Allowed

THREE6 Incommerce Ventures Private Limited v. Decathlon Sports India Private Limited

Karnataka HC11 Jun 2024WP/22530/2019

Case brief

AI extract

What is this about?

This writ petition challenged an order rejecting an application for third-party notice under Order VIII-A of CPC. The High Court allowed the petition, distinguishing the contrary Kerala decision (Khaleel) and holding that the State amendment is consistent with the amended CPC, thereby valid.

What did the court decide?

The writ petition is allowed and the impugned order rejecting IA No.3 is set aside, consequentially permitting the third party notice.

THREE6 Incommerce Ventures Private Limited Vs… — Company and Corporate | Karnataka HC (2024)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11^TH DAY OF JUNE, 2024

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BEFORE

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THE HON'BLE MRS JUSTICE M G UMA

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WRIT PETITION NO.22530/2019 (GM-CPC)

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BETWEEN:

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THREE6 INCOMMERCE VENTURES PRIVATE LIMITED A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT NO.2, VAISHNAVI KRUPA, 6^TH "A" CROSS SIR. M.V. NAGAR, RAMMURTHY NAGAR BANGALORE - 560 016. REPRESENTED HEREIN BY ITS AUTHORIZED SIGNATORY, MR. OM PRAKASH

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… PETITIONER

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(BY SRI: DEVARAJ K.S., ADVOCATE)

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AND:

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DECATHLON SPORTS INDIA PRIVATE LIMITED A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT SURVEY NO.78/10, A2, BELLARY ROAD CHIKKAJALA VILLAGE, CHIKKAJALA BANGALORE - 562 157 REPRESENTED HEREIN BY ITS AUTHORIZED REPRESENTATIVE.

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... RESPONDENT

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(BY SRI: ARUN KUMAR, SR. ADVOCATE FOR SRI: SUNDARARAMAN M.V., AND SMT: SHRIYA JADHAV, ADVOCATES)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED

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21.02.2019 (ANNEXURE-B) PASSED BY THE HON'BLE XIX ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BANGALORE (CCH-18) ON I.A.NO.3 IN O.S.NO.6056/2017; DIRECTION ALLOWING I.A.NO.3 FILED BY THE PETITIONER UNDER ORDER VIII-A OF THE CPC, IN O.S.NO.6056/2017 PENDING ON THE FILE OF THE HON'BLE XIX ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BANGALORE (CCH-18) (ANNEXURE-D) AND ETC.,

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THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED ON 06.02.2024 COMING ON FOR PRONOUNCEMENT OF ORDERS THIS DAY, THE COURT PASSED THE FOLLOWING:

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ORDER

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The defendant in OS No.6056 of 2017 on the file of the learned XIX Additional City Civil and Sessions Judge, Bengaluru (CCH-18), is impugning the order dated 21.02.2019, rejecting IA.3 filed under Order VIII-A Rules 1 and 2 read with Section 151 of CPC, seeking issuance of notice to third party as the defendant is entitled for contribution and indemnity against it.

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Heard K S Devaraj, learned counsel for the petitioner and Sri Arun Kumar, learned senior advocate along with Sri M V Sundararaman and Smt Shriya Jadhav, learned counsel for the respondent. Perused the materials on record.

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Learned counsel for the petitioner contended that the respondent commenced business in India as an entity involved in cash and carry wholesale trading of sporting goods, as it was not

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permitted to carry on operation of retail stores in view of FDI regulations. Petitioner was a nominal vendor lent its name to enable the respondent to deal directly in selling its goods in e- commerce platform. Respondent introduced Snapdeal to deal with the products through its portal. They were having direct dealings bypassing the petitioner. Gradually it stopped sharing details such as selling price, with the petitioner and on the other hand, respondent and Snapdeal used to take all decisions independently. As a result, the petitioner faced issues with regard to sale of respondent's products on Snapdeal, customer return issues, commission debit issues etc., On reconciliation of its accounts, the petitioner noticed huge difference in receivables including transfer price, commission receivable etc., Petitioner raised these issues repeatedly with the respondent as well as with Snapdeal. They have acknowledged their errors and Snapdeal undertook to forego some percentage of commission in favour of the petitioner for two months i.e., July and August, 2015. It also admitted difference in transfer pricing to a tune of morethan 33 lakhs. Thereafter, on 26.10.2015, a re-seller agreement was entered into between the petitioner and Snapdeal subsequent to executing a seller agreement

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between the petitioner and respondent on similar terms. The respondent addressed an e-mail to the petitioner alleging that a sum of Rs,15,80,832/- was payable by the petitioner on the pretext that it has suffered losses. As the respondent and Snapdeal were dealing directly in selling the respondent's products bypassing the petitioner, petitioner sent an e-mail setting out the details about the losses suffered by it, which was admitted by the respondent by issuing a reply. In spite of that, the respondent filed the suit OS No.6056 of 2017 for recovery of the amount.

