Judgment:
ORDER
1. This order will dispose of two applications being is 520/87 filed by defendant 3 under O.1, R. 10, C.P.C. and is 453/ 87 filed by defendant 1 under S. 34 of the Arbitration Act.
2. The plaintiff has filed a suit for the recovery of money against the defendants and it is alleged in the plaint that it floated tender for supply of sugar to the plaintiff. The plaintiff is a trading organisation and acts as a canalising agency for import and export of various goods. The sugar, for which the tender was floated, was required to be purchased and exported out of India.
3. Defendant 1 is a company which owns a sugar mill and on 26th Feb., 1982 an agreement was reached between the plaintiff and defendant 1 whereby the plaintiff agreed to purchase from the first defendant 1850 M.T. of D-30 grade white crystal sugar of 1981-82 crushing season. According to the plaintiff the first defendant supplied 1406 M.T. of said sugar. Before the contract could be completed the Government of India imposed an embargo on the export of sugar from India. According to the plaintiff it was not under any obligation to lift the balance quantity of sugar in view of Cl. 10(d) of the agreement between the parties, which clause reads as under:-
'(d) This contract is at all times subject to Government of India's permission to STC to export sugar out of India. If at any time, the Government of India disallow STC to export sugar and /or ask STC to defer, postpone or cancel any export commitment and / or reduce the quantity of sugar to be exported by STC, STC shall have the right, at its discretion, to cancel this contract and/ or defer, postpone or reduce the quantity of sugar to be exported under this contract without incurring, any liability to the factory, on any account whatsoever. Similarly, if for any reason whatsoever including any default on the part of the foreign buyer(s) of STC, STC, is not able to export sugar, STC without incurring any liability to the factory shall be entitled to cancel the quantities yet to be dispatched by the factory.'
4. It is further alleged that defendants 2 and 3, as representatives of defendant No. 1 and other sugar manufacturers, approached the plaintiff and asked it to lift the balance quantity of sugar. It was represented by defendant 1 and other sugar manufacturers that if the balance quantity of sugar was not lifted, then the manufacturers will sell the sugar at the risk and cost of the plaintiff. According to the plaintiff, in order to avoid hardship to the sugar manufacturers, it entered into an agreement with defendants 2 and 3 wherein it was agreed that sugar manufacturers may dispose of the balance unlifted quantity of free sale sugar of D-30 grade in the open market and the plaintiff would pay to the sugar manufacturers the difference between the actual sale price and the contract price. This decision was conveyed by the plaintiff to defendants 2 and 3 vide the plaintiff's letters dated 10th Feb., 1983 and 22nd April, 1983. It was further agreed that the manufacturers, including the first defendant, after disposal of the said sugar would prefer a claim on the plaintiff for the payment of difference in price. The plaintiff had agreed to pay provisionally 90%, of the difference in the price upon the submission of the claim and the balance 10% was to be paid after due verification of the invoices and the other documents in respect of the sale of the said sugar.
5. It is further the case of the plaintiff that defendant 1 submitted a claim of Rupees 3,57,338 /- alleged to be the difference in price of the unlifted quantity of 444 M.T. of sugar. On 14th Nov., 1983 the plaintiff paid to defendant 1 Rs. 2,88,357.48 representing 90% of the amount claimed by defendant 1. The plaintiff thereafter asked the defendant 1 to submit relevant certificates from the auditors and other documents before the balance 10% amount could be released. According to the plaintiff on the examination of the documents it was found that the defendant 1 had in fact sold 262.2 M.T. of E-30 grade of sugar instead of D-30 grade, and was, thereforee, not entitled to claim any payment in respect thereof. According to the plaintiff there had been a breach of agreement on the part of defendant 1. After giving the plaintiff credit in respect of D-30 grade sugar, the plaintiff filed the present suit for the refund of Rupees 1,47,016.74 plus interest of Rs. 72,561.25 at the rate of 18% per annum calculated up to 10th Aug., 1986. It is further stated in the plaint that no relief is being claimed against defendants 2 and 3, and they have been joined as proper parties to the case.
6. A large number of similar suits have been filed by the plaintiff against the other sugar manufacturers levelling similar allegations.
