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2014 DIGILAW 1140 (CAL)

Sahaj E-Village Limited v. Oracle India Pvt. Ltd.

2014-12-03

SOUMEN SEN

body2014
Judgment Soumen Sen, J. This is an application for revocation of leave under Clause 12 of the Letters Patent and rejection of the plaint at the instance of the defendant No.2. The applicant defendant no.2 has prayed for dismissal on the ground that the plaint does not disclose any cause of action against the defendant no.2. It was further alleged that no part of the cause of action has arisen within the jurisdiction of this Hon’ble Court. Mr. Pratap Chatterjee the learned senior Counsel appearing on behalf of the applicant submits that a meaningful reading of the plaint together with the documents annexed thereto would show that the plaint does not disclose any cause of action against the defendant no.2 and no part of the alleged cause of action has arisen within the jurisdiction of this Hon’ble Court. It is further submitted that a reading of the plaint would show that the plaintiff has attempted to create an illusion of a cause of action against the defendant no.2, although in reality there is none. It is submitted that the suit is vexatious and harassing. The suit is also claimed to be barred by the Specific Relief Act, Indian Contract Act and the Companies Act 1956. It is further argued that the defendant no.2 is neither a necessary nor a proper party to the suit and in the event it is contended and held that the plaint is not liable to be rejected, the name of the defendant no.2 be deleted and struck off from C.S. 86 of 2013. The plaintiff has instituted the suit against the defendant for realization of money over and above 114 crores. In the alternative the plaintiff claims an enquiry into the loss and damages suffered by the plaintiff and a decree for such sum as may be found due and payable upon such enquiry. The claim in the suit is essentially on account of damages against the said defendants joint and severally. The plaintiff states that the defendant no.2 is a manufacturer of software used for designing and operating web based portals. The defendant no.2 through the defendant No1 sells such software and delivers services in respect of development, operation and maintenance of web based portals in India. The plaintiff states that the defendant no.2 is a manufacturer of software used for designing and operating web based portals. The defendant no.2 through the defendant No1 sells such software and delivers services in respect of development, operation and maintenance of web based portals in India. The defendant no.2 it is alleged at all material times represented and held out to the public including the plaintiff that the defendant No.1 is its Indian arm and the said defendants constitute one single economic entity. The defendant no.1 is a wholly owned subsidiary of the defendant no.2. The affairs of the defendant no.1 constitute the affairs of the defendant no.2. The plaintiff has been carrying on the business of a designated Service Centre Agency (SCA) operating in six states. As such SCA, the plaintiff maintains and operates a portal known as Sahaj Portal through which approximately 26000 number of village level entrepreneurs carry out transactions. The plaintiff as a SCA earns commission for every transaction routed through and/or transactions undertaken on the Sahaj Portal. The Sahaj Portal was initially developed on the basis of a software stack developed by the defendant no.2 and sold by the defendant no.1 known as “Portal 1.0” in and around 2010. The representatives of the defendants represented to the plaintiffs that the Sahaj Portal can be operated more efficiently with reduced transaction time and with greater data security on the platform of an upgraded software stack known as “Portal 2.0”. It was further represented to the plaintiff that the defendant no.1 had the requisite expertise to develop and maintain the Portal 2.0 and also guaranteed due performance and execution of works by the defendant no.1 in the event the work to develop and maintain portal 2.0 was assigned to the defendant no. 1. The aforesaid representations were made by the representatives of the defendants at 22 Camac Street as also at the registered office of the plaintiff both within and outside jurisdiction of this Court. 1. The aforesaid representations were made by the representatives of the defendants at 22 Camac Street as also at the registered office of the plaintiff both within and outside jurisdiction of this Court. The plaintiff relying upon the said representation and believing it to be true and correct purchased from one HCL Infosystem Ltd. the agent of the defendant no.1 on a license basis the software stack known as Portal 2.0 at a total price of Rs.19,93,12,032 and also paid an amount of Rs.50,00,000 on account of annual support and service fee to the said HCL Infosystem Ltd. The plaintiff had also agreed to avail the service of the defendant no.1 for developing the Sahaj Portal on the Portal 2.0 platform, on agreed terms and conditions which are evidenced in the several purchase orders issued by the plaintiff. Thereafter, dispute arose with regard to the technical scope of the Portal 2.0 project. During the meetings held between the parties to resolve the dispute the defendants represented that it would make all