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IN THE HIGH COURT OF DELHI AT NEW DELHI
RAJIV SAHAI ENDLAW, J.
Modtech Furniture Private Ltd. – Plaintiff
Versus
Ncube Planning Design Private Limited & Anr. – Defendants
CS(COMM) 379 of 2017, IA No.8483 of 2017, 9152, 10033, 10034, 11188 of 2017
Decided On : 28-02-2018
Privity of Contract - Order XXXVII of the CPC - Arbitration & Conciliation Act, 1996 - Section 8 - Section 21 - Section 23 - Joint and Several Liability - Necessary Party - IA No.10034/2017
Fact of the Case:
The court found that there was no privity of contract between the plaintiff and defendant no.2, and the suit was not maintainable under Order XXXVII of the CPC. The court converted the suit into an ordinary suit and dismissed IA No.10034/2017 filed under Section 8 of the Arbitration & Conciliation Act, 1996.
Finding of the Court:
The court concluded that the presence of defendant no.2 was essential for adjudication of the claims, and there was no Arbitration Agreement between the plaintiff and defendant no.2. Therefore, the question of referring the parties to arbitration in terms of the Arbitration Agreement between the plaintiff and defendant no.1 only did not arise.
Issues: Privity of contract, maintainability of the suit under Order XXXVII of the CPC, dismissal of IA No.10034/2017 under Section 8 of the Arbitration & Conciliation Act, 1996.
Ratio Decidendi: The court emphasized the lack of privity of contract between the plaintiff and defendant no.2, the essential presence of defendant no.2 for adjudication, and the absence of an Arbitration Agreement between the plaintiff and defendant no.2.
Final Decision: The suit was converted into an ordinary suit, IA No.10034/2017 was dismissed, and the defendants were directed to file their written statement within 30 days.
1. Though applications of the two defendants for leave to defend are for consideration but during the hearing it transpires that the contract, monies where under are claimed to be due to the plaintiff, was between the plaintiff and the defendant no.1 only and there is no privity of contract between the plaintiff on the one hand and defendant no.2 Prime Focus Technologies Pvt. Ltd. on the other hand.
2. The plaintiff however in the plaint has made the claim jointly and severally against both the defendants.
3. It is the requirement of Order XXXVII of the CPC that no claim which does not fall within the ambit of Order XXXVII should have been made in the suit. The plaintiff having made a claim, besides against the defendant no.1, against whom according to the counsel for the plaintiff, suit under Order XXXVII of the CPC is maintainable, also against defendant no.2, the suit is not maintainable under Order XXXVII of the CPC and ought not to have been entertained by the learned Joint Registrar under Order XXXVII of the CPC.
4. This is yet another case where the Joint Registrars have entertained a suit under Order XXXVII of the CPC, without examining the maintainability thereof under Order XXXVII of the CPC, resulting in the matter coming up for consideration before the Court only at the stage of leave to defend and axiomatically leading to delay in the disposal of the suit.
5. A copy of this order be placed before Hon’ble the Chief Justice for appropriate action.
6. The suit is accordingly converted into an ordinary suit and IAs No.8483/2017, 9152/2017, 10033/2017 and 11188/2017 are disposed of.
7. The defendant no.1 has filed IA No.10034/2017 under Section 8 of the Arbitration & Conciliation Act, 1996.
8. The counsel for the plaintiff and the counsel for the defendant no.1 have been heard on the said application as well.
9. The counsel for the defendant no.1 draws attention to Clauses 68 and 69 of the Agreement between the plaintiff and the defendant no.1 and which are as under:
“68. ARBITRATION
Any dispute arising out of this Contract Agreement shall be resolved amicably with in 30 days. Disputes shall be referred to the decision makers of both parties for resolution. If any disputes still remain unresolved it will be referred for adjudication to the sole arbitrator to be appointed by mutual consent of client and contractor.
The arbitration shall be conducted by three arbitrators, one each to be nominated by the contractor and the Employer and the third to be appointed by both the arbitrators in accordance with the Indian Arbitrations Act. The language of the arbitration proceedings and that of the documents and communications between the parties shall be English. The arbitration shall be conducted in accordance with the provisions of the Indian Arbitration and Conciliation Act, 1996 or any statutory modification thereof. The venue of arbitration shall be New Delhi.
The decision of the majority of the arbitrators shall be final and binding upon the parties. In the event of any of the aforesaid arbitrators dying, neglecting, resigning or being unable to act for any reason, it will be lawful for the party concerned to nominate another arbitrator in place of the outgoing arbitrator. During settlement of disputes and arbitration proceedings, both parties shall be obliged to carry out their respective obligations under the contract.
Following matters shall not lie within the preview of Arbitration :
(a). Any dispute in respect of substituted, altered. Additional work/omitted work/defective work referred by the contractor for the decision of Contractor/Client if it is being heard or has been decided by Contractor/Client.
(b). Any dispute regarding the Scope of Work or its execution or suspension or abandonment that has been referred by the contractor for the decision of Contractor/Client and has been so decided finally by Contractor/Client.
69. JURISDICTION
The parties to this Contract Agreement unequivocally agree that that the Courts at N.C
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