Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1998 Supreme(Cal) 227

IN THE HIGH COURT AT CALCUTTA
Ruma Pal, J.
Innovative Capital Strategies Private Limited – Petitioner
Versus
Tushar G. Shah & Ors. – Respondents
G.A. No. 1832 of 1997 & C.S. No. 47 of 1997
Decided on: 15th May, 1998

Advocates:
Advocate Appeared:
Mr. P.K. Roy, Pratap Chatterjee and A. Mitra, for the petitioner
Mr. Hirak Mitra, Nirmalya Bhattacharya and A.K. Pramanick, for the respondents

A suit is not multifarious if the claims against the defendants arise out of the same transaction and involve common questions of law and fact.

Headnote:
Civil Procedure Code, 1908 - Order 1 Rule 3 - Joinder of Parties and Causes of Action - Multifariousness - Jurisdiction - Territorial and Pecuniary - Balance of Convenience - Suit Valuation Act, 1887 - Section 8 - West Bengal Court Fees Act, 1970 - Sections 7(i) and 21.
Fact of the Case:

The plaintiff, an investment company, filed a suit against 14 defendants for recovery of loans advanced to them for the purchase of promoter's quota of shares in a company. The defendants challenged the maintainability of the suit on grounds of territorial jurisdiction, pecuniary jurisdiction, and multifariousness.
Finding of the Court:

The court held that the suit was maintainable in Calcutta, where the plaintiff had its registered office and where the agreements were executed and advances were made. The court also held that the suit was not multifarious as the claims against the defendants arose out of the same transaction and involved common questions of law and fact.
Issues: 1. Whether the court had territorial jurisdiction to entertain the suit. 2. Whether the court had pecuniary jurisdiction to entertain the suit. 3. Whether the suit was multifarious.
Ratio Decidendi: 1. The court has territorial jurisdiction to entertain the suit as the agreements were executed and advances were made in Calcutta. 2. The court has pecuniary jurisdiction to entertain the suit as the plaintiff has valued the suit at Rs.2.11 crores and paid Court fees on that amount. 3. The suit is not multifarious as the claims against the defendants arise out of the same transaction and involve common questions of law and fact.
Final Decision: The court dismissed the application challenging the maintainability of the suit with costs.

Judgement Key Points

Key Points: - The suit was held maintainable in Calcutta where plaintiff’s registered office, agreements, and pledge of shares were located and where advances were made (!) (!) (!) . - The claim valued at Rs. 2.11 crores with court fees paid supported pecuniary jurisdiction; leave under Clause 12 of the Letters Patent considered for action arising partly within and partly outside the court’s jurisdiction (!) (!) (!) . - Order 1 Rule 3 requirements examined: joinder permissible if a right to relief against each defendant arises out of the same act/transaction and common questions of law/fact would arise; the plaint showed a composite transaction financing promoter’s quota and shared liability (!) (!) (!) . - The Court held the suit not multifarious since the transactions shared a common thread and allow for adjustment among defendants; common payments and proportionate adjustment supported linkage among actions (!) (!) . - The balance of convenience and natural forum considerations favored the plaintiff’s chosen Calcutta forum; alternative forum transfer is not mandated absent overwhelming convenience in favor of the other court (!) (!) (!) . - The Court dismissed the objection challenging maintenance with costs, upholding the joinder of parties and causes of action in a single suit for a composite transaction (!) (!) .

What is the scope of territorial and pecuniary jurisdiction for a suit seeking recovery of loans where agreements were executed and advances made in Calcutta but some payments were made in Bombay?

What is the test for multifariousness and misjoinder of parties and causes of action under Order 1 Rule 3 in the context of a composite financing transaction?

What are the considerations and principles governing joinder of parties and causes of action when a single composite transaction involves multiple defendants and common questions of law and fact?

Judgment

This is an application by the defendant no. 8 challenging the maintainability of the suit filed by the plaintiff against the 14 defendants on three grounds which broadly stated are:-

(i) That this Court does not have the territorial jurisdiction to try the suit. In the alternative it is claimed that the balance of convenience warrants trial of the suit in Bombay rather than in Calcutta.

(ii) That this Court did not have the pecuniary jurisdiction to entertain the claim of plaintiff against the applicant or the defendants nos. 2, 4, 9, 12, 13 and 14. The plaintiff has claimed separate monetary decrees against each of the defendants. The claims against the named defendants were below Rs.10 lakhs which is the lower limit of the pecuniary jurisdiction of this Court.

(iii) That the plaint was had for multifariousness. There was misjoinder of parties and causes of actions.

2. The objections being in the nature of demurrers must be decided on the basis of allegations made in the plaint. The case in the plaint is in brief as follows:-

The plaintiff is an investment company and has its registered office within the jurisdiction of this Court. The defendant No. 1 Tushar G. Shah and the defendant No.7 Akshay P. Sanghavi were known to the Directors of the plaintiff. They approached the plaintiff at its office in Calcutta for financing the defendants nos. 1 & 7 and their family members and friends for purchase of the promoter's quota of shares in a company by the name of Credence Sound and Vision Ltd. Negotiations were held between the plaintiff and the defendants Nos. 1 & 7. The defendants agreed to borrow different amounts for purchasing the shares. The agreement was entered into in Calcutta. Subsequent thereto 14 separate but materially identical agreements were executed between each of the defendants and the plaintiff. The plaintiff paid different amounts to each of the defendants. The payments were made in Bombay. The defendants pledged shares of Credence Sound and Vision Limited with the plaintiff in Calcutta. The defendants paid a total amount of Rs.25 lakhs to the plaintiff at Bombay. The parties agreed that the amounts would be credited proportionately in the account of the defendants. After such adjustment different amounts were outstanding by each of the defendants to the plaintiffs. The defendants defaulted in repayment of the loan. The defendants Nos. 1 & 7 admitted their liabilities and wrote letters of admission on behalf of the other defendants. The letters were written to the plaintiff in Calcutta. Subsequent agreements were entered into extending the time for repayment and raising the rate of interest in consideration for such extension. The defendants did not pay within the extended time. The plaintiff has claimed the right to sell the pledged shares. In Paragraph 14 of the plaint the plaintiff has stated as follows:-

"The plaintiff states that all the said loans were given for one object viz. to enable the defendants to purchase the promoters quota of shares in the public issue scheduled to be made in December 1994 and all transactions referred to above were negotiated and carried through by the defendants Nos. 1 & 7 for and on behalf of the defendants. By reason of the aforesaid, the cause of action of the plaintiff arose out of the same and/or series of transactions and the plaintiff is entitled to institute the present suit in its present form. Further if separate suits were filed the same questions of law and facts would arise and the same would amount/lead to multiplicity of suits/proceedings."

3. The plaintiff has valued the suit at Rs.2.11 crores and paid Court fees on that amount. As part of the cause of action as pleaded arose within the jurisdiction of this Court and part arose outside the jurisdiction of the Court, the plaintiff prayed for leave under Clause 12 of the Letters Patent and has as asked for separate monetary decrees against each of the defendants. In addition the plaintiff has claimed a decree fo

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