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2025 DIGILAW 151 (TS)

Progressive Constructions Ltd. , Hyderabad v. Rithwik Projects Pvt. Ltd. , Hyderabad

2025-03-20

B.R.MADHUSUDHAN RAO, MOUSHUMI BHATTACHARYA

body2025
ORDER : Moushumi Bhattacharya, J. The proposed appellant/Progressive Construction Limited, seeks leave to assail an order dated 14.10.2024 passed by the Commercial Court in Commercial Original Petition (COP.No.70 of 2023) filed by the respondent Nos.1 and 2 in the present Appeal. The Commercial Court passed the impugned order restraining the respondent Nos.3 and 4 from revoking the Powers of Attorney dated 27.12.2006 and 17.02.2011 executed by the respondent No.3 in favour of the respondent No.2 in the present Appeal. 2. To simplify matters, the proposed appellant (Progressive) was not a party before the Commercial Court. An application to implead Progressive was ultimately not decided and the COP was instead disposed of. The Commercial Court records in paragraph 44 of the impugned order that the COP was taken up for hearing at the instance of the respondent Nos.3 and 4 and disposed of without issuing notice to Progressive. 3. The respondent Nos.1 and 2 in the present Appeal were the petitioner Nos.1 and 2 in the COP before the Commercial Court. The respondent No.3 in the Appeal was the respondent No.1 in the COP and the respondent No.4 herein (authorized representative of the respondent No.3) was the respondent No.2 in the COP. 4. The respondent Nos.1 and 2 in the Appeal filed the COP under section 9 of The Arbitration and Conciliation Act, 1996 (1996 Act), for restraining the respondent Nos.3 and 4 herein from terminating/revoking the POAs dated 17.02.2011 and 27.11.2006 executed by the respondent Nos.3 and 4 in favour of the respondent No.2, pending disposal of the arbitration proceedings initiated by the respondent No.1 herein. 5. The Commercial Court allowed the petition and granted the prayer of the respondent Nos.1 and 2 i.e., restrained the respondent Nos.3 and 4 from terminating/revoking the POAs dated 17.02.2011 and 27.11.2006. 6. First and foremost, it should be stated that although the impugned restraint is against the respondent Nos.3 and 4 i.e., PCL Intertech Lenhydro Consortium Joint Venture (‘JV’) and its authorized representative K. Bhaskar Rao, the said respondents have not challenged the impugned order passed by the Commercial Court. The only challenge as on date is by Progressive/the proposed appellant who was not a party to the COP before the Commercial Court. 7. The only challenge as on date is by Progressive/the proposed appellant who was not a party to the COP before the Commercial Court. 7. Learned Senior Counsel appearing for the proposed appellant places the relevant facts leading to the present Appeal and submits that the proposed appellant is vitally affected by the impugned order. It is submitted that the respondent Nos.1 and 2 are acting to the detriment of the JV (the respondent No.3) by fastening liabilities on the JV without authority. Counsel submits that the respondent No.2 has opened a Bank Account without any authority in law which is also causing severe prejudice to the proposed appellant and the JV. Counsel urges that the proposed appellant is a necessary and proper party to the proceedings since the appellant is a constituent of the respondent No.3/JV and is materially affected by the impugned order restraining the respondent No.3 from terminating the POAs. It is also submitted that the POAs, which formed the subject matter of the COP, were superseded by a POA dated 18.05.2018. 8. Learned Senior Counsel appearing for the respondent No.3/JV supports the case of the proposed appellant and urges that the POA dated 18.05.2018 given on behalf of the JV mandated that all acts on behalf of the JV will be done under the joint signatures of the respondent No.2 and the Managing Director of the proposed appellant. Counsel submits that the impugned order restrained the revocation of superseded POAs which would inevitably affect the POA dated 18.05.2018 mandating joint action by the respondent No.2 and the Managing Director of the proposed appellant. Counsel adopts the submissions made on behalf of the proposed appellant by stating that the respondent No.2 has opened a Bank Account in the name of the JV and that the respondent Nos.1 and 2 are subjecting the proposed appellant and the JV to further liabilities in the proceedings pending before the Delhi High Court. 