w w w . L a w y e r S e r v i c e s . i n



Reliance Industries Limited v/s Adarsh Packers Private Limited


Company & Directors' Information:- L C PACKERS PRIVATE LIMITED [Active] CIN = U25202DL2012PTC241798

Company & Directors' Information:- K M D PACKERS PRIVATE LIMITED [Active] CIN = U74950DL2000PTC104742

Company & Directors' Information:- PACKERS INDIA PVT LTD [Active] CIN = U99999MH1985PTC038391

Company & Directors' Information:- Q E D PACKERS PRIVATE LIMITED [Active] CIN = U74950DL2001PTC110725

Company & Directors' Information:- S S A S PACKERS PRIVATE LIMITED [Active] CIN = U21029WB2012PTC179508

Company & Directors' Information:- J. S. PACKERS PRIVATE LIMITED [Active] CIN = U36991UP1995PTC018211

Company & Directors' Information:- PACKERS (INDIA) PRIVATE LIMITED [Strike Off] CIN = U14102KA1999PTC024636

Company & Directors' Information:- PACKERS PRIVATE LIMITED [Active] CIN = U21010MH1968PTC014058

Company & Directors' Information:- ADARSH PACKERS PRIVATE LTD [Strike Off] CIN = U21022DL1972PTC006394

Company & Directors' Information:- K B S PACKERS PVT LTD [Strike Off] CIN = U99999UP1972PTC003540

Company & Directors' Information:- A & A PACKERS PRIVATE LIMITED [Active] CIN = U63090UP2011PTC047868

Company & Directors' Information:- S H K PACKERS PRIVATE LIMITED [Strike Off] CIN = U21000HP2013PTC000458

Company & Directors' Information:- ADARSH INDUSTRIES LIMITED [Strike Off] CIN = U99999MH1950PLC008068

    Interim Application Appeal No. 5636 of 1997, 8794 of 1997

    Decided On, 01 December 1997

    At, High Court of Delhi

    By, THE HONOURABLE MR. JUSTICE VIJENDER JAIN

    For the Appearing Parties: Anis Ahmed, Manmohan, R.S. Prabhu, S.B.Ghosh, S.C. Agrawal, S.K. Kaul, Advocates.



Judgment Text

VIJENDER JAIN, J.


(1) THESE are applications (IA 8793/97 and IA 8794/97) filed by applicant/ defendant No. 2 under Order 39 Rule 4 read with Section 151 of the Code of Civil Procedure (in short 'code of Civil Procedure') for vacation of injunction granted by this Court on 24. 7. 1997 and under Order 1 Rule 10 read with Section 151 Code of Civil Procedure for deleting the name of defendant No. 2.


(2) MR. S C Aggarwal, learned counsel appearing for the applicant/defendant No. 2, has contended that the transaction was between the plaintiff and defendant Nos. 1 and 3 and defendant No. 2 cannot be held liable to make the payment of any amount as no personal guarantee was ever executed by the defendant No. 2. Mr. Aggarwal has contended that the suit is based on invoices and letters exchanged between the plaintiff and defendant Nos. 1 and 3, which are limited companies and as such in the absence of any guarantee held out by the defendant No. 2 for payment of any amount, defendant No. 2 is neither a proper nor a necessary party. Mr. Aggarwal has further contended that property bearing No. 35, Anand Lok, New Delhi is an ancestral property of the defendant No. 2 and Mr. Sushil Kumar, the brother of defendant No. 2, who has got 50% share in the property. Mr. Aggarwal has also contended that this said property is a residential property owned by the defendant No. 2 along with his brother and no injunction in respect of same can be granted by this Court. In support of his contentions, he has cited S C Jain Vs. Union of India AIR 1983 Delhi 367.


(3) NEXT argument of learned counsel for the applicant/defendant No. 2 canvassed before this Court, was that in terms of sub-rule (2) of Rule 1 of Order XXXVII of the Code of Civil Procedure, the guarantee appearing in sub-rule (2) (b) (iii) has to be read as written guarantee. As there is no written guarantee by defendant No. 2, defendant No. 2 ought not to have been impleaded as defendant. He has further contended that suit under Order XXXVII will not lie against the defendant No. 2. What Mr. Aggarwal has contended is that in such a case it is general provision of law regarding suit for recovery would be applicable and no summary procedure as postulated under Order XXXVII can be invoked against defendant no. 2.