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Learned counsel for the petitioner submitted that the petitioner filed IA.3 under Order VIII-A Rules 1 and 2 read with Section 151 of CPC invoking third party procedure and seeking issuance of notice to third party i.e., Snapdeal. The Trial Court rejected the said application mainly relying on the order of the High

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Court of Kerala in Khaleel Vs Aranjikkal Jamal Muhammed¹ . It has not considered the contentions of the parties and position of law laid down by the other High Courts including our High Court. Therefore, the petitioner is before this Court.

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1(2018) 1 KLJ 463

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Learned counsel submitted that Order VIII-A of CPC as

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amended in Karnataka deals with third party procedure. When the defendant claims to be entitled for contribution from or indemnity against any person who is not a party to the suit, he is entitled to issue notice to such third party with the leave of the Court. In compliance of the procedure contemplated under sub Rule (2) of Order VIII-A(1) of CPC, the petitioner filed the application seeking leave for issuance of notice.

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Learned counsel submitted that this amendment in

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Karnataka inserting Order VIII-A in CPC remains in force even after amendment to CPC in the year 1977 and subsequently. Section 97 in Chapter V of the CPC after Amendment Act of 1976 deals with repeals and savings. However, it refers to any amendment made or any provision inserted in the principal Act, the State legislature or a High Court before commencement of the Act stands repealed except so far as such amendment or provision is consistent with the provision of principal Act as amended by the said Act. Therefore, it is contended that Order VIII-A of State amendment is in no way inconsistent with the provisions of amended CPC and hence, it

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cannot be held that the same is repealed by force of Section 97 of the Amendment Act.

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Learned counsel placed reliance on the decision in

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Mohammed Iqbal Shah and Others Vs Kunnoth Moidu and

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Others² , in support of his contention that the provisions contained in Order VIII-A of the Kerala State amendment, which is similar to that of amended Order VIII-A in this State, is not inconsistent with any of the other provisions contained in the amended CPC and therefore, the amended Order VIII-A continues even after the amendment of CPC in the year 2002. Learned counsel submitted that even though this order of the High Court of Kerala was challenged before Hon'ble Apex Court in SLP No.11832 of 2017, the same was dismissed and therefore, the said stand taken by the High Court of Kerala is aptly applicable to the facts of the present case.

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Learned counsel submitted that this Court in M.P.

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Balasubramayam Vs T.K. Nagarathnamma³ interpreted the

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amended Order VIII-A Rules 1 and 2 of CPC and categorically held

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2 2017 SCC Online Ker 438

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3 ILR 1982 Kar 290

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that the object of amendment is to avoid multiplication of proceedings. It would not prejudice the right of the plaintiff. This decision was rendered much after the amendment to CPC in the year 1976. Under such circumstances, the Trial Court could not have dismissed the application placing reliance on the decisions of the Kerala High Court, where a contrary view was taken.

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Learned counsel placed reliance on the decision in Ms.

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Tablets India Ltd. Vs Canara Bank, Represented by its Manager, Koyambedu Branch, Madras⁴ in support of his contention that Rule 1 in Order VIII-A of CPC is an exception to the well known principle that the plaintiff is the dominus litus in a suit. Once a party is recognized as a third party on direction for contribution and indemnity against him follow as a matter of course, if such a claim is possible in the eye of law. Learned counsel also placed reliance on the decisions in G. Swaminathan and another Vs. Banumathi and another⁵ , Dr.L Prabhakara Prabhu Vs Canara Bank and Others⁶ , M/s Bapu Pillai Vs The

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4 1998 (III) CTC 157

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5 1995-2-L.W.125

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6 AIR 1996 Ker 297

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Superintendent Engineer and Others⁷ and also Malthesh Gudda Pooja Vs State of Karnataka and Others⁸ in support of his contention that the amended Order VIII-A is being considered and applied in various Courts especially in four states of southern India where the amendment to include Order VIII-A is made.

