FAO(OS)405/2009 Page 1 of 79 * IN THE HIGH COURT OF DELHI AT NEW DELHI + FAO(OS) No.405/09 & CM Nos.12908/09, 10475/10 Walchandnagar Industries Ltd. …..Appellant through Mr. Sunil Gupta, Sr. Adv. with Mr. Jatin Zaveri, Mr. Gaurav Aggarwal & Mr. Tanmaya Aggarwal, Advs. versus Saraswati Industrial Syndicate Ltd.…..Respondent through Mr. P.V. Kapur, Sr. Adv. with Ms. Ekta Kapil & Mr. Gaurav Chauhan, Advs. for Respondent No.1 Mr. Arun Bhardwaj, Sr. Adv. with Mr. Manish Sharma, Mr. Amit Bhardwaj & Mr. Vishal Malhotra, Advs. for Respondent No.2 WITH FAO(OS) No.406/09 & CM Nos.12911/09, 6093/10 Walchandnagar Industries Ltd. …..Appellant through Mr. Ramji Srinivasan, Sr. Adv. with Mr. Jatin Zaveri, Mr. Gaurav Aggarwal & Mr. Zeyaul Haque, Advs. versus Uttam Sucrotech International Pvt. Ltd.…Respondent through Mr. A.S. Chandhiok, Sr. Adv., Mr. Chetan Sharma, Sr. Adv. with Mr. Pragyan Sharma & Mr. Rupesh Gupta, Advs. for Respondent No.1 FAO(OS)405/2009 Page 2 of 79 Mr. Arun Bhardwaj, Sr. Adv. with Mr. Manish Sharma, Mr. Amit Bhardwaj & Mr. Vishal Malhotra, Advs. for Respondent No.2 WITH FAO(OS) No.461/2009 & CM No.14117/09 Overseas Infrastructure Alliance .…..Appellant through India Pvt. Ltd Mr. Arun Bhardwaj, Sr. Adv. with Mr. Manish Sharma, Mr. Amit Bhardwaj & Mr. Vishal Malhotra, Advs. versus Uttam Sucrotech International Pvt. Ltd….Respondent through Mr. A.S. Chandhiok, Sr. Adv., Mr. Chetan Sharma, Sr. Adv. with Mr. Pragyan Sharma & Mr. Rupesh Gupta, Advs. for Respondent No.1 Mr. Ramji Srinivasan, Sr. Adv. with Mr. Jatin Zaveri, Mr. Gaurav Aggarwal & Mr. Tanmay Aggarwal, Advs. for Respondent No.3 WITH FAO(OS) No.462/09 & CM No.14122/09 Overseas Infrastructure Alliance …..Appellant through India Pvt. Ltd. Mr. Arun Bhardwaj, Sr. Adv. with Mr. Manish Sharma, Mr. Amit Bhardwaj & FAO(OS)405/2009 Page 3 of 79 Mr. Vishal Malhotra, Advs. versus Saraswati Industrial Syndicate .…..Respondent through Mr. P.V. Kapur, Sr. Adv. with Ms. Ekta Kapil, Mr. Gaurav Chauhan & Mr. Sudhanshu Goyal, Advs. for Respondent No.1 Mr. Sunil Gupta, Sr. Adv. with Mr. Jatin Zaveri, Mr. Gaurav Aggarwal & Mr. Tanmaya Aggarwal, Advs. for Respondent No.3 % Date of Hearing: November 25, 2010 Date of Decision: December 24, 2010 CORAM: * HON'BLE MR. JUSTICE VIKRAMAJIT SEN HON'BLE MR. JUSTICE G.P. MITTAL 1. Whether reporters of local papers may be allowed to see the Judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the Judgment should be reported in the Digest? Yes VIKRAMAJIT SEN, J. 1. The facts germane for a decision in these Appeals are that in respect of a Sugar Mill Project to be established in Ethiopia, funding has been made available by the Government of India through the aegis of EXIM Bank. The Project has been sub divided into seven sub-projects for which separate and independent tenders were floated. These are – (1) Steam FAO(OS)405/2009 Page 4 of 79 Generation (2) Process House (3) Juice Extraction (4) Power Generation (5) Diesel Generation (6) Factory Workshop and (7) Plant Water System. It was further decided that for ease and facility of implementation of the Project, instead of dealing separately with all the successful Tenderers, the Tenderer who had been awarded the largest number of projects, would act as the lead party; a single Engineering, Procurement and Construction (EPC) contract would be entered into with this party. Saraswati Industrial Syndicate Ltd. was the Successful Tenderer in respect of Steam Generation; Uttam Sucrotech International Pvt. Ltd. in respect of Process House; and since in respect of Juice Extraction and Power Generation the successful Tenderer was OIA, it was agreed that Overseas Infrastructure Alliance India Pvt. Ltd. (OIA) would act as the single EPC Contractor. 