Himachal Pradesh High Court
State Bank Of Patiala vs Hypine Carbons Ltd. (In Liquidation) ... on 8 November, 1988
Equivalent citations: AIR1990HP10
JUDGMENT V.K. Mehrotra, J.
ORDER ON ISSUE NO. I : The first defendant Hypine Carbons Ltd. (in liquidation was established at Nalagarh in the State of Himachal Pradesh to carry on the business of producing, processing of activated carbon and bye-products thereof. At the request of the first defendant. State Bunk of Patiala sanctioned and granted some credit limits to it in pursuance of an agreement dt. Dec. 18, 1972. This agreement was reviewed and the necessary documents renewed from time to lime.
2. The first defendant was supplying its manufactured products, which were hypothecated with the Bank, to various parties with direction to make payment directly to the Bank. Hundies used to be drawn by these parties which used to be discounted to the Bank.
3. A petition for the winding up of the first defendant (being Company Petition No. 1 of 1977) was moved in this Court by M/s. Kuldip Industrial Corporation. This Court, while admitting the petition, appointed a Provisional Liquidator for the first defendant under Section 450 of the Companies Act, 1956.
4. The first defendant made default in making repayments as envisaged under the various agreement with the Bank. The manufacturing operations of the first defendant came to a standstill. The Bank had to issue notices to the first defendant recalling the loan and requiring repayment.
5.. The provisional Liquidator could also not make suitable arrangement for the discharge of the liability of the first defendant to the Bank.
6. Company Application No. 4 of 1978 was moved by the Bank in Company Petition No. 1 of 1977 with the following prayers :
"(1) to sell the pledged/hypothecated goods immediately and in case the amount realized by their sale is more than the amount due to the petitioner Bank the balance may be allowed to be said to respondent No. 2 so that the employees of the respondent Company are paid their wages as directed by this Hon'ble Court on 24-8-1977.
(2) In case the amount realized from the sale of the pledged/hypothecated goods falls short of the amount due to the petitioner Bank, it may be permitted to file a suit for the recovery of the balance amount with interest and costs by enforcing the personal guarantee of respondents Nos. 3 to 5.
(3) To file a suit against respondent No. I and respondents 6 to 12 for the recovery of the amount as detailed above with interest and costs.
(4) Such other order may be made in the premises as shall be just."
7. In the application, the first respondent was M/s. Hypine Carbons Ltd. while defendants 2, 4, 6, 8, 10, 12 and 13 were arrayed as respondents 6 to 12.
8. The aforesaid Company Application No. 4 of 1978 was allowed by this Court on May 30, 1979. The operative portion of the order of this Court reads thus :
"As such, the application is allowed and the petitioner is permitted to sell the goods pledged/hypothecated to it on behalf of respondent I Company in collaboration with the Official Liquidator. Proper accounts of the goods sold and price fetched would be maintained by the Bank and the Official Liquidator. The sale would be subject to the confirmation by this Court. The petitioner is also permitted to file a suit against respondent I and respondents 3 to 5 to recover the amount due with interest and costs. The petitioner is also allowed to file a separate suit for the recovery of the amount due from respondent I and respondents 6 to 12 to the petitioner bank with interest and costs.
The petition is accordingly disposed of.
9. On Oct. 15, 1979, the present suit (No. 72 of 1979) was filed by the Bank in this Court. In it, the first defendant is M/s. Hypine Carbons Ltd. (in liquidation). As mentioned earlier, defendants 2, 4, 6, 8, 10, 12 and 13 are the parties which were respondents 6 to 12 in Company Petition No. 4 of 1978 and in respect whereof permission was granted by this Court to the Bank to file a separate suit for recovery of the amount due from the first defendant and these respondents. Defendants 3, 5, 7, 9 and 11 are partners or officers of defendants 2, 4, 6, 8 and 10.
10. In the present suit the Bank has sought decree for recovery of different amounts from defendant No. 1 long with other defendants. The case of the plaintiff-Bank, in respect of different sets of defendants has been set out in para 7. The accrual of causes of action in respect of various sets of defendants are enumerated in para 11 of the plaint. The reief sought has been set out in para 13 of the plaint.
