Delhi High Court
Mr. B. Rath vs Mr. David Ball And Ors. on 13 December, 2006
Equivalent citations: 138(2007)DLT284, AIR 2007 (NOC) 919 (DEL.), 2007 (3) AJHAR (NOC) 764 (DEL.)
Author: Gita Mittal
Bench: Gita Mittal
JUDGMENT Gita Mittal, J.
1. By this order, I propose to dispose of three applications filed by defendants under Order 1 Rule 10 read with Order 7 Rule 11 of the Code of Civil Procedure, 1908. I.A. No. 66/2006 has been filed on behalf of defendant No. 1; I.A. No. 67/2006 has been filed on behalf of defendant Nos. 3 and 3 (a); and I.A. No. 2455/2006 has been filed by the defendant No. 4. In as much as the applications raise similar questions of law and fact as to whether the plaint discloses any cause of action against these defendants, which is to be decided on perusal of the plaint, these applications are being taken up together.
2. For the purposes of this application, it is necessary to examine the case laid down by the plaintiff in the plaint. The present suit has been filed seeking damages of Rs. 1 crore. The plaintiff contends that he is a software engineer and had been the Vice President - Marketing & Services of the UEC SAIL Information Technology Ltd., defendant No. 2 in this case, from 15th March, 1997 up to the 13th November, 2003. A few months before the termination of his services, the plaintiff was promoted to the post of Sr. Vice President of the defendant No. 2. The plaintiff has contended that in view of his qualifications and his services, he was looking forward to an active career with the defendant No. 2 for the next eight years as he was only 52 years old at the time of issuance of the promotion letter.
3. The suit has been necessitated as, all of a sudden, by a one-line letter dated 13th November, 2003, Mr. David Ball, the defendant No. 1 being the then Chief Executive Officer of the defendant No. 2, even though he had no power or authority to do so, terminated the services of the plaintiff. The plaintiff has alleged irreparable damage to his career and standing in society and has assailed the termination of his services as being illegal and having a debilitating impact on his career in terms of loss of opportunity and reputation.
4. On this basis, the present suit has been filed seeking damages of Rs. 1 crore for these actions. Apart from Mr. David Ball who has been arrayed as defendant No. 1 and also 1 (a), the plaintiff has arrayed UEC SAIL Information Technology Ltd. as defendant No. 2; the President, USX Engineers & Consultants Inc. as defendant No. 3; the President, UEC Technologies LLC as defendant No. 3(a); and the Chairman of Steel Authority of India Ltd. as defendant No. 4.
5. In the plaint, it is urged that the defendant No. 2 is a joint venture company, incorporated in 1995 under the Companies Act, 1956. It is submitted that a Promoters Agreement dated 10th November, 1994 was entered into between the USX Engineers & Consultants Inc., USA (UEC) and the Steel Authority of India Ltd. (SAIL) at Delhi. As a result of this Promoters Agreement dated 10th November, 1994, M/s UEC SAIL Information Technology Ltd. (defendant No. 2 herein) was incorporated. M/s UEC Technologies LLC has become the successor in interest of the USX Engineers & Consultants Inc., USA (defendant No. 3) herein and is arrayed as defendant No. 3 (a) before this Court.
6. It is asserted that in terms of Clause 6.1 of the Promoters Agreement dated 10th November, 1994, M/s USX Engineers & Consultants Inc., the defendant No. 3 was to nominate three directors to the Board of Directors of the defendant No. 3 while the Steel Authority of India Ltd., the defendant No. 4 was required to nominate two directors to the Board.
7. The plaintiff has further alleged that upon incorporation of the defendant No. 2, as per Clause 5.1.1 of the Promoters Agreement, he was an employee of the Steel Authority of India, the defendant No. 4 who was working as its General Manager in the E-8 grade and that he was originally assigned to the UEC SAIL Information Technology Ltd. as part of the 'Core Group'. Upon incorporation of such joint venture, the plaintiff was one of the senior most personnel originally assigned to the joint venture by SAIL.
On allegations that the plaintiff was made a sacrificial lamb on account of a power struggle between the USX Engineers & Consultants Inc. and the Steel Authority of India Ltd., the plaintiff has therefore challenged the termination of his services as being illegal and without authority and hence the claim for damages has been made.
8. The plaintiff has arrayed as defendants the afore-noticed parties in the suit and has sought the following prayers:
(a) pass a decree of damages for Rs. 1,00,00,000/- along with pendente lite and future interest at the rate of 12% from the date of institution of the suit till the date of realisation thereof in favor of the plaintiff and against the defendants on account of harm done in terms of loss of opportunity and loss of reputation to the plaintiff;
(b) award costs to the plaintiff; and
(c) pass such other and further orders as are fit and proper in the circumstances of the case.
9. Mr. Chandan Kumar, learned Counsel appearing for the plaintiff has submitted that the defendant Nos. 3, 3 (a) and 4 were responsible for the effective implementation of the joint venture dated 10th November, 1994. It is contended that defendant No. 3 (a) i.e. M/s UEC Technologies LLC is the successor in interest of M/s USX Engineers & Consultants Inc. and is equally liable for any illegality in the working of the joint venture, that is the defendant No. 2.
10. Mr. Chandan Kumar, learned Counsel appearing for the plaintiff has urged that the plaintiff is required only to disclose cause of action. For the purposes of consideration of an application under Order 7 Rule 11 of the Code of Civil Procedure, 1908, it is not necessary for the plaintiff to establish that it had a cause of action. It has been urged that the defendant No. 1 has issued a letter dated 13th November, 2003 illegally terminating the services of the plaintiff in the defendant No. 2/company.
