Indian Overseas Bank, Madras v. Chemical Construction Company & Ors.

Judgment

ORIGINAL JuRISDICTION : Transfer Petition No. 26 of 1978. S. T. Desai, K. layaram and K. Ramkumar for the Petitioner. T. S. Vishwanatha Rao and A. T. M. Sainpath for Respondent No. 1 B. D. B11l and MrJ. JayaJhree Wad for Respondent No.2 The Judgment of the Coun was delivered by SARKARIA, J.-This is a petition under Section 25 of the Civil Procedure •Code 1908, as amended by Act 104 of 1976 for transfer p of suit IB of 1972 instituted in the Court of District Judge, Senoi, Madhya Pradesh by the !iecond respondent herein, against the petitioner and respondents 1, 3 & 4 to the file of the High Court of Madras (Original Side). The facts material to this petition are as under: . The first respondent, M/s. Chemical Construction Company, is a regiStered partnership having its registered office at No. 14, Milestone Mathura Road, Faridabad, Haryana and Head Offise at Madras. It is represe:nttd by its partners Shri T. V. P. Nrunbiar, Shri 0. P. Nam- 'biar, Shri 0. V. Nambiar, Smt. Uela Nambiat and Smt. Nlrmala Nambiar.

3-409 SCij79 8 . 922 . SUPREME COURT' R.E.POUS [1979]. 3 S.C.R . The second respondent, Rajadhiraj. Industries· Pvt. Ltd.,· has - its ·registered office· at Seoni, Madhya Pradesh. It -is represented by its Managing Director,· Shri Harishchandra Singhania. The third respondent, Industrial Development Bank of India Ud. has its registered office at Bombay and branch offices at other placet·, including one at Madras. The fourth respondent is Madhya Pradesh Financial Corporation, ·incorporated under the State Financial Corporation Act, 1957, hav· int~; its registered office in Indore, Madhya Pradesh. The first respondent (manufacturer) entered into a contract on November 11, 1969 with the second respondent to erect a plant for manufacture of hydrogenated vegetable oil. There was a supplement&ry agreement between them on Jan'Uary 24, 1970. The cost of the plant was Rs. 25,00,000/-.

The third respondent (for short called the Industrial Bank), agreed to finance the manufacturer (first res- _pondent) under a Scheme called the "Bills Rediscounting. Scheme". Under that Scheme the manufacturer would obtain in convenient mutually agreed instalments the value of the machinery supplied within !!. few days of its delivery by discounting with his banter the bi~ of exchange arising out of the sale of the machinery, either before dr after acceptance ·by the second respondent (purchaser). The bankers of the manufacturer/seller would tAke up the discounted bills and get them :i-ediscounted by the Industrial BanJc, prior to their due dates, thus reimbursing themselves with the amounts paid to the manufacturer. The discounting bank would be liable to pay to the Industrial Bank the amounts under the bills on their due dates.

The discounting bank would normally requires the ~econd respondent to accept the bills/promissory notes, a~er the payment had beeli guaranteed on his behalf by its banker or the fourth re~pondent (thi- State Financial Corporation) etc. The petitioners, it is alleged, acted as discounting bank under the Scheme. The first respondent and the second respondent took advaJJ~ tage of the Scheme, and pursuant to an agreement for supply of materials between the first and second respondents, the fourth respondenl executed an irrevocable guarantee on November 3, 1970 and a suP" plementary guarantee_ on February 18, 1971 in favour of the petitioner . on, behalf of second respondent. It is further alleged that in pW'!uance of the independent agr~ tnent, the petitioner bad discounted a total of 9 Usance Bills to tM oitent of Rs. 9.42 lacs which were drawn by the first rest:>ondent lllld OVE~SEAS BANK V. CHEMI(;AL <;ONS!RU<?TI<?~. c;o. (Sarkaria, J.) 92_ J:, ~ accepted by the.

S.econd. respPitdent. _The_ fir$t .eight of thes~ b.ills were rediscounted by the petitioner with the third· respondent. (the lndust..;. . rial Bank) for ·a total sum of Rs. ~6.99 lacs, which am01W,t was ilUQ&e-. quently P!!:id over to the 'third respondent by the petitioner but none of these eight bills was paid by the second respondent to the petitioners on the due dates. The remaining bill for Rs. 2,43,376/,. was not rediscounted by the petitioner with the third respondent. In September 1972, the dr~wees of the bills (second respondent) filed suit No. IB/1972 in the District Court, Seoni against the :etltioner and the respondents 1, 3 & 4, seeki,ng a decree for (a) one 1ac of rupees against the first respondent on account of damages for breach of contract;

(b) directing the petitioners (Indian Overseas Bank) and re~pondents 1 & 3 jointly and severally to deliver up the guarantee deeds dated November 3·, 1970 and February 18, 1971 and the 9 Usance Bills and for cancellation of the same by the Court; (c) permane1it injunction restraining the petitioner Bank and respondents 1 & 3 from enforcing the aforesaid guarantee and the 9 Usance Bills; (d) permanently restraining the guarantor (fouith respondent) from discharging any liability under the aforesaid guarantees, dated November 3, 1970 and February 18, 1971. It w~s alleged in the plaint by the second respondent that acceptance of the bills was vitiated by false representation made by the agent of the petitioner Bank. The defendants in the Sooni suit (petitioner and respondent 1 herein) filed their written statements denying the allegations and claim made in the plaint In March 1978, the District Judge, Seoni framed issues in that suit.