11. The suit is being contested only by defendants 4, 5, 10, 11 and 13. It was directed to proceed ex parte against the remaining defendants by an order dt. May 29, 1980, when these defendants were found absent in spite of service upon them.
12. Four written statement have been filed in this suit. The first of these has been filed by defendant 1, the second by defendants 4 and 5, the third by defendants 3 and 11 and the fourth by defendant 13. Statements under Order X, Rule 2, C.P.C. were recorded in the case on Sept. 22, 1981, Miss Shyama Vasudeva, Advocate, made a statement on behalf of defendants 4 and 5. Shri Suresh M. Pradhan, Director, made a statement for defendant 10. Issues were also framed on the same date. They are 10 in number. The first issue is :
"Whether the suit is bad for mis-joinder?" The oral evidence on behalf of the parties was also recorded on various dates. The plaintiff-Bank has examined Shri L. D. Khanna, who is General Manager (operation) as PW 1 and Shri H. C. Safat, the Manager of its Nalagarh Branch as P.W. 2. The contesting defendants have examined S/Shri V. K. Chopra (D.W. 1), D. C. Jindal (D.W. 2), Suresh M. Pradhan (D. W. 3), J. L. Alsundhar (D.W. 4), Suresh Wadhwa (D.W. 5), J. P. Singh (D.W. 6), K. D. Sharma (D.W. 7) and Kuldip Prakash (D.W. 8). They have also produced documentary evidence. The recording of oral evidence took place between March, 1982 and March, 1987.
13. When the case eventually came up for final arguments a prayer was made by counsel, appearing for contesting defendants, that arguments may be heard, in the first instance, on issue No. 1 and a decision recorded thereon before the parties were heard in respect of other issues. Consequently learned counsel for the parties were heard, on various dates, in respect of the first issue.
14. The first issue, as already mentioned, is in the following terms :
"Whether the suit is bad for misjoinder?"
15. The submission, which has been made on behalf of the contesting defendants, has been that the suit is bad both for misjoinder of parties as also of causes of action. The consequence of this misjoinder, according to Shri Inder Singh, who led the submissions on behalf of the contesting defendants, was that the plaintiff Bank should make an election of the parties against which it would like to proceed in the present suit. This, according to him, could be done by the plaintiff by amending the plaint and seeking leave for presenting separate plaints against those defendants or in respect of those causes of action who were to be excluded on account of the amendment so sought.
16. Order I, C.P.C. deals with parties to suits. Rule 3 of this Order provides for those who can be joined as defendants. It says that:
"All persons may be joined in one suit as defendants where-
(a) any right to relief in respect of, or arising out of, the same act or transaction or series of acts or transactions is alleged to exist against such persons, whether jointly, severally or in the alternative; and
(b) if separate suits were brought against such persons, any common question of law or fact would arise."
Rule 3-A then provides that:
"Where it appears to the Court that any joinder of defendants may embarrass or delay the trial of the suit, the Court may order separate trials or make such other order as may be expedient in the interest of justice."
Rule 5 contemplates that:
"It shall not be necessary that every defendant shall be interested as to all the relief claimed in any suit against him."
17. Under Rule 6 the plaintiff may, at his option, join as parties to the same suit all or any of the persons severally, or jointly and severally, liable on any one contract, including parties to bills of exchange, hundies and promissory notes. In regard to consequence of misjoinder it has been provided in Rule 5 of Order I, CPC that:
"No suit shall be defeated by reason of the misjoinder or non-joinder of parties, and the Court may in every suit deal with the mailer in controversy so far as regards the rights and interest of the parties actually before it :
Provided that nothing in this rule shall apply to non-joinder of a necessary party."
Rule 10(2) then says that :
"the Courl may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant be struck out....."
An objection on the ground of misjoinder of parties is to be taken at the earliest possible opportunity under Rule 13.
18. The relevant provisions of Order 11 CPC may now be noticed. Rule 1 says that :
"Every suit shall as far as practicable be framed so as to afford ground for final decision upon the subjects in dispute and to prevent further litigation concerning them.