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Learned counsel placing reliance on all these decisions contended that the Trial Court could not have placed reliance on Khaleel (supra) to form an opinion that amended Order VIII-A is in conflict with amended central law contained in Order II Rule 6 of CPC and therefore, the said provision stood repealed by Section 97 of the Amendment Act 1976 and that Order VIII-A ceases to exist after 01.02.1987. Therefore, the Trial Court committed an error in rejecting the application and hence, the impugned order calls for interference by this Court. Accordingly, he prays for allowing the petition.

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Per contra, learned senior advocate for the respondent opposing the petition submitted that by way of State amendment,

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7 1999 - 1 - LW - 531

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8 (2011) 15 SCC 330

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Order VIII-A was inserted which deals with third party procedure. The amended CPC do not refer to any third party procedure. In view of Section 97 of amended CPC 1976, all such amendment made by State legislature or High Court before commencement of the Act shall stand repealed except those amendments or provisions which are consistent with the provision of principal Act. When Order VIII-A is not consistent with the provisions of amended CPC, it deemed to have been repealed. The Trial Court placed reliance on the decision of the Kerala High Court in Khaleel (supra), wherein it is categorically held that similar amended Order VIII-A which is the State amendment of Kerala ceases to exist in view of Section 97 of amended CPC.

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Learned senior advocate placed reliance on the decision of the Hon'ble Apex Court in Ganpat Giri Vs Second Additional District Judge, Ballia And Others⁹ , in support of his contention that the object of Section 97 of the amending Act is to have a uniform procedural law throughout the Country. Therefore, all the State or local amendments stand repealed unless and until such amendment is made which is in consistent with the amended CPC.

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9 (1986) 1SCC 615

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Learned senior advocate contended that the Hon'ble Apex Court made it clear that the effect of Section 97(1) is that all local amendments made to any of the provision of CPC either by State legislature or by High Court, which are inconsistent with the code as amended by the amending Act stands repealed, irrespective of the fact that the corresponding provision in the Code is amended or modified by the amending Act and that was subject only to what is referred to in Section 97(2) and (3) of amended CPC. Therefore, it is contended that the Trial Court was right in rejecting IA.3 and the impugned order does not call for interference by this Court.

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Learned senior advocate submitted that simply because the Hon'ble Apex Court dismissed the Special Leave against the decision of the High Court of Kerala in Mohammed Iqbal Shah (supra) , it does not make it as the decision of the Hon'ble Apex Court nor it can be construed that the finding of the Trial Court was affirmed by the Hon'ble Apex Court. Accordingly, he prays for dismissal of the petition.

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The contentions of the parties in the present case in nutshell is that, according to the petitioner, the Karnataka High

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Court amendment inserting Order VIII-A in CPC is consistent with the amended CPC or in other words, the same is not inconsistent with any of its provisions. Whereas, it is the contention of the respondent that the High Court amendment inserting Order VIII-A stands repealed in view of Section 97 of Amendment CPC, 1976, as the same is not consistent with the provisions of amended CPC. Therefore, I have to consider the Karnataka High Court amendment inserting Order VIII-A and also the amended CPC, 1976, with special reference to Section 97.

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The Karnataka High Court inserted Order VIII-A by way of amendment by Notification No. ROC No.2526/1959 dated 09.02.1967, which came into effect from 30.03.1967. Similar amendments were brought into CPC by the High Courts in Southern India, i.e., the High Court of Kerala, Madras and Andhra Pradesh as well. It refers to third-party procedure, where in respect of the claim made against the defendant in a suit, he seeks contribution from or indemnity against any person who is not already a party to the suit and who is referred to as a third party. He may, with the leave of the Court, issue notice to that effect, sealed with the seal

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of the Court. The procedure for invoking this provision is also highlighted in the said Order itself.

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Section 97 of the Amendment 1976 reads as under:

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"97. Repeal and savings . —(1)Any amendment made, or any provision inserted in the principal Act by State Legislature or a High Court before the commencement of this Act shall except in so far as such amendment or provision is consistent with the provisions of the principal Act as amended by this Act, stand repealed."

