TMI Blog2017 (9) TMI 1977X X X X Extracts X X X X X X X X Extracts X X X X ..... en the subject of some judicial deliberation in other common law jurisdictions - A party must be shown to have known that they were inducing a breach of contract. It is not enough that a defendant knows that he is procuring an act which, as a matter of law or construction of the contract, is a breach, nor that he ought reasonably to have known that it is a breach. It was only on 4th August, 2005 that the present suits came to be filed by the appellants in which a prayer for injunction was made with a view to enforce the terms of clauses 15 and 20 of the agreement which incorporated negative covenants prohibiting mining operation by anyone else except the appellants, or without their permission. The use of the words during the subsistence of this agreement in clause 15, and during the pendency of this indenture in clause 20 of the agreement is significant. In the absence of a document renewing the original agreement for a further period of 5 years and in the absence of any declaration from a court of law that the original agreement stood renewed automatically upon the appellants exercising their option for grant of renewal, it was held that the appellants cannot be granted r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducing one person not to contract with other may, however, become tortious if unlawful means are used or threatened. 5. In fact, the averments made in the plaint describing the later developments with regard to the shareholding of the plaintiff No. 1 company itself would indicate that the plaintiffs do not have in support of the reliefs of specific performance of the alleged pre-incorporation agreement against the defendant No. 1 nor does the plaint discloses any such cause of action in relation to the said relief. In amplifying Mr. Chidambaram submits that neither MOA nor AOA of the plaintiff No. 1 contain any terms reflecting the alleged pre-incorporation agreement. At the relevant time the defendant No. 1 held 75% shareholding in the plaintiff No. 1 company through a holding company named Benhill Finance Limited. In August, 2002, Benhill Finance Limited ceased to be a shareholder of the plaintiff No. 1 company. The entire shareholding of Benhill Finance Limited in the plaintiff No. 1 company was transferred by way of gift to the plaintiff No. 2 and 3, who became 100% shareholders of the plaintiff No. 1. The plaintiff Nos. 2 and 3 continued to be 100% shareholders of the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any previous discussions and representations. 9. If the plaintiffs still seek to prove that paragraph 6 is the pre-incorporation agreement, the same would be barred in law because no evidence is admissible of such oral agreement in view of the written Shareholders' Agreement. The learned Senior Counsel has referred to Sections 90 and 91 of the Evidence Act, 1872 in this regard. 10. Mr. Chidambaram submits that the only agreement produced with the plaint is a Shareholders' Agreement dated 21st January, 2010 along with an Amendment No. 1 to the said agreement dated 29th February, 2016. The Shareholders' Agreement along with the Amendment No. 1 have been thoroughly analysed by this Court while considering G.A. No. 117 of 2017. This Court has made very important observations/findings based on the document being the Shareholders' Agreement, as amended which are summarised as follows:- (a) The Shareholders' Agreement dated 21st January 2010 would be considered to be the whole agreement superseding all other agreements. The Shareholders' Agreement shall be treated to be the whole agreement superseding all earlier agreements. (b) The reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Mr. Chidambaram has referred to the decision of the Hon'ble Supreme Court in Hardesh Ores Pvt. Ltd. v. Hede Company, reported at (2007) 5 SCC 614, paragraph 30, 31, 33, 37 and 39 and submitted that it is well established that for enforcement of the negative covenant, it presupposes the existence of a subsisting agreement. Accordingly prayers (g) (q) and (s) based on such negative covenant which does not exist, cannot be granted. 16. It is submitted that the contention of the plaintiffs that the defendant No. 1 has colluded and conspired to ensure that Arcelor Mittal Companies do not procure the goods and services from the plaintiff No. 1 company but procure the same form some other companies is vague and without any particulars. 17. Mr. Chidambaram has referred to Order VI Rule 4 of the Code of Civil Procedure Code and submits that it is well settled that allegations of such nature has to be supported by sufficient particulars and mere use the words fraud, collusion, conspiracy and fraudulent transactions without any foundational pleadings and particulars does not constitute a cause of action. The learned Senior Counsel has referred to the decision of the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders placed by the Arcelor Mittal Companies on the plaintiff No. 1 or any of the supply purchase orders placed on the defendant Nos. 39 to 42 by the plaintiff No. 1. In fact, all the purchase orders and supply orders have been performed. 