Under Rule 2 every suit is to include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action and that where a plaintiff omits to sue in respect of, or intentionally relinquishes, any portion of his claim, he shall not afterwards sue in respect of the portion so omitted or relinquished. Joinder of causes of action is provided for by Rule 3 which says that save as otherwise provided, a plaintiff may unite in the same suit several causes of action against the same defendant, or the same defendants jointly; and that where causes of action are united, the jurisdiction of the Court as regards the suit shall depend on the amount or value of the aggregate value at the dale of institution of the suit. Rule 6 then says that where it appears to the Court that the joinder of causes of action in one suit may embarrass or delay the trial or is otherwise inconvenient, the Court may order separate trials or make such other order as may be expedient in the interest of justice. Under Rule 7 all objections on the ground of misjoinder of causes of action shall be taken at the earliest possible opportunity.
19. In the Slate of Himachal Pradesh the following Rule is applicable as Rule 8 in Order 11, CPC on account of Section 25 of the State of H.P. Act 1970 (Act 53 of 1970) :
"8(1) Where an objection, duly taken, has been allowed by the Court, the plaintiff shall be permitted to select the cause of action with which he will proceed, and shall, within a time to be fixed by the Court, amend the plaint by striking out the remaining causes of action.
(2) When the plaintiff has selected the cause of action with which he will proceed, the Court shall pass an order giving him time within which to submit (amended plaints for the remaining cause of action) and for making up the Court-fees that may be necessary. Should the plaintiff not comply with the Court's order, the Court shall proceed as provided in Rule 18 of Order VI and as required by the provisions of the Court-fees Act."
20. Order VI Rule 18 says that :--
"If a party who has obtained an order for leave to amend does not amend accordingly within the lime limited for that purpose by the order, or if not time is thereby limited then within fourteen days from the date of the order, he shall not be permitted to amend after the expiration of such limited time as aforesaid or of such fourteen days, as the ease may be, unless the time is extended by the Court."
21. What appears from the perusal of the aforesaid provisions is this :
Where an objection to misjoinder of defendants or causes of action in a suit is taken at the earliest possible opportunity and the Court finds substance in the objection, it may direct the striking out of the names of the defendants in appropriately joined or give opportunity to the plaintiff to make an election about the defendants or the cause of action with which he would like to proceed in the suit. The plaintiff may then proceed to amend the plaint and obtain leave of the Court for presenting separate claims in respect of remaining causes of action and making up the court-fees that may be necessary (in terms of Rule 8 of Order 11, CPC).
22. If the Court finds that any joinder of defendants or causes of action in one suit may embarrass or delay the trial of the susil or is otherwise inconvenient, the Court may order separate trials.
23. As far as the plaintiff is concerned, he is under an obligation to include the whole of the claim to which he is entitled in respect of a cause of action and where he omits to sue for any portion of his claim he would not be entitled to sue in respect of that portion afterwards. This is what is envisaged by Rule 2 of Order II, CPC. The plaintiff is entitled to join all such persons as defendents in one suit where he alleges existence of any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions against the defendants whether jointly, severally or in the alternative. It is not necessary that every defendant should be interested in all the reliefs claimed in the suit. The plaintiff may also join in one suit such persons as defendants wherein common question of law or fact would arise for determination if separate suits were brought against them. It is also clear from the provisions noticed earlier that no suit shall be defeated by reason of the misjoinder of parties or of causes of action. Where misjoinder of defendants is found to exist in a suit, the Court may direct that the names of the defendants inappropriately joined may be struck out. Where it finds that the joinder of any defendants may embarrass or delay the trial of the suit, it may direct separate trials. Where a misjoinder of causes of action is found to exist in a suit and it appears to the Court that such joinder of causes of action may embarrass or delay the trial or is otherwise inconvenient, it may direct that separate trials be held in respect of the various causes of action. The Court may permit the plaintiff to make an election both in respect of the defendants and the cause of action by seeking amendment of the plaint, in respect whereof the plaintiff wishes to proceed in the suit. The plaintiff may seek leave of the Court to present amended plaint for the remaining causes of action. Where he does so, the Court shall pass an order giving him the time within which the amended plaint may be presented.