9. Learned Senior Counsel appearing for the respondent Nos.1 and 2, who were the petitioners before the Trial Court, points to acts of suppression on the part of the proposed appellant. Counsel submits that the proposed appellant was aware of filing of COP.No.70 of 2023/petition under section 9 of 1996 Act as well as the interim order dated 31.08.2023 as the respondent Nos.1 and 2 had sent the notice of invocation of arbitration dated 05.10.2023 to the proposed appellant. Counsel submits that the proposed appellant was aware of filing of COP.No.70 of 2023/petition under section 9 of 1996 Act as well as the interim order dated 31.08.2023 as the respondent Nos.1 and 2 had sent the notice of invocation of arbitration dated 05.10.2023 to the proposed appellant. Counsel submits that the appellant filed a reply to the notice on 08.11.2023. According to counsel, there is no explanation from the proposed appellant as to why the proposed appellant chose not to implead itself in COP.No.70 of 2023 before the Commercial Court. Counsel denies any prejudice being faced by the proposed appellant by reason of the impugned order. 10. We have heard learned Senior Counsel appearing for the proposed appellant, the respondent Nos.1 and 2 (petitioners before the Trial Court) and the respondent No.3 (JV, who is presently supporting the proposed appellant for leave to Appeal). 11. The present Application i.e., I.A.No.1 of 2025, has been filed for granting leave to the proposed appellant to challenge the impugned order dated 14.10.2024 passed by the Commercial Court restraining the respondent Nos.3 and 4 from revoking the two POAs executed in favour of the respondent No.2 herein. The respondent No.2 is the nominee of the respondent No.1 and the Power of Attorney holder of the respondent No.3. 12. We first wish to refer to the relevant facts which led to filing of COP.No.70 of 2023 by the respondent Nos.1 and 2 under section 9 of the 1996 Act in the Commercial Court. 13. The respondent No.3 and Tehri Hydro Development Corporation Limited (‘Tehri Hydro’) entered into an Agreement on 14.11.2002 for “Construction of Civil Works of Dam, Spillway & Power House of Koteshwar Hydro Electric Project, Koteshwar, Uttaranchal. The respondent No.1/Rithwik Projects approached the respondent No.3/PCL Intratech for sub-contracting the work. On 16.11.2002, the respondent No.3 entered into a Sub- Contract Agreement with a joint venture between M/s.Swathi Constructions and M/s. Rithwik Projects (M/s.Rithwik Swathi Joint Venture). Under this Sub-Contract Agreement dated 16.11.2002, the respondent No.3 agreed to give a Power of Attorney in favour of the person authorized by M/s. Rithwik Swathi JV. On 30.01.2003, the respondent No.3, represented by Mr.Bhaskar Rao (the respondent No.4), executed a Power of Attorney in favour of the respondent No.2 (P.Nageswara Rao) who is the Managing Partner of M/s.Swathi Constructions. Under this Sub-Contract Agreement dated 16.11.2002, the respondent No.3 agreed to give a Power of Attorney in favour of the person authorized by M/s. Rithwik Swathi JV. On 30.01.2003, the respondent No.3, represented by Mr.Bhaskar Rao (the respondent No.4), executed a Power of Attorney in favour of the respondent No.2 (P.Nageswara Rao) who is the Managing Partner of M/s.Swathi Constructions. Tehri Hydro approved the JV with M/s. Rithwik Swathi JV on 22.05.2006 as sub-contractor as per the principal Agreement dated 14.11.2002. The respondent No.3 again issued a POA dated 27.12.2006 in favour of the respondent No.2 (P.Nageswara Rao) who is the authorized representative of the respondent No.1. 14. The respondent No.3 invoked arbitration in 2007 against Tehri Hydro in relation to the loss suffered by the respondent No.3 during execution of Hydro-Electric project. In 2008, the M/s. Rithwik Swathi JV was dissolved by a Deed dated 31.03.2008 pursuant to which the respondent No.1/Rithwik Projects took over the assets and liabilities of the erstwhile JV. The respondent No.1 entered into a fresh Sub-Contract Agreement on 01.04.2008 with the respondent No.3. P.Nageswara Rao/respondent No.2 (for the respondent No.1) continued to represent the respondent No.3 as its POA holder. An Arbitral Award dated 17.12.2010 was passed in favour of the respondent No.3 and against Tehri Hydro wherein the respondent No.3 was awarded Rs.72 Crores along with 18% interest. Tehri Hydro approached the Delhi High Court to set- aside the Award under section 34 of the 1996 Act. The respondent No.3 contested this application through its agent/POA holder (P.Nageswara Rao) in the Delhi High Court. 