It has been submitted by learned Counsel, that the plaintiff has specifically alleged that the defendant No. 2 had no authority to issue the letter of termination and that allegations to this effect have been made in paras 2, 7, 9 and 10 of the plaint which read thus:
2. That the defendant No. 2 is a Joint Venture Company incorporated in 1995 under the Companies Act, 1956. That this is a product of the Promoters Agreement dated 10.11.1994 between USX Engineers & Consultants Inc., USA (UEC) and the Steel Authority of India Ltd. (SAIL) executed in Delhi. USX Engineers & Consultants Inc, USA (UEC) and the Steel Authority of India Ltd. (SAIL) arrayed herein as the defendant Nos. 3 and 4 respectively. Of late, as per the reply dated 7.2.2005 received from UEC Technologies LLC, it has become the successor in interest of USX Engineers & Consultants Inc, USA. That due to this UEC Technologies LLC have been arrayed as defendant No. 3 (a). That defendant No. 1 was the Chief Executive Officer of the defendant No. 2 as on 13.11.2003 who had signed the said illegal termination of service letter.
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7. That in the context, all of a sudden by his one line letter dated 13.11.2003, defendant No. 1, being the then CEO of the defendant No. 2, even when he had absolutely no powers under eight the JV Agreement, or under the Articles and Memorandum of Association or under any delegation of such power by the Board of Directors, or even under the applicable HR policy of the defendant No. 2, terminated the services of the plaintiff with immediate effect.
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9. That this illegal communication was protested against by the plaintiff by his letter dated 20.11.2003 addressed to the Chairman of the defendant No. 2. That this was duly received by the said Chairman. By his letter dated 27.11.2003, addressed to Mr. C.J. Navetta, Director, being representative of the Defendant No. 3 on the Board of Directors of the defendant No. 2, he called this communication illegal and without authority as defendant No. 1 had no authority to terminate. That in spite of this, none of the aforesaid three defendants being defendant Nos. 2-4 took any step to redeem the situation. Nor was any communication issued to the plaintiff from either of the three defendants.
10. That this state of affairs continued for almost a year. During this period, the defendant No. 2 did not even offer salary due and the terminal benefits to the plaintiff. The same has till date been not given. That as during this period the defendant Nos. 1 and 2 were neither withdrawing the said letter nor were releasing the money held under terminal benefits and the plaintiff could not have sustained without searching for new engagements, he was forced to take up other engagement. As on today, the plaintiff has no job.
11. Reliance has been placed on the pronouncement of the Apex Court entitled Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay and Ors. and judgments of this Court reported in 88 (2000) DLT 769 Inspiration Clothes & U v. Colby International Limited; Anjum Nath v. British Airways PLC and Ors.; and Balbir Singh v. Government of NCT of Delhi and Ors. (para 11).
12. On the other hand, Mr. Parag P. Tripathi, learned senior counsel appearing for defendant No. 1 has vehemently urged that the plaintiff has claimed employment with the defendant No. 2 and termination of such contract of service. Since defendant No. 2 was a company, the actions on its behalf had to be taken by human agencies. The defendant No. 1 has only issued the letter for and on behalf of the defendant No. 2 and for such act, he cannot be imp leaded as a party in the present suit for damages. It is further urged that the plaint contains no allegations against defendant Nos. 3 & 3a and no relief has sought against them.
13. In support of these submissions, learned senior counsel appearing for defendant No. 1 has placed reliance on the pronouncements of this Court reported in 2006 (86) DRJ 374 Ajit Singh v. Ramesh Vohra and Anr. (para 9 and 11); 2006 III AD (Delhi) 141 Arunesh Punetha v. Boston Scientific Corporation and Ors. (para 19); and 2001 VI AD (Delhi) 457 TBWA Anthem Private Ltd. v. Mr. Madhukar Kamath and Anr. (para 4 and 8).
14. Having heard learned Counsel for the parties and given my thoughtful consideration to the issues raised in regard to Order 7 Rule 11 of the CPC, I find that a plaint which does not disclose any cause of action against the defendant is required to be rejected against such a party. The court is also adequately empowered to add or delete a party to the suit who is neither a necessary or a proper party at any stage.
15. Before examining the law on the subject, it is necessary to notice some essential facts. On a bare perusal of the plaint, the admitted position which emerges is that the plaintiff was an employee of the defendant No. 2 and is aggrieved by the action of termination of his services by the UEC SAIL Information Technology Ltd. The plaintiff contends that this joint venture company has been incorporated in 1995 under the provisions of the Companies Act, 1956. Consequently, in terms of Section 3 of this enactment, the defendant No. 2 is a legal entity which is capable of suing and being sued. There is also no dispute, as is also evident from the array of parties in the plaint, that Mr. David Ball, defendant No. 1 has been arrayed in the capacity of his being the Chief Executive Officer of the defendant No. 2 and for the reason of his having issued the letter of termination of services of the plaintiff.
16. The defendant No. 3 i.e. M/s USX Engineers & Consultants Inc. is the erstwhile M/s UEC Technologies LLC. However, upon the incorporation of the defendant No. 2 i.e. M/s UEC SAIL Information Technology Ltd. as a company under the Companies Act, 1956, the joint venture was required to run under these statutory provisions and is an independent legal entity.
So far as the defendant Nos. 3, 3 (a) and 4 are concerned, in fact they have no connection with the act of termination of services of the plaintiff and also no allegations have been made in the plaint against these defendants.
Defendant Nos. 3, 3 (a) and 4 certainly cannot be held responsible for the functioning of the defendant No. 2.
17. Perusal of the plaint further shows that it is not the Steel Authority of India Ltd. who has been imp leaded as a party-defendant but the Chairman of this Corporation has been imp leaded as defendant No. 4. During the course of arguments, it was admitted by Mr. Chandan Kumar, learned Counsel for the plaintiff that defendant No. 4 was imp leaded only as a 'proforma party'.