2. The Appellants assert that a completed contract had already evolved in their favour, whereas OIA contends that while Saraswati Industrial Syndicate Ltd. and Uttam Sucrotech International Pvt. Ltd. were successful Tenderers, a contract between them was required to be executed and this had not transpired. It is not in controversy that OIA had demanded fifteen per cent commission/charges from the FAO(OS)405/2009 Page 5 of 79 Appellants and all other successful Tenderers ostensibly to cover expenses that OIA would inevitably have to incur as the single EPC Contractor. The Appellants assert that Walchandnagar Industries Ltd. was illegally introduced into the subject Sugar Mill Project by OIA by engineering the removal of both Saraswati Industrial Syndicate Ltd. and Uttam Sucrotech International Pvt. Ltd. owing to their reluctance to make the payment of the said fifteen per cent commission/charges. The Ethiopian party, namely, TENDAHO Sugar Factory Project has not contested either the suit or this Appeal. 3. Saraswati Industrial Syndicate filed a Suit for perpetual and mandatory injunction, being CS(OS) No.1368/2008, pleading, inter alia, in paragraph 16 that OIA “has failed and/or neglected to execute the formal contract document with the plaintiff and is threatening to introduce a third party in place of the plaintiff”. Most significantly, in paragraph 7 of the original Plaint, it has been pleaded that on or about 7th December, 2007, TENDAHO reiterated in writing to OIA that “the winning bidders of other packages are to be retained as sub contractors without any alteration in the agreed technical and financial aspects as already finalized with the individual FAO(OS)405/2009 Page 6 of 79 bidder”. This averment has not been denied but in response to the said paragraph, OIA has pleaded as follows: … The correct position, however, is that the right and the power to fix a sub contract on terms and conditions to be negotiated between the answering defendant and the sub contractors is a matter which is entirely within the domain of the answering defendant‟s function as the main EPC contractor. The Defendant No.1 after signing of contract dated 10.01.2008 and addendum no.1 dated 21.02.2008 of contract had tried to persuade the Plaintiff by verbal and writing communication to sign the contract at the earliest so that the project should not be jeopardized. The answering defendant may also at this stage point out that since the plaintiff was dillydallying the finalization of the terms of the sub contract to be executed, the said matter was therefore brought to the notice of the defendant No.2 vide letter dated 13th June 2008 as also by letter dated 16th June 2008 in pursuance of which clear cut instructions were issued to the answering defendant to finalize the sub contract agreement with all the sub contractors by 27th June, 2008 with a view to avoid any further delay in the start of the work. A copy of the minutes is being filed by the answering defendant in the list of documents and shall be referred to at an appropriate stage. Pursuant to the said instructions, the answering defendant requested the plaintiff to finalize the contract by the 27th of FAO(OS)405/2009 Page 7 of 79 June 2008. As submitted earlier the plaintiff failed to settle the terms of the contract and therefore in order to save the project from being jeopardized on account of price and other relevant factor entered into a Memorandum of Understanding dated 8th July, 2008 with M/s Walchandnagar Industries Limited (WIL) which has agreed to undertake the construction of the Steam Generation Plant for the Tendhao sugar factory project. Further, the answering Defendant no.1 has signed a definite contract with Messrs WI, Mumbai for execution of Project as a sub-contractor to answering Defendant on 12.07.2008. The answering defendant has thereafter proposed the name of Messrs WI, Mumbai as proposed sub-contractor to defendant no2 vide letter dated 11th of June 2008. In light of these developments, it is futile for the plaintiff to allege that the sub contracts had already come into existence between the plaintiff and the answering defendant or defendant No.2 for that matter. 