ASHOKA INDUSTRIES LTD. v. ORISSA STATE FINANCIAL CORPORATION
1994-07-05
P.C.MISRA
body1994
DigiLaw.ai
JUDGMENT : P.C. Misra, J. - This revision is directed against the order of the Subordinate Judge, Bhubaneswar passed under Order 1, Rule 10, read with Order 34, Rule 1. CPC directing impletion of Allahabad Bank as one of the defendants in the suit. In the suit where the aforesaid application for impletion of party was filed by Allahabad Bank the following prayers were made : (i) A preliminary decree to be passed for accounts directing the defendant (Orissa State Financial Corporation) to render true accounts of the entire transaction of the plaintiff ; (ii) A decree for compensation to be passed against the defendant-Corporation for the damages caused to the plaintiff which is to be determined in course of trial; (iii) A decree to be passed holding inter alia that the plaintiff is entitled to redeem the entire mortgage entered into with the defendant-Corporation on payment of such amount as would be determined on account of adjustment of the amount of compensation found to be payable by the defendant-Corporation to the plaintiff ; (iv) A decree for permanent injunction to be passed restraining the defendant-Corporation from selling away the property in question and/or from creating any other encumbrance and/or leasing out transfering management of the hotel in question to any other agency in any manner whatsoever ; and (v) A decree to be passed directing the defendant-Corporation to-redeliver possession of the hotel in question to the plaintiff within a time to be fixed by the Court failing which possession to be restored through the process of Court. The plaintiff evidently impleaded the Orissa State Financial Corporation (in short 'OSFC') as the sole defendant in the suit. After describing facts regarding further developments in matters of Loans and investments and decisions thereon. His Lordship found : 6. The present suit out of which this revision arises has been filed for the reliefs mentioned earlier in the aforesaid background. During the pendency of the suit Allahabad Bank made an application to be impleaded as a party in the suit. In the said application it was stated that the Allahabad Bank has advanced a term loan/secured loan of Rs. 4o lakhs to the petitioner and the petitioner has made himself liable to pay back the said Joan with interest. The premises situated at 86/A/1, Goutam Nagar ih New Capital, Bhubaneswar together with all buildings, structures, erections etc.
In the said application it was stated that the Allahabad Bank has advanced a term loan/secured loan of Rs. 4o lakhs to the petitioner and the petitioner has made himself liable to pay back the said Joan with interest. The premises situated at 86/A/1, Goutam Nagar ih New Capital, Bhubaneswar together with all buildings, structures, erections etc. have been given as martgage to Allahabad Bank as a matter of security for the loan advanced. Besides, they have hypothecated the present and future plants, machineries, equipments, appliances, fixtures and implements to be stored in the premises at 86/A1l Goutam Nagar. Reference has also been made to a pan' passu agreement by which the rights of all the lending banks and the financial institutions including Allahabad Bank for division of the sale proceeds in the event of enforcement of securities have been assured. On the basis of these facts Allahabad Bank claims to be one of the necessary parties in the suit and prayed for an order in their behalf. 7. The said application was objected to by the present petitioners. It was contended on behalf of the petitioner that Allahabad Bank is neither a necessary nor proper party and, therefore, its impletion cannot be ordered. It was stated in the said objection that none of the questions which arises for consideration in the suit would affect the interest of Allahabad Bank who has already filed a separate suit in the High Court of Calcutta to safeguard its own interest. The learned trial Court allowed the application of Allahabad Bank holding that Allahabad Bank is a necessary party in view of the provisions of Order 34, Rule 1, CPC. 8. The only question which arises for consideration in this revision is as to whether the intervenor-Allahabad Bank is a necessary or proper party entitled to be impleaded in the suit under Order 1, Rule 10 read with Order 34, Rule 1, CPC. The provision permitting the Court to strike out or add parties is in Order 1, Rule 10, Sub-rule (2), CPC which provides that only a necessary or proper party may be added. The object of the rule is not to change the scope or character of the suit by adding new parties or to enable the new party so added to litigate their own independent claims, but the rule is meant to avoid unnecessary litigations which may otherwise become necessary.
