
5.7 It was a vain attempt on part of the plaintiff - respondent to contend that it had right to sue the Pandi Correspondents Private Limited over the petitioner who acted as agents and representated the vessel M.T.Box or its owners Shell Tankers Private Limited. In this regard however, no specific pleadings were made, nor were the contention raised before the commercial court below. Even otherwise, in view that the facts and the pleadings in the plaint did not disclose for the plaintiff any right to sue and right to seek relief, this contention is misconceived and untenable.
Page 23 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 5.8 The contention about the Bank Guarantee and Letter of Undertaking that on the basis of which the right to be enforced against the petitioner only in respect of the amount adjudged in law, was noticed by the commercial court below, however it failed to appreciate that the entire frame of the suit based on the same was not disclosing any enforceable right, therefore no right to sue and consequentially there was no cause of action. There is distinction between absence of cause of action pleaded and the plea that the plaint does not disclose cause of action. No cause of action pleaded would mean that the court would consider as to whether the plaintiff has pleaded cause of action as required under the court. In case where the plaintiff does not disclose the cause of action what is to be considered is whether there exits a clear right for the plaintiff to sue in the sense whether a legal right is available to be enforced in the suit to seek the suit relief.
6. From the frame of the suit, on the basis of the averments made in the plaint and the documents referred to and relied on in the plaint and considering the total case revealed thereby, there is no gainsaying that no rights to sue exists in law for the plaintiff regarding damages to be paid by the petitioner to the plaintiff. The documents of Letter of Undertaking and the Bank Guarantee clearly refer to sum ascertained by the court of the competent jurisdiction to be paid to the plaintiff from the owner as may be adjudged. There is no decree right to seek.
6.1 The entire claim of the plaintiff against the petitioner- defendant is unliquidated and is dependent upon the event of such ascertainment and fixation by the competent court in the valid proceedings between the parties concerned. In such set of facts and circumstances, how it can be said that a right to sue Page 24 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022 C/SCA/6866/2021 CAV JUDGMENT DATED: 29/04/2022 exists. Right to sue and existence of cause of action go hand-in- hand. Mere bundle of facts pleaded does not give rise to cause of action unless legal right to sue emanates therefrom. In State of Punjab Vs. Gurdev Singh [(1991) 4 SCC 1], the Apex Court held that the words 'right to sue' mean to right to seek relief by means of legal proceedings. It was observed that the right to sue accrues only when cause of action arises.
6.2 A clever drafting cannot inject life of law in the plaint which is otherwise manifestly meritless not disclosing any legal right and therefore cause of action, as held by the Supreme Court in Arinvandan Vs. T.V.Satyapal [(1977) 4 SCC 467] it was succinctly observed, "And, if clever drafting has created the illusion of a cause of action, nip it in the bud at the first hearing..." In the facts of the present case, when the averments in the plaint are noticed alongwith the Letter of Undertaking and the Bank Guarantee which are made premise and the basis for suit claim and suit relief, it has to be held that cause of action does not arise for the plaintiff to seek any damages. The cause of action becomes illusory to be not the foundation to seek relief prayed for in the suit. This is inescapable conclusion from the careful and meaningful reading of the plaint.
6.3 In ITC Limited Vs. Debt Recovery Appellate Tribunal [(1998) 2 SCC 70] the Court held that the law cannot permit clever drafting which creates illusions of cause of action and that what is required is that clear right must be made out in the plaint. The conferment of power under Order VII Rule 11 is to ensure that the meaningless litigation and which are bound to prove abortive should not be allowed to occupy the judicial time of the court and the sword of Deamocalus need not be kept hanging.
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7. In the view of the above reasons and discussion, order dated 11.2.2021 passed by the learned Principal Senior Civil Judge, Gandhidham, Kutch, below application Exhibit 62 in Commercial Civil Suit No. 56 of 2019, does not sustain in the eye of law. Application Exhibit 62 of the petitioner - original defendant filed under the Order VII Rule 11, CPC stands allowed. The plaint of the Commercial Suit No.56 of 2019 is liable to be rejected and the same stands rejected. The petition is allowed. Rule is made absolute.
(N.V.ANJARIA, J) (SANDEEP N. BHATT,J) Manshi Page 26 of 26 Downloaded on : Sat Dec 24 15:55:07 IST 2022