In the Seoni Suit, the second respondent made an application for interim. injunction restraining the petition~r from enforCing the right8 in respect of the Usance Bills accepted by the second respondent and regarding the guarantees furnished by the fourth respondent. ·The District Judge dismissed that application; but on appeal, the High Court of Madhya Pradesh granted the interim injunCtion a~ prayed for. On appeal by the petitioner, this Court by it~ order, dated March 20, 1974, set aside the High Court's order and vacated ·the interim injunction as regards the petitioner and the fourth respondent subject to the petitioner undertaking to reimburse the fourth respon.. dent in accordance with the directions of the· Court' depending upon the res~l~ of the Seoni S~it.

As a result the irppedime:"t in the way of the pehhOnet: for enforcmg its rights was removed. · The petitio?er bank filed suit C.~.-No. -143/75 in the High Coqrt of Madras agamst respondents ·1·& 4 herein (as also :five other. d.efenll SUPREME COURT U:PORTS [1979] 3 S.C.ll. dants, who ~e partners of the first respondent two of whom had furnished collateral securities by way of equitable mortgages. In this Madras sui!, the petitioner herein, has prayed for the followiiig reliefs : (i) Directing the respondents, herein, (except respondent 3), jointly and severally to pay to the plaintiff-petitioner the swp. of Rs. 10,62,364.57 under the Bills Purchase Acco.unt together With interest OQ. the said nine Usance Bills. (ii) Directing the first respondent herein, and their partners to pay to the plaintiff-petitioner the sum of R~. 1,28,154.57 under the overdraft account of the first defendant firm together with interest.

P~ss­ ing of a mortgage preliminary decree a_gains~ ~efendants S and 6 ~ere­ in, (two of the par!IJ.ers of the first respondent, herein). It is note-wDrthy that respondents 1, 2 and 4 herein, have filed their written statements in th~t suit before the Madras High Court, which on November 2, 1977, framed 12 issues. Issues 1 and 6 run as follows: (1) Whether the defendant (first respondent, herein) is liable to pay the suit claim under the Bills purchase account ? {6) Whether the defendant (second respondent, herein) is not liable for the suit claim as an acceptor under the Bills Purchase Account.

A comparative study of the issues framed in the two suits, one at Seoni and the other at M_adras, shows that the principal common ques· tion arising in each of these two suits, is : whether the second responde!lt and the fourth resJLondent, herein, are bound to make payment, the second respondent as acceptor of the bills of exchange and the fourth respondent as guarantors for due payment thereunder. The receiving party in both the suits is the petitioner, herein. According to the allegation~ in the present petition, the bills of excillinge were drawn in Madras and discounted in Madras and also rc~:discounted with the Industrial Bank and payments were to be made expressly in Madras. Under an interim order dated April 9, 1976 passed by the High Court of Madras in the said suit, the fourth respondent has deposited with the petitioner herein, a ·sum of Rs. 10 lacs as and by way of deposit. Apart from a claim for damages of Rs. 1 lac against the first respondent herein, (the .manufacturers), no money claim has been made against the petitioner in the Seoni Suit.

Nor has the petiti~ner made any counter-claim in the Senoi Suit. OVI!I.SBAS BANK v. CHEMICAL CONSTI.UCTION CO. (Sarkaria, J.) g 25 W c are of opinion, this petition must succeed. Section 25 of the Code of Civil Procedure as ~u,.b&tituted for the former section by the Code of Civil Procedure (Amendment) Act, ·1976, empowen this Court to direct that any suit, appeal or other . proceeding be transfer· rod from a ~igh Court or other Civil Court in one State to a High Court or other Civil Court in any dther State, if it is satisfied that such an order is "expedient in the ends of justice". The former Secti~ 25 empowered the State Government to transfer, on receiving a report from the Judge concerned of the High Court to transfer suits or pro- • 1'_..._ _ ceedings in certain circumstances from one High Court to another - ~- High Court. The scope of the former Section was very restricted as it provided only for transfer of any proceeding pending iri a High Court presided by a Single Judge.

It was thought that the State Government was not the appropriate agency for exercising this power of transfer, obviously because such exercis~ is a judicial function. For these reasons, the new Section 25 which has beeri substituted for the former one, confers on this Court very wide po~ers of transfer which are as extensive as its powers under Section 406 of the Code of Criminal Procedure, 1973. The principle governing the general power of transfer and withdrawal under Section 24 of the Code is that the plaintiff is the dominus litis and, as such, entitled to institute his suit in any forum which the law allows him. The Court should not lightly change that forum and compel him t~ go to another Court, with consequent increase in inconvenience and expense of prosecuting his suit. A mere balance of convenience in favour of proceedings in another Court, albeit ii material consideration may not always be a sure criterion justifying transfer.