Only one fact has been asserted in order to maintain the suit against the defendant No. 4.
It has been urged that a letter dated 27th November, 2003 was written by Mr. S.C.K. Patne, Chairman of USIT & Director (Tech) SAIL to Mr. C.J. Navetta, Director USIT requesting that before the letter dated 13th November, 2003 was given effect to, the issue should be discussed in the next board meeting.
This letter has been written by a person who is director in the defendant-joint venture. The letter has not been written by or on behalf of the Steel Authority of India Ltd.
However, in any case, as noticed above, the Steel Authority of India Ltd. is not even a party to the present suit. Any letter written by any official who was an employee of either the Steel Authority of India Ltd. or of the joint venture cannot be held against the Chairman of the Steel Authority of India, who has been imp leaded as defendant No. 4.
18. Even assuming that such a communication was binding on the defendant No. 4, this communication would be at best documentary evidence in support of the case of the plaintiff who has claimed illegality in the termination of his services. Certainly, every person who maybe a witness in a case cannot be made a party to the litigation and is not a necessary or proper party in a suit.
19. In this behalf, reference can be usefully made to a pronouncement of the Apex Court in entitled Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay and Ors., wherein the Apex Court laid down the law thus:
14. The person to be joined must be one whose presence is necessary as a party. What makes a person a necessary party is not merely that he has relevant evidence to give on some of the questions involved; that would only make him a necessary witness. It is not merely that he has an interest in the correct solution of some question involved and has thought of relevant arguments to advance. The only reason which makes it necessary to make a person a party to an action is so that he should be bound by the result of the action and the question to be settled, therefore, must be a question in the action which cannot be effectually and completely settled unless he is a party. The line has been drawn on a wider construction of the rule between the direct interest or the legal interest and commercial interest. It is, therefore, necessary that the person must be directly or legally interested in the action in the answer i.e. he can say that the litigation may lead to a result which will affect him legally that is by curtailing his legal rights.
20. It is trite that only such person is to be imp leaded as a party to a suit for a proceeding who is directly and legally interested in the dispute involved. This would include a person whose presence before the court may be necessary to enable the court to effectually and completely adjudicate upon and settle all the questions involved in the suit. It is necessary that in the absence of such person, the court would not be able to decide all the issues and disputes involved in the suit finally and completely. A party who is not directly interested in the issue but is only indirectly effected cannot be added as a defendant in the suit. It is necessary that a person must be directly and legally interested in the dispute involved. A person cannot be imp leaded simply because he would be effected by the final decision in the suit. (Ref: 2001 (7) AD Delhi 1060 HBL Ltd. v. Union of India)
21. The statutory provision of Order 1 Rule 10 (2) of the Code of Civil Procedure, 1908 permits the court, at any stage of proceeding, either upon or without the application of either party, order that the name of any party improperly joined whether as plaintiff or defendant, to struck out. The court is also empowered to direct any person who ought to have been joined whether as plaintiff or defendant or whose presence before the court may be necessary in order to enable the court to effectually and completely adjudicate upon and settle all the questions involved in the suit, to be added as a party.
22. In Anil Kumar Singh v. Shivnath Mishra, the court held that to bring a person as a party-defendant is not a substantive right but one of procedure and the court has discretion in its proper exercise. The object of the rule is to bring on record all the persons who are parties to the dispute relating to the subject-matter so that the dispute may be determined in their presence at the same time without any protraction, inconvenience and to avoid multiplicity of proceedings.
The court further held that a person may be added as a party-defendant to the suit though no relief may be claimed against him/her provided his/her presence is necessary for a complete and final decision on the question involved in the suit. Such a person is only a proper party as distinguished from a necessary party.
23. Two tests have been laid down by the Supreme Court for determining the question as to who is a necessary party. In this behalf, in Kasturi v. Iyyamperumal, the court set down the principles thus:
7. In our view, a bare reading of this provision, namely, second part of Order 1 Rule 10 Sub-rule (2) CPC would clearly show that the necessary parties in a suit for specific performance of a contract for sale are the parties to the contract or if they are dead, their legal representatives as also a person who had purchased the contracted property from the vendor. In equity as well as in law, the contract constitutes rights and also regulates the liabilities of the parties. A purchaser is a necessary party as he would be affected if he had purchased with or without notice of the contract, but a person who claims adversely to the claim of a vendor is, however, not a necessary party. From the above, it is now clear that two tests are to be satisfied for determining the question who is a necessary party. Tests are - (1) there must be a right to some relief against such party in respect of the controversies involved in the proceedings; (2) no effective decree can be passed in the absence of such party.
P. In the present matter, another aspect has been raised by the defendants which needs to be examined. It has been urged that the plaint is liable to be rejected for the reason it discloses no cause of action against them. The legislature has incorporated this ground for rejection of the plaint in Rule 11 of Order 7 of the Code of Civil Procedure. However, the statute has not defined the 'cause of action'.
24. So far as to what would constitute cause of action, the same has fallen for consideration in several judicial pronouncements. It has been held that 'cause of action' means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is that bundle of facts which is necessary for the plaintiff to prove in order to succeed in the suit. (Ref: Bloom Dekor Ltd. v. Subhash Himatlal Desai).
The expression 'cause of action' has acquired a judicially settled meaning. In (2001) 2 SCC 294: AIR 2001 SC 416 Rajasthan High Court Advocates' Association v. Union of India, it was held that in the restricted sense, cause of action means the circumstances forming the infraction of the right or the immediate occasion for the action. In the wider sense, it means the necessary conditions for the maintenance of the suit, including not only the infraction of the right, but the infraction coupled with the right itself. Compendiously, the expression means every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court. Every fact which is necessary to be proved, as distinguished from every piece of evidence which is necessary to prove each fact, comprises 'cause of action'.
