V.S Aggarwal, J.:— Canara Bank (hereinafter described as ‘the petitioner’) has filed a civil suit against Scanomax India Limited and others for recovery of Rs. 1,32,41,767.50 besides the interest. The said civil suit is being contested and written statement has been filed.

2. On behalf of the respondents 2 to 4 an application has been filed seeking stay of the suit. It has been asserted that respondent Scanomax India Limited was a joint sector undertaking with the Punjab State Industrial Development Corporation and private co-promoters comprising of Dr. B.S Grewal and other share holders. The said project was set up for the manufacture of bulk drugs. The private share holders comprising of B.S.G Associates sold their shares and rights to the Raunaq Group in pursuance of the agreement dated 2.11.1994 executed by the B.S.G Associates. The agreement was done with the approval and consent of the Financial Institutions namely, respondents 5 to 7 and also Consortium of Banks i.e State Bank of Patiala. The petitioner-Bank was the lead Bank. In terms of the agreement dated 2.11.1994 it was stipulated that B.S.G Associates will get the ratification of the change in the management and control to Raunaq Group, from the Financial Institutions. The said approval was drafted by the Punjab State Industrial Development Corporation on 17.11.1994 and by the Industrial Finance Corporation India respondent No. 7 on 31.1.1995 Formal letter in this regard was issued by the Industrial Finance Corporation India. The Consortium of Banks with the petitioner-Bank as lead Bank granted their necessary approval and consent for transfer of the control and management of respondent No. 1 Scanomax India Limited in favour of Raunaq Group.

3. There were communications interaction and dealing with the Financial Institutions, the consortium of the Bank on one hand and Raunaq Group on the other. In pursuance of the interaction and deliberation between the parties, it was agreed that project for the manufacturing of Ibuprofen, Ampicillin, Trihydrate and their formulations be changed and restructured. It was to be rehashed for manufacture of the bulk drugs of Acyclovir and others. As a result of this change and restructure of initial project, the terms and conditions of the alleged guarantee deed between the petitioner Bank and the applicant-respondents were varied. They claimed that in this process they were discharged from their liability. It has further been alleged that in pursuance of the agreement dated 2.11.1994, Raunaq Group had also agreed to indemnify respondents 2 to 4 from their liability towards their Financial Institutions and the consortium of the Banks. The relevant clause of the said agreement reads:—

“(i) RAUNAQ GROUP shall take steps for the release of the members of BSG Associates from all personal guarantees and undertaking given by them for SCANOMAX to Banks, Financial Institutions and authorities and for this purpose provide, substitute and/or arrange for personal guarantees of the RAUNAQ GROUP members to be furnished to the said Banks, Financial Institutions and authorities to their satisfaction.

Furthermore, upon the completion of the transactions and pending the release of the personal guarantees as aforesaid RAUNAQ GROUP shall indemnify and hold harmless BSG ASSOCIATES from all claims, losses etc. to which BSG ASSOCIATES may be subjected to or suffer on account of enforcement of such personal guarantees.”

4. It is asserted that even otherwise there has been such acts of omission and commission on the part of Canara Bank that the project and manufacturing process of Scanomax stood considerably delayed. In these circumstances, it is claimed that respondents 2 to 4 stood discharged. However, the Financial Institutions i.e Industrial Financial Corporation India sent a legal notice to them to enforce the guarantee. Respondents 2 to 4 filed a civil suit in the Court of learned Senior Sub Judge, Chandigarh for a declaration that their alleged liability, if any, stood discharged. In said civil suit Canara Bank, State Bank of Patiala and also the Financial Institutions, besides Raunaq Group have been impleaded as parties.

5. The applicants' case is that the said Civil Suit is comprehensive which would determine the rights of the parties including the alleged rights, if any, of the Canara Bank. The said civil suit which has been filed in the Court of Senior Sub Judge, Chandigarh is a previously instituted suit. The parties are identical and, therefore, it was prayed that the said civil suit be stayed under Section 10 of the Code of Civil Procedure.