24. Where the Court makes a direction for separate trial and permits the plaintiff to make an election and seek an amendment of the plaint, allowing him time therefor, but the plaintiff does not follow the direction, the Court may direct that the further trial of the suit shall remain stayed. That seems to be the inevitable consequence of the provisions noticed earlier. The suit cannot fail on account of misjoinder of parties. It cannot fail for misjoinder of causes of action either. The only consequence which is contemplated by Rule 18 of Order VI, CPC on failure to make the necessary amendment within the time allowed by the Court or within 14 days from the date of the order, if no time has been allowed, is that the plaintiff shall not be permitted to amend the plaint. There is no other consequence envisaged by any provision of the Code of Civil Procedure. The observations contained in the Code of Civil Procedure by Mulla(Fourteenth Edition) (at pages 916 and 917) that :
"as under the old Code, so under this Code, the Court, may, where a suit is bad for misjoinder.....of defendants and causes of action direct them (plaintiffs) to elect against which defendants they will proceed and direct all necessary amendments to be made within a time to be prescribed by the Court. If the plaintiff does not comply with the order and amend the plaint, the Court may stay the action." represent the true legal position.
25. Considerable argument was made by Shri Inder Singh on behalf of the contesting defendants and Shri D. K. Khanna, on behalf of the plaintiff-Bank, on the question whether there was, in the instant case, misjoinder of defendants and causes of action, having regard to the allegations made in plaint. That it was so was what was urged by Shri Inder Singh. According to Shri Khanna's contention, there was no misjoinder either of defendants or of the causes of action. Reference was made by the learned counsel to a large number of decisions of various High Courts. Apart from noticing these decisions, it is not necessary for the disposal of this issue, to deal with all of them in any detail. The decisions to which my attention was drawn were these :
Narsingh Das v. Mangal Dubey (1882) ILR 5 All 163 (FB), Ramendra Nath Ray v.
Brojendra Nath Dass, AIR 1918 Cal 858. Harendra Nath Singha Ray v. Purna Chandra Goswami, AIR 1928 Cal 199, Inder Bahadur Singh v. Sita Ram, AIR 1941 All 209, Bhondu v. Ch. Raj Singh AIR 1948 All 60, Shew Narayan Singh v. Brahmanand Singh, AIR 1950 Cal 479, Jayanabibi v. Jayarabi AIR 1950 Mad 761, Hardwarilal v. Narain Das, AIR 1951 Punj (Simla) 233, Ramdhin v. Thakuran Dulaiya, AIR 1952 Nag 303 (FB), Sm. Nagendra, Bala Debi v. Provash Chandra, AIR 1953 Cal 185, Md. Ishaq v. Abdul Majeed, AIR 1954 All 455, Madan Lal L. Raja Ram v. Munshi Datu, AIR 1956 Papsu 80, Kanhaiyalal v. Keshodas AIR 1961 Madh Pra 46, B. Channabyre Gowda v. State of Mysore, AIR 1974 Kant 136, Lobsang Khampa v. Sunam Ram ILR (1976) Him Pra 534 : (AIR 1977 Him Pra 23), M. S. Khalsa v. Chiranji Lal, AIR 1976 All 290 (FB) and Sardar Balbir Singh v. Atma Ram Srivastava AIR 1977 All 211 (FB).
26. The basic principles which emerge from the discussion made in these decisions are these:
The plaintiff may join, in the same suit, several defendants and causes of action where there is community of interest between the defendants or if the evidence, which was sufficient to enable the plaintiff to get a decree against all the defendants, is the same. There should be some nexus which should enable the plaintiff to join various defendants in one suit. The nexus may take the form of the right to relief which the plaintiff is claiming as flowing from the same transaction or series of transactions involving the various defendants. It may also take the form of the same question of law being involved for decision in the suit upon which may depend the right of the plaintiff to seek relief against all the defendants. The nexus may also be that on a common set of facts the plaintiff may claim relief against the defendants. It is, not necessary that all the questions of fact arising in the suit are common to each and every defendant. It would be sufficient if one common question of fact arose. Merely because some additional fact was required to be established in regard to some defendant or the other, which was not common to all of them, it would not mean that the qauses of action against the defendants cannot be combined in one suit.
27. The basic object in permitting joinder of defendants or causes of action being to avoid multiplicity of proceedings, the provisions contained in Order I Rule 3, CPC and Order II Rule 3, CPC should receive a liberal interpretation.
