2016 (8) TMI 1533 - HC - Indian Laws

Constitution of appeal suit - first defendant is personally bound by the contract or not - Exception (1) to Section 230 of the Indian Contract Act, 1872 - HELD THAT - The trial court though has not admitted the foreign judgment in evidence has curiously enough held that the same was obtained by fraud and hence not binding on the plaintiff The reason for holding so is that the period of the letter of credit was extended solely to facilitate the second defendant to obtain an order from court. An order was obtained from the Commercial Court Records of Marseille by the second defendant before the expiry of the extended period of the letter of credit. Thus utmost care and caution should be exercised while holding that a foreign judgment was procured by fraud which would otherwise operate as an estoppel against the plaintiff. There cannot be a retrial of the issue on merits unless the foreign judgment is dislodged for weighty reasons which are wholly absent - The decree passed against defendants 2 and 3 cannot be put into execution now since more than two decades have rolled on and they are also not parties to the appeal suit. Defendants 1, 4 and 5 if now found liable are bound to be indemnified by the second defendant as the consequence of a lawful act done by an Agent under Section 222 of the Act. It will be unjust to make the second defendant vulnerable to such liability without being afforded an opportunity to contest the suit on merits after remand. The question as to whether the first defendant is an Agent of the second defendant or only an intermediary broker entitled to commission is also an ancillary issue. Neither can we accede to the request of the plaintiff to grant a decree for money in entirety as against defendants 1, 4 and 5 also in this appeal suit. Nor can we countenance the plea that there is no embargo for a decree to be passed against defendants 1, 4 and 5 in conformity with the decree passed against defendants 2 and 3 - thus, the Appeal Suit is not properly constituted impleading all the parties to the suit and therefore liable to be dismissed as incompetent in the circumstances. Appeal suit is dismissed.

Summary

Issues Involved:
1. Jurisdiction of the court over an appeal suit not properly constituted.
2. Dispute regarding the status of the first defendant as an agent or intermediary.
3. Liability of defendants in a suit for non-payment of goods exported.
4. Interpretation of Section 230 of the Indian Contract Act, 1872.
5. Admissibility and conclusive effect of a foreign judgment obtained by fraud.
6. Impleading necessary parties in an appeal suit for a fair trial.
7. Consequences of not impleading all parties in an appeal suit.

Analysis:

Issue 1: Jurisdiction of the court over an appeal suit not properly constituted
The court highlighted that the appeal suit was not properly constituted as it failed to include all necessary parties, specifically defendants 2 and 3. This led to the conclusion that the appeal suit was incompetent and liable to be dismissed due to improper constitution.

Issue 2: Dispute regarding the status of the first defendant as an agent or intermediary
The status of the first defendant as an agent or intermediary was a point of contention. The plaintiff argued that the first defendant was personally bound by the contract as an agent for the sale of goods for the second defendant, a merchant resident abroad. However, the defendants disputed this claim, stating that the contract was nullified by a foreign judgment due to alleged fraud.

Issue 3: Liability of defendants in a suit for non-payment of goods exported
The trial court had decreed the suit against defendants 2 and 3 for non-payment of goods exported by the plaintiff. However, the liability of defendants 1, 4, and 5 was a subject of dispute, with the court emphasizing the need for a fair trial involving all parties to determine liability accurately.

Issue 4: Interpretation of Section 230 of the Indian Contract Act, 1872
The court revisited Section 230 of the Indian Contract Act, focusing on Exception (1) which deals with the personal liability of an agent in specific situations. The court analyzed the applicability of this provision in the context of the case at hand to determine the personal liability of the first defendant.

Issue 5: Admissibility and conclusive effect of a foreign judgment obtained by fraud
The court discussed the admissibility and conclusiveness of a foreign judgment obtained by fraud. It emphasized the need for substantial evidence to prove fraud and highlighted the criteria for challenging the conclusiveness of a foreign judgment.

Issue 6: Impleading necessary parties in an appeal suit for a fair trial
The court underscored the importance of impleading all necessary parties in an appeal suit to ensure a fair trial and proper adjudication of all relevant issues. Failure to include all parties could lead to legal complications and impact the finality of the judgment.

Issue 7: Consequences of not impleading all parties in an appeal suit
The court discussed the consequences of not impleading all parties in an appeal suit, emphasizing that the judgment would remain intact as far as the non-imparted parties were concerned. This could lead to limited res judicata effects and hinder a comprehensive resolution of the legal disputes at hand.