20. It is not the case of the plaintiffs in the plaint that defendant No. 1 has procured the breach of the Shareholders' Agreement dated 21st January 2010 as amended by Amendment No. 1 dated 29th February, 2016. In fact the Shareholders' Agreement has been terminated by the defendant No. 3. 21. Furthermore, it is an established position that there is no tort of wrongfully inducing a person not to enter into a contract as held in Midland Cold Storage Ltd. v. Steer Ors. reported at 1972] Ch. 630 at 645 and referred to in Bullen Leake Jacob's Precedents of Pleadings (supra). 22. Furthermore, the relief of damages at prayer (I) of ₹ 750 crores has been claimed only against the defendant Nos. 2 to 38 and not against defendant No. 1. As regards the relief of damages sought at prayer (n) it refers to paragraphs 38 to 47 which primarily deal with defendant Nos. 39 to 42 and not defendant No. 1. The reference to defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to procure a breach of contract because no existing contract has been breached. (iii) The plaintiffs cannot ask the court to invent a contract and complain either of its breach or tortious interference to procure a breach thereof. 26. Per contra, Mr. S.K. Kapoor, the learned Senior Counsel appearing on behalf of the plaintiffs submits that the plaint discloses several causes of action against the defendant No. 1. Firstly, the plaintiffs have pleaded that a pre-incorporation agreement was made by and between the plaintiff No. 2 and the defendant No. 1 which contract was implemented for several years. The plaintiffs' alleged breach of that contract by the defendant No. 1 and in consequence of the breaches of the pre-incorporation contract committed by the defendant No. 1, the plaintiffs have suffered losses and damages. Mr. Kapoor has referred to Paragraphs 6 to 9, 13, 14, 16, 24, 38, 45, 49, 50 and prayers (a), (m), (n), (q), (s), (u) and (w) of the plaint. 27. It is submitted that the suit is first and foremost a suit against the defendant No. 1 to enforce a pre-incorporation contract made with him. The first plaintiff is a company. The second plaintiff is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for nearly two decades. In fact, the record manifests that the buying and selling were indeed warranted by the terms of the incorporation of the company. 30. Apart from the cause of action against defendant No. 1 on the basis of breaches of the pre-incorporation contract, which per se is more than sufficient to defeat the application, the plaintiffs have extensively pleaded other causes of action also against him in respect of economic torts in which he was a principal wrongdoer. These causes of action against the defendant No. 1 are based on elaborate facts which have been fully narrated in the plaint. 31. The wrongful acts according to Mr. Kapoor are:- (i) Inducing breaches of contracts with third parties; (ii) Interfering with performance of contracts by third parties; (iii) Intimidation in collusion with third parties; (iv) Conspiracy in agreement with third parties and (v) Interference with trade or business by unlawful means in concert and conspiracy with third parties. 32. Mr. Kapoor has relied upon extracts from Bullen Leake, 12th Edition, Pages 500-501 and 15th Edition, V-I, Pages 623-624 and Clerk Lindsell on Torts, Passag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lawfully induced or procured the breaches of contracts between the plaintiffs and third parties, namely, defendant No. 39 to defendant No. 42 and each of them. Similarly, Paragraphs 45(hh) and 45(II) of the plaint would demonstrate that defendant No. 1 has deliberately and directly interfered with the performance of the contracts between the plaintiffs and the defendant No. 39 to defendant No. 42 by unlawful means. The defendant No. 1 was guilty of the tort of intimidation and using coercion by unlawful means to cause harm to the plaintiffs. The defendant No. 1 conspired with the defendant No. 2 to defendant No. 42 to do various acts by unlawful means and caused injuries and damages to the plaintiffs as stated in Paragraph 45(hh)(ii)(kk) and Paragraph 46. Mr. Kapoor has referred to Paragraphs 45(II), 48, 49 and 56 of the plaint and submits that in the said paragraphs the plaintiff has categorically stated that the defendant No. 1 caused intentional harm without any just excuses by using unlawful means to the plaintiffs. All these wrongful acts were civil wrongs that defendant No. 1 perpetrated in concert and conspiracy with the other defendants and these economic torts and/or indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... picentre of the dispute and the grievances of the plaintiffs are essentially against him since the other defendants are only acting at his behest. The causes of action are against the defendant No. 1 individually in part and jointly with regard to other comprehensive pleas. 43. The plaint must conform to Order 7 Rule 1 of the Code of Civil Procedure. It is essential that a plaint must disclose a cause of action and a statement to the effect that it is not barred by limitation. The cause of action is essentially a bundle of facts to be stated in the plaint which if proved at the trial would result in a decree being passed in favour of the plaintiff. 