M/S.Edmi Limited v. Rs Yarns And Power Pvt.Ltd And Another
IN THE HIGH COURT OF JUDICATURE AT MADRAS
(ORDINARY ORIGINAL CIVIL JURISDICTION) WEDNESDAY, THE 12TH DAY OF JANUARY 2022 THE HON'BLE MR. JUSTICE N.ANAND VENKATESH A.No. 4536 of 2021 in C.S.No.302 of 2020 C.S.No.302 of 2020:- RS Yarns & Power Pvt. Ltd.
Represented by its Director Mr.S.Babu 40(1) S.V.Colony East, 9 th Street, PN Road, Tirupur - 641 602.
...Plaintiff -Vs1.M/s EDMI India P.Ltd.
Represented by its Director Mr.Sukant Behera, M-3, 9 th Street, Dr.VSI Estate, Thiruvanmiyur, Chennai - 600 041.
2.M/s EDMI Limited, Represented by its Director Mr.How New Sang, 47, Yishun Industrial Park A, Singapore - 768 724.
... Defendants A.No. 4536 of 2021:- M/s EDMI Limited,
Represented by its Director Mr.How New Sang, 47, Yishun Industrial Park A, Singapore - 768 724.
...Applicant / 2 nd Defendant Vs.
1.RS Yarns & Power Pvt. Ltd.
Represented by its Director Mr.S.Babu 40(1) S.V.Colony East, 9 th Street, PN Road, Tirupur - 641 602.
... 1 st Respondent / Plaintiff 2.M/s EDMI India P.Ltd.
Represented by its Director Mr.Sukant Behera, M-3, 9 th Street, Dr.VSI Estate, Thiruvanmiyur, Chennai - 600 041.
... 2 nd Respondent / 1 st Defendant Application praying that this Hon'ble Court be pleased to strike out the name of the applicant/2 nd defendant in the above C.S.(Commercial) No.302 of 2020. This Application coming on this day before this court for hearing, the court made the following order:- This application has been filed by the 2 nd defendant to strike out the name of the 2 nd defendant in the suit.
2.The 1 st respondent / plaintiff has filed the present suit seeking for the relief of recovery of money. The case of the 1 st respondent is that in the course of
transanction, the 1 st respondent/ plaintiff entered into a Memorandum of Understanding dated 20.03.2019 with the 2 nd respondent / 1 st defendant for supply of meters and the grievance of the 1 st respondent is that the 2 nd respondent / 1 st defendant did not supply the meters after having received the payments from the 1 st defendant / plaintiff.
3.The applicant / 2 nd defendant has filed the present application mainly on the ground that there is absolutely no privity of contract between the applicant and the 1 st respondent and they are in no way involved in the transaction and even though, the nd respondent / 1 st defendant is a subsidiary company of the applicant, that does not in any way make the applicant liable under the transaction, since the 2 nd respondent / st defendant is an independent entity.
4.A counter affidavit has been filed by the 1 st respondent /plaintiff and it has been explained in the counter affidavit as to how the applicant is a proper party in the present suit. The 1 st respondent / plaintiff has sought for the dismissal of this application.
5.Heard the learned counsel for Mr.M.Santhanaraman and M.Surya senthil for M/s.Surana and Surana,learned counsel for 1 st respondent and Mr.T.V.Suresh Kumar, learned counsel for 2 nd respondent.
6.A careful reading of the plaint shows that the entire transaction is as between the 1 st respondent /plaintiff and the 2 nd respondent / 1 st defendant. Admittedly, the 2 nd respondent is the subsidiary company of the applicant and it is stated that the applicant holds more than 99% of the shares in the 2 nd respondent /1 st defendant company. It is now too well settled that a holding company and a subsdiary company are independent entities in the eye of law and a company cannot be added as a party just because it is the holding company without anything more. 7.The 1 st respondent / plaintiff has come up with a specific stand that the 2 nd respondent / 1 st defendant went against the terms of MOU and refused to supply materials.