Thus 'cause of action' means every fact which it is necessary for the plaintiff to establish to support a right or obtain a judgment. (Ref: Sadanandan Bhadran v. Madhavan Sunil Kumar).
Accrual of cause of action has been related to the vesting of territorial jurisdiction of the court. This aspect has raised some interesting issues.
25. In a judgment State of Rajasthan v. Swalika Properties, certain properties belonging to a company which had its registered office in Calcutta were sought to be acquired in Jaipur and the notice under Section 52 of the Rajasthan Urban Improvement were served upon the company at Calcutta. Basing its right to maintain the writ petition at Calcutta High Court, it had been contended that service of the notice within the territorial jurisdiction of the Calcutta High Court empowered that court to exercise jurisdiction in the matter. The Apex Court held that the entire cause of action for challenging the acquisition of the land under Section 152 of the Rajasthan Urban Improvement Act had arisen within the territorial jurisdiction of the Rajasthan High Court. The factum of service of the notice at Calcutta was held unnecessary for grant of an appropriate writ, order or direction under Article 226 of the Constitution for quashing the notice issued by the Rajasthan Government. It was thus held that the High Court at Calcutta had no jurisdiction to entertain the writ petition.
26. The law on this aspect has been authoritatively laid down by the Apex Court when it had occasion to examine this question further in its judgment reported at entitled Union of India v. Adani Export Ltd. and Ors. wherein it was held thus:
17. It is seen from the above that in order to confer jurisdiction on a High Court to entertain a writ petition or a special civil application as in this case, the High Court must be satisfied from the entire facts pleaded in support of the cause of action that those facts do constitute a cause so as to empower the court to decide a dispute which has, at least in-part, arisen within its jurisdiction. It is clear from the above judgment that each and every fact pleaded by the respondents in their application does not ipso facto lead to the conclusion that those facts gives rise to a cause of action within the court's territorial jurisdiction unless those facts pleaded are such which have a nexus or relevance with the lis that is involved in the case. Facts which have no bearing with the lis or the dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the court concerned. If we apply this principle then we see that none of the facts pleaded in Paragraph 16 of the petition, in our opinion, fall into the category of bundle of facts which would constitute a cause of action giving rise to a dispute which could confer territorial jurisdiction on the courts at Ahmadabad.
27. Placing reliance on the pronouncement of the Apex Court in the State of Rajasthan (supra) and the Adani Export matter in its judgment reported at National Textile Corporation Ltd. and Ors. v. Haribox Swalram and Ors., the Apex Court elucidated the applicable principles:
12.1. As discussed earlier, the mere fact that the writ petitioner carries on business at Calcutta or that the reply to the correspondence made by it was received at Calcutta is not an integral part of the cause of action and, therefore, the Calcutta High Court had no jurisdiction to entertain the writ petition and the view to the contrary taken by the Division Bench cannot be sustained. In view of the above finding, the writ petition is liable to be dismissed.
In this case as the parties had litigated up to the Apex Court. In order to put an end to the litigation, the Supreme Court however examined the matter on merits as well.
28. In a recent judgment reported at Kusum Ingots & Alloys Ltd. v. Union of India and Anr. the Apex Court has considered this issue further and held thus:
26. The view taken by this Court in U.P. Rashtriya Chini Mill Adhikari Parishad that the situs of issue of an order or notification by the Government would come within the meaning of the expression "cases arising" in Clause 14 of the (Amalgamation) Order is not a correct view of law for the reason hereafter stated and to that extent the said decision is overruled. In fact, a legislation, it is trite, is not confined to a statute enacted by Parliament or the legislature of a State, which would include delegated legislation and subordinate legislation or an executive order made by the Union of India, State or any other statutory authority. In a case where the field is not covered by any statutory rule, executive instructions issued in this behalf shall also come within the purview thereof. Situs of office of Parliament, legislature of a State or authorities empowered to make subordinate legislation would not by itself constitute any cause of action or cases arising. In other words, framing of a statute, statutory rule or issue of an executive order or instruction would not confer jurisdiction upon a court only because of the situs of the office of the maker thereof.
29. This principle finds application in the rationale and reasoning of the Apex Court in the Adani Export matter. Thus, there may be some facts which may constitute a cause of action whereby the High Court would be enabled and empowered to decide the disputes. Yet, each and every such fact pleaded by a party does not by itself lead to the conclusion that the court would have the territorial jurisdiction to entertain the writ petition. It is only such facts which have a nexus or relevance with the issues raised in the litigation which vest the court with territorial jurisdiction. Thus, though an agreement may have been executed within the territorial jurisdiction of the court, however in order to decide the issue of territorial jurisdiction in cases where the extraordinary jurisdiction of the High Court has been invoked under Article 226 of the Constitution of India, it has to be seen whether the execution of the agreement is such an integral part of the facts relating to the litigation and dispute that consideration of such fact is absolutely imperative and essential for deciding the disputes involved in the case.