44. In (1988) QBD 128, Lord Esher M.R., defined cause of action to mean every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved. 45. Fry L. J., agreed and said :- Everything which, if not proved, gives the defendant an immediate right to judgment must be part of the cause of action. 46. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Garner, the word demurrer has been described as:- Demurrer. [Law French demorer to wait or stay ] (16c) A pleading stating that although the facts alleged the facts alleged in a complaint may be true, they are insufficient for the plaintiff to state a claim for relief and for the defendant to frame answer. In most jurisdictions, such a pleading is now termed a motion to dismiss, but demurrer is still used in a few states, including California, Nebraska, and Pennsylvania. (See Pleading (quot.). Cf. Denial (3). The word 'demurrer,' derived from the Latin demorari, or the French demorer, meaning to 'wait or stay', imports that the party demurring waits or stays in his proceedings in the action until the judgment of the court is given whether he is bound to answer to so insufficient a pleading. Each party may demur to what he deems an insufficient pleading of the other. The demurrer was general when it was to matter of substance; it was special when it was made to matter of form, and must specifically point out the defect. Edwin E. Bryant, The Law of Pleading Under the Codes of Civil Procedure 15 (2d ed. 1899) 52. The Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction of the Delhi High Court and also that Respondent No. 2 did not carry out business within the jurisdiction of the said High Court. Following the same principle in Indian Mineral Chemicals Co. v. Deutsche Bank (2004) 12 SCC 376 (SCC paras 10 and 11), it was observed that the assertions in a plaint must be assumed to be true for the purpose of determining whether leave is liable to be revoked on the point of demurrer. 15. The principle underlying clause (d) of Order 7 Rule 11 is no different. We will refer here to a recent decision of this Court rendered in Popat and Kotecha Property v. State Bank of India Staff Assn. (2005) 7 SCC 510 where it was held as under in para 10 of the report: (SCC p.515) 10. Clause (d) of Order 7 Rule 7 speaks of suit, as appears from the statement in the plaint to be barred by any law. Disputed questions cannot be decided at the time of considering an application filed under Order 7 Rule 11 CPC. Clause (d) of Rule 11 of Order 7 applies in those cases only where the statement made by the plaintiff in the plaint, without any doubt or dispute shows that the suit is barred by any law in force. 16. It was emphasized in para 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscloses no cause of action, it is obligatory upon the Court to reject the plaint as a whole under Order 7 Rule 11 of the Code, but the rules does not justify the rejection of any particular portion of a plaint. Therefore, the High Court therein could not act under Order 7 Rule 11(a) of the Code for striking down certain paragraphs nor the High Court could act under Order 6 Rule 16 to strike out the paragraphs in the absence of anything to show that the averments in those paragraphs are either unnecessary, frivolous or vexatious, or that they are such as may tend to prejudice, embarrass or delay the fair trial of the case, or constitute an abuse of the process of the Court. In ITC Ltd. v. Debts Recovery Appellate Tribunal reported in (1998) 2 SCC 70 it was held that the basic question to be decided while dealing with an application filed by the defendant under Order 7 Rule 11 of the Code is to find out whether the real cause of action has been set out in the plaint or something illusory has been projected in the plaint with a view to get out of the said provision. In Saleem Bhai v. State of Maharashtra reported in (2003) 1 SCC 557 this Court has held that the trial court can exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efault, undue influence or of the same nature. So long as the plaint discloses some cause of action which requires determination by the Court, the mere fact that in the opinion of the Judge the plaintiff may not succeed cannot be a ground for rejection of the plaint. 55. Incidentally, the said decision has also considered the celebrated decision of the Hon'ble Supreme Court in T. Arivandandam v. T.V. Satyapal reported in (1977) 4 SCC 467 which was followed in a number of subsequent decisions where the Hon'ble Supreme Court called upon all Courts to nip it in the bud vexatious and meritless litigations. 56. The said decision was also referred to and relied upon in N.V. Srinivasa Murthy Anrs. v. Mariyamma (dead) by proposed Lrs. Ors. reported at 2005 (5) SCC 548, Paragraphs 16 and 17 which states:- 16. The High Court does not seem to be right in rejecting the plaint on the ground that it does not disclose any cause of action . In our view, the trial court was right in coming to the conclusion that accepting all averments in the plaint, the suit seems to be barred by limitation. On critical examination of the plaint as discussed by us above, the suit se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true. 59. In Bijoy Nagar Tea Company Ltd. v. Narsing Dasgupta Ors. reported at 2008 (1) CHN 98(Cal), a Co-ordinate Bench of this Court has expressed similar views. It is stated:- 38. While considering an application for rejection of plaint under Order VII Rule 11 of the Code of Civil Procedure, the Court is required to confine itself within the plaint. Not a casual approach or a formal reading, but a meaningful reading of the plaint is the demand of the statute. 