endeavour to restore the “Portal 2.0” project back on track and ensure that same would adhere to various technical specifications that are particularized in Para 11 of the plaint. The plaintiff contends that the defendant no.1 had failed to adhere to the agreed time schedule for implementation of the said project inasmuch various defects were noticed at the time of testing. The said portal had failed to function properly. The defendants were called upon to rectify all the defects. The defendant no.1 although assured that such defects would be rectified but had failed to provide to the plaintiff “Portal 2.0” as per terms and conditions agreed upon. The plaintiff has given particulars of breach in Para 17 of the plaint. In view of the failure on the part of the defendants to rectify the defects it is alleged that the plaintiff was constrained to roll back to the “Portal 1.0” platform on January 22, 2012. The “Portal 2.0” developed by the defendant No. 1 was unfit for use for the purpose for which it was agreed to be licensed and developed resulting in a failure of consideration. The defendants in further breach of their obligation withdrew support at the time of roll back. The “Portal 2.0” developed by the defendant No. 1 was unfit for use for the purpose for which it was agreed to be licensed and developed resulting in a failure of consideration. The defendants in further breach of their obligation withdrew support at the time of roll back. By reason thereof the Sahaj Portal remained shut and inoperative on January 22, 2012, 23rd January 2012, 24th January 2012, for the roll back resulting in revenue losses to the plaintiff. The plaintiff states that plaintiff has quantitive the loss and damages suffered by reason of such breach which is particularized in Paragraph 22 of the plaint. It is stated that the damages as mentioned therein arise as direct and natural consequence of the breaches of the representations made by the defendants jointly, breach of guarantee by the defendant no.2 and breach of contractual obligation by the defendant no.1. It is stated that defendant no.2 is also responsible for the aforesaid losses as a guarantor for due performance of the works that were entrusted to the defendant no.1. It is further stated that the reason of misrepresentation of the defendant no.2 the plaintiff has suffered such losses having altered its position to its detriment. On a plain reading of the plaint it cannot be said that the plaint does not disclose any cause of action. The statements made in the plaint are to be taken as correct. The plaint contains definite and specific allegations against defendant no.2. The plaint states that the defendant no.2 has misrepresented facts and guaranteed due performance of the works that were entrusted to the defendant no.1. The close proximity of the defendant no.1 and defendant no.2 cannot be denied. Whether the plaintiff would succeed on such a cause of action is too early to predict and need not to be considered at all at this stage. There is a clear distinction between the non-existence of a cause of action and nondisclosure of a cause of action. It is settled law that for determining whether the plaint is liable to be rejected under Clause (a) of Rule 11 of Order 7 averments in the plaint alone are material and relevant and nothing else. On the other hand, for determining whether there is cause of action for institution of a suit, the question can only be determined on the basis of materials (other than the plaint) on record. On the other hand, for determining whether there is cause of action for institution of a suit, the question can only be determined on the basis of materials (other than the plaint) on record. In that case, Order 7 Rule 11(a) has no application (State of Orissa Vs. Klockner & Co., (1996) 8 SCC 377 ). In (1988) QBD 128, Lord Esher M.R., defined “cause of action” to mean “every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved.” Fry L. J., agreed and said:- “Everything which, if not proved, gives the defendant an immediate right to judgment must be part of the cause of action.” To put it in a concise form, the words “cause of action” means the whole bundle of material facts which are necessary for the plaintiff to prove, in order to entitle him to the reliefs claimed in the suit Order 7 Rule 11 required the plaintiff to incorporate in the plaint the facts constituting the cause of action. The plaintiff is required to plead all material facts upon which his right to relief is based and from which court can arrive at a conclusion in his favour. Such “cause of action” generally means a situation or state of facts that entitles a party to maintain an action in court, the material facts imperative for claimant to allege and prove, constitute cause of action that helps plaintiff to obtain decree. The phrase ‘does not disclose cause of action’ as used in Order 7 Rule 11(a) has to be narrowly construed. This power of rejection of plaint ought to be used only when court is absolutely sure that plaintiff does not have an arguable case at all. In view of the fact that the plaint discloses a cause of action against the defendant No.2, this application for rejection of the plaint is dismissed. In view of the order passed in G.A. No.3294 of 2013, the suit is now to be tried at New Delhi. There shall, however, be no order as to costs.