30. A similar question had fallen for consideration before this Court in a judgment reported at Callipers Naigai Ltd. and Ors. v. Government of NCT of Delhi and Ors. and it was held as under:
8. In this particular case, we have to examine, therefore, what is the actual grievance of the petitioner. The petitioners, in view of Section 3 (3) of the said Act, cannot have any grievance with regard to the issuance of notices dated 02.07.1998 because these have been issued merely in compliance of the recovery certificate received by the respondent No. 2 from the Haryana Financial Corporation at Chandigarh. The respondent No. 2 had no option in the matter. He was not in any manner enjoined with any duty to examine the correctness or otherwise of the recovery certificate issued under Section 3 (2) of the said Act. The issuance of the recovery certificate is conclusive proof of the matters stated therein. In fact, the actual cause of action is in respect of the recovery certificate which is the causa causea and it is well-known that causa causea est causa causati (the cause of a cause is the cause of the thing cause) and the cause of the cause is to be considered as the cause of the effect also (see: Black's Law Dictionary 6th Edition, p.220). Thus, the recovery notices are nothing but the effect and the cause, in point of fact, is the issuance of the recovery certificate. In other words, the recovery certificate is the causa sine qua non (a necessary or inevitable cause); a cause without which the effect in question could not have happened (see: Black's Law Dictionary 6th Ediction, p.221. Sans the recovery certificate, the recovery notices could not have been issued. Thus, it is clear that the recovery notices dated 02.07.1998 cannot be set aside without the recovery certificate dated 21.10.1998 also being set aside. The recovery notices have no life of their own and must necessarily depend for their sustenance on the existence of the recovery certificate and the cause of action for which arose entirely in Chandigarh. The recovery notices do not form an integral part of the cause of action. Thus, this Court does not have territorial jurisdiction to entertain the present writ petition.
9. In the aforesaid decision, which clearly dealt with a similar situation, it was held that recovery notices such as the one impugned herein do not form an integral part of the cause of action and, therefore, this Court would not have territorial jurisdiction to entertain the writ petition challenging the recovery notice. I see no reason to depart from this view. The lis is with PICUP. Consequently the cause of action is qua PICUP. Unfortunately that has entirely arisen outside the territorial jurisdiction of this Court. The issuance of the recovery notice has no relevance with this lis that is involved in the case. It is the result of a purely ministerial act on the part of Respondent No. 1 who cannot be faulted for acting in the manner he did. The stature required him to do so. He had no discretion in the matter. He had no lis to decide. The recovery notice is merely an effect and not the cause. It is the cause which confers jurisdiction and not the effect. Then, the answer to question No. 2 is that the mere issuance of the impugned recovery notice at Delhi does not clothe this Court with the territorial jurisdiction to entertain this petition.
31. In South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises (P) Ltd., it was held that the cause of action is a bundle of facts which taken with the law applicable to them, gives the plaintiff a right to claim against the defendant.
The present applications have to be examined from the principles laid down in these binding judicial precedents.
32. My attention has been drawn to the pronouncement of this Court reported in 2006 (86) DRJ 374 Ajit Singh v. Ramesh Vohra and Anr., wherein the court held that for the purposes of consideration of the issues as to whether the plaint discloses any cause of action or not, all the pleadings in the plaint have to be treated as correct and the defense has not to be looked into. The court emphasised the principle that the plaint had to be read meaningfully.
It is trite that every case has to be examined in the light of the facts averred in plaint by the plaintiff and no absolute principles governing such consideration can possibly be laid down.
Rejection of a plaint is undoubtedly a serious matter in as much as it would terminate the proceedings before the court and consequently have serious repercussions on the rights of the parties. The same cannot be had recourse to lightly and requires a serious construction of the plaint and the documents relied upon by the plaintiff.
33. For this reason, the courts have emphasised that the pleadings have to be meaningfully read. In this behalf, it would be instructive to advert to the pronouncement Harnam Singh v. Surjit Singh.
34. The distinction between 'a plaint disclosing no cause of action' on the one hand and 'the plaintiff having no cause of action' on the other have to be borne in mind. The principles which would guide the court in this consideration were elaborately laid down in a pronouncement of this Court reported at 88 (2000) DLT 769 Inspiration Clothes & U v. Colby International Limited. It was held thus:
10. Having considered the submissions made at the Bar and gone through the impugned order, we are of the view that learned Single Judge proceeded on erroneous assumption that he was entitled to go into the merits of the controversy that whether the plaintiff had any cause of action against the defendant or not or that whether the plaintiff's suit against the defendant was or was not maintainable. Such an approach is erroneous. The plea of the defendant that there is no cause of action does not amount to the plea that the plaint does not disclose any cause of action. A distinction must always be drawn between a plea that plaint does not disclose a cause of action and the plea that the plaintiff has no cause of action to sue. The grounds on which the plaint can be rejected are enumerated in Clauses (a) to (d) of Rule 11 of Order 7, CPC. The first ground on which plaint can be rejected is that it does not disclose a cause of action. While considering the prayer to reject the plaint on ground (a) of Order 7, Rule 11, CPC that the plaint discloses no cause of action, which is essentially a demurrer, the defendant must be taken to admit for the sake of argument that the allegations of the plaintiff in the plaint are true in manner and form. The power to reject the plaint on this can be exercised only if the Court come to the conclusion that even if all the allegations are taken to be proved, the plaintiff would not be entitled to any relief whatsoever. A distinction must, always be drawn between a case where the plaint on the face of it discloses no cause of action and another in which after considering the entire material on the record the Court come to the conclusion that there is no cause of action. In the first case the plaint can be rejected but in the latter case the plaint cannot be rejected. The suit has to be dismissed. Learned Single Judge adopted the second approach. This was not the stage where the Court was expected to enter into this controversy that whether there was a cause of action to the plaintiff against the defendant or not. No doubt that where the plaint is based on a document, the Court will be entitled to consider the said document also and ascertain if a cause of action is disclosed in the plaint, but validity of the document cannot be considered at this stage. To enable a Court to reject a plaint on the ground that it does not disclose a cause of action, it should look at the plaint and documents accompanying the plaint only and nothing else. The Court, however, cannot look at the defense of the defendant or the documents relied upon by the defendant. See D. Ramchandran v. R.V Janakiraman and Ors. . Learned Single Judge fell in error in placing reliance upon the material supplied by the defendant, which alone is sufficient to set aside the impugned order. Learned Single Judge instead of proceeding to reject the plaint dismissed the suit, which approach is also erroneous. The effect of dismissal of suit is altogether different and distinct from the effect of rejection of the plaint. In case plaint is rejected under Order 7 Rule 11, CPC, filing of a fresh plaint in