Allowed

M/s. A.P.S.R.T.C. v. Fremery Resources Ltd.

Telangana HC6 Nov 2009CCCA/255/2006

Case brief

AI extract

What is this about?

The Appellate Court allowed an appeal against the rejection of a plaint under Order 7 Rule 11 CPC. The court held that the lower court erred in dismissing the suit against the third defendant based solely on allegations of quasi-contract and unjust enrichment, noting the pendency of an amendment application that should have been considered first.

What did the court decide?

The impugned order rejecting the plaint was set aside; the matter was remanded to the lower court for a fresh decision on merits, considering the pending amendment application.

M/s. A.P.S.R.T.C. Vs Fremery Resources Ltd. — Company and Corporate | Telangana HC (2009)

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THE HONOURABLE SRI JUSTICE B.PRAKASH RAO

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AND

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THE HONOURABLE SRI JUSTICE B.CHANDRA KUMAR C.C.C.A.No.255 of 2006

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FRIDAY THE 0 6 th DAY OF NOVEMBER, 2009

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Between:

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M/s.A.P.S.T.C. Ltd, Represented by its Vice Chairman & Managing Director, Having its Regd. Office at 5-10-174, Fathamaidan Road, Hyderabad .. Appellant

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And

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Fremery Resources Ltd., Room No.809, Concordia Plaza – I, Science Museum Road, TST Hong Kong rep. By its Managing Director and Others .. Respondent

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THE HONOURABLE SRI JUSTICE B.PRAKASH RAO

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AND

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THE HONOURABLE SRI JUSTICE B.CHANDRA KUMAR

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C.C.C.A.No.255 of 2006

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JUDGMENT: (Per the Ho’nble Sri Justice B.Prakash Rao)

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The appellant herein is the plaintiff, who files this appeal under Section 96 of the Code of Civil Procedure, aggrieved against the orders in I.A.No.593 of 2006 in O.S.No.248 of 2005 dated 22-7-2005, on the file of the Chief Judge, City Civil Court, Hyderabad allowing an application filed by the respondent No.1 herein viz., the defendant No.3 under Rule 11 of Order 7 of Code of Civil Procedure seeking to reject the plaint insofar as the said defendant No.3 is concerned.

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Briefly stated, the facts of the case are, that in the suit filed by the appellant/plaintiff, it sought a decree as against all the three defendants jointly and severally for a sum of Rs.13,21,43,907/- towards the value of the goods with interest at 12% per annum, and an injunction against the 2^nd defendant/ Syndicate Bank restraining it from initiating steps for recovery of

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any amounts credited on 31-3-2004 to the plaintiffs account, and further for a decree against the defendant No1 for a sum of Rs.2,27,93,796/- with interest at 12% per annum and other reliefs.

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The case of the defendant No.3 in the said application filed for rejection of the plaint was in sum and substance rested on the sole ground that there being no relationship inter se between the plaintiff and the said defendant No3 nor the plaint discloses any cause of action, hence, the plaint has to be rejected as against the said defendant No.3.

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After the contest by the appellant, the Court below allowed the said application holding that admittedly there is no privity of contract and the appellant has no cause of action. That apart, it also held that in regard to the receipt of goods by the 3^rd defendant, a dispute arose between the 3^rd and the 1^st defendant whereby the third party already invoked the arbitration clause. Even a reading of the plaint does not disclose the real cause of action between the plaintiff and the 3^rd defendant.

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Challenging the rejection of the plaint and the findings has given by the Court below, the learned counsel for the appellant submits that having regard to the nature of transaction and especially when the appellant is admittedly the owner of the goods, and therefore, the quasi contract and quasi liability arises, and thus, the defendant No.3 cannot reckon out of the

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relief since there is a conspiracy between the defendants 1 and 3 with the 2^nd defendant/bank to defraud the plaintiff. That apart, it was also pointed out that an application filed by the plaintiff specifically in I.A.No.2150/2006 under Order 6 Rule 17 of the Code of Civil Procedure is still pending consideration, and therefore, the Court below could not have rejected the plaint without taking the said application.

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The learned counsel appearing for the respondents sought to sustain the order on the self same reasons and grounds, especially, to the effect that the plaint totally lacks in any point to the defendant No3, and therefore, no suit lies and hence rightly rejected.