7. Before taking any steps, after the defendants had been served, an application under S. 34 of the Arbitration Act was filed by defendant No. 1. Defendant 3 moved an application under O. 1, R. 10, C.P.C. contending that no relief had been claimed against the said defendant and, thereforee, it's name should be struck off from the array of the defendants.
8. Before dealing with these applications it is relevant to take note of another fact. In this case the defendant 2 has also moved an application being IA519/87 under O. 1, R. 10, C.P.C. Learned Counsel for defendant 2 states that she has instructions from her client not to press this application and not to contest the suit on behalf of the said defendant. thereforee, I.A. 519/87 is dismissed and defendant 2 is proceeded ex parte.
9. The case of the applicant is that defendant 3 is not a necessary party as no relief is claimed against it and, thereforee, the application under O. 1, R. 10, C.P.C. should be allowed. It is further contended that there is a valid and binding arbitration agreement between the parties and, thereforee, further proceedings in this suit should be stayed because the defendant has always been ready and willing to proceed to arbitration and have the disputes adjudicated in that forum. The arbitration agreement, which is relied upon by defendant 1 is as follows -.
'Subject to and without prejudice to the provisions of C1. 9(i) above, all disputes or differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or the effect of this contract or breach thereof shall be settled by arbitration at New Delhi in accordance with the rules of arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties.'
10. According to the plaintiff an argument, had been entered into between the plaintiff' and defendants 2 and 3 in particular, as representatives of the sugar manufacturers and it was pursuant to that fresh agreement that the plaintiff had agreed to pay the difference in the sale price. The submission is that in order to prove the agreement, and the facts concerning thereto, the defendants 2 and 3 are necessary parties even though no relief may have been claimed against them. It is further the case of the plaintiff that the claim in the suit does not arise out of the original agreement between the parties which contained an arbitration clause. According to the plaintiff a new agreement had come into existence when the plaintiff agreed that the defendant 1 and other sugar manufacturers could sell D-30 grade of sugar in the free market and, if any loss is suffered, the difference in price will be made good by the plaintiff. This is regarded as a contact independent of the original one, and the second agreement did not contain any arbitration clause.
11. In support of his application under O. 1, R. 10 the learned Counsel for the defendant has first relied on in the decision of the case entitled Malayam Patel Basavana Gowd v. Lakka Narayana Reddi AIR 1931 Mad 284. It was observed in that case that where no cause of action is mentioned against a party to a suit, and no relief is claimed against him, it would be improper and unnecessary to retain him and he may be struck off from the suit. To the same effect is the decision in Srivenkateswara Constructions v. Union of India, : AIR1974AP278 .
12. Under O. 1, R. 10(2), C.P.C. if a party has been improperly joined as a defendant, the Court has the Jurisdiction to strike off its name. It is essentially for the plaintiff to decide as to who has to be imp leaded as a defendant, If, however, it is found that a. party has been improperly joined, then its name can be struck off, If a defendant has no connection with the merits of the case, then it would not be necessary to retain that party and the Court would be justified in striking off the name of the said defendant. In the present case, however, a new agreement or a contract having come into existence between the plaintiff and defendants 2 and 3 has been pleaded by the plaintiff. The foundation of the claim of the plaintiff is based on this fresh agreement. This agreement came into existence, according to the learned Counsel for the plaintiff, when representatives of defendants 2 and 3 met the plaintiff and the agreement is evidenced by the letters dated 10th Feb., 1983 and 22nd April, 1983 written by the plaintiff to the said two defendants. By the letter dated 10th Feb., 1983 the Managing Director of defendant 3 was informed that the plaintiff had no objection if the mills, on whom release orders were pending, applied for cancellation of the release orders on the understanding that if it was finally decided to re-lift the balance quantity for the purpose of export, then an equivalent amount from the current year's crop will be supplied by the mills on the same terms and conditions. The plaintiff also undertook to inform the Directorate of Sugar that the release orders would be cancelled. By the letter dated 22nd April, 1983 both the defendants 2 and 3 were informed as follows:-
'We are receiving communications from various factories wherein they have requested us to issue fresh release orders for equivalent orders for free sale white sugar out of 1982-83 production. '
In this context we would request you to advise your member factories that the sugar of 1981-82 crop for which the release orders have since been cancelled is being disposed of on account of STC. The loss as such shall be borne by STC. In view of this, the question of fresh release orders for equivalent quantity for free sale white sugar does not arise.'