respect of the same cause of action is specifically, permitted under Rule 13 of Order 7, CPC. Altogether different consequence follows in the event of dismissal of suit, which has the effect of precluding the plaintiff to file a fresh suit on the same cause of action. Rejection of plaint takes away the very basis of the suit rendering as if there was no suit at all or that no suit was instituted. Order of dismissal of suit while recognising the existence of a suit indicates its termination. While deciding the application under Order 7 Rule 11 of the CPC, learned Single Judge ought not and could not have dismissed the suit. Even in the decision of the Supreme Court in T. Anvandandam's case (supra), relied upon by learned Counsel for the appellant, it was held 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, the Trial Court should exercise his power under Order 7 Rule 11, CPC taking care to see that the ground mentioned therein is fulfillled. In order to fulfill that ground bare allegation made in the plaint and the documents filed therewith were required to be looked into which in the instant case clearly disclosed at least a cause of action against the defendant that defendant was liable for damages for its acts of omission and commission. It would be an altogether different situation that the plaintiff might not ultimately succeed in obtaining a decree against the defendant or that Court might come to the conclusion that suit would not be maintainable against the defendant and that plaintiff had a cause of action only against defendant's principal and its parent unit in Hong Kong, but such aspect could not have been gone into at this stage. Three paragraphs of the plaint quoted above in our view do clearly disclose cause of action for the plaintiff to claim damages.
35. In this behalf, it would be useful to refer to the pronouncement of the Apex Court State of Orissa v. Klockner and Company and Ors., wherein the court laid down the principles thus:
From the discussion in the order it appears that the learned trial judge has not maintained the distinction between the plea that there was no cause of action for the suit and the plea that the plaint does not disclose a cause of action. No specific reason or ground is stated in the order in support of the finding that the plaint is to be rejected under Order 7 Rule 11 (a). From the averments in the plaint, it is clear that the plaintiff has pleaded a cause of action for filing the suit seeking the reliefs stated in it. That is not to say that the plaintiff has cause of action to file the suit for the reliefs sought that question is to be determined on the basis of materials (other than the plaint) which may be produced by the parties at appropriate stage in the suit. For the limited purpose of determining the question whether the suit is to be wiped out under Order 7, Rule 11 (1) or not the averments in the plaint are only to be looked into. The position noted above is also clear from the petitioner filed by defendant No. 1 under Order 7, Rule 11 in which the thrust of the case pleaded is that on the stipulations in the agreement of 20.4.1982 the plaintiff is not entitled to file a suit seeking any of the reliefs stated in the plaint.
36. Again, in 1987 Supp. SCC 563 Samar Singh v. Kedar Nath, the court held that:
132. It is trite that a party should not be unnecessarily harassed in a suit. An order refusing the reject a plaint will finally determine his right in terms of Order 7 Rule 11 of the Code of Civil Procedure.
133. The idea underlying Order 7 Rule 11 (a) is that when no cause of action is disclosed, the courts will not unnecessarily protract the hearing of a suit. Having regard to the changes in the legislative policy as adumbrated by the amendments carried out in the Code of Civil Procedure, the court would interpret the provisions in such a manner so as to save expenses, achieve expedition and avoid the court's resources being used up on cases which will serve no useful purpose. A litigation which is in the opinion of the court is doomed to fail would not further be allowed to be used as a device to harass a litigant. (See Azhar Hussain v. Rajiv Gandhi 1986 Supp. SCC 315 at pp. 324-325).
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139. 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.
140. A cause of action is a bundle of acts which are required to be pleaded and proved for the purpose of obtaining relief claimed in the suit. For the aforementioned purpose, the material facts are required to be stated but not the evidence except in certain cases where the pleading reliefs on any misrepresentation, fraud, breach of trust, willful default or undue influence.
37. The principles which would guide the court while exercising its power under Order 7 Rule 11 of the CPC have been widely laid down by the Apex Court in Mayor (H.K) Ltd. v. owners & Parties, Vessel M.V. Fortune Express, wherein the court laid down the applicable law stating as hereunder:
11. Under Order 7 Rule 11 of the Code, the court has jurisdiction to reject the plaint where it does not disclose a cause of action, where the relief claimed is undervalued and the valuation is not corrected within the time as fixed by the court, where insufficient court fee is paid and the additional court fee is not supplied within the period given by the court, and where the suit appears from the statement in the plaint to be barred by any law. Rejection of the plaint in exercise of the powers under Order 7 Rule 11 of the Code would be on consideration of the principles laid down by this Court. In T. Arivanandam v. T.V. Satyapal, this Court has held 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, the court should exercise its power under Order 7 Rule 11 of the Code taking care to see that the ground mentioned therein is fulfillled. In Roop Lal Sathi v. Nachhattar Singh Gill, this Court has held that where the plaint discloses no cause of action, it is obligatory upon the court to reject the plaint as a whole under Order 7 Rule 11 of the Code, but the rule does not justify the rejection of any particular portion of a plaint. Therefore, the High Court therein could not act under Order 7 Rule 11 (a) of the Code for striking down certain paragraphs in the absence of anything to show that the averments in those paragraphs are either unnecessary, frivolous or vexatious, or that they are such as may tend to prejudice, embarrass or delay the fair trial of the case, or constitute an abuse of the process of the court. In ITC Ltd. v. Debts Recovery Appellate Tribunal, it was held that the basic question to be decided while dealing with an application filed by the defendant under Order 7 Rule 11 of the Code is to find out whether the real cause of action has been set out in the plaint or something illusory has been projected in the plaint with a view to get out of the said provision. In Saleem Bhai v. State of Maharashtra, this Court has held that the trial court can exercise its powers under Order 7 Rule 11 of the Code at any stage of the suit before registering the plaint or after issuing summons to the defendant at any time before the conclusion of the trial and for the said purpose the averments in the plaint are germane and the pleas taken by the defendant in the written statement would be wholly irrelevant at that stage. In Popat and Kotecha Property v. State Bank of India Staff Assn., this Court has culled out the legal ambit of Rule 11 of the Order 7 of the Code in these words: (SCC p. 516, para 19)
19. There cannot be any compartmentalisation, dissection, segregation and inversions of the language of various paragraphs in the plaint. If such a course is adopted it would run counter to the cardinal canon of interpretation according to which a pleading has to be read as a whole to ascertain its true import. It is not permissible to cull out a sentence or a passage and to read it out of the context in isolation. Although it is the substance and not merely the form that has to be looked into, the pleading has to be construed as it stands without addition or subtraction of words or change of its apparent grammatical sense. The intention of the party concerned is to be gathered primarily from the tenor and terms of his pleadings taken as a whole. At the same time it should be borne in mind that no pedantic approach should be adopted to defeat justice on hair-splitting technicalities.