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On a consideration of these and other submissions made from both sides and on perusal of the material, the point, which crops up for consideration is as to whether in the circumstances of the case the rejection of the plaint as has been filed and framed by the appellant is sustainable?

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At the outset, it is to be stated that this appeal was taken up for consideration along with C.M.A.No.802 of 2006 and heard together. The said appeal arose as against the interlocutory order granted in the same suit in I.A.No.2337/2005 in O.S.No.248/2005, dated 22^nd September 2005, whereby the application filed by the appellant/plaintiff itself under Order 39

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Rule 1 and 2 of the Code of Civil Procedure seeking for temporary

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injunction against the defendant No.2/bank from taking any proceedings as against the recovery, pending disposal of the suit was dismissed and the ad interim injunction granted initially on 2-8-2005 was vacated. However, the

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said appeal is being dealt with separately.

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Coming to the question and the facts of this case, it is to be seen as to whether there exists any cause against defendant No3 in the suit as framed by the appellant/plaintiff. On a reading of the plaint where the appellant sought to proceed for recovery jointly and severally and also individually as against the

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1^st defendant, it proceeded with the allegations in para 2 onwards stating that the appellant/plaintiff is a trading corporation with varied activities including the export of iron ore. It entered into a Memorandum of Understanding on

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29-9-2003 with the 1^st defendant, which is a public limited company registered under the Companies Act, as per which the defendant would transfer its export orders to the plaintiff, and as such, the plaintiff in its export operations receive half of the net profits for its service. Prior to the said Memorandum of Understanding, there appears to have been an agreement between the defendant No1 and defendant No.3 agreeing to supply 5,00,000 Metric Tons of iron ore during 2003-2004. This contract was not

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transferred to the plaintiff. The 1^st defendant shipped 41950 MTs of iron ore belonging to the plaintiff on

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27-3-2004 to the 3^rd defendant, which is a foreign buyer and chartered a vessel M.V.JIMILTA II at the rate payable for the said consignment at USD 64.00 per MT. Though there is an obligation on the part of the plaintiff to make the export in the name of the plaintiff, however, it obtained Bill of Lading in its own name. Thereby, the 1^st defendant sought to deprive the plaintiff from its export incentives. On behalf of the 1^st defendant and the 2^nd defendant there has been negotiation and the 1^st defendant directly contacted the 2^nd defendant for creation of the export documents along with letter dated 31-3-2004,

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where-under the plaintiff was sought to be avoided and the arrangement was totally non-business like and a conspiracy and a fraud has been played, as a result of which, an enquiry ordered by the plaintiff is on. In view

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of the said acts on the part of the defendant No1, which is equally of unethical conduct and violative of the norms, it has resulted into certain disputes and denying the privity contract with the 3^rd defendant and the plaintiff and claiming the entire transaction of business by the defendant No1 itself. Though the plaintiff had made a step to solve the situation by

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negotiating with the 3^rd defendant, there has been no assistance by the defendant No.1, and thus, ultimately resulting into the claim by the 2^nd defendant for demand of Rs.11,82,88,932/- with interest. Therefore, the plaintiff by setting forth the reasons and making specific allegations for the liability of defendant No.1 for a sum of Rs.77,93,796/- with interest as against the defendant No1 and claiming that the defendant No.2-bank cannot proceed to recover any amounts as claimed, in view of the nature of

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the things, and further specifically pleading liability of the 3^rd defendant which is a foreign buyer in the typical circumstances of the case on the footing of Doctrine of unjust enrichment and restitution, claimed for decree of Rs.11,64,26,351/- with interest at 12% as against the 3^rd defendant, and pointing out that the basic cause of action is one and the same for such joint liability, hence, alleging the cause of action in the following words in para 11, the plaintiff rested its relief as stated above:

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“The cause of action for the suit claims arose on 29-09-2003 when the contract was executed at Hyderabad between the plaintiff and the 1^st defendant on 27-03-2004 when the plaintiffs iron Ore was exported, on 31-03-2004 when the 1^st defendant submitted the export documents to the 2^nd defendant and the 2^nd defendant discounted the export bill and credited the amount to the plaintiff, on 02-04-2004 when the plaintiff paid an amount of Rs1,50,00,000/- to the 1^st defendant and the date when the 3^rd defendant took delivery of the goods and appropriated the same, on 25-05-2004 when the 2^nd defendant crystallized and finally on 21-10-2004 when the 2^nd

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defendant issued a notice informing about the crystallization of the Bill and demanded payment and on several dates when the plaintiff requested the defendants to settle the claims under the Export documents. As the respective attitudes of the defendants were clear no suit notice was deemed necessary and accordingly not issued.”