15. The respondent No.3 through K. Bhaskar Rao (the respondent No.4 herein) executed another POA dated 17.02.2011 in favour of P.Nageswara Rao empowering him to represent and contest the arbitration proceedings on behalf of the respondent No.3 as its POA. The POA dated 17.12.2011 was in continuation of the POA dated 27.11.2006. On 15.11.2013, the respondent Nos.1 and 3 entered into an Agreement for apportionment of amounts received under the Arbitral Award dated 17.12.2010. The respondent No.3, represented by P.Nageswara Rao, raised further claims against Tehri Hydro in 2013 which resulted in another Arbitral Award dated 26.11.2020 in favour of the respondent No.3. 16. In 2018, the respondent No.2 executed two POAs dated 18.05.2018 and 20.07.2018 in the joint names of P.Nageswara Rao and P.Praveen (Director of Progressive/proposed appellant) for the limited purpose of Niti Aayog compliances. 16. In 2018, the respondent No.2 executed two POAs dated 18.05.2018 and 20.07.2018 in the joint names of P.Nageswara Rao and P.Praveen (Director of Progressive/proposed appellant) for the limited purpose of Niti Aayog compliances. The respondent No.1 filed petition in 2019 seeking execution of the Arbitral Award dated 17.12.2010 before the Delhi High Court. 17. On 20.12.2011, the Delhi High Court directed Tehri Hydro to deposit Rs.450 Crores within 6 weeks and permitted the respondent No.3 to withdraw this amount by furnishing Bank Guarantees and by giving an undertaking that the entire amount withdrawn shall be deposited with interest if the Arbitral Award is set aside. The respondent No.1 furnished Bank Guarantees equivalent to Rs.450 Crores thereafter. A sum of Rs.24.75 Crores was disbursed to the respondent No.3 and an amount of Rs.425.25 Crores was disbursed to the respondent No.1 through escrow accounts which were opened for the purpose of receiving the awarded amount of Rs.450 Crores. 18. On 12.07.2023, Tehri Hydro’s application under Section 34 was dismissed by the Delhi High Court. P.Nageswara Rao, on behalf of the respondent No.3, filed an application for Tehri Hydro to deposit the remaining amount of Rs.1010.25 Crores as per the Arbitral Award dated 17.12.2010. Tehri Hydro preferred an Appeal under section 37 of the 1996 Act which was subsequently dismissed by the Delhi High Court on 24.04.2024. Tehri Hydro filed a Special Leave Petition against the dismissal before the Supreme Court and on 26.07.2024 the Supreme Court stayed the Execution Proceedings before the Delhi High Court. 19. The Court is informed that disputes arose between the respondent No.1 and 3 pursuant to which the respondent No.1 invoked Arbitration which is presently pending before a learned Sole Arbitrator. As on the date of filing of the claim statement of the respondent No.1, an amount of Rs.1010.25 Crores stood deposited by Tehri Hydro before the Delhi High Court out of which the respondent No.1 is entitled to 94.5% towards its share in terms of the Agreement dated 15.11.2013 and the Memorandum of Understanding dated 29.11.2019 and 11.03.2020. The respondent No.1 issued a notice invoking arbitration on 15.10.2023 under Clause 18 of the Agreement dated 15.11.2013. The respondent No.3 refuted the claim in its reply dated 08.11.2023. The learned Sole Arbitrator was appointed on 15.02.2024 by the High Court on an application filed by the respondent No.1 under section 11(6) of the 1996 Act. The respondent No.1 issued a notice invoking arbitration on 15.10.2023 under Clause 18 of the Agreement dated 15.11.2013. The respondent No.3 refuted the claim in its reply dated 08.11.2023. The learned Sole Arbitrator was appointed on 15.02.2024 by the High Court on an application filed by the respondent No.1 under section 11(6) of the 1996 Act. A substitute Arbitrator was appointed on 02.05.2024. This arbitration is pending as on date. 20. We now propose to discuss the core issue of adjudication i.e., the prayer for Leave to Appeal. ‘Leave to Appeal’ for non-party Appellants: 21. Section 96 of The Code of Civil Procedure, 1908 (CPC), contemplates appeals from original decrees and provides under sub-section (1) that an appeal shall lie from every decree passed by any Court exercising original jurisdiction to the competent Court including an original decree passed ex parte: Section 96(2). Sections 96-100 of the CPC do not restrict the categories of persons who can prefer an appeal. Section 96, in particular, simply provides for appeals from original decrees and does not differentiate between the parties and non-parties to the suit in the context of preferring an appeal. 