12. From the aforesaid, it is apparent that the plaint cannot be rejected on the basis of the allegations made by the defendant in his written statement or in an application for rejection of the plaint. The court has to read the entire plaint as a whole to find out whether it discloses a cause of action and if it does, then the plaint cannot be rejected by the court exercising the powers under Order 7 Rule 11 of the Code. Essentially, whether the plaint discloses a cause of action, is a question of fact which has to be gathered on the basis of the averments made in the plaint in its entirety taking those averments to be correct. A cause of action is a bundle of facts which are required to be proved for obtaining relief and for the said purpose, the material facts are required to be stated but not the evidence except in certain cases where the pleadings relied on are in regard to misrepresentation, fraud, willful default, undue influence or of the same nature. So long as the plaint discloses some cause of action which requires determination by the court, the mere fact that in the opinion of the Judge the plaintiff may not succeed cannot be a ground for rejection of the plaint.
38. In the pronouncement of this Court reported in 2006 III AD (Delhi) 141 Arunesh Punetha v. Boston Scientific Corporation and Ors., this Court had an occasion to consider an application under Order 7 Rule 11 of the Code of Civil Procedure filed in the suit challenging termination of service by the defendants and it was held that the plaintiff disclosed privity of contract only with the defendant No. 3 which gave rise to rights and obligations between the parties. In this behalf, the court noticed thus:
17. ...The admission of the plaintiff that all the defendants are corporate bodies and have their separate independent entity being companies duly incorporated, would further show that merely on vague averment and without expression of a definite cause of action, the plaintiff cannot be permitted to expose the said defendants to vague and purposeless litigation. Except the defendants who are his employers and against whom some definite averments have been made, constitute a proper cause of action which of course the plaintiff would have to prove during the course of trial.
39. Therefore, it is only such facts which would give rise to a legitimate claim or relief in favor of the plaintiff and against the defendants which would give it a right to file and maintain a suit against such a party. The plaintiff has to prima facie show that he has an actionable remedy in law on the facts stated in the plaint read in conjunction with the documents.
40. As noticed above, the consequences of rejection of the plaint on the ground that it does not disclose any cause of action in respect of a particular defendant would be drastic and the plaintiff would be deprived of its right to seek adjudication of its claim against such defendant.
These applications have to be examined in the light of the principles noticed hereinabove.
41. I find that there is not a single allegation against the Chairman of the Steel Authority of India Ltd. who has been imp leaded as defendant No. 4. He also has no nexus or connection with the transaction by which the plaintiff is aggrieved. No relief can be granted against him. The plaintiff has also not claimed any employment with or any right, title or interest in or against the Steel Authority of India. On the contrary, in para 11 of the plaint, the plaintiff admits that he had 'past employment' with the Steel Authority of India. No relief has been prayed for or granted. There can therefore be no dispute that the plaint does not disclose any cause of action against the defendant No. 4.
Consequently, I.A. No. 2455/2006 filed by defendant No. 4 seeking deletion of his name from the array of parties deserves to be allowed.
Defendant No. 4 is accordingly directed to be deleted from the array of parties in the present suit.
42. I now propose to consider I.A. No. 67/2006 filed by defendant Nos. 3 and 3(a). I further find that the only reason for arraying the defendant Nos. 3 and 3 (a) as party in the suit has been on the ground that M/s USX Engineers & Consultants Inc. had entered into the Promoters Agreement dated 10th November, 1994 with SAIL which had resulted in the formation of the joint venture company M/s UEC SAIL Information Technology Ltd., defendant No. 2. which was incorporated in 1995.
A close examination of the plaint shows that the plaintiff has averred that the joint venture company i.e. the defendant No. 2 is bound by the stipulations contained in the agreement dated 10th November, 1994. This would certainly not be sufficient ground to array this firm as a party in a claim for damages based on a plea that the services of the plaintiff have been illegally terminated.
43. Perusal of the plaint shows that the plaintiff has arrayed the President of USX Engineers & Consultants Inc. and the President of its successor in interest, UEC Technologies LLC, as party-defendants.