13. Furthermore, it is alleged in the plaint that. the terms which had been agreed between the parties for payment to the defendant 1 was that 90% was to be made on the claim being made, and the balance amount of 10% was to be paid subsequently after the plaintiff was satisfied that the sale had in fact been made, and had checked. the particulars of the sale. These negotiations had taken place between the plaintiff and the representatives of defendants 2 and 3 and, thereforee, to my mind, the said defendants are proper, if not necessary parties in order to decide this question of fact as to whether a new agreement had come into existence or not, and what were the terms of the agreement, and it was necessary to implead the party with whom the agreement is alleged to have been entered into, 1, thereforee, do not find any merit in the application under O. 1, R. 10, C.P.C. The same is accordingly dismissed.
14. In support of its application under S. 34 of the Arbitration Act it has been contended by the learned Counsel for the defendant that the original agreement entered into between the plaintiff and the defendant 1 had not been cancelled and what has happened by virtue of the letters dt. 10th Feb., 1983 and 22nd April, 1983 is only a modification of the said agreement, According to the learned Counsel when the original contract has not been substituted, the disputes which have been raised is in connection with the original contract and the disputes are covered by the arbitration clause.
15. The agreement dated 26th Feb., 1982 entered into between the plaintiff and defendant 1 was for the purchase of sugar for export. The agreement did not relate to purchase and sale of sugar by the plaintiff in India. Clause 10(d) expressly gave the power to the plaintiff to cancel the agreement, without incurring any liability, if the Government of India disallowed the export of sugar. It is the case of the plaintiff that the Government of India prohibited the export of sugar and that is why it was no longer obligatory for it to fulfill the terms of the agreement dt. 26th Feb., 1982. It Is in this context that the question arose for the sale of sugar in India by the manufacturers.
16. It is clear from the correspondence on record that negotiations took place between defendants 2 and 3 on the one hand, and the plaintiff on the other, which culminated in the plaintiff issuing the aforesaid letters dt. 10th Feb., 1983 and 22nd April, 1983. It was further agreed between the parties as to how the payment was to be made by the plaintiff to the defendant 1. This mode of payment is not reflected in any document on the record, and it is certainly not a part and parcel of the original agreement dt. 26th Feb., 1982. In the plaint it has been specifically stated that an agreement had been entered into between the plaintiff and defendants 2 and 3 and that defendant 1 had submitted its claim 'As per the abovementioned agreement reached between the plaintiff and the sugar manufacturers through their respective organisations, defendants 2 and 3 herein'. There is, thereforee, a clear plea on the part of the plaintiff that a fresh agreement was entered into between the parties pursuant to which the defendant 1 put forth its claim. The practical effect of defendant 2 having been ordered to be proceeded ex parte is that the allegations made against defendant 2 mst be regarded as being admitted. That apart, it is clear from the evidence on record that the liability of the plaintiff to make payment to the defendant 1 on the sale of D-30 grade of sugar in India arose not pursuant to the original agreement dt. 26th Feb., 1982 but was the result of afresh agreement which had been entered into between the parties in 1983. The original agreement did not postulate the plaintiff buying any sugar for sale in India, and it was concerned with release orders being issued by the governmental authorities in favor of defendant 1. The fresh agreement entered into in 1983 dealt with a situation which was not contemplated or provided for by the original agreement. The arrangement which was arrived at between the parties by the letters dt. 10th Feb., 1983 and 22nd April, 1983 was wholly independent of the original agreement dt. 26th Feb., 1982. This new arrangement did not become part and parcel of the agreement dt. 26th Feb., 1982 and, thereforee, was not covered by the aforesaid arbitration clause.
17. For the aforesaid reasons I do not find any merit in this application, and the same is accordingly dismissed with costs.
18. Petition dismissed.