Citation Codes

Equivalent Citations

citation codes

Case Number

Suit No. 319 of 1970

Advocates

B. C. Dutt

Judges

Ramendra Mohan Datta, J.

Acts

Section 294(1) of the Companies Act, 1956.

See more information ...

Smart Summary

Structured Summary of the Opinion (application under Section 10, CPC)

Factual and Procedural Background

The plaintiff, Life Pharmaceuticals Private Ltd. (the plaintiff company), appointed the defendant (the defendant firm) as Chief Regional Distributor for the East Zone by letter dated July 19, 1966. On or about December 1969 the defendant firm discovered that Messrs. Hindusthan Medical Syndicate had been appointed as a stockist by the plaintiff company. The defendant protested and, on or about January 5, 1970, the plaintiff company purported to terminate the distributorship agreement.

The defendant firm filed three suits in Alipore courts arising from the same agreement: (i) Title Suit No. 5 of 1970 (filed January 6, 1970) in the Alipore Court seeking, inter alia, a declaration that the appointment of Hindusthan Medical Syndicate as stockist was illegal and for permanent injunction; an interlocutory injunction was granted on January 16, 1970 restraining the plaintiff company from making direct sales in West Bengal except through the defendant; the plaintiff company filed a written statement on January 29, 1970. (ii) Money Suit No. 33 of 1970 (filed June 15, 1970) before the Sub-Judge's Court at Alipore for recovery of unpaid commission of Rs. 70,000/-. (iii) Title Suit No. 208 of 1970 (filed July 2, 1970) before the Munsiff's Court at Alipore seeking, inter alia, a declaration that the termination letter dated January 5, 1970 was illegal and for injunction; an ad-interim injunction was granted restraining the plaintiff from giving effect to the termination letter.

The plaintiff company filed the present suit on or about July 28, 1970 in which it challenged, for the first time, the validity of the distributorship agreement itself as void and illegal under Section 294(1) of the Companies Act, 1956, and sought declaration of invalidity and an injunction restraining the defendant from enforcing the agreement and from proceeding with the three Alipore suits.

The plaintiff's interlocutory application in this suit was finally disposed of on August 11, 1970 by making no order apart from directions for expeditious hearing; that order was expressly made without prejudice to the defendant firm's right to apply for a stay under Section 10 CPC. The defendant firm applied under Section 10 CPC for a stay of the present suit on or about August 31, 1970.

Legal Issues Presented

Whether the present suit should be stayed under Section 10 of the Civil Procedure Code because earlier suits between the same parties based on the same agreement were already pending.
Whether the defendant firm had submitted to the jurisdiction of the court hearing the present suit by participating in the earlier interlocutory proceedings (such that a stay should be refused).
Whether questions as to pecuniary jurisdiction or inadequate valuation in the earlier suits (before Munsiff's Court) prevent application of Section 10 to stay the later suit.
Whether principles of res judicata, including constructive res judicata, are relevant and may be applied when deciding an application under Section 10 CPC.

Arguments of the Parties

Plaintiff's Arguments (Mr. B.C. Dutt)

The defendant firm had submitted to the jurisdiction of this Court by participating in the motion in which the plaintiff company applied under Section 151 CPC to restrain the Alipore suits; therefore the application for stay should not be granted.
The subject-matter and valuation of two of the Alipore suits (valued at Rs. 40 and Rs. 100) were such that the present suit could not have been entertained by the Munsiff's Court; hence the present suit is maintainable and need not be stayed. The plaintiff also contended that the subject-matter could not properly be agitated in those earlier suits on jurisdictional/valuation grounds.
The principle of res judicata (constructive res judicata) cannot be applied in an application under Section 10 CPC; accordingly the Court should not treat constructive res judicata as a bar to the present suit.