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As already stated in the present application the 3^rd defendant points out that there being no cause as specifically arising or alleged nor any liability has been fixed up nor any liability germane there-from, hence, the suit is liable to be thrown out and the plaint to be rejected.

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Admittedly, no written statement has been filed by the 3^rd defendant on the merit of the allegations as contained in the plaint. The Court below

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in para 12 of its order observed as follows:

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“As candidly admitted by the plaintiff himself, there is no privity of contract between the plaintiff and the third defendant. At the same time, there is no contract or transaction whatsoever between the plaintiff and the third defendant. It the third defendant received goods or product from the first defendant as the agent of the plaintiff and failed to honour the transaction, perhaps, the plaintiff has a cause of action against the third defendant. However, it is not to be in this case. Further, regarding the iron ore received by the third defendant, a dispute arose between the third defendant and the first defendant and the third defendant already invoked the arbitration clause. This is all the more reason why the plaintiff has no cause of action against the third defendant. The principle of syllogism have no application. The logic that the plaintiff has a cause of action against the first defendant, the first defendant has a cause of action against the third defendant and, therefore, the plaintiff has a cause of action against the third defendant does not hold good. A plain reading of the plaint does not show real cause of action between the plaintiff and the third defendant.”

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From the above, it shows that the entire approach of the Court below is on the aforesaid premise as if there is nothing against the 3^rd defendant. However, the reading of the plaint sufficiently makes out a specified direction against the 3^rd defendant as to how the claim is being made by the plaintiff and fixing the liability as against the said 3^rd defendant as also the allegations from the plaint on the various versions as mentioned to and blaming the

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1^st defendant in regard to the export, which it made to the 3^rd defendant, and asserting the exclusive right to the plaintiff for entitling to all the export incentives. Ultimately it also refers to the fact in paras 8 and 9 of the plaint and letter of the 2^nd defendant/bank dated 21-10-2004 apart from the other corresponding inter se and informing the plaintiff that the bankers of the

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3^rd defendant returned the shipping documents on the ground that the original bill of lading was not sent, in addition to pointing out some other discrepancies in the shipping documents and refused payment. This apart, the plaintiff need to try to fix up the individual liability of the defendants. In para 10-A the allegations are specific as to how the plaintiff claims fixing the liability on the

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1^st defendant in regard to the said amount of Rs77,93,796/-. Coming to the

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2^nd defendant in para 10-B, the plaintiff complains as against the action of

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the

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2^nd defendant Bank and seeks the injunction. Further, in regard to the

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3^rd defendant, the para 10 (c) avers in detail in the following manner in

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para 10 (c):

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“C). LIABILITY OF THE THIRD DEFENDANT (FOREIGN

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BUYER):

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The 3^rd defendant Foreign Buyer has defaulted in honouring its commitment to he 1^st defendant. It is understood that this conduct of the 3^rd defendant foreign buyer was consequential to a slump in the price of Iron Ore after the goods were shipped. The plea that copies and not originals of unsuperable bar to releasing the goods. It appears to be more a pretext for avoiding the contract. The 3^rd defendant ultimately took delivery of the goods and appropriated the same. As it has appropriated the goods of the plaintiff, it is lawfully obliged to pay the contract price to the owner (Plaintiff). As the plaintiff is the real owner of the goods, it is entitled to recover the value thereof together with interest from the foreign buyer. Though there is no privity of contract between plaintiff and the 3^rd defendant, it is still liable on the basis of quasi contract. The Doctrines of unjust enrichment and restitution also support the plaintiff’s claim against Defendant No.2. Accordingly the plaintiff prays for a decree for rs.11,64,26,351/- with interest @ 12% from 25.04.2004 till the dte of realization.

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The plaintiff is also entitled to interest @ 12% p.a on all the above amounts from the date of the suit. As the basic cause of action is the same, the plaintiff prays for a joint and several decree against defendants 1 to 3 for a sum of

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Rs.11,64,26,351/- with interest at 12% from 25-4-2004 till the date of realization. The 1^st defendant is also liable to pay a further sum of Rs.2,27,93,796/- and separate decree for a further sum of Rs2,27,93,796/- be passed against the 1^st defendant.”