22. The above provisions do not contain any threshold limits for a non-party to challenge a decree before a competent Court nor do they put any fetter on the Court from adding a party who the Court deems necessary or proper for adjudication. The only threshold requirement is that the non-party to the original proceeding must be impacted by the decree or decision and must establish the prejudice to the Appellate Court for Leave to Appeal. The settled assumption, as pronounced by the Courts, is that a stranger cannot be permitted to file an appeal unless he/she satisfies the Court that he/she falls within the category of persons affected by the decision. 23. In other words, a person who is not a party to a decree or order may, with the leave of the Court, prefer an appeal from such decree or order if he/she is bound by the decree or is aggrieved by it: H. Anjanappa Vs. A. Prabhakar , [2025 SCC OnLine SC 183] 24. 23. In other words, a person who is not a party to a decree or order may, with the leave of the Court, prefer an appeal from such decree or order if he/she is bound by the decree or is aggrieved by it: H. Anjanappa Vs. A. Prabhakar , [2025 SCC OnLine SC 183] 24. The Supreme Court has opined on the issue of ‘Leave to Appeal’ in several decisions including in Smt. Jatan Kumar Golcha v. M/s. Golcha Properties (P) Ltd., 1970 (3) Supreme Court Cases 573 and My Palace Mutually Aided Co-operative Society v. B. Mahesh , [2022 SCC OnLine SC 1063] . A Division Bench of this Court in P. Chenga Reddy v. Kuppala Bala Subramanya , [2014 SCC OnLine AP 269] , Calcutta High Court in United Commercial Bank v. Hanuman Synthetics , [AIR 1985 Calcutta 96] and the Bombay High Court in The Province of Bombay v. Western India Automobile Association , AIR (36) 1949 Bombay 141 also dealt with this question. The consensus reflected from these decisions is that a person, who is not a party to a suit or proceeding, may prefer an appeal with the leave of the Court and such leave should be granted if the person is prejudicially-affected by a judgment or order. 25. Since Leave to Appeal is not an automatic right or a matter of presumption, the proposed appellant must establish the twin conditions of prejudice and being bound by the impugned order passed by the Commercial Court. We hence propose to deal with that question in the following section of this judgment. Has the proposed Appellant been prejudicially-impacted by the impugned order? 26. For ease of reference, it is reiterated that the Commercial Court restrained the respondent Nos.3 and 4 (JV and its representative) from terminating or revoking the Powers of Attorney (POA) dated 27.12.2006 and 17.02.2011 executed by the said respondents in favour of P.Nageswara Rao (R.2 in the Appeal). This impugned order was passed in a petition filed by R.1 and R.2 in the Appeal under section 9 of the 1996 Act. 27. The proposed appellant was not a party in the section 9 proceedings before the Commercial Court. The proposed appellant seeks leave of this Court to file the present Appeal on the ground that the proposed appellant is prejudiced by the impugned order. 28. 27. The proposed appellant was not a party in the section 9 proceedings before the Commercial Court. The proposed appellant seeks leave of this Court to file the present Appeal on the ground that the proposed appellant is prejudiced by the impugned order. 28. The undisputed facts, as stated above, show that the proposed appellant claims to be a constituent of R.3-JV. Although the proposed appellant and R.3 are separate legal entities in law, the proposed appellant and R.3, for all practical purposes, are one and the same entity since 2002. Both entities are represented by K. Bhaskar Rao (R.4) and operate from the same official premises/address. 