Defendant Firm's Arguments (as reflected in the opinion)

All three earlier suits are founded on the same distributorship agreement and seek reliefs that depend on the validity and enforceability of that agreement; the defendant firm had acquired rights under that agreement which the Alipore suits sought to protect.
The plaintiff company could and should have challenged the validity of the agreement in those earlier suits (for example in written statements), including the Money Suit in the Sub-Judge's Court which had adequate pecuniary jurisdiction; the plaintiff's failure to raise the point earlier would render the later suit barred by constructive res judicata.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Durgaprasad v. Kantichandra Mukerji, AIR 1935 Cal 1	Expressed the test for Section 10 applications: "supposing the first suit was determined: would the matters raised in the second suit be res judicata by reason of the decision of the prior suit?"	The Court relied on this case to adopt the stated test and to support the view that Section 10 logically precedes Section 11; the decision was cited as supportive of staying the later suit.
27 Cal WH 772 (AIR 1923 Cal 716)	This case was relied upon by counsel for the plaintiff (specific rule cited in argument not detailed in the opinion).	The Court observed that the decisions relied on by Mr. Dutt (including this one) did not prevent the Court from making the order in this application.
ILR 60 Cal 1096 (AIR 1933 Cal 887)	Relied upon by the plaintiff's counsel (the opinion does not specify the exact principle from the case).	The Court found that this authority did not stand in the way of granting the Section 10 application.
AIR 1954 Pat 314	Cited by the plaintiff (specific principle not detailed in the opinion).	The Court stated this decision did not prevent making the order sought by the defendant firm.
AIR 1957 Cal 727	Cited by the plaintiff (specific principle not detailed in the opinion).	The Court held this authority did not preclude granting the stay under Section 10.
AIR 1962 SC 527	Cited by the plaintiff (specific principle not detailed in the opinion).	The Court indicated this Supreme Court authority did not stand in the way of its order in the case before it.

Court's Reasoning and Analysis

The Court considered the defendant firm's Section 10 application in detail and addressed each contention raised by the plaintiff's counsel. The analysis proceeded in distinct steps:

Submission to jurisdiction: The Court rejected the plaintiff's submission that the defendant had submitted to the jurisdiction of the present Court by participating in proceedings on the plaintiff's Section 151 application. The Court noted that no order was made on that interlocutory application and the order recorded that it was made without prejudice to the defendant's right to apply for a stay under Section 10. The Court emphasized that an application under Section 10 may be made at any stage of the proceedings and that the language of Section 10 is mandatory; once the statutory conditions are met, the court must stay its hand and cannot refuse an application on grounds of delay or laches.
Valuation and pecuniary jurisdiction: The Court examined the argument that two earlier suits had valuations (Rs. 40 and Rs. 100) such that the present suit could not have been entertained by those Munsiff's Court proceedings. The Court observed that all three earlier suits were founded on the same distributorship agreement and that the plaintiff could have raised the invalidity/illegality of that agreement in the earlier suits, particularly in written statements. The Court further noted that the Money Suit before the Sub-Judge (valued at Rs. 70,000) unquestionably had the pecuniary jurisdiction to entertain matters overlapping with the present suit; accordingly, pecuniary valuation did not prevent application of Section 10.
Res judicata and constructive res judicata: The Court rejected the plaintiff's contention that constructive res judicata could not be considered in a Section 10 application. The Court formulated the appropriate test: whether the matter in the later suit would be res judicata if the earlier suit were decreed as prayed in its plaint. Under this test, it is immaterial that no written statement has yet been filed in the earlier suit; if the matters in the later suit would be conclusively barred by a decree in the earlier suit, Section 10 mandates a stay. The Court warned that if the plaintiff fails to make the same ground of defence in the earlier suits, the later suit would be hit by the principles of constructive res judicata.
Purpose of Sections 10 and 11: The Court highlighted that the twin purposes of Sections 10 and 11 of the CPC are to secure finality in litigation, prevent multiplicity of proceedings, and avoid conflicting decisions on the same subject-matter between the same parties. The Court applied these procedural principles to the facts, concluding that the present suit raised matters that were the same as (or dependent upon) the matters in the earlier suits.
Precedent application: The Court relied on Durgaprasad v. Kantichandra Mukerji (AIR 1935 Cal 1) to support the chosen test for Section 10 applications. The Court also noted several authorities cited by the plaintiff but concluded they did not prevent the Court from granting the Section 10 relief in the present case.

