Court upheld inclusion of petitioner in suit despite arguments against privity of contract, citing exceptions and agency doctrine, necessitating full factual evaluation.

JUDGMENT

Amit Bansal, J. (Oral)

CM No.42517/2021 (for exemption)

1. Allowed, subject to all just exceptions.

2. The application stands disposed of.

CM(M) 1081/2021 & CM No.42516/2021 (for stay)

3. The present petition under Article 227 of the Constitution of India impugns the order dated 6th October, 2021 passed by the District Judge (Commercial Court)-02, Patiala House Courts, New Delhi (Commercial Court) in a commercial suit bearing CS (COMM) No.165/2019, dismissing the application filed on behalf of the petitioner (defendant no.2 in the suit) under Order I Rule 10 of the Code of Civil Procedure, 1908 (CPC).

4. Brief facts as set out in the impugned order are set out below:

4.1. The respondent herein, was awarded the contract for plumbing and sanitary works by the petitioner and the defendant no.1 with respect to work orders starting from 14th November, 2011 to 26th November, 2015.

4.2. Alleging default in payments as well as breach of terms of the contract by the petitioner and the defendant no.1, the respondent filed the commercial suit for recovery in 2019.

4.3. Upon the written statement in the suit being filed beyond a period of 120 days, the defence of the petitioner and defendant no.1 was struck off by the Commercial Court vide order dated 29th January, 2021.

4.4. The application under Order I Rule 10 of the CPC filed by the petitioner for deletion of its name from the array of parties in the suit, was dismissed by the Commercial Court vide the impugned order.

5. Counsel appearing on behalf of the petitioner has submitted that; (i) there are no allegations in the plaint against the petitioner except in paragraph 20 of the plaint; (ii) there is no privity of contract between the petitioner and the defendant no.1; (iii) the suit is not based on torts but is based on an agreement entered into between the respondent and defendant no.1; (iv) the petitioner and defendant no.1 are separate legal entities; (v) corporate veil can only be lifted in public interest or in the case of tax fraud; (vi) there are no specific averments made in the plaint in terms as required under Order VI Rule 4 of the CPC with regard to the petitioner; and, (vii) where no particulars are pleaded in the plaint, corporate veil may not be pierced. Reliance is placed on the judgment dated 16th May, 2017 of the Single Judge of this Court in OMP (COMM) No.22/2016 titled as Sudhir Gopi Vs. Indira Gandhi National Open University and Anr. in this regard. Reliance has also been placed on the judgment dated 2nd July, 2014 while deciding IA No.6063/2010 and IA No.2737/2014 in CS(OS) No.76/2010 titled as Kohli One Housing & Development Pvt. Ltd. Vs. C.S. Agarwal and Ors. to contend that in case there is no privity of contract, then a party may not be impleaded in a suit for recovery and unless there are specific pleadings in this regard, the doctrine of lifting of corporate veil is not applicable.

6. Counsel appearing on advance notice on behalf of the respondent has contended that (i) in the present case the defence of both the defendants has already been struck off; (ii) in terms of the proviso to Order VIII Rule 5 of the CPC as applicable to commercial suits, every allegation or fact in the plaint if not denied shall be taken to be admitted; (iii) since, the defence of the petitioner has been struck off, all the averments made in the plaint including paragraph 20 shall be deemed to be admitted; and (iv) after the passing of the impugned order, an application under Order VII Rule 11 of the CPC has also been filed by the defendants which is pending adjudication before the Commercial Court.

7. Counsel appeari