29. The identity of interest, insofar as the proposed appellant is concerned, would also be evident from the contentions and written submissions filed on behalf of the proposed appellant, where all the grounds raised by the proposed appellant were urged on behalf of R.3. These grounds include R.1 and R.2 acting to the detriment of R.3 and fastening liabilities on R.3 without authority. The proposed appellant also states that R.3 is being ousted by R.1/R.2 in the Delhi High Court proceedings and that R.2 has opened a bank account without the knowledge of R.3. The other grounds include the proposed appellant being jointly and severally responsible for the contract with R.3 and is a signatory to the Agreement dated 15.11.2013. In fact, neither the proposed appellant nor R.3 have lent any clarity on the 2013 Agreement save and except basing the right to appeal on the said Agreement by reason of the proposed appellant being a signatory thereto. The lack of clarity does not assist the proposed appellant in its prayer for Leave to Appeal. 30. R.3 supports the proposed appellant on the issue of the proposed appellant’s entitlement to challenge the impugned order. The reasons given by R.3 for grant of Leave to Appeal to the proposed appellant are identical to those taken by the latter. 31. R.3 reiterates that P. Nageswara Rao, as the nominee of R.1, has opened a bank account in the name of JV beyond his authority. R.3 further states that R.1 and R.2 are subjecting R.3/JV and the proposed appellant to liabilities. The POAs, which formed the basis of the impugned order, were revoked by a Power of Attorney dated 18.05.2018. 31. R.3 reiterates that P. Nageswara Rao, as the nominee of R.1, has opened a bank account in the name of JV beyond his authority. R.3 further states that R.1 and R.2 are subjecting R.3/JV and the proposed appellant to liabilities. The POAs, which formed the basis of the impugned order, were revoked by a Power of Attorney dated 18.05.2018. It is further interesting to note that R.3 states that the application for amendment (I.A.No.710 of 2023) in the section 9 petition was allowed and that the section 9 petition proceeds on the basis that the proposed appellant has been impleaded as the respondent No.3 in the section 9 petition. If this be the case, the proposed appellant’s Leave to Appeal becomes academic and the parties need not have laboured on this question at all. 32. We, therefore, find that there is a complete identity of interest between the proposed appellant and R.3 in terms of the proposed appellant being granted Leave to Appeal for challenging the impugned order passed by the Commercial Court. 33. Further, regarding the question of prejudice, the Court is informed that in the event Tehri Hydro succeeds before the Supreme Court in setting aside of the Award dated 17.12.2024 in favour of R.3, the Bank Guarantees furnished by R.1 would have to be invoked. There would be no prejudice suffered either by the proposed appellant or by R.3 in terms of parting with any sum of money in the event the Award is finally set aside. 34. Significantly, the proposed appellant failed to take any steps to implead itself in the section 9 proceedings, despite being served notice of the arbitration proceedings and also being made aware of the interim order passed by the Commercial Court on 31.08.2023. Hence, for reasons best known to it, the proposed appellant remained invisible from 31.08.2023 to 14.10.2024 i.e., the date of the impugned order. 35. It is also undisputed that the Agreements entered into between the proposed appellant, R.1 and R.3 including of 15.11.2013 pertain merely to apportionment of amounts receivable from Tehri Hydro in the arbitration proceedings. There is no prejudice shown by the proposed appellant, which is independent of R.3, to support its right to appeal. 36. 35. It is also undisputed that the Agreements entered into between the proposed appellant, R.1 and R.3 including of 15.11.2013 pertain merely to apportionment of amounts receivable from Tehri Hydro in the arbitration proceedings. There is no prejudice shown by the proposed appellant, which is independent of R.3, to support its right to appeal. 36. The most fundamental question remains as to why R.3/JV, which undoubtedly is the party affected by the impugned order as a signatory to the two POAs, has refrained from challenging the same. As of now, there is no appeal filed by R.3 from the said order. 