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IN THE HIGH COURT OF DELHI AT NEW DELHI
Manmeet Pritam Singh Arora, J.
Rajiv Sharma – Appellant
Versus
M/s Balaji Enterprises & Anr. – Respondents
CM(M) 1031 of 2023 & CM APPL. 33631 of 2023
Decided On : 06-07-2023
Order I Rule 10 (2) of the Code of Civil Procedure, 1908 allows the Court to strike out or add parties. The Court has the discretion to decide whether a party is improperly joined or whether a person who ought to have been joined is necessary for the effective adjudication of the suit. The Court referred to previous judgments and established that a necessary party is one against whom the plaintiff seeks relief or in whose absence an effective decree cannot be passed, while a proper party is one whose presence is essential for the determination of the questions involved in the suit. The Court found that defendant No.2 cannot be considered a necessary or proper party as he cannot be made liable for the financial liabilities of defendant No.1.
Fact of the Case:
The plaintiff filed a commercial suit against defendant No.1 and defendant No.2 for recovery of a certain amount. Defendant No.2 filed an application seeking deletion from the array of parties, stating that he has no role or concern in the functioning of the proprietorship firm. The Trial Court dismissed the application, stating that it cannot be inferred at this stage that defendant No.2 is not involved in the day-to-day affairs of the firm. The defendant No.2 appealed against this decision.
Finding of the Court:
The Court analyzed the provisions of Order I Rule 10 of the Code of Civil Procedure, which allows the Court to strike out or add parties. It referred to previous judgments and established that a necessary party is one against whom the plaintiff seeks relief or in whose absence an effective decree cannot be passed, while a proper party is one whose presence is essential for the determination of the questions involved in the suit. The Court found that even if the facts stated by the plaintiff were considered to be correct, defendant No.2 cannot be legally liable for the financial liabilities of defendant No.1. The Court set aside the Trial Court's decision and allowed the application for deletion of defendant No.2 from the array of parties.
Ratio Decidendi: Defendant No.2 cannot be considered a necessary or proper party to the suit as he cannot be made liable for the financial liabilities of defendant No.1. The Court has the discretion to add or remove parties from a pending litigation, and in this case, the application for deletion of defendant No.2 is allowed.
Result: The application filed by defendant No.2 seeking deletion from the array of parties is allowed and defendant No.2 is deleted from the array of parties. Pending application stands disposed of.
JUDGMENT
Manmeet Pritam Singh Arora, J. (Oral)
CM APPL. 33632/2023 (for exemption)
Allowed, subject to all just exceptions.
Accordingly, the present application stands disposed of.
CM(M) 1031/2023
1. This petition filed under Article 227 of the Constitution of India impugns the order dated 24.05.2023 passed by District Judge, Commercial Court-03, South East District, Saket Court, Delhi (`Trial Court') in CS (COMM.) No. 205/2022, titled as M/s Balaji Enterprises v. Bhushan Sharma & Anr., dismissing the application filed by the Petitioner herein i.e., defendant No. 2 under Order 1 Rule 10 C.P.C. seeking deletion from the array of parties.
2. For the sake of convenience, the parties herein shall be referred to in terms of their rank and status before the Trial Court, i.e., Petitioner as Defendant No.2, Respondent No.1 as Plaintiff and Respondent No.2 as Defendant No.1.
3. The plaintiff instituted a commercial suit against defendant No.1 and 2 herein for recovery of Rs. 66,95,658/-. The claim in the suit arises on account of the commercial transactions with respect to sale and purchase of plastic granules' defendant no. 1 admittedly carries on business of a sole proprietorship firm under the name and style of `M/s Raghav Industries'. The Petitioner herein has been arrayed as a defendant No.2 in the civil suit on the plea that he as well is directly involved in the day-to-day business and affairs of `M/s Raghav Industries'.
4. The defendant no.2 filed an application under Order 1 Rule 10 C.P.C. seeking his deletion from the array of parties on the ground that he has no role or concern in the functioning of the proprietorship firm of `M/s Raghav Industries'. It was stated that defendant No.1 is the sole proprietor of `M/s Raghav Industries'
5. The Trial Court while dismissing the above-said application filed by the defendant no.2 herein, observed at paragraph 5 of the impugned order, that in view of the averments made in the plaint `at this stage' it cannot be inferred that defendant no. 2 is not involved in the day-to-day affairs of the proprietorship firm `M/s Raghav Industries'. On this basis, the Trial Court dismissed the application filed by the defendant no. 2 under Order 1 Rule 10 C.P.C.
Arguments of the Petitioner/Defendant no. 2
6. The learned counsel for the defendant no. 2 states that the plaintiff instituted the commercial suit, against the defendant nos. 1 and 2 seeking recovery of Rs. 66,95,658/-along with pendente lite and future interest at 24 %.
6.1 He states that it is admitted on record that the commercial transactions which are the subject matter of the claim in the civil suit were only allegedly executed between plaintiff and defendant no.1. All documents relied upon by the plaintiff have also been exchanged between plaintiff and defendant no.1.
6.2 He states that the defendant no. 2 herein has no liability under the commercial transaction allegedly entered into between the said parties.
6.3 He states that M/s Raghav Industries is a proprietorship firm of defendant no.1 i.e., Mr. Bhushan Sharma, who is the sole proprietor of the said firm. He states that all the documents placed on record by plaintiff with the plaint, evidence, only evidence alleged transaction between plaintiff and defendant no.1.
6.4 He states on instructions that defendant no. 2 does not operate the bank accounts of the proprietorship firm, M/s. Raghav Industries. He states that defendant no.1 alone is liable for the transactions carried out in the name of M/s Raghav Industries. He states that the PAN number of the firm M/s. Raghav Industries is of defendant No.1, as he is the sole proprietor. Therefore, the impleadment of defendant no.2 is without any cause.
6.5 He states therefore, in law defendant no. 2 cannot be arrayed as a defendant in this commercial suit since he admittedly has no privity of contract with the plaintiff.
6.6 He also relies upon the proceedings, which were initiated by the plaintiff with respect to the mandatory pre-lit
Defendant No.2 cannot be considered a necessary or proper party to the suit as he cannot be made liable for the financial liabilities of defendant No.1.
The main legal point established in the judgment is that the exceptions to the rule of privity of contract and the doctrine of agency require fact finding and due application of law, and may not warr....
A newly admitted partner to a firm cannot be held liable for debts incurred prior to their admission; determination of liability requires full trial.
Court upheld inclusion of petitioner in suit despite arguments against privity of contract, citing exceptions and agency doctrine, necessitating full factual evaluation.
The principle of estoppel under Section 115 of the Evidence Act, 1872 was central to the Court's decision, along with the consideration of evidence and suppression of relevant documents.
Defendant No. 2 is deemed a necessary and proper party for adjudicating the claims raised by the Plaintiff due to the absence of contractual obligation and the need for effective resolution of disput....
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