39. The Court cannot be necessarily burdened with luxury litigation. It has statutory obligation to search, screen and then, eliminate vexatious or mala fide, litigation. It cannot be afford to remain a passive onlooker while coming across a case which is filed in order to harass the opponent and in the process to derive undue advantage - without having any 'cause of action' in the true sense. 40. Borrowing expression from Lord Denning, it can be said that the Court must act as 'bold spirit' and not as 'timorous soul'. 60. For rejection of plaint under Order 7 Rule 11 only contents of the plaint have to be seen and read as a whole and nothing else. As long as the plaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that all supplies should be routed through the plaintiff No. 1. 65. The second cause of action is that the defendant Nos. 2 to 38 being the alter ego of the defendant No. 1 or under its absolute control is acting in derogation of the existing terms and conditions of the agreement at the instance and behest of the defendant No. 1. In short, the allegation is that the defendant No. 1 is procuring a breach of contract between the plaintiffs and the said defendants. The third cause of action is procuring a breach of contract with the third parties, namely, defendant Nos. 39 to 42. In short the cause of action against the defendant No. 1 is personal on tortious interference to procure a breach of contract. 66. The learned Senior Counsel for both sides have relied upon extracts from Bullen Leake Jacob's Precedents of Pleadings, Fourteenth Edition, Vol.2 (2001) paragraphs 51-01 and 51-05 at pages 833 and 834 Paragraphs 51-3 and 51-05 and Clerk Lindsell on Torts, Passages from Chapter-XXIV, Page 1687. 67. The torts of procuring a breach of contract, intimidation, unlawful interference and conspiracy are now generally described as economic torts . Lord Neuberger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unfair competition , even where one person intends harm to his rival's economic interests. (Warnink (Erven) BV v. Townend Sons (Hull) Ltd. (1979) A.C. 731, HL). That a breach of contract is unlawful in the sense that it involves the violation of a legal right there can be no doubt (ibid. at 1201 per Lord Hodson); and to draw the line... between contract and tort seems to be inconsistent with the principle that underlies Lumley v Gye (ibid. at 1234 per Lord Pearce). Lord Devlin could find nothing to differentiate a threat of a breach of contract from a threat of physical violence or any other illegal threat [1964] A.C. 1129 at 1209. The two causes of action (for breach of contract - actual or anticipatory - and for intimidation) are in law quite independent ; so that in no circumstances does C sue on B's contract. The cause of action arises not because B's contract is broken but because it is not broken; it arises because of the action which B has taken to avert the breach. (ibid. at 1207 and 1208). But there have been judicial warnings that new forms of tort may develop , or that the ambit and ingredients of torts of conspiracy and unlawful interference may h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential ingredients are the knowledge and intention. An act of inducement is not by itself actionable. (See per Lord Devlin in Rookes v Barnard, (1964) AC 1129 at 1212) The procurer must act with the requisite knowledge of the existence of the contract and intention to interfere with its performance: a two-fold requirement . (per Lord Diplock in Merkur Island Shipping Corp v Laughton [1983] 2 A.C. 570 at 608] The plaintiff must show that there was intentional invasion of its contractual rights and not merely that the breach of contract was the natural consequence of the defendant's conduct; he must show that the breach of contract was an end in itself or the means to an end. (OBG Ltd. v Allan). The defendant must be shown to have knowledge of the existence of a contract; but in many cases a third party may be deemed to know of the almost certain existence of a contract and indeed of some of its likely terms (per Neill L.J. in Middlebrook Mushrooms Ltd. TGWU). The defendant need not know of the precise terms to be liable, for given that he knew of the existence of the contract, the test of his intention is objective. (Greig v Insole [1978] 1 W.L.R. 302 at 337-338). It is, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimant, by the defendant's wrong (and not the closeness of the connection between the defendant's wrong and the claimant's loss). (ibid. at 269) 74. The indeterminate ambit of unlawful means thus remains one of the principal causes of uncertainty as to the potential scope of liability under this tort. The issue has been the subject of some judicial