37. The last reason, as well as the others stated in the foregoing paragraphs, reinforces our view that the proposed appellant has been set up to fight a proxy litigation on behalf of R.3. Not only is there an identity of interest between the two, but also obfuscation of the material issue that is whether the proposed appellant has suffered any injury independent of the alleged prejudice caused to R.3. The grounds urged by the proposed appellant are intertwined and inseparable from those urged by R.3. Conclusion: 38. The principle of Leave to Appeal is born in equity. A person prejudiced by a decision must be given a forum to ventilate his/her grievance subject to the Court being satisfied that the person is prejudiced and bound by the decision. The principle does not allow for relinquishment of the forum for grievance redressal by the entity which is truly affected by the decision in favour of another who is simply a mouthpiece of the affected party. 39. Leave to Appeal requires the Court to assess the fact of prejudice and whether the decree/order is binding on the proposed appellant. It is clear, however, that there is no scope for proxy-prejudice i.e., the proposed appellant urging prejudice on behalf of a party or speaking on behalf of another. The prejudice must directly be felt and not one that travels from one party to another. The transfer of prejudice becomes the deciding factor against grant of leave when the first party (who is affected by the decision) remains in the background and chooses to urge prejudice vicariously through another. The prejudice must directly be felt and not one that travels from one party to another. The transfer of prejudice becomes the deciding factor against grant of leave when the first party (who is affected by the decision) remains in the background and chooses to urge prejudice vicariously through another. Simply put, there is also no room for empathy in as much as the proposed appellant being empathetic to the injury caused to another and challenging the decree on behalf of the other party. 40. On examining the relevant facts culminating in the impugned order in the present case, we have no doubt that the proposed appellant and R.3 are acting in tandem for the purpose of challenging the impugned order. There cannot be any embargo on parties espousing a common cause, save and except where the impacted party (R.3) declines to come forward to brave the vagaries of an appeal and shifts the burden to another (the proposed appellant herein) to take up cudgels on its behalf. The proposed appellant has not shown any prejudice which can stand on its own, independent of the looming presence of R.3. 41. The requirement of obtaining ‘leave’ pre-supposes exercise of discretion by the Court considering the grant of leave. Leave to appeal is not an automatic entitlement of the proposed appellant. The very fact of R.3 taking on the role of a cheering bystander instead of challenging the impugned order as an aggrieved party, raises the spectre of collusion between the proposed appellant and R.3. The Court would hence ascertain the prejudice allegedly suffered by the proposed appellant in the overall fact-situation. The considered view is that the proposed appellant has not made out a case of direct and irrefutable prejudice for our discretion to be exercised in its favour for grant of leave to appeal. 42. Admittedly, the two POAs dated 27.12.2006 and 17.02.2011 which have been restrained by the impugned order of the Commercial Court are between R.3 and R.1/R.2. The proposed appellant is not a party or signatory to either of these two POAs. 43. The Supreme Court in Anjanappa (supra) set out the principles governing the grant of Leave to Appeal. The principles exclude a person who has suffered an imaginary injury. In the present case, the proposed appellant has not satisfied the benchmark of injury which is required for grant of leave to Appeal. 44. 43. The Supreme Court in Anjanappa (supra) set out the principles governing the grant of Leave to Appeal. The principles exclude a person who has suffered an imaginary injury. In the present case, the proposed appellant has not satisfied the benchmark of injury which is required for grant of leave to Appeal. 44. We therefore hold that the proposed appellant is not entitled to the leave prayed for against the impugned order passed by the Commercial Court dated 14.10.2024. 45. I.A.No.1 of 2025 is accordingly dismissed. COMCA No.4 of 2025, along with all connected applications, is also dismissed. There shall be no order as to costs.