On the basis of the above analysis, the Court concluded that the statutory conditions for a stay under Section 10 were satisfied and that the application must succeed.

Holding and Implications

Holding:

Application under Section 10 of the Civil Procedure Code is allowed. The Court ordered relief in terms of prayers (a) and (d) of the defendant firm's application and held that the petitioner (the defendant firm in the present application) is entitled to the costs of the application. The petition was allowed.

Implications:

The direct, immediate consequence is that the Court made an order in accordance with prayers (a) and (d) of the Section 10 application (the opinion records that the application "must succeed" and the order was made in those terms).
The Court's decision enforces the procedural principle that where prior suits between the same parties on the same subject-matter are pending and a decree in the earlier suits would render the later suit res judicata, the later suit must be stayed under Section 10 CPC; failure to raise a defence or point in the earlier suits may lead to constructive res judicata barring the later suit.
The opinion does not purport to create a new legal principle beyond applying established tests and precedents; no broader new precedent is stated to have been set by this single decision beyond the application of the established Section 10/11 principles to the facts at hand.

This summary is confined strictly to the content and reasoning contained in the provided opinion and does not add or infer facts beyond that text.

Show full summary ...

Life Pharmaceuticals (Private) Ltd. v. Bengal Medical Hall .

1. This is an application tinder Section 10 of the CPC for stay of this suit filed on or about July 28, 1970.

2. The facts shortly are that on or about July 19, 1966 the plaintiff Life Pharmaceuticals Private Ltd. (hereinafter called the plaintiff company) appointed the defendant (hereinafter called the defendant firm) the Chief Regional Distributor of the products of the plaintiff company for the East Zone. On or about December, 1969 the defendant firm came to know that one Messrs. Hindusthan Medical Syndicate was appointed as stockist by the plaintiff company in respect of its products. The defendant firm protested against such appointment with the result that on or about January 5, 1970 the plaintiff company terminated the agreement and cancelled the Chief Regional Distributorship granted to the defendant firm.

3. On or about January 6, 1970, the defendant firm filed the Title Suit No. 5 of 1970 in the Alipore Court (hereinafter called the said first suit) against the plaintiff company, inter alia, for a declaration that the appointment of Messrs. Hindusthan Medical Syndicate as stockist was illegal and void and also asked for permanent injunction. An interlocutory application for injunction was made in the said Title Suit No. 5 of 1970 and on or about January 16, 1970, an order was made thereon whereby the plaintiff company was restrained from making direct sales or supply to the stockists or distributors in West Bengal including the said Messrs. Hindusthan Medical Syndicate except through the defendant. On or about January 29, 1970 the plaintiff company filed its written statement in the said Title Suit No. 5 of 1970. It is to be remembered that neither in the application for injunction resulting in the order dated January 16, 1970, nor in the aforesaid written statement did the plaintiff company ever challenge the validity of the said agreement for distributorship as it did in the present suit filed in this Court.

4. On or about June 15, 1970 the defendant company filed the Money Suit being Suit No. 33 of 1970 (hereinafter called the said second suit) against the plaintiff company before the Sub-Judge's Court at Alipore, inter alia, for realisation of unpaid commission to the extent of Rs. 70,000/-. On or about July 2, 1970 the defendant firm filed another Title Suit being No. 208 of 1970 before the Munsiff's Court at Alipore (hereinafter called the said third suit), against the plaintiff company inter alia, for a declaration that the notice of termination dated January 5, 1970 was illegal, void, inoperative and not binding on the defendant firm and also for permanent injunction etc. In the said third suit an ad-interim order was made by granting temporary injunction restraining the plaintiff company from giving effect to the purported letter of termination dated January 5, 1970. All the said three suits were filed on the basis that there was a valid and enforceable agreement by and between the parties.