As compared with Section 24, the power of transfer of a civil proceeding to an~ther Court, conferred under. the new Section 25 on the Supx:eme Court, ~far wider. And, so is the amplitude of the expression, "expedient in the interest of justice" which furnishe~ a general guideline for the exercise of the power. Whether it is expedient or desirable in the interest of justice to transfer a proceeding to another Court is a question which depends on the circumstances of the particular case. Although the exercise of this discretionary power cim not be imprisont:d within them 8traight jacket of any cast iron formula uniformly app1icable to all situations; yetj certain broad propositions as to what may constitute a ground for ttansfel' ean be deduced from judicial deei&ions. One of them is that where two suit's raising common ques- .

926 . tions :.of -~acts 'and laws between parties common to both the suits, =a~e pending iri two -different courts, it i~ generally in the intere!lt of justice to transfer one of those suits to the other forum to be tried by the _ s;im~ Court, with consequent ~voidance of ll!ultiplicity in the trial of the same issues and !_he risk of conflicting decisions thereon. The instant case falls squarely within this category. · Here, in the twosuits, one in the District Court, Seoni, Madhya Pradesh, and the other 1iled by the petitioner in the High Court of Madras, the parties are the same except that in the Madras suit five __ .,.Y 4 other persons who are alleged to be partners of the first respondent, ~ herein and two of whom furnished collateral securities, have also been joined as defendants. Further, the material issues in both the suits are common or interdependent. For instance, issue No. 14 in the Seoni Suit is substantially the same as issue No. 7 framed by the Madra9 High Court in the suit filed there by the petitioner.

The questiOiii i~volved, inter alia, in issues 9, 10, 12, 18, 19 and 20 in the Seor~i Suit have a substantial bearing on the decision of issues 1, 2, 6, 8, 9 and 10 framed in the Madras Suit. The basic question commonly arising in each of the two suits concerns the liability of the second respondent and the fourth respondent to make payment as the acceptor of the bills of exchange and the guarantors, respectively, for due payment under those bills. If the two suits are allowed .to continue in their original forums there is a possibility of conflicting findings on the question of liability under the Usance Bills and lllider the gu_~rantees. It is not disputed (we are told)•that the payment of the bills were to be made to the petitioner bank at MadrM. The evidence in both the suits would mostly be common and locally available at Madras. Transfer of the Seoni suit to Madras High Court will avoid multiplicity in the trial of the common issues and obviate the risk of conflicting decisions.

Under the circumstances, it is manifestly "expedient in the interest of justice" that both the suits should be tried by the Madra9 High Court on i!s Original Side by the same Judge/Judges. Mr. Bal appearing for the second respondent, opposed thil'l petition for transfer. Learned counsel submitted that for a small company like respondent 2 it will simply be impossible to fight the litigation at Madras, and the extra expenditure that will have to be incurred by his · clients in undertaking frequent visitl'l to Madra~ which is about 1000 miles from Seoni, may prove too heavy a financial burden for it. . Another apprehension expres~ed by the· counsel was that the objection as to want of territorial juri~d'iction in the Madras ·Court L oVERSEAS BANK V. CHEMICAL CONST.RUCTION co. (Sar!«Jria, 1.) 92"1: til-ken by the second ·respondent, ·will, in effect, be rendered sterile b the proposed transfer of Seoni suit to Madras.

Counsel suggested thi the proper course is to stay the subsequently instituted &uit at Mad!f under Section 10 of the Code of Civil Procedure tin tho disposal f the suit !it Seoni by the District Judge. We are unable to accept any of these arguments. Both the suits at Madras and Sconi are more or less at the same stage. Evidence has not yet commenced i.r). either o! the suits.. The defendants in both the suits have filed their written st'!t~ments. The second respondent has appeared in the Madras High Court and joined issue with the petitioner-plaintiff there. It seellls that the common evidence, which will mostly be documentary, is to be found locally at Madras. The fourth respondents who arc the guarantors, have no objection to the transfer of the Seoni suit to Madras. The second respondents' apprehensions, therefore, about the transfer causing extraordiriary increase in expe.nses of litigation and inconvenience to them, are much too exaggerated.

Rather, the balance o! <;onvenience i~ iii favour ol · the Seoni suit being t.:ransferred to the Madras High Court which i~ a superior forum than the District Court, Seoni. · As regards the second submis:o~ion of Mr. Bal, we make it clear tknt the transfer o[ the Seoni suit to Madras will be without prejudice to the objection raised by the second respondent, herein, ns to the Madras High Court's jurisdiction to try the suit, already instituted there by the petitioner.. . Mr. Bal's argument founded. on Sectio~ 10 of the Code _of Civil Procedure c.Joc!' not arise in this transfer petition, and we express no opinion on it. For the forecoing reasons. we allow this ·p~tition and. t.ransfer suit No. m of t97£ filed by the second respondent l;CTein in the Co_urt of. the District Judge, St:oni, · ~!adhya · Pradesh; to the file. of the H1~h Court of judicature at .Madras (Original Side). · I P.B.R. . P~titio11 allowtd. I ~-i,