One important reason that was given by the 2 nd respondent / 1 st defendant is that the 1 st respondent / plaintiff was attempting to supply materials to Iran and such supply of materials to Iran goes against the rules and regulations at Singapore, where the holding company is having its registered office. One of the document that has been relied upon by the 1 st respondent / plaintiff shows that the 2 nd respondent /1 st defendant informed the plaintiff through email dated 20.07.2019 that EDMI is owned by Osaki (a japnese Company) and as per the available law and regulation, EDMI cannot transact with the companies situated at Iran.
to supply the meters and the 2 nd defendant refused to respond to any of the communication made by the plaintiff.
8.This Court has to see if the applicant / 2 nd defendant is a necessary and / or proper party in the present suit. The scope of order I Rule 10(2) of CPC was gone into by the Hon'ble Supreme Court and the Hon'ble Supreme Court explained as to who is a necessary party and a proper party. Useful reference can be made to the judgement of the Hon'ble Supreme Court in [Mumbai International Airport (P) ltd., Regency Convention Centre and Hotels P Limited and others] in 2010 7 SCC 417. The relevant portion in the judgement is extracted hereunder :-
15. A "necessary party" is a person who ought to have been joined as a party and in whose absence no effective decree could be passed at all by the court. If a "necessary party" is not impleaded, the suit itself is liable to be dismissed. A "proper party" is a party who, though not a necessary party, is a person whose presence would enable the court to completely, effectively and adequately adjudicate upon all matters in dispute in the suit, though he need not be a person in favour of or against whom the decree is to be made. If a person is not found to be a proper or necessary party, the court has no jurisdiction to implead him,
against the wishes of the plaintiff. The fact that a person is likely to secure a right/interest in a suit property, after the suit is decided against the plaintiff, will not make such person a necessary party or a proper party to the suit for specific performance.
9.In the considered view of this Court, the 2 nd defendant is not a necessary party and even in the absence of the 2 nd defendant, an effective decree can be passed in the present suit as against the 1 st defendant. Therefore, the only other issue that requires the consideration of this Court is to see if the applicant / 2 nd defendant is a proper party in the present suit.
10.A proper party is a party whose presence would enable the Court to completely, effectively and adequately adjudicate upon all matters and dispute in the suit. The plaintiff is the dominus litis who can choose to add any one as a party to the suit. While adding the party to the suit, the plaintiff must justify the same by substantiating that the concerned party is either a necessary or a proper party. If the party does not fall within either of these categories, the party has to be necessraily struck off from the suit.
11.In the present case, if the 1 st defendant had merely stated that the plaintiff had acted beyond the terms of the MOU and that is the reason why the payment was not made to the plaintiff, there would have been absolutely no justification to add the nd defendant as a party to the suit. However, the 1 st defendant apart from taking such a stand, has also taken a further stand to the effect that the 2 nd defendant which is the holding company has directed the 1 st defendant not to permit the plaintiff to supply any materials to Iran, since it goes against the rules and regulations. 12.Mr.Sukant Behera, Director of the 1 st defendant, is also the Senior Vice President of the 2 nd defendant. In that capacity, the reference is made to the defendants only as EDMI group and this very person through email dated 20.07.
2019 talks about the 2 nd defendant being owned by the Japnese entity Osaki and the corporate policy of not allowing the supply of materials to Iran. In view of this reason, the plaintiff has thought it fit to add the 2 nd defendant in the suit, since the plaintiff thinks that the 2 nd defendant is a proper party.
13.The presence of the 2 nd defendant will certainly enable this Court to completely, effectively and adequately adjudicate upon the terms of the MOU dated
20.03.2019. Even if ultimately a decree is not passed against the 2 nd defendant, the presence of the 2 nd defendant as a party will enable this Court to understand about the scope of the corporate policy, which prevents the plaintiff from supplying the materials to Iran. This is in addition to determining the basic issue as to whether the plaintiff violated the terms of MOU and which justified the 1 st defendant not to supply any materials as per the MOU.
14.In view of the above discussion, this Court holds that the 2 nd defendant is a proper party in the present suit and the presence of the 2 nd defendant is required for this Court to completely and effectively adjudicate upon a matters in dispute in the suit.
15.In the result, this application is dismissed and considering the facts and circumstances of the case, there shall be no order as to costs. Sd./-NAVJ.
12/01/2022 //Certified to be true copy// Dated at Madras this the day of 2022. COURT OFFICER(O.S.) From 25th Day of September 2008 the Registry is issuing certified copies of the Orders/Judgments/Decrees in this format.
EVK 01/02/2022