28. There is implicit indication in the various rules contained both in Order I and Order II CPC, which have been read earlier, pointing to the fact that liberal interpretation should be given to Rule 3 both in Order I and Order II CPC. Rule 5 of Order I, CPC provides that it shall not be necessary that every defendant should be interested in all the reliefs claimed in any suit against him. Rule 1 of Order II, CPC contemplates that the suit be so framed as to afford ground for final decision upon the subjects in dispute and prevent further litigation concerning them. Rule 3-A in Order I CPC and Rule 6 in Order II, CPC envisage a direction from the Court for separate trials where it appears to the Court that the joinder of defendants or causes of action in the same suit may embarrass or delay the trial or is otherwise inconvenient.
29. The provision in Rule 13 of Order I, CPC and Rule 7 of Order II CPC that objection on the ground of misjoinder of parties and causes of action should be taken at the earliest possible opportunity and the provision in Rule 9 of Order I CPC that misjoinder of parties shall not result in the suit being defeated are indicative of the intention of the framers of the Code that misjoinder, either of the parties or of the causes of action, was not to be viewed with such seriousness so as to result in denial of justice to a party.
30. The requirement in Rule 2 of Order II, CPC that the entire claim of the plaintiff is to be included in a suit and where he omits to do so in respect of any portion thereof, he would not be entitled to sue therefor afterwards, with the liberty to a plaintiff to unite in the same suit various causes of action against the same set of defendants, would seem to suggest that where the right to relief against the various defendants is founded upon the proof of some basic fact, of which proof is necessary before claiming relief against the various defendants, causes of action against the defendants may be combined in the same suit. This approach finds support from what is contained in Rule 6 of Order 1, C.P.C. which permits the plaintiff to join all such persons as defendants in a suit who are severally or jointly and severally liable on any one contract including on the basis of hundis etc.
31. Where, as in the present suit, the basic claim of the plaintiff is against the first defendant and where the contesting defendants have rendered themselves liable, according to the case set-up in the plaint, for payment of the different amounts claimed from them by the plaintiff by accepting Hundis with an obligation for payment to be made directly to the plaintiff Bank, it cannot be said that there is no nexus between these defendants interse on the basis whereof they could be sued in the same suit. The assertions which the plaintiff Bank has made in the plaint in paras 4 to 7 and, in particular, in para 7, clearly show that it is claiming relief against them primarily on the basis of a contract between the plaintiff Bank and the first defendant which resulted in series of transactions between the plaintiff Bank and the various defendants. Before succeeding in its claim against any of the contesting defendants, the plaintiff Bank will have to establish the contract contained in its agreement dated Dec. 18, 1972, with the first defendant. In respect of the contesting defendants it would also be necessary for the plaintiff to prove some additional facts peculiar to them. That would, however, not mean that there is no such community of interest between the defendants as to enable the plaintiff to sue them in the same suit or that the causes of action in relation to the contesting defendants were so unconnected with that arising against the first defendant that they couldnot be brought in the same suit.
32. The trial has virtually come to its concluding stage because the parties have already led their evidence in the suit. At this stage, it cannot be said that the trial of the various defendants or the various causes of action together, in one suit, will embarrass or delay the trial of the suit or is otherwise inconvenient.
33. Even if the trials were to be separated on the assumption that there was a misjoinder of defendants of causes of action, and the plaintiff Bank directed to make an election in respect thereof, no useful purpose will be served in the present case. There is no dispute between the parties that any suit in regard to any of the defendants or causes of action which have been joined in the present suit, will have to be tried by this Court alone. The first defendant is under liquidation on account of an order made by this Court in Company Petition No. 1 on 1977. This Court alone has the jurisdiction to try the present suits, irrespective of their valuation, on account of Section 446(2) of the Companies Act, 1956. Besides, by an order made on May 30, 1979, in Company Application 4 of 1978 the plaintiff Bank was allowed by this Court "to file a separate suit for the recovery of the amount due from respondent No. 1 and respondents 6 to 12 with interest and costs". As noticed earlier, the contesting defendants in the present suit are either respondents 6 to 12 in Company Petition No. 4 of 1978 or partners or officers thereof.
34. In sum, it must be held that the suit is not bad for misjoinder. Issue No. 1 is, accordingly, answered in the negative in favour of the plaintiff Bank and against the contesting defendants.
35. List the case for argument on the remaining issues in the next week.