(4) ALTERNATIVELY, Mr. Aggarwal has contended that even otherwise, no prima facie case has been made out for grant of injunction regarding 35, Anand Lok, New Delhi, as nowhere in the plaint it has been pleaded that on which date, to whom and at what place the alleged guarantee was given by defendant No. 2 to the plaintiff. Mr. Aggarwal has contended that it was only for the first time on 29. 1. 1997 when a notice was issued by the Lawyer of the plaintiff, a story of personal guarantee was cooked up. Had there been any guarantee by defendant No. 2, plaintiff would have invoked that guarantee much earlier and not even a single letter to that effect has been written and placed on record by the plaintiff.


(5) NEXT submission of the learned counsel for the applicant/defendant No. 2 was that what is stated in sub-clause (iii) of sub-rule (b) of Rule (2) of Order XXXVII of the Code of Civil Procedure is a guarantee and not indemnity. Mr. Aggarwal has contended that in order to have a contract of guarantee there has to be a tripartite contract between the parties and as there is no tripartite contract between the parties, it can at best be an indemnity and for indemnity no suit under Order XXXVII of the Code of Civil Procedure would lie. In support of his contentions, he has relied upon Ramchandra B. Loyalka Vs. Shapurji N. Bhownagree AIR 1940 Bombay 315. Mr. Aggarwal has further contended that in the pleadings, nowhere the plaintiff has pleaded any fraud and, therefore, the plaintiff cannot be allowed to argue that there is any fraud, which has been committed by defendant No. 2 in the absence of any pleading on the subject.


(6) IN reply to the submissions made by the learned counsel for the applicant/defendant No. 2, Mr. Manmohan, learned counsel appearing for the plaintiff, has contended that on the letter head of the defendant company, which is at page-1 as well as at page-4 of the documents filed by the plaintiff, registered office of the defendant No. 1 company has been shown as '35, Anand Lok, New Delhi' and, therefore, the story put forward by defendant No. 2 that property bearing No. 35, Anand Lok, New Delhi is a residential property, does not hold any ground. Mr. Manmohan has also taken this Court to various letters written by defendant No. 1 to the plaintiff requesting them to extend the validity of arrangement and regarding repayment of the dues of the plaintiff and on the basis of these letters has contended that defendant No. 2 was personally liable to pay the dues to the plaintiff.


(7) MR. MANMOHAN has further contended that basically the defendant Nos. 1 and 3 were the companies managed by defendant No. 2 and in order to see the true picture and affairs of the corporate entity this Court must lift the veil of corporate entity. In his support has cited the judgment of the Supreme Court in Delhi Development Authority Vs. Skipper Construction Company (P) Ltd. and anr. AIR 1996 S. C. 2005. He further contended that the concept of corporate entity should be ignored and the veil drawn aside and the real picture of the corporate veil should be discovered. He has specifically mentioned the observations made by the Supreme Court in para-24 of the said judgment in the case of Delhi Development Authority Vs. Skipper Construction Company (P) Ltd. and anr. (supra), which is as follows :-


". . . . . . . . . . . When the conception of corporate entity is employed to defraud creditors, to evade an existing obligation, to circumvent a statute, to achieve or perpetuate monopoly, or protect knavery or crime, the Courts will draw aside the web of entity, will regard the corporate company as an association of live, up-and-doing, men and women shareholders, and will do justice between real persons. ("piercing the veil of corporate entity" published in (1912) XII Columbia Law Review 496)" Repelling the arguments advanced by the learned counsel for the applicant/defendant No. 2, Mr. Manmohan has contended that guarantee as mentioned in sub-clause (iii) of sub-rule (2) (b) of Rule 1 of Order XXXVII of the Code of Civil Procedure need not to be a guarantee, which may be written. Mr. Manmohan has contended that Section 126 of the Indian Contract Act defines guarantee, which may be oral or written and on that basis he has argued that no other meaning as contended by defendant no. 2 could be given to sub-clause (iii) sub-rule (2) of Rule 1 of Order XXXVII of Code of Civil Procedure. I have given my careful consideration to the arguments advanced by the learned counsel appearing for both the parties. Let me first deal with the submissions of the learned counsel appearing for both the parties with regard to Order XXXVII of the Code of Civil Procedure. Prior to amendment of Code of Civil Procedure by Amendment Act, 1976, Order XXXVII related to 'summary Procedure of Negotiable Instruments'. Prior to amendment of Code of Civil Procedure, Rule (2) of Order XXXVII Code of Civil Procedure was to the following effect |- All suits upon bills of exchange, hundies or promissory notes may in case the plaintiff desires to proceed hereunder, be instituted by presenting a plaint in the form prescribed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . " The words 'negotiable Instruments' were deleted by Amendment Act, 1976 and in addition to 'negotiable Instruments' as defined in sub-rule (2) of Rule 1 of Order XXXVII of the Code of Civil Procedure, 1976 other classes of suits were also brought in the ambit and scope of Order XXXVII Code of Civil Procedure, 1976. It will be relevant to reproduce said Rule |-