4. The similar position obtains so far as Uttam Sucrotech International Pvt. Ltd is concerned which has filed Suit No.1447/2008 averring, inter alia, that while it had been extending all cooperation to OIA, the latter “has been illegally trying to avoid the conclusion of any such contract and is delaying the process unnecessarily for its vested interests of FAO(OS)405/2009 Page 8 of 79 ousting them from the contract completely and illegally replacing it with its own parties”. In the Plaint, there are allegations kindred to those of Saraswati Industrial Syndicate Ltd., namely, that OIA “has threatened to introduce a third party in place of the plaintiff”. Uttam Sucrotech International Pvt. Ltd has also asserted that a concluded contract has already emerged between itself and TENDAHO. OIA pleads in the Written Statement as follows: The answering defendant further submits that the plaintiff failed to meet the deadline and settle the terms of subject contract resulting in the answering defendant entering into a memorandum of understanding with Walchandnagar Industries Ltd. on 8.7.2008 for the construction of the process house project. Defendant No.2 vide their letter reference no.TSPFOI/12/201 dated 5.8.2008 accepted the substituted offer for process house package of TSPF in favour of OIA and Walchandnagar Industries Ltd. on the basis of the substituted technical offer submitted by answering defendant dated 18.7.2008. 5. Both the Plaintiffs assert that the contract with Walchandnagar Industries Ltd. was predated with the purpose of defeating the interim orders passed by the learned FAO(OS)405/2009 Page 9 of 79 Single Judge. Contempt proceedings have been initiated by the plaintiff and are presently pending. 6. It is at this juncture that Saraswati Industrial Syndicate filed IA No.13366/2008 in CS(OS) No.1868/2008 under Order VI Rule 17 read with Order I Rule 10 read with Section 151 of the Code of Civil Procedure (CPC for short) praying for amendment of the Plaint to be „taken on record‟; and for Walchandnagar Industries Ltd. as well as EXIM Bank to be allowed to be impleaded as Defendant Nos.3 and 4. The amendments have been allowed and the impleadment of only Walchandnagar Industries Ltd. has been permitted in terms of the impugned Order. OIA and Walchandnagar Industries Ltd. have filed separate Appeals. 7. Uttam Sucrotech International Pvt. Ltd. has, in familiar fashion, filed IA No.1938/2009 in CS(OS) No.1447/2008 under Order VI Rule 17 read with Order I Rule 10 read with Section 151 of the CPC. Reliefs similar to Saraswati Industrial Syndicate have been made which have been also allowed in the impugned Order, declining, however, to implead EXIM Bank. 8. It seems to us that because a composite application had been filed by both the Plaintiffs praying for the amendment of FAO(OS)405/2009 Page 10 of 79 the Plaint as well as for impleadment of parties, notice thereof came to be issued to the party proposed to be impleaded, namely, Walchandnagar Industries Ltd. In the normal course, it is a contradiction in terms to issue notice of an application seeking the impleadment of a party to the party proposed to be so impleaded. If the Court is convinced by the Plaintiffs‟ submission of the necessity and expediency of impleading the proposed parties, the proposed party should be impleaded and notice would thereafter be issued to it. There is no scope, nor is this the practice, for obvious reasons, at the very first instance and at the very initiation of the suit to show cause why it should be arrayed as a defendant. Of course, it is always open to the defendant as it would be available to a party impleaded in the course of litigation to file an application under Order I Rule 10(2) of the CPC for striking it out of the array of parties. We must immediately clarify that this relief is not available in the present cases since Walchandnagar Industries Limited has already been extensively heard on the question of whether it should be impleaded as a party to the respective suits. 9. The refusal by the learned Single Judge in the impugned Order to implead EXIM Bank was also challenged by Uttam FAO(OS)405/2009 Page 11 of 79 Sucrotech International Pvt. Ltd. in the form of FAO(OS) No.460/2009. However, on 18.11.2009 the Appeal was dismissed as withdrawn. 