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Learned counsel for the petitioner has placed reliance on the decision of the High Court of Kerala in Mohammed Iqbal Shah (supra) in support of his contention. In Mohammed Iqbal Shah (supra) , the Co-ordinate Bench of the High Court of Kerala at Ernakulam considered a similar question as to whether Order VIII-A inserted by the Kerala High Court is not in the Code of Civil Procedure after the 2002 amendment of the Code of Civil Procedure, and therefore, the proceedings before the Court below and those before the High Court are not maintainable. The Court, after considering the decision in Union of India v/s Anchery

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Lonappan and Kakoo and Another¹⁰ , referred to Section 97 of CPC (Amendment) Act, 1976 to hold that the decision in the said case is aptly applicable with the facts of the case and also held that there is no case where the provisions contained in Order VIII-A inserted by the Kerala High Court through the amendment to CPC, are inconsistent with any of the other provisions contained in the CPC after the amendment. Since it was held that there is no inconsistency with the amended CPC, it is held that the said provision of Order VIII-A inserted by the Kerala High Court through the amendment of CPC still continues, even after the amendment to CPC in the year 2002.

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The above decision of the Kerala High Court in Mohammed Iqbal Shah (supra) , was challenged before the Hon'ble Apex Court and admittedly, the special leave petition came to be dismissed. The contention of the learned senior advocate for the respondent that simply because the Hon'ble Apex Court dismissed the special leave petition filed against the decision of the High Court of Kerala in Mohammed Iqbal Shah (supra) , it does

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10 AIR1980 Ker 180

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not make it as a decision of the Hon'ble Apex Court or it cannot be construed that the finding of the Trial Court was affirmed by the Hon'ble Apex Court, cannot be accepted, as I am of the opinion that dismissal of the special leave by the Hon'ble Apex Court amounts to acceptance of the decision of the High Court of Kerala and affirmation of the same.

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Learned counsel for the respondent, on the other hand, places reliance on the decision of the Co-ordinate Bench of the High Court of Kerala at Ernakulam in Khaleel (supra), where the Coordinate Bench considered the Kerala High Court amendment to CPC by inserting similar provision as Order VIII-A, in the light of Sections 97(1) and (3) of the Amendment Act, 1976, to form an opinion that the provisions in Order VIII-A ceases to operate after the Amendment Act, 1976, as it was repealed. It has placed reliance on the decision of the Hon'ble Apex Court in Ganpat Giri (supra), where the Hon'ble Apex Court considered 97 (1) of the Amendment Act of 1976 to hold that the effect of Section 97(1) is that all local amendments made to any of the provisions of the Code, either by a State Legislature or by a High Court, that were

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inconsistent with the code as amended by the amending Act, stood repealed, irrespective of the fact whether the corresponding provision in the code had been amended or modified by the Amendment Act and that was subject only to what was found in Sub Section (2) of Section 97. Therefore, the High Court of Kerala in Khaleel (supra) was of the opinion that Order VIII-A inserted by way of an amendment was inconsistent with the code as defined by the Amendment Act, 1976. The Court has referred to Order II Rules 1, 3, and 6 to form an opinion to reject the contention taken by the respondent therein to hold that Order II Rules 1 and 3 of the Court remain unchanged after two amendments. The Court was of the opinion that invoking Order VIII-A would make the suit complicated by adding parties, with whom the plaintiff doesn't wish to fight, under the guise of preventing multiplicity of proceedings. It is also held that the power of the Court to add or strike out parties dehors application of the party to the suit as provided under Order I Rule 10(2) of CPC is a safeguard to see that all the proper and necessary parties are brought on record for a complete, effective, and justifiable adjudication of the case. Therefore, it was concluded that Order VIII-A ceases to operate after the Amendment Act, 1976, as

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the same was repealed. It is also held that in order to make it operative, the State Legislature should again enact a law and obtain the assent of the President.

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It is pertinent to note that, in Ganpat Giri (supra ), the Hon'ble Apex Court was referring to Order XXI Rule 72 CPC as an amendment by Allahabad High Court that has been repealed by operation of Section 97 (1) of the amended CPC, 1976. But there is no reference to Order VIII-A, which is referred to in the present case. However the court dealt with the effect of Section 97(1) of the amendment Act 1976 to hold in paragraph No.13 as under:

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13. xxx the effect of Section 97(1) is that all local amendments made to any of the provisions of the Code either by a State Legislature or by a High Court which were inconsistent with the Code as amended by the Amending Act stood repealed irrespective of the fact whether the corresponding provision in the Code had been amended or modified by the Amending Act and that was subject only to what was found in sub-section (2) of Section 97. Sub-section (3) of Section 97 provides that save as otherwise provided in sub-section (2) the provisions of the code as amended by the

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Amending Act shall apply to every suit, proceeding appeal or application pending at the commencement of the Amending Act or instituted or filed after such commencement notwithstanding the fact that the right or cause of action in pursuance of which such suit, proceeding, appeal or application is instituted or filed had been acquired or had accrued before such commencement. Subsection (3) of Section 97 sets at rest doubts, if any, by making the code as amended by the Amending Act applicable to all proceedings referred to therein subject to sub-section (2) of Section 97.