The object of the rule is not to change the scope or character of the suit by adding new parties or to enable the new party so added to litigate their own independent claims, but the rule is meant to avoid unnecessary litigations which may otherwise become necessary. The distinction between the necessary party and proper party rs well known which can be succinctly put in the following words : "A person is a necessary party if in his absence no effective decree can be passed. He is a proper party if his presence is necessary for effectual and complete adjudication." The principle underlying the provisions of Order 1, Rule 10, CPC, is to avoid multiplicity of suits. in order to allow a prayer to implead a party, two tests as explained in the decision reported in 36(1970) CLT 1038 (Daitari Prasad Naik and Ors. v. Umakanta Nayak and Ors.) are required to be satisfied which are : "( i ) There must be right to some relief against the party not joined. This means that no decree can be passed without affecting the right of the absentee party ; and (ii) The presence of the absentee party shall be necessary in order to enable the Court to effectually adjudicate upon and settle all questions involved in the suit. This concept includes the idea that no decree should be passed by a Court which would be rendered infructuous and become ultimately unexecutable." In the present case the plaintiff has prayed for redemption of a mort- gage said to have been executed in favour of OSFC. There cannot be said to be any right existing against the intervenor-Bank in this suit so far as the plaintiff is concerned. It has been alleged by the intervenor that the very same properties have been subsequently mortgaged to the Bank by the plaintiff in order to secure a loan advanced to it by the Bank. A decree to be passed against the defendant-Corporation may or may not allow the prayer of redemption and such a decree cannot affect the right of the intervenor-Bank inasmuch as the security, it created, in favour of the Bank by a subsequent mortgage, will subsist irrespective of the decree passed in favour or against the plaintiff.
A decree to be passed against the defendant-Corporation may or may not allow the prayer of redemption and such a decree cannot affect the right of the intervenor-Bank inasmuch as the security, it created, in favour of the Bank by a subsequent mortgage, will subsist irrespective of the decree passed in favour or against the plaintiff. In other words, the intervenor-Bank as a subsequent mortgagee can always enforce its rights against the present plaintiff and vice versa irrespective of the result in the present suit. The alleged subsequent mortgage in favour of the bank shall be subject to the first mortgage in favour of the defendant-Corporation So far as the second test prescribed as aforesaid the intarvenor-Bank does not satisfy the same. In order to effectually adjudicate upon and settle all questions involved in this suit, the presence of the intervanor-bank is unnecessary The decree to be passed in the suit would not be rendered infructuous or become unexecutable in the aosence of the intervenor-bank. Thus, the intervenor-bank does not satisfy the aforesaid two tests laid down to be entitled to be impleaded in the suit under Order 1, Rule 10, Suo- rule (2). Yet another question may be necessary to be referred to in this connection. Whether the expression "all questions involved in the suit" will also include questions which the intervenor-bank might raise if impleaded in the suit. Generally speaking, the aforesaid expression need not be confined only to questions between the parties to the litigation. But the questions that may be raised for adjudication by the intervenor must necessarily satisfy the aforesaid two tests. The intervenor in his application for impletion as a party has alleged that the plaintiff has obtained a loan on execution of a mortgage in favour of the intervenor-bank as a security offering the very same properties which were earlier mortgaged to the defendant-Corporation. In the present suit the enforceability of the subsequent mortgage even if raised by the intervenor party is unconnected with the genuineness and the liability already created in respect of the properties by the first mort- gagee and, therefore, neither the result of the suit would affect the intervenor-bank nor the subsequent mortgage even if found to be genuine and enforceable against the plaintiff would affect the interest of the first mortgagee, namely, the defendant-Corporation.
Even giving wider interpretation to the expression "between the parties to the suit", the intervenor in this case does not become entitled to be impleaded as a party as it does not satisfy the very object of the rule which is to avoid multiplicity of suits and to avoid conflicting decisions on the same question. The purpose of the rule is not to implead an absentee party to widen the scope of the suit, requiring the plaintiff to avoid a litigation with the newly added party, for which the cause of action is entirely different. Much reliance has been placed on the provisions of Order 34, Rule 1, CPC which runs as follows : "O.34, Rule 1. Parties to suits for foreclosure, sale and redemption-Subject to the provisions of the Code, all reosns having an interest either in tha mortgage-security or in the right of redemption shall be joined as parties to any suit relating to the mortgage. Explanation-A puisne mortgagee may sue for foreclosure o for sale without making the prior mortgagee a party to the sui and a prior mortgagee need not be joined in a suit to redeem subsequent mortgage." The object of this rovision is to avoid multiplicity of suits which is the same as in Order 1, Rule 10, Sub-rule (2). The peculiarity of this rule is that it applies only to suits relating to mortgages. The opening words or the rule suggest that it is subject to other provisions of the Code. It has been decided in a decision reported in Shyam Behari and Another Vs. Rameshwar Prasad Sahu and Others and followed in various other decisions that Order 34, Rule 1, CPC is subject to Order 1, Rule 9, CPC which provides that no suit shall be defeated by reason of misjoinder or non-joinder of parties and the Court in every suit can deal with the matter in controversy as regards the rights and interest of the parties actually before it, provided nothing in this rule shall apply for non-joinder of necessary party. A already stated, necessary party being one in whose absence no decree at all be passed, the intervenor-bank cannot be called a necessary party. Therefore, imple- tion of the intervenor-bank under Order 34, Rule I,'". PC if at all, has to be considered keeping the provisions of Order 1., Rule 9, CPC in view.