Certainly, an authority or official in a Corporation cannot be held liable or responsible for actions attributable to or which may bind the Corporation unless there were certain personal allegations against them. There is no act attributable to or so stated anywhere in the plaint against the defendant Nos. 3 and 3 (a). No cause of action is disclosed in the plaint against these persons. In view of the legal principles noticed above, consequently, it has to be held that the defendant Nos. 3 and 3 (a) are also neither necessary nor proper parties in the present litigation.
Consequently, I.A. No. 67/2006 filed by defendant Nos. 3 and 3 (a) also deserves to be allowed.
Defendant Nos. 3 and 3 (a) are also directed to be deleted from the array of parties in the present suit and the plaint against them is rejected.
44. It is now necessary to consider I.A No. 66/2006 which has been filed by defendant No. 1 Mr. David Ball who is stated to be the Chief Executive Officer of the defendant No. 2 herein.
45. From the above, it is apparent that every fact pleaded does not give rise to a cause of action in favor of the plaintiff and against the defendant. The act of issuance of the letter of termination is certainly attributable to the defendant No. 2. However, admittedly the plaintiff was an employee of the defendant No. 2 and was not employed by the defendant No. 1.
46. The entire claim in the plaint rests on the challenge to the issuance, contents and impact of the letter dated 13th November, 2003. The contents of this letter dated 13th November, 2003 have been reproduced in the plaint which reads thus:
Dear Mr. Rath, This is to inform you that, effective immediately, your services to USIT are no longer required as per paragraph 4 of your Appointment Letter dated 15th March, 1997.
You will be paid two months salary in lieu of two months notice.
47. There is no dispute that this letter has been issued by the defendant No. 1 in his capacity as Chief Executive Officer of the defendant No. 2 and is a letter of termination of service.
By such letter, the services of the plaintiff with the defendant No. 2 were stated to be as not required and consequently, the contract of service came to an end.
48. In the instant case, undoubtedly, the defendant No. 1 has written a letter dated 13th November, 2003 as the CEO of the defendant No. 2. However, the plaintiff has urged in the plaint that this letter was without authority and in violation of the terms of the joint venture dated 10th November, 1994.
On such pleas, the relief of damages has been sought against all the defendants. The issue raised in the plaint would require a consideration of the aspect as to whether the letter had been issued with or without authority on behalf of the defendant No. 2. If the termination of services of the plaintiff was without authority, the consequences thereof would be that the termination would stand invalidated.
On such finding being returned in favor of the plaintiff, so far as its claim against the defendant No. 2 is concerned, in view of the principles of the Specific Relief Act, 1963, the plaintiff may not be entitled to reinstatement into service but certainly the claim of damages may ultimately be found justified.
49. The plaintiff has urged that the defendant No. 1 has acted without authority in issuing the letter. On the assertions made in the plaint, it has been urged on behalf of the plaintiff by such illegal actions that the defendant No. 1 would have contributed to the damages suffered on account of the wrongful termination of his services. Certainly on an examination of the plaint and the communications placed before this Court, therefore it cannot be stated at this stage that the plaint does not disclose any cause of action against the defendant No. 1.
So far as the submission that the defendant No. 1 was only the human agency acting for and on behalf of defendant No. 2 is concerned, in my view, such a plea is really in the nature of the defense of the defendant No. 1 to the suit filed by the plaintiff. It is well settled that such a plea cannot be examined at this stage.
50. Defendant Nos. 1 and 2 would be required to show that the letter of termination of services of the plaintiff was issued with its authority and was as per the provisions which were applicable with regard to the service of the plaintiff.
51. In Anjum Nath v. British Airways PLC and Ors., the plaintiff had filed the suit seeking a decree against the defendants for the sum of Rs. 55 lakhs and a declaration that he was entitled to the benefits under the Indian Early Retirement Scheme. The plaintiff had arrayed several persons as parties who filed applications under Order 7 Rule 11 of the CPC contending that the plaint does not disclose any cause of action against them as they were only superior officers in the organisation and consequently no liability for acts of the organisation could be fastened upon them.
It was held by the court that the plaintiff had urged a plea that these officers had deliberately misled her and given assurances to her and consequently had contributed to the alleged damages suffered. In the facts and circumstances of the case, the court held upon consideration of the averments made that it could not be held that the plaint did not disclose any cause of action against such persons. Whether the plaintiff ultimately succeeded against them or not would be decided after evidence and adjudication and not merely on the pleas urged by the plaintiff in the plaint.
52. In the light of the pleadings laid by the plaintiff against the defendant No. 1 herein before this Court, the plaintiff has stated that he was made a sacrificial lamb in a power struggle between the defendant No. 2 i.e M/s UEC SAIL Information Technology Ltd. and defendant No. 4 i.e. Steel Authority of India Ltd. and that the defendant No. 1 Mr. David Ball has issued the letter of termination of service without any authority, resulting in loss and damages to it. The plaintiff has claimed loss of reputation for such act on the part of defendant No. 1. Whether such act was with or without authority and whether the act of the defendant No. 1 in issuing such letter of termination of services of the plaintiff vests any personal liability against the defendant No. 1 are the matters which would require to be ultimately adjudicated upon after the parties lead evidence. However, looked against the legal position set down hereinabove, it cannot be held that the plaintiff has not made out such case against the defendant No. 1 which requires examination.
Looked at from any angle, it cannot be held at this stage that the plaint does not disclose any cause of action against defendant No. 1.
53. In this view of the matter, so far as maintainability of suit against defendant No. 1 is concerned, it cannot be held that Mr. David Ball is not a necessary and proper party to the present suit or that the plaint does not disclose any cause of action against him. The plaintiff is entitled an opportunity to prove its case against the defendant No. 1. This defendant would have the right to lead to establish its defense in accordance with law.
Consequently, I.A. No. 66/2006 filed on behalf of defendant No. 1 is hereby dismissed.
There shall be no order as to costs.