(8) ORDER XXXVII Rule 1 Sub-Rule (2)


(a) suits upon bills of exchange, hundies and promissory notes; (b) suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest arising,- (i) on a written contract; or (ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty; or (iii) on a guarantee, where the claim against the principal is in respect of a debt or liquidated demand only.


(9) THE arguments advanced by Mr. Aggarwal that as the legislature has intended in sub-clause (b) (i)-'on a written contract' and sub-clause (b) (ii)-'on an enactment on the basis of which sum is sought to be recovered, are both written, therefore, with the guarantee appearing in sub-clause (iii) of sub-rule (b) word 'written' should be read for harmonious construction of the Rule. I am afraid that the argument of learned counsel for the applicant/defendant No. 2 is of no force. The mere fact that the legislature has omitted the word 'written' with guarantee signifies that legislature in its wisdom has deliberately omitted the word 'written' in the said sub-clause. More so, legislature was conscious of the definition of the guarantee as defined in the Indian Contract Act.


(10) SECTION 126 of the Indian Contract Act defines the contract of guarantee. It will be relevant to reproduce Section 126 of the Indian Contract Act |- 'contract of guarantee', 'surety', 'principal debtor' and 'creditor' - A 'contract of guarantee' is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the 'surety'; the person in respect of whose default the guarantee is given is called the 'principal debtor', and the person to whom the guarantee is given is called the 'creditor'. A guarantee may be either oral or written. (Emphasis supplied).


(11) OBVIOUSLY, word 'written' has not been defined in the Code of Civil Procedure. Guarantee is a contract, which is defined under the Indian Contract Act and for the purposes of Indian Contract Act a guarantee may be oral or written. This Court cannot substitute 'written guarantee' in Order XXXVII Rule 1 (2) (b) (iii) of Code of Civil Procedure as that would not be harmonious construction of the Statute. More so, the object of amending Order XXXVII Code of Civil Procedure by virtue of Amendment Act, 1976 was to bring in its fold suits other than the suits, which are based on Negotiable Instruments Act. That was in suits where prima facie the amount is due either by written contract or on account of enactment or on a guarantee, the summary procedure had to be adopted. The whole scheme of Order XXXVII of the Code of Civil Procedure as amended is for a summary procedure in order to get the debt recovered at the earliest stance.


(12) THE arguments of the learned counsel for the applicant/defendant No. 2 that if Court does not interpret 'written' guarantee in sub-clause (iii) of sub-Rule (b) of Rule 2 of Order XXXVII same would lead to filing of frivolous suits under Order XXXVII Code of Civil Procedure is also devoid of any merit, as Rule 3 of Order XXXVII Code of Civil Procedure takes care of that eventuality. Sub-rule (5) of Rule 3 of Order XXXVII Code of Civil Procedure read as under |-


The defendant may, at any time within ten days from the service of such summons for judgment, by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the Court or Judge to be just. "


(13) IN view of the above provisions of sub-rule (5) of Rule 3 of Order XXXVII, it is manifestly clear that after service of summons for judgment, defendant is provided with an opportunity to disclose facts, which may be deemed sufficient to entitle him to defend the suit and for that leave to defend the suit may be granted unconditionally or upon certain terms. The arguments of the learned counsel for the applicant/defendant No. 2 that plaintiff has no right to maintain the cause of action under Order XXXVII Rule 1 (2) (b) (iii) of Code of Civil Procedure is devoid of any merit. In the authority cited by the learned counsel for the applicant/defendant No. 2 Ramchandra B. Loyalka Vs. Shapurji N. Bhownagree (supra), it is held that :-