6. The contest has been offered by the Canara Bank. It was pointed in the reply that there is no intimation to Canara Bank with respect to the alleged change of the management or agreement dated 2.11.1994 It is not disputed that respondents 2 to 4 had preferred the civil suit before the learned Senior Sub Judge, Chandigarh but it has been pointed that it is on a different perspective altogether. Raunaq Group is not a necessary party in the civil suit filed by the Canara Bank. A winding up order had been passed against the Company besides the borrower of the Company. There was none other than the guarantors who are necessary parties to the civil suit. The questions involved are stated to be different.

7. Learned counsel for the applicants-respondents 2 to 4 while pressing for the stay of the civil suit pending, urged that the questions involved in the present civil suit filed by the Canara Bank and one filed by respondents 2 to 4 are identical. Therefore, he pressed that in terms of Section 10, Code of Civil Procedure, when there is identity of the controversy, the subsequently instituted suit which is pending in this Court should be stayed. As pointed out above, the defence of Canara Bank is that not only the parties are different but the controversy involved in the civil suits, one filed by respondents 2 to 4 and the other by Canara Bank is totally different.

8. Section 10 of the Code of Civil Procedure reads, as under:—

“10. Stay of suit.- No Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in India having jurisdiction to grant the relief claimed, or in any Court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court.

Explanation. — The pendency of a suit in a foreign Court does not preclude the Courts in (India) from trying a suit founded on the same cause of action”

It is abundantly clear from perusal of Section 10 of the Code of Civil Procedure that before it can come into play, certain conditions must be satisfied:—

(a) The matter/matters in issue should substantially be the same in two suits;

(b) The previously instituted suit should be pending in other Court in India or the same Court; and

(c) Two suits should be between the same parties or their representatives and these parties should be litigating in two suits under the same title.

Regarding the said principles, there is little controversy. The Supreme court in the case of Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal, AIR 1962 SC 527 held that provisions of Section 10 of the Code of Civil Procedure are mandatory. It was concluded:—

“The suit at Indore which had been instituted later, could be stayed in view of Section 10 of the Code. The provisions of that Section are clear, definite and mandatory. A Court in which a subsequent suit has been filed is prohibited from proceeding with the trial of that suit in certain specified circumstances.”

9. In fact this is the consistent view and reference to some of the precedents in this regard can conveniently be made. In the case of Shaw Wallace and Co. Limited v. Bholanath Mandanlal Sherawala, AIR 1975 Calcutta 411 an appointment was made of the person to sell goods at Ferrukhabad. Dealership agreement was executed. The alleged dealer had put up the claim that agreement was cancelled by mutual consent. He filed a suit at Ferrukhabad to recover the amount out of the transactions. The said person also filed a suit claiming damages for wrongful repudiation of the agreement. At Calcutta an application was filed that the suit at Ferrukhabad was previously instituted. Section 10 of the Code of Civil Procedure was pressed into service. The Calcutta High Court held that mere identity of some of the issues is not sufficient to attract Section 10 of the Code of Civil Procedure. It was concluded:—

“One of the most essential conditions of Section 10 is that the matter in issue in the later suit which is sought to be stayed must be directly and substantially in issue in the earlier suit which is pending in the same or in any other Court of concurrent jurisdiction. A mere identity of some of the issues in both the suits is not sufficient to attract this section in view of the law laid down by Sir Ashutosh Mookerjee. Unless the decision of the suit operates as res judicata in the other suit it cannot be said that the matter in issue is “directly and substantially” the same in both the suits. In other words, the decision in one suit must non-suit the other suit before it can be said that the matter in issue in both the suits is directly and substantially the same.”

10. Similarly in the case of Fulchand Motilal v. Manhar Lall Jetha Lall Mehta, AIR 1973 Patna 196, the question in controversy was as to whether in the subsequently instituted suit, the matter was directly and substantially the same or not? It was held that acid test is that decision in the previously instituted suit should operate as res judicata in the subsequently instituted suit. The Court concluded:—

“Under this section, the Court is prohibited from proceeding with the trial of a suit where two conditions exist, namely (i) where there is a previously instituted suit between the same parties, and (ii) where the matter directly and substantially in issue in both the suits is the same. The first of these requirements of Section 10 can present no difficulty, and, for determining whether the second one exists or not, the Court has to direct its attention to the pleadings of both the suits and to determine what is the matter directly and substantially in issue in the two suits. Having ascertained this, the Court has further to consider whether or not the matter” directly and substantially in issue in both the suits is the same. The test to be applied for this purpose is not whether the cause of action or the reliefs claimed in both the suits are the same, nor whether one of the issues arising in both of them is the same. The test is whether the decision of the matter directly and substantially arising in the former suit will decide not merely that suit, but will also operate as res judicata in the subsequent suit between the same parties.”