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Under Order VIII-A, if the Court is satisfied that there are

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special circumstances for invoking the same, it can grant leave to issue notice to a third party when the defendant claims to be entitled for contribution or indemnification against such person. The provision does not speak of any privity of contract between the defendant, the party to be impleaded and the plaintiff in the suit. It could be on the basis of equitable consideration or flowing from the statutes. However, to invoke Order VIII-A, the Court must be prima facie satisfied that the defendant is entitled to indemnity or contribution from such a third party, and there must be some

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evidence in support of such a claim for grant of leave. It can be said that Order VIII-A is an exception to the general Rule that the plaintiff, being the dominus litus , normally cannot be asked to expand the scope of the frame of the suit beyond his own choice and the dispute between the defendants and a third party cannot be brought within the scope of the suit of which the plaintiff is the master.

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It is to be noticed that the object with which Order VIIIA was inserted by way of amendment is to avoid multiplicity of proceedings when the claim of the defendant against such a third party flows from the claim made by the plaintiff against the defendant. However, it is for the defendant to make out a prima facie case regarding his claim against a third party. At the same time, the rights of the plaintiff cannot be unduly prejudiced while adjudicating the question between the defendant and the third party. However, such a prayer by the defendant cannot be rejected simply because some inconvenience is caused to the plaintiff. The claim made by the defendant against the third party is not limited to the claim made out of the same transaction or simultaneous

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transaction. There need not be privity of contract between the plaintiff and the third party for its application. It goes without saying that a third party has every right to contest the claim of the defendant to contribute or indemnify on all grounds that are available to the defendant himself in the suit.

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When the decision of the High Court of Kerala in Mohammed Iqbal Shah (supra) , was affirmed by the Hon'ble Apex Court by dismissing Special Leave, the decision of the same Court in Khaleel (supra) expressing the contra opinion cannot be a basis for rejecting the application filed by the petitioner before the Trial Court. The further contention of the respondent that this amended provision in CPC is inconsistent with Order I Rule 10(2) or Order II Rule 1(3) or (6) cannot be accepted, when this provision is treated as an exception to general Rule that the plaintiff is dominus litus. Thus, the contention raised by the respondent that High Court inserting Order VIII-A in CPC is inconsistent with the code as amended by the amending Act cannot be accepted. Accordingly, it is rejected.

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On facts of the case, it is the contention of the petitioner herein that he suffered loss as the plaintiff and the proposed defendant started taking all the decisions independently, without taking the defendant into confidence and further that there is re-seller agreement dated 26.10.2015 entered into between the petitioner and the proposed defendant subsequent to execution of seller agreement between the petitioner and the respondent on similar terms. The dispute between the parties need not have to be decided in a separate suit, as it will only lead to multiplicity of suit, as such determination requires the presence of all the three parties. Therefore, I am of the opinion that the contention raised by the respondent to oppose the application have no legal basis and the same are liable to be rejected.

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I have gone through the order passed by the Trial Court. Its finding is only based on the decision of the High Court of Kerala in Khaleel (supra) ignoring the decision in Mohammed Iqbal Shah (supra) and also of this Court in M.P. Balasubramayam (supra). Hence, the same is liable to be set aside.

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Accordingly, I proceed to pass the following:

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ORDER

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(i) Writ Petition is allowed.

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(ii) Consequently, IA.3 filed under Order VIII-A Rules 1 and

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2 read with Section 151 of CPC by the petitioner herein in OS No.6056 of 2017 on the file of the learned XIX Additional City Civil and Sessions Judge, Bengaluru (CCH-18), is hereby allowed.

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Sd/JUDGE

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*bgn/- & spv

THREE6 Incommerce Ventures Private Limited v. Decathlon Sports India Private Limited

Case brief

What is this about?

What did the court decide?

THREE6 Incommerce Ventures Private Limited v. Decathlon Sports India Private Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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