10. In the course of the hearing of the two composite applications for amendment of the plaint as well as for the impleadment of Walchandnagar Industries Ltd. and EXIM Bank, learned counsel for OIA had uncontrovertedly been conceded on 30.7.2009 that the amendments prayed for by Saraswati Industrial Syndicate in paragraph 15(1) and paragraphs 18A to 18K may be permitted to be incorporated in the amended Plaint. On that date, it was specifically noted that – “insofar as amendments to the prayer clause are concerned, counsel submit that he is seriously opposing the same. In this view of the matter, list on 3.8.2009 at 2:30 P.M. for further argument on the remaining reliefs prayed for in the application”. However, the impugned Order categorically mentions that learned counsel for OIA has no objection to the amendments being carried out. The learned Single Judge recorded that “as far as the prayer for amendment is concerned, it need not detain me for long and the reason is that after the application had suffered lengthy arguments, for and against, the learned counsel for defendant no.1 conceded FAO(OS)405/2009 Page 12 of 79 that the amendment sought could be allowed subject to liberty to it to raise such objections as may be available to it and to this, it may be noted, the learned counsel for the plaintiff had no objection”. In other words, the reservation viz.-a-viz., the amended Prayers was abandoned and given up. 11. The same sequence of events occurred in the Suit and Application filed by Uttam Sucrotech International Pvt. Ltd. The learned Single Judge has recorded in the Order dated 30.7.2009 that counsel for OIA “states that without prejudice to its rights and contentions, he has no objection if the proposed amended plaint except the reliefs claimed in the prayer clause is taken on record. Insofar as prayer clause is concerned, he states that he is opposing the amendments proposed therein”. The learned Single Judge records in the impugned Order thus – “it is time now to come straight to the application for amendment and impleadment. Should it be allowed? As far as prayer for impleadment is concerned, it need not detain me for long and the reason is that after the application had suffered lengthy arguments, for and against, learned counsel for defendant no.1 conceded that the amendments sought should be allowed subject to liberty to it to raise such objections as may be available to it and to this, FAO(OS)405/2009 Page 13 of 79 it may be noted, the learned counsel for the plaintiff has no objection. Keeping this in view and keeping also in view the nature of the amendments and so also the fact that the amendments have their seed in subsequent developments, the amendments sought are allowed”. As already noted, it is palpably clear that the earlier objection to the Court allowing the Prayers to be augmented was not agitated any longer. 12. In view of the recorded concession, we are unable to appreciate how the present Appeals are maintainable since on the face of it they endeavour to reverse orders passed on concession. Learned Senior Counsel appearing for the Appellants/Defendants have strenuously contended that complete and total concession, as mentioned in the impugned Order, had not been expressed. We are firmly of the opinion that it is not open to the Appellants to take this plea. The proper course would have been to file a Review before the learned Single Judge articulating therein the factum of the Appellants/Defendants allegedly having steadfastly made only a partial concession and having opposed the inclusion of the amended prayers on the date on which orders were reserved. We need not go further than Pushpa Devi Bhagat –vs- Rajinder Singh, AIR 2006 SC 2628 in which their Lordships FAO(OS)405/2009 Page 14 of 79 have held that an Appeal is not maintainable against a consent Decree having regard to the specific bar contained in Section 96(3) of the CPC and that the proper course to adopt was to approach the Court which passed the consent Decree with a view to establishing that there was no compromise. On a parity of reasoning, we are of the view that the Appellants should have filed Review Petitions before the learned Single Judge on this aspect and having failed to do so are foreclosed from contending that the impugned Order records the position incorrectly. 