The main legal point established in the judgment is the necessity of impleading subsequent purchasers as parties to a suit involving agreements and the obligations of secured creditors to disclose encumbrances.

K.K.SASIDHARAN, J.

1. This Letters Patent appeal is directed against the fair and decreetal order dated 23 March 2010 in A.No.6722/2009 in C.S.No.257/2005 whereby and whereunder, the appellants were impleaded as parties to the civil suit at the instance of respondents 1 and 2.

2. The suit in C.S.No.257/2005 was instituted by respondents 1 and 2 against respondents 3 to 9 praying for a decree of declaration and injunction with respect to Technical Services and Project Consultancy and Royalty Agreements executed between respondents 1 and 2 on the one hand and the third respondent on the other.

Plaint Averments :-

3. Respondents 1 and 2, as plaintiffs, in their plaint, contended that they have entered into an agreement with the third respondent which was in the nature of a Project Consultancy Agreement and another agreement known as Royalty agreement. Those agreements were executed on 26 October 1988. As per the said agreement, the first respondent agreed to provide its technical knowledge, skill and professional services required for operating a Hotel at Mount Road, Madras, to be constructed by the third respondent. There was a provision in the said agreement whereby and whereunder, the third respondent agreed that they would maintain full ownership of the Hotel throughout the period of agreement and they would disclose the existence of the agreement and operators vested interest in the hotel to any lender/s, leasing Company/ies, financial institution/s and or Bank/s having or proposing to take any lease, mortgage, charge or other security over the Hotel or any part thereof and shall obtain from such institution/s in writing a confirmation of existence of the agreement and that the agreement would be binding upon the institutions. The project undertaken by the third respondent for construction of the hotel underwent several times extensions and cost overruns, including change in the scope of the project by way of inclusion of a commercial complex and increase in the number of rooms. The project was re-appraised by the Tourism Finance Corporation of India during September, 1996 and the total hotel project cost was increased to Rs.192 crores. The third respondent obtained loans from Tourism Finance Corporation of India and ICICI Bank for the construction of the hotel complex.

4. The agreement executed between respondents 1 and 3 were subsequently amended by way of supplementary agreements. The first respondent also advanced a total sum of Rs.15.12 crores on various dates and an agreement was executed evidencing such payment. The fourth respondent on

4 February, 2002, executed an irrevocable and continuing guarantee in favour of the first respondent.

5. In the meantime, the first respondent came across an advertisement issued in the Economic Times, dated 24 July 2002, by the Tourism Finance Corporation of India Ltd., inviting offers for takeover/joint ventures and/or sale of a five star deluxe category hotel project having 405 rooms along with food and beverage outlets and other facilities under construction on a plot of land admeasuring 16680.70 sq.meters with built up area of 55058 sq.mtrs at Mount Raod, Chennai, on as is where is basis by way of transfer of controlling interest in the Company owning the project. Immediately, the first respondent wrote a letter dated 18 September 2002 to the Tourism Finance Corporation of India informing them that they have entered into a Technical Services Agreement with the third respondent for operation of the hotel and advanced a sum of Rs.15.12 crores for completion of the project. In the said letter, it was also indicated that till the repayment of the amount, the first respondent would have the exclusive right to operate the hotel in view of the technical services agreement. The first respondent further informed that all intending bidders should be informed about the said agreement and especially the fact that the Technical Services Agreement would remain subsisting and operative,