5. The present suit was filed on or about July 28, 1970 by the plaintiff company, inter alia, lor a declaration that the appointment of the defendant firm by the letter dated July 19, 1966 was void and illegal on the ground, that the said agreement appointing the defendant as the Regional Distributor was void and illegal as being in contravention of Section 294(1) of the Companies Act, 1956. It is to be noted that the plaintiff company for the first time challenged the said agreement on the aforesaid ground as being void and illegal. The plaintiff company made an application in this suit for an order of injunction restraining the defendant from enforcing the said agreement and from proceeding with the said three suits filed before the Alipore Court. On August 11, 1970 the said application was finally disposed of by making no order thereon save and except giving directions for expeditious hearing of the said suit. The said order was made without prejudice to the defendant firm's making an application for stay of this suit. On or about August 31, 1970 the defendant firm made this application under Section 10 of the CPC for stay of this suit.

6. Mr. B.C Dutt, on behalf of the plaintiff company, contended that the order for stay should not be granted for three reasons. It was contended in the first place that the defendant firm submitted to the jurisdiction of this Court by participating in the motion wherein the plaintiff company applied under Section 151 of the CPC to restrain the defendant firm from proceeding with the said three suits at Alipore. In my opinion, there is no substance in the point. Not only that no order was made on the said application for an order of injunction but it was expressly recorded therein that the said order was made without prejudice to the rights and contentions of the defendant firm's taking steps for initiating the proceedings under Section 10 of the CPC. Under the circumstances, the defendant firm could not be said to have submitted to the jurisdiction of this Court by opposing the said motion. Moreover, it is settled law and as the language of Section 10 would suggest, an application thereunder would be perfectly maintainable at any stage of the proceeding. As soon as the conditions laid down therein are satisfied the court is bound to stay its hands and will cease to have jurisdiction to proceed with the subsequent suit any longer, The language of the section is mandatory and as such no option is left to the Court to refuse an application on the ground of delay or laches. Accordingly, I reject the contention of Mr. Dutt.

7. The second point urged by Mr. Dutt was that the said first and the third suits were started before the Munsiff's court at Alipore and the valuations thereof were Rs. 40/- and Rs. 100/- respectively. Accordingly, the present suit filed before tins Court could not have been entertained by the said MunsifFs Court nor could the subject-matter of the present suit be the same as that of the subject-matter in the said two suits filed before the Munsiff's Court at Alipore. The valuation of the suit herein has been assessed by the plaintiff company at a sum of Rs. 54,000/-. Mr. Dutt was unable to give a satisfactory explanation as to why the subject-matter of the present suit could not be agitated in the said Money Suit which was filed before the Sub-Judge's Court at Alipore, the valuation where of was Rs. 70,000/-.

8. All the said three suits were founded on the said agreement whereby the defendant firm was appointed the Regional Distributor of the plaintiff company's products. The said first suit was inter alia, for a declaration that the appointment of Messrs. Hindusthan Medical Syndicate as stockists was illegal and void and for permanent injunction against the plaintiff company. In other words, the defendant firm had acquired a definite right under the said agreement and that right was bound to be respected by the plaintiff company, if allowed to be made, would be in violation of the defendant firm's right under the said agreement (sic). Again, the said third suit was, inter alia, for a declaration that the notice of termination of the said distributorship granted to the defendant firm was illegal, void and inoperative and not binding on the defendant and for permanent injunction against the plaintiff company from giving effect to the said letter of termination. Here also the foundation is laid on the said agreement and the defendant-firm's right under the said agreement was sought to be enforced by the said reliefs claimed in the said suit. The second suit was for realisation of the unpaid commission for Rs. 70,000/- payable by the plaintiff company. That sum accrued and remained due, according to the defendant firm, in respect of the said agreement. In my opinion, there could not have been any difficulty on the part of the plaintiff company to challenge the said agreement as void and illegal in the said three respective suits. Neither any procedural difficulty nor any question relating to the pecuniary jurisdiction of the said respective Courts at Alipore would have stood in the way of the plaintiff company's agitating the very same point and relief as it has purported to agitate by filing the present suit here. I see no reason why the very same point could not have been taken in the written statements filed or to be filed in the said Alipore Suits. The question of suffering damages to the extent of Rs. 54,000/- would arise only when the plaintiff company would otherwise succeed in establishing the invalidity or illegality of the said agreement dated July 19, 1966 whereby the defendant firm was appointed the Regional Distributor of the plaintiff company's products. Accordingly there could be no bar in the Munsiff's entertaining the point relating to the invalidity or illegality of the said agreement in the said first and the third suits if the same were raised in the written statements.