13. Since, however, lengthy arguments have already been heard on the merits of the amendments, we think it proper to return a complete and comprehensive answer to the amendment of Plaint controversy. The facts which stand incorporated in the respective plaints, concededly on the concessions of the Respondent/Defendant, speak voluminously and extensively of Walchandnagar Industries Ltd. Pleadings in unamended Plaint (Saraswati Industrial Syndicate Ltd.) 15. The Defendant No.1, thereafter, began to threaten the Plaintiff that they would inform Defendant No.2 that Plaintiff FAO(OS)405/2009 Page 15 of 79 was delaying execution of a formal contract. The Plaintiff meanwhile drafted a contract that was acceptable to the Plaintiff and in line with the agreement arrived at between all parties on 19th & 20th December, 2007 and the concluded contract terms and conditions between Defendant No.2 and the Plaintiff which was forwarded to the Defendant No.1 on June 28, 2008. …. 18. In the agreement between defendant No.1 and defendant No.2 and/or the Plaintiff, there exists a positive covenant coupled with an implied negative which the defendant No.1 is threatening to breach. This Hon‟ble Court ought to grant injunction to perform the negative covenant. The implied negative covenant is contained in letter dated 7.12.2007 from defendant No.2 to defendant No.1 as under:- The winning bidders of other packages are to be retained as sub contractors without any alteration in the agreed technical and financial aspects as already finalized with the individual bidder. Further in letter dated 7.12.2007 from defendant No.2 to Plaintiff:- You, as winning Bidder of Steam Generation Plant Bid Tender No.TSFP-F/002/06/SG, will be retained as FAO(OS)405/2009 Page 16 of 79 sub-contractor to the main EPC Contractor without any alteration in the agreed technical and commercial aspects including the time schedule, as already negotiated and finalized. Further, in the joint meeting, inter alia, Plaintiff, defendant No.1 and defendant No.2:- All winning bidders were informed that as per the directive from the Government of Ethiopia, the managements of TSFP & FSF intend to appoint one single EPC contractor and all other winner bidders shall work as sub contractor to the proposed single EPC contractor. Contract agreement between EPC contractor and winner bidder shall be seamless and address all issues as per original tender documents including GCC, SCC and other financial conditions. The aforesaid clauses clearly stipulates that the defendant No.1 is by way of an implied negative covenant not permitted to modify and/or attempt to modify any agreed technical, commercial including price aspects already finalized between the plaintiff and defendant No.2. Pleadings in amended Plaint 15. The Defendant No.1, thereafter, began to threaten the Plaintiff that they would inform Defendant No.2 that Plaintiff was delaying execution of a formal contract. The Plaintiff FAO(OS)405/2009 Page 17 of 79 meanwhile drafted a contract that was acceptable to the Plaintiff and in line with the agreement arrived at between all parties on 19th & 20th December, 2007 and the concluded contract terms and conditions between Defendant No.2 and the Plaintiff which was forwarded to the Defendant No.1 on June 28, 2008. …. 18. In the agreement between defendant No.1 and defendant No.2 and/or the Plaintiff, there exists a positive covenant coupled with an implied negative which the defendant No.1 is threatening to breach. This Hon‟ble Court ought to grant injunction to perform the negative covenant. The implied negative covenant is contained in letter dated 7.12.2007 from defendant No.2 to defendant No.1 as under:- The winning bidders of other packages are to be retained as sub contractors without any alteration in the agreed technical and financial aspects as already finalized with the individual bidder. Further in letter dated 7.12.2007 from defendant No.2 to Plaintiff:- You, as winning Bidder of Steam Generation Plant Bid Tender No.TSFP-F/002/06/SG, will be retained