2017 (10) TMI 1650 - SC - Indian Laws

Supreme Court overturns order allowing third party impleading after 27 years citing unreasonable delay and prejudice to defendant's rights

The SC allowed an appeal challenging an HC order that permitted impleading of a third party as plaintiff after 27 years of suit filing. The court held ... Suit for specific performance of the agreement of sale - order of Single Judge was a 'judgment' finally affecting the rights of the parties or not - non-maintainability of Letters Patent Appeal - HELD THAT:- The right of the Letters Patent Appeal to the High Court depends upon whether or not the decision of the Single Judge appealed from affects the merits of the question between the parties and their valuable rights. Whether an order is a 'judgment' or an 'interlocutory order' depends upon whether or not, it has finally decided the rights of the parties and whether it has the effect of affecting the rights of the parties. For an order to be a 'judgment', it is not always necessary that it should put an end to the controversy or terminate the suit. An 'interlocutory order' determining the rights of the parties in one way or other is also a 'judgment'. The order allowing the application impleading Respondent No. 3 as assignee (Order XXII Rule 10 Code of Civil Procedure) after 27 years of filing of the suit vitally affects the valuable rights of the Appellant. The order allowing amendment of plaint by impleading Respondent No. 3 as 'Plaintiff No. 3' on the basis of alleged assignment of agreement dated 24.08.1987 decides a vital question which concerns the rights of the parties and hence is a 'judgment' to maintain the Letters Patent Appeal. Allowing of such application after 27 years of filing suit for specific performance would cause serious prejudice to the Appellant-Defendant depriving valuable right of defence available to the Appellant and hence the order of Single Judge allowing the Chamber Summons is a 'judgment' within the meaning of Clause 15 of the Letters Patent Appeal. When the Plaintiff assigns/transfers the suit during the pendency of the suit, the assignee is entitled to be brought on record and continue the suit. Order XXII Rule 10 Code of Civil Procedure enables only continuance of the suit by the leave of the court. It is the duty of the court to decide whether leave to be granted or not to the person or to the assignee to continue the suit. The discretion to implead or not to implead parties who apply to continue the suit must be exercised judiciously and not arbitrarily. The High Court was not right in holding that mere alleged transfer/assignment of the agreement would be sufficient to grant leave to Respondent No. 3 to continue the suit. From the filing of the suit in 1986, over the years, valuable right of defence accrued to the Appellant; such valuable right of defence cannot be defeated by granting leave to the third Respondent to continue the suit in the application filed Under Order XXII Rule 10 Code of Civil Procedure after 27 years of filing of the suit - the application filed for impleading Respondent No. 3 as Plaintiff No. 3 was not filed within reasonable time. No explanation is offered for such an inordinate delay of 27 years, which was not kept in view by the High Court. The application was filed after 27 years of filing of the suit. Of course, the power to allow the amendment of suit is wide and the court should not adopt hyper technical approach. In considering amendment applications, court should adopt liberal approach and amendments are to be allowed to avoid multiplicity of litigations. We are conscious that mere delay is not a ground for rejecting the amendment. But in the case in hand, the parties are not rustic litigants; all the Respondents are companies and the dispute between the parties is a commercial litigation. The impugned order, allowing Chamber Summons No. 187 of 2014 filed after 27 years of the suit would take away the substantial rights of defence accrued to the Appellant and the same cannot be sustained - Appeal allowed. Issues Involved:1. Whether the order of the Single Judge allowing the impleadment of Respondent No. 3 as Plaintiff No. 3 constitutes a 'judgment' under Clause 15 of the Letters Patent.2. Whether the 27-year delay in filing the application for impleadment under Order XXII Rule 10 of the Code of Civil Procedure (CPC) is justified.3. Whether the impleadment of Respondent No. 3 as Plaintiff No. 3 causes prejudice to the Appellant.Issue-wise Detailed Analysis:1. Whether the order of the Single Judge allowing the impleadment of Respondent No. 3 as Plaintiff No. 3 constitutes a 'judgment' under Clause 15 of the Letters Patent:The Supreme Court examined whether the order of the Single Judge, which allowed the impleadment of Respondent No. 3 as Plaintiff No. 3, qualifies as a 'judgment' under Clause 15 of the Letters Patent. The Court referred to the principles laid down in Shah Babulal Khimji v. Jayaben D. Kania and Anr. (1981) 4 SCC 8, which stated that an interlocutory order affecting valuable rights of the parties and causing serious injustice can be considered a 'judgment.' The Court concluded that the order allowing the impleadment of Respondent No. 3 after 27 years vitally affects the valuable rights of the Appellant and thus qualifies as a 'judgment' to maintain the Letters Patent Appeal.2. Whether the 27-year delay in filing the application for impleadment under Order XXII Rule 10 of the Code of Civil Procedure (CPC) is justified:The Court scrutinized the 27-year delay in filing the application for impleadment under Order XXII Rule 10 CPC. It noted that Order XXII Rule 10 CPC allows the continuation of a suit by an assignee during the pendency of the suit, provided the court grants leave. The Court emphasized that the discretion to grant leave must be exercised judiciously and not arbitrarily. The Court found that the application for impleadment was not filed within a reasonable time, and no explanation was provided for the inordinate delay of 27 years. The High Court's failure to consider this delay was deemed erroneous.3. Whether the impleadment of Respondent No. 3 as Plaintiff No. 3 causes prejudice to the Appellant:The Supreme Court addressed the potential prejudice to the Appellant due to the impleadment of Respondent No. 3 as Plaintiff No. 3. The Court observed that the valuable right of defense accrued to the Appellant over the years cannot be defeated by allowing the impleadment after such a long delay. The Court held that the Single Judge's order, which stated that no prejudice would be caused to the Appellant and that the issues could be raised at the time of trial, was incorrect. The Court concluded that allowing the impleadment would cause serious prejudice to the Appellant, depriving them of a valuable right of defense.Conclusion:The Supreme Court set aside the impugned judgment and allowed the appeal. It dismissed Chamber Summons No. 187 of 2014 in Suit No. 894 of 1986, finding that the application for impleadment was not filed within a reasonable time and that allowing it would cause serious prejudice to the Appellant. The Court emphasized that the substantial rights of defense accrued to the Appellant over the years could not be taken away by permitting the impleadment after 27 years.