11. The Madras High Court in the case of P.S Kandasami Mudaliar v. T.N Ranganathan, AIR 1973 Madras 47 @ applied the same test and held:—

“The test for applicability of Section 10 is to see whether the final decision in a previous suit would operate as res judicata in the subsequent suit. It is not necessary that the subject-matter and cause of action in the two suits should be identical. In the present case, there is substantial identity between the matters in dispute in the earlier and the later suit.”

12. In the matter of C.L Tandon v. Prem Pal Singh Rawat, AIR 1978 Delhi 221 the same test that decision in the earlier suit must operate as res judicata to attract the rigors of Section 10 was reiterated in the following words:—

“One valuable touchstone for determining whether the matters in issue are directly and substantially the same is whether the decision in the prior suit will bring the principle of res judicata into operation in the subsequent suit, because the removal of Prem Pal Singh Rawat and the competence of Mataji to do the same, issues of utmost, importance, are alien to the Patna suit, the disposal of the suit at Patna will not stand in the way of the trial of the said issues by the appropriate courts.”

13. A Division Bench of Calcutta High Court in the case of Bishwanath Balkrishna v. Smt. Rampeyari Devi, AIR 1979 Patna 159 was concerned with a situation where a first suit for eviction was filed on the ground of personal requirement. A subsequent suit for eviction was filed on the ground of non-payment of rent. An application was filed for stay of subsequent suit of eviction. It was held that causes of action in both the suits were different and, therefore, it did not require to be stayed.

14. This Court in the case of Jagan Nath Jagdish Lal v. Piara Mal Gobind Ram Sachdeva, 1979 Punjab Law Journal 231 accepted the well known above principle that the decision in the earlier suit should operate as res judicata in the subsequent suit and held:—

“To Judge as to whether the subject-matter in the two suits is substantially the same, the test universally accepted is that the decision in the prior suit should operate as res judicata in the suit instituted later and shut out its trial. This test is fully satisfied in the present case because if the High Court at Delhi holds that the respondents are liable to render accounts and taking those accounts, nothing is found due from the petitioners that decision would operate as res judicata and would render the present suit incompetent. Apart from preventing the multiplicity of the proceedings, the other principal object of Section 10 of the Code of Civil Procedure is the prevention of contradictory decrees by Courts of concurrent jurisdiction. This object would also be defeated if the present suit is not stayed.” Same view prevailed with this Court in the case of Jaswant Singh v. Surjant Singh, 1984 Current Law Journal 679 that where questions involved are not substantially the same, only in that event the subsequently instituted suit need not be stayed. Similarly, this Court in the case of O.P Steel Traders…Petitioner, v. Steel Strips Ltd.…., AIR 1992 Punjab and Haryana 217 held:—

“After hearing the counsel for the parties, I hold that the suit filed by the petitioner-firm at Ludhiana relates to the same transaction regarding which a suit has been filed by the respondent-company at Chandigarh. One of the tests of the applicability of Section 10, Code of Civil Procedure, to a particular case is whether, on the final decision being reached in the previous suit, such decision operates as res judicata in the subsequent suit and there can be no doubt that if this test is applied, Section 10, C.P.C must be held to be applicable to the present case. Since the suit filed by the respondent-Company is prior to the suit filed by the petitioner-firm at Ludhiana, therefore, the trial Court was bound to stay the proceedings of the suit of the petitioner-firm under Section 10 read with Section 151, Code of Civil Procedure.”