as sub-contractor to the main EPC Contractor without any alteration in the agreed technical and FAO(OS)405/2009 Page 18 of 79 commercial aspects including the time schedule, as already negotiated and finalized. Further, in the joint meeting, inter alia, Plaintiff, defendant No.1 and defendant No.2:- All winning bidders were informed that as per the directive from the Government of Ethiopia, the managements of TSFP & FSF intend to appoint one single EPC contractor and all other winner bidders shall work as sub contractor to the proposed single EPC contractor. Contract agreement between EPC contractor and winner bidder shall be seamless and address all issues as per original tender documents including GCC, SCC and other financial conditions. The aforesaid clauses clearly stipulates that the defendant No.1 is by way of an implied negative covenant not permitted to modify and/or attempt to modify any agreed technical, commercial including price aspects already finalized between the plaintiff and defendant No.2. 18(A). That this Hon‟ble Court on 23.7.2008, passed an Order that, “having regard to the facts of the case and taking the consideration the documents placed on the record, till the next date of hearing, the defendant No.1 shall not take any measures to introduce a third party in respect of the tender floated by defendant No.2 for Steam Generating Plant for FAO(OS)405/2009 Page 19 of 79 which the plaintiff has been accepted by the defendant No.2 as the successful bidder”. The said order was duly served on the defendant No.1 on 24.7.2008 and has also been served on Defendant No.2. The defendant No.1 has filed its written statement on 4.8.2008 wherein it has alleged in paragraph 1 of the Preliminary Objections that the defendant No.1 has already singed a definite contract with defendant No.3 for execution of the power project as a Sub-contractor for construction of the steam generation plant for the Tendaho Sugar Factory Project (purportedly just about 11 days before the passing of the ex parte injunction order). Therefore, in light of the said development, it has been alleged that the said suit filed by the plaintiff has become infructuous. A copy of the purported Sub-Contract Agreement between defendant No.1 and the said defendant No.3 has been filed by the defendant No.1 18(B). The said purported Sub-Contract Agreement is clearly antedated and has been fabricated with a view to frustrate the injunction order dated 23.7.2008 and/or to overreach the Order dated 23.7.2008 passed by this Hon‟ble Court. 18(C). The first telltale sign is in the Written Statement itself where in para 7, it has been alleged that a Memorandum of FAO(OS)405/2009 Page 20 of 79 Understanding (MOU) was signed between Defendant No.1 and defendant No.3 on 8th July, 2008 and thereafter, a definite purported contract was signed on 12th July, 2008, i.e. within 4 days of the MOU despite the MOU being valid for a period of 30 days – seemingly, a tearing hurry indeed. However, the Defendant No.1 proposed the name of defendant No.3 to defendant No.2 long after 12th July 2008. 18(D). It is also relevant to note that in the alleged sub- contract Agreement dated 12th July, 2008 filed by the Defendant No.1, Defendants Nos.1 and 3 have purported to create a definition of “contract documents” which includes documents that have not yet been finalized but are only „proposed‟. One of the documents forming part of Contract document is “Minutes of Package Negotiations meeting (proposed) to be held between Employer and Sub-Contractor (WIL), for the Package Facilities on technical aspects”. Firstly, there cannot be a meeting or minutes of a meeting which are qualified as “proposed”. Secondly, there cannot be minutes of a meeting which is yet “to be held”. It is obvious that the documents have been prepared in a hurry only to be produced before this Hon‟ble Court with a view to mislead FAO(OS)405/2009 Page 21 of 79 this Hon‟ble Court and to frustrate and overreach the orders of this Hon‟ble Court. 18(E). That even as late as on 5th August, 2008, in the meeting between the Defendant No.1 and Defendant No.2,