9. In any went there could hardly be any explanation as to why the said point could not be agitated in the second suit filed before the Sub-Judge's Court at Alipore wherein the defendant firm claimed the sum of Rs. 70,000/-. Even assuming Mr. Dutt's contention to be correct about the Munsiff's Court not having pecuniary jurisdiction to entertain the subject-matter of this suit yet the Sub-Judge's Court unquestionably had the pecuniary jurisdiction to entertain the subject-matter of this suit. Accordingly I reject the contention of Mr. Dutt on this point.

10. The third point why this suit should not be stayed is that the principle of res judicata cannot be applied in an application under Section 10 of the CPC. Mr. Dutt argued that the Court should not consider the question of constructive res judicata in an application under Section 10 of the CPC. According to him the scope of Section 10 would not permit such construction. I am unable to accept this contention.

11. In my opinion, the test to be applied in deciding an application under Section 10 of the CPC is whether the matter in the later suit will be res judicata if the prior suit is taken to have been decreed in the manner as prayed in the plaint. In such circumstances, it will matter little that no written statement has been filed in the earlier suit. If the above test is applied in the present case before me the position will be like this viz., that m the first suit before the Munsif's Court at Alipore if a decree will be deemed to be passed that will be possible only on the basis of the said agreement being a valid and an enforceable one. Such will be the case also in respect of the second and the third suits. As such it will be idle on the part of the plaintiff company to agitate this point regarding the invalidity of the said agreement by filing another suit later in point of time and by contending that this point regarding the invalidity of the agreement was not agitated in the said Alipore suits.

12. If the plaintiff company fails to make the same a ground of defence in such former suits then the same will be hit by the principles of constructive res Judicata in the present suit filed before this Court at a subsequent stage.

13. The principle underlying both Sections 10 and 11 of the CPC is to achieve finality in litigation, to prevent multiplicity of proceedings and also to prevent conflict of decisions in respect of the same subject-matter involved in two different suits filed by and between the same parties. These are the matters relating to the procedure to be followed in suits.

14. The view I have taken finds support from the case of Durgaprasad v. Kantichandra Mukerji, in AIR 1935 Cal 1 where the Division Bench of this Court at page 7 observed:—

“The real criterion to apply is this: supposing the first suit was determined: would the position then be that when the second suit was instituted the matters raised In the second suit were res judicata by reason of the decision of the prior suit? In that way, the provisions of Section 10, logically and naturally, precede Section 11.”

15. That being the position, I have no hesitation to reject the contention of Mr. Dutt on this point as well. Several’ decisions relied on by Mr. Dutt in 27 Cal WH 772 : (AIR 1923 Cal 716); ILR 60 Cal 1096 : (AIR 1933 Cal 887); AIR 1954 Pat 314 : AIR 1957 Cal 727 and AIR 1962 SC 527) do not, in my opinion, stand in the way of my making an order in this application.

16. Under the circumstances, this application must succeed and I make an order in terms of prayers (a) and (d). The petitioner herein is entitled to the costs of this application.

17. Petition allowed.

Life Pharmaceuticals (Private) Ltd. v. Bengal Medical Hall .

Structured Summary of the Opinion (application under Section 10, CPC)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Plaintiff's Arguments (Mr. B.C. Dutt)

Defendant Firm's Arguments (as reflected in the opinion)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Life Pharmaceuticals (Private) Ltd. v. Bengal Medical Hall .

Comments