15. The Madras High Court in the case of R. Srinivasan v. Southern Petrochemical Industries Corporation Limited, AIR 1992 Madras 363 concluded that the key words in Section 10, Code of Civil Procedure are that matter in issue should be directly and substantially the same. There has to be the identity of matter in issue in both the suits. The test in this regard drawn was the same and in the words of the Hon'ble Judge of that Court it was held:—

“One test of the applicability of Section 10 to a particular case is whether on the final decision being reached in the previous suit, such decision would operate as res judicata in the subsequent suit. What is essential is that there must be substantial identity between the matters in dispute and parties in the earlier and later suits.”

16. It is abundantly clear from aforesaid that matters in question substantially should be the same in both the suits and that decision in the earlier suit should operate as res judicata in the subsequently instituted suit.

17. In this backdrop one can conveniently refer to the nature of the suit filed by Canara Bank. Scanomax India Limited has been ordered to be wound up in the civil suit for recovery of amount referred to above, the Canara Bank had asserted that in connection with the business of Scanomax India Limited, it needed credit facility. The Board of Directors passed a resolution dated 3.3.1989 It was resolved to avail credit facility from the Canara Bank and State Bank of Patiala. They wanted credit facility to a sum of Rs. 5 crore. The facility initially sanctioned was open cash credit Rs. 20 lacs, secured demand business Rs. 21 lakhs and non fund base including Bank guarantees Rs. 25 lacs. Consequent upon sanctioning of the facility, the Scanomax India Limited through the Managing Director executed certain documents and request was made for over draft facility. Scanomax India Limited needed more funds. It requested for enhancement of cash credit limit. Canara Bank agreed to enhance the same to Rs. 25 lacs. Since the earlier resolution had an agreement of Rs. 5 crore fresh resolution was not obtained. Shri B.S Grewal executed certain documents. Scanomax India Limited availed the facility and Canara Bank maintained its accounts in the regular course of business. Since the factory was situated in a village, the facility was permitted to be utilised from Patiala Main Branch of Canara Bank. On 31.3.1992 Scanomax India Limited renewed the facility by executing the letter of renewal mentioning the existing facility as well as liability as on 31.3.1992 An acknowledgement of debt was made. Scanomax India Limited needed more funds. It requested for opening of cash-credit facility to Rs. 75 lacs. The request was acceded to and it executed fresh set of documents. The interest was liable to be paid at 16.5% per annum. In order to secure the interest of Canara Bank, certain personal guarantees were executed by respondents 2 to 4. They made themselves personally and severally liable for the amount due. The civil suit had been filed for recovery against the said respondents besides Punjab State Industrial Development Corporation, Punjab Financial Corporation, Industrial Finance Corporation India and State Bank of Patiala.

18. It is abundantly clear from aforesaid that while the civil suit has been filed for recovery of a specific amount with respondents 2 to 4 being the guarantors also. The civil suit filed by Dr. B.S Grewal and others in the court of Senior Sub Judge, Chandigarh is only for a declaration that plaintiffs in that suit stood discharged as sureties against the term loan and instead some of the other defendants in that suit are liable. They prayed for a permanent injunction that Industrial Finance Corporation, the Canara Bank and certain other Financial Institutions are not entitled to invoke the guarantees against them and further that they should be restrained from initiating recovery proceedings.

19. As already pointed out above, the questions involved in the subsequently instituted suit and previously instituted suit should be substantially the same. As one glance through the pleadings of both the suits, it is clear that one is a civil suit for recovery of specific amount. The said suit is pending in this court. Even if the civil suit pending before the learned Senior Sub Judge Chandigarh is decided, it will not operate as res judicata on all the controversies between the parties in two suits. It may have some repercussions but recovery suit still have to be continued. Therefore, one is constrained to observe that question in controversy in the subsequently instituted suit is not substantially the same Merely because one or two issues may be identical will not be a ground to stay the subsequently instituted suit. That would be contrary to the plain language of Section 10 of the Code of Civil Procedure.

20. As an off shoot of these reasons, it is clear that there is no good ground to allow the application because Section 10, Code of Civil Procedure is not attracted. The application filed under Section 10 of the Code of Civil Procedure is dismissed. List of company petition for statement of the parties before issues and for framing of the issues on 18.11.1999

R.M.S

Application dismissed.