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These aspects as averred to with all the allegations as contained

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therein, which necessitates to be considered more so in an application of this nature, wherein a rejection is sought on the ground of total absence of cause of action, the Court below has not paid attention from its proper perspective.

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Even on these allegations as existing in all these paras (a) to (c) of the para 10 of the plaint, it sufficiently gives an indication of a quasi contract and quasi liability. These are all the matters, which require to be gone into only after regular enquiry to fix up the individual liability or that of a joint and several. At the threshold, all these averments cannot be brushed aside nor can it be said that the plaint is totally silent and no averment is made making any allegations as against the defendant No.3 at all, nor can it be said that there is no averment to rope in all the three defendants individually and together. There is an ample indication, which has to be decided through the process of trial and the appreciation cannot run to disseminate amongst themselves nor to eliminate any one as such.

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The principle in regard to the Courts and consideration of the application under Rule 11 order 7 is now well settled. The Court below has no doubt referred to the decisions as reported in Mayar (H.K) Ltd. Vs.

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Owners & Parties, Vessel M.V.Fortune Express^[1] , N.Vsrinivasa Murthy vs. Mariyamma^[2] a n d I.T.C. Ltx vs. Debts Recovery Appellate Tribuna l^[3] . Apart from those principles as enunciated there-under resting it for consideration only within the four corners of the plaint and the allegations contained and making a reading of the entire plaint as a whole to avoid vexatious and merit-less litigation, and also to pierce through the plaint to find out the real cause of action if any, it calls for consideration of the case on hand on these parameters. However, the Court below admittedly has not kept in view these principles vis-à-vis the body of the plaint and its contents as referred to above. It is to be seen that the plaint thus refer to the entire sequel of events and raising a specific point against each and every defendant including the defendant No.3 as to how it seeks to claim. The principle of fixing the liability out of the quasi contract has not been dealt with by the Court below. Therefore, primarily we are of the view that these aspects need to be paid attention before one seems to throw out the plaint on such ground. That apart, the Court below has totally lost sight of the pendency of a comprehensive application filed by the plaintiff in

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I.A.No.2150/2006 under Order 6 Rule 17 of the Code of Civil Procedure seeking for amendment of the plaint. The said plaint gives us the date 296-2006, where as the present order is passed on 22-7-2006. It is not known

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as to whether any counter affidavits were filed by all the defendants including the defendant No3. However, the said application has not seen the light of the day and no reason is found from the order nor there is any reference to the said application.

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It necessitates to state that it is the very same plaint, which is sought to be thrown out at the instance of the defendant No.3, which is being sought for amendment.

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Shorn of the reasons given in the affidavit filed in support of the said application, the request for addition of para 10 (b) (a) after para 10 (b) is for importing with further allegations.

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A reading of these allegations, though application yet to be considered on merits and the existing paras in 10 from (a) to (c), prima facie, it cannot be said that there is no allegation to lay a claim nor the absence of its cause, therefore, the Court below should have disposed of this application, before it took up the present application, seeking for rejection of the plaint. Apart from the reasons given by us in the preceding paras as to

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the non-applicability of the mind in regard to the costs existing in those para

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10 to search further point raised by the plaintiff and defendant No.3, the perspective para, which is sought to be added also plays a role. Be that as it may, without expressing any opinion on the merits as such, we are of the view that the Court below has not properly considered the application in an apt manner as required to be applied with the para-meters as laid down. Therefore, we hold that the matter requires re-consideration by the Court below afresh on merits, in its entirety. Necessarily, this application needs no attention as long as the application for amendment is taken up and disposed of.

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For the aforementioned reasons, the appeal is allowed. The order in I.A.No.593/2006 in O.S.No248/2005 dated 22-7-2006, on the file of the Chief Judge, City Civil Court, Hyderabad is set aside and the matter is remanded for consideration a fresh. The lower Court shall dispose of the application afresh on merits, after taking into consideration the amendment application in I.A.2150/2006, after giving notice and opportunity to both sides, in accordance with Law. No costs.

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_________________ B.PRAKASH RAO,J

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B.CHANDRA KUMAR,J

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Dt:06-11-2009 Grk

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THE HONOURABLE SRI JUSTICE B.PRAKASH RAO

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AND

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THE HONOURABLE SRI JUSTICE B.CHANDRA KUMAR