A already stated, necessary party being one in whose absence no decree at all be passed, the intervenor-bank cannot be called a necessary party. Therefore, imple- tion of the intervenor-bank under Order 34, Rule I,'". PC if at all, has to be considered keeping the provisions of Order 1., Rule 9, CPC in view. It is, therefore, clear that though the object in enacting Rule 1, Order 34, is to prevent multiplicity of suits by bringing all the parties before the Court in a suit based on mortgage either as plaintiffs or defendants, the intention of the legislature is not to visit the non-inclusion of certain defendants by the plaintiff with dismissal of the suit. Order 34, Rule 1, CPC does not profess to impose any such penalty nor can the rule of procedure be construed to have such an effect. The test is to determine in each case if the relief cannot be granted to the plaintiff without imp- leading other persons who have not been joined as defendants in the suit. 9. There is another angle from which this rule can be viewed. This Rule enables the interested parties to raise necessary defence open to them in law so that the same may be taken into consideration in dealing with the claim under the mortgage, In such a suit based on a mortgage be it for toreclosure, sale or redemption, all the persons interested in consequence of the decree to be passed in the suit are to be joined as parties under this rule. A person claiming adversity to the mortgagor or the mortgagee or a person claiming paramount title is neither necessary nor a proper party to a suit relating to mortgage. In a suit for redemption as in the present case a party in whose favour or against whom no right has been created by the mortgage sought to ba redeemed cannot be said to be a person having interest either in the mortgage security or in the right of redemption. The exoression "mort- gage security or in the right of redemption" must necessarily mean "an interest arising out of the very mortgage transaction in the suit" and not the transactions which are independent and subsequent thereto. I am. therefore, of the view that the intervenor-Bank is not a party whose impletion can be permitted under Order 34, Rule 1, CPC. 10.
I am. therefore, of the view that the intervenor-Bank is not a party whose impletion can be permitted under Order 34, Rule 1, CPC. 10. Learned counsel for the opposite party placed reliance on several decisions of which some are irrelevant for the question to be decided in the suit. I am also not dealing with the decisions which relate to the interpretation of Order 1, Rule 10, Sub-rule (2) as it is beyond any controversy that a Court can direct addition of necessary parties and the proper parties whose presence is essential for effective adjudication of the matters in dispute. The decision reported in AIR 1957 Gau 99 (Namer Ali v. Khaiwan Goala and Ors.) holds that the provisions of Order 34. Rule 1.CPC are imoerativa and the heirs of the deceased mortgagor cannot be treated as being merely proper party to the suit as they are necessary parties. Their Lordships held that their impletion is unnecessary so far as the dispute in that suit is concerned. The decision reported in AIR 1927 PC 82 (Panaganti Ramarayanimgar v. Sri Rajah Velugoti Govinda Krishna Vachendra Bahadur Vari and Ors.) explains the object of Order 34,Rule 1. CPC by saying that the rule is meant to dispose of all claims affecting the equity of redemption in one and the same suit. This means, all such claims must arise out of the mortgage involved in the suit. The aforesaid view of the Privy Council has also been followed in the decision reported in AIR 1851 Pat28 (Aneshwar Prasad and Anr. v. Misri Lall and oth ers). Their Lordships of Allahabad High Court in the decision reported in Mst. Satwati and Another Vs. Kali Shanker and Others, have expressed the view that the position of law is wall-settled that a person having a paramount title is not a necessary party in a mortgage suit and need not be impleaded. They have gone to the extent of saying that if a mortgagee in a suit for mortgage impleads certain other persons who were setting up an adverse title to the mortgagor, the Court may on an objection made by such defendants discharge them from the array of parties and leave the dispute for decision in another litigation. The view expressed in AIR 1957 Gau 19(supra) has been reaffirmed in the decision reported in Devathi Subbarayudu and Others Vs. Puvvadi Chinna Venkatasubbiah, . 11.
The view expressed in AIR 1957 Gau 19(supra) has been reaffirmed in the decision reported in Devathi Subbarayudu and Others Vs. Puvvadi Chinna Venkatasubbiah, . 11. In the result, the revision is allowed and the impugned order is set aside. There shall be no order as to costs. Final Result : Allowed