It is I think true that a contract might fall within both those definitions, but it is clear from S. 126 that a contract of guarantee involves three parties - the creditor, the surety and the principal debtor - and I agree with the view taken by the Madras High Court in 49 Mad 156 that a contract of guarantee involves a contract to which those parties are privy. Of course, the contract need not be embodied in a single document, but I think there must be a contract or contracts to which the three parties referred to in S. 126 are privy. There must be a contract, first of all, between the principal debtor and the creditor. That lays the foundation for the whole transaction. Then there must be a contract between the surety and the creditor, by which the surety guarantees the debt, and no doubt the consideration for that contract may move either from the creditor or from the principal debtor or both. But if those are the only contract, in my opinion, the case is one of indemnity. In order to constitute a contract of guarantee there must be a third contract, by which the principal debtor expressly or impliedly requests the surety to act as surety. Unless that element is present, it is impossible in my view to work out the rights and liabilities of the surety under the Contract Act. . . . . . . . . . . . "


(14) NO doubt, this case distinguishes between the contract of indemnity and guarantee. This Court is in complete agreement with the view taken in Ramchandra B. Loyalka Vs. Shapurji N. Bhownagree (supra) but whether it is a contract of indemnity or a contract of guarantee, will depend upon the facts and circumstances of the case. It is too early to return a finding on that score. It will only after the evidence is led, parties are given opportunity that issue could be determined regarding the objection of the learned counsel for the applicant/defendant No. 2. The fundamental rule is that the averments made in the plaint are taken as correct. In various paragraphs of the plaint such as paragraphs 4, 6, 7 and 11 etc. , it has been averred by the plaintiff that defendant No. 2 personally guaranteed payment of the purchase price of the product supplied to defendant Nos. 1 and 3. It will be seen after appropriate stage is reached as to whether defendant No. 2 is liable to suffer a decree in terms of Order XXXVII of Code of Civil Procedure or not.


(15) FOR the reasons as stated above, I am of considered view that it is too preliminary a stage to delete the name of defendant no. 2 from the array of defendants, therefore, I dismiss the application of the applicant/defendant No. 2 (IA No. 8794/1997) for striking out the name of defendant No. 2 from the array of defendants.


(16) THERE is some force in the arguments advanced by the learned counsel for the applicant/defendant No. 2 with regard to injunction granted by this Court in relation to property bearing No. 35, Anand Lok, New Delhi, which is a property of the defendant No. 2 along with his brother, Mr. Sushil Kumar. Plaintiff itself in para-3 of their application (IA No. 5636/1997) has mentioned that "defendant No. 2 Mr. Arun Kumar is in the process of selling his house at 35, Anand Lok, New Delhi-110 049. " If that is so when the transaction and supply of the goods are

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between the plaintiff and defendant Nos. 1 and 3 how the personal property, which according to the applicant/defendant No. 2 is a joint family property of defendant No. 2 and his brother, can be attached? Moreover there is no averment in the pleadings specifically made by the plaintiff that defendant no. 2 had offered as a perennial guarantee his residential property for repayment of debt. The arguments advanced by the learned counsel for the defendant that as a matter of fact corporate veil be lifted to discover the true face of defendant nos. 1 and 3 are of no help to the plaintiff, as nothing has been averred in the plaint regarding fraud etc. by the plaintiff. Therefore, on the authority cited by the counsel for plaintiff Delhi Development Authority vs. Skipper Construction Company Pvt. Ltd. and anr. (supra) is of no help to the plaintiff. (17) THEREFORE, I modify the order dated 21. 7. 1997 to the extent that property bearing No. 35, Anand Lok, New Delhi will no longer be the subject-matter of the injunction order granted by this Court on 21. 7. 1997. However, in order to protect the interest of the plaintiff, defendants are restrained from selling, alienating, transferring, encumbering and disposing of property bearing No. 977-A, Uperhar, Bamrauli, Allahabad and property bearing No. 977-B, Uperhar, Bamrauli, Allahabad till the decision of the suit. (18) NOTHING said earlier would be an expression of opinion on the merit of the case. (19) FOR the reasons stated above, I order accordingly. (20) WITH these observations, these applications stand disposed of. Suit No. 1322/97 (21) LIST this suit for further proceedings before Joint Registrar on 18. 2. 1998.
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