deliberation in other common law jurisdictions. In Scotland, in McLeod v Rooney, Lord Glennie concluded from an extensive review of the speeches in OBG Ltd. v Allan that the essential aspect [of the tort] is that the loss is caused to the claimant through a third party on whom the defender has unlawfully acted. That is the control mechanism. The inquiry focuses on the nature of the disruption caused as between the third party and the claimant rather than on the directness of the causative link between the defender's wrong and the claimant's loss. ([2009] CSOH 158; 2010 S.L.T. 499 at 18) 75. A party must be shown to have known that they were inducing a breach of contract. It is not enough that a defendant knows that he is procuring an act which, as a matter of law or construction of the contract, is a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some unlawful acts which interferes in B's due performance of his contract with C as was intended. 82. In Greig v. Insole, (1978) 3 All ER 449, five conditions have laid down that are required to be fulfilled by the plaintiff in a suit for interference with a subsisting contract. First, there must be either (a) 'direct' interference with performance of the contract or (b) indirect interference with performance coupled with the use of unlawful means. Secondly, the defendant must be shown to have knowledge of the relevant contract; but it is not necessary that he should have known its precise terms. (Emerald Construction Co. Ltd. v. Lawthien, (1966) 1 WLR 691). Thirdly, he must be shown to have had the intent to interfere with it. Fourthly, the plaintiff must show that he has suffered special damage, that is, more than nominal damage. Fifthly, so far as is necessary, the plaintiff must successfully rebut any defence based on justification which the defendant may put forward. 83. At this stage, however, the Court is only required to find out if the necessary ingredients of such economic tort constituting the cause of action are present in the plaint and not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter seen as cases of causing loss by unlawful means. More recent authorities have expressly confirmed that the tort is limited to inducement of a breach of contractual obligations. To prevent the performance of a contractual obligation is not the same thing in law as inducing its breach. The former may give rise to the tort of causing loss by unlawful means; the latter requires the defendant's conduct to have operated on the will of the contracting party: OBG per Lord Nicholls at paras 174-180 and discussion Mertez Investment NV v ACP Ltd. [2008] Ch 244 at paragraphs 129-140,, 177. 86. Following the OBG case referred to above, the essential elements of this tort have been identified as follows: (1) Use by the defendant of unlawful means, thereby (2) Interfering with the actions of a third party in relation to the claimant. (3) Intention to cause loss to the claimant. (4) Damage. 87. Per Lord Hoffman in the OBG case at paragraphs 45-47. In Aasia Industrial Technologies v. Ambience Space Sellers Ltd. And Ors. reported at (1997) 99 BOM LR 613 it is stated:- 15. A reference may also be made to the observation of Lord Denning MR in Torquay Hote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terfering with the plaintiff's contract, or that he acted without malice or in good faith. It is enough to show that the defendant did an act which must damage the plaintiff; it need not be proved that he intended to do so. It is certain that justification is capable of being a defence to this tort, but what constitutes justification is incapable of exact definition. It has been said that regard must be had to the nature of the contract broken, the position of the parties to the contract, the grounds for the breach, the means employed to procure it, the relation of the person procuring it to the person who breaks the contract, and the object of the person procuring the breach. In Midland Cold Storage Ltd. v. Steer Ors. reported at [1972] 1 Ch. 630 It is stated:- Lord Esher M.R., at p. 723, stigmatised the distinction between inducing a breach of contract and inducing a person not to enter into a contract as being rather a fine distinction ; and he refused to accept it. Lopes L.J. took a similar view, but A.L. Smith L.J. reserved the point. This case, of course, supported Mr. Campbell. What he relied upon in J.T. Stratford Son Ltd. v. Lindley [1965] A.C. 269 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of course in relation to trade disputes or (No. 2) industrial disputes this must be read subject to section 1 of the Trade Disputes Act, 1906 and section 132(1) of the Industrial Relations Act, 1971 respectively, making not actionable in tort an agreement or combination to do an act which would not be actionable in tort if done without such an agreement or combination. As the authorities stand, I am certainly not prepared to hold on motion that, conspiracy or unlawful means apart, there is a tort of wrongfully inducing a person not to enter into a contract. Unless hedged about with many restrictions, such a tort would have an extremely wide ambit that would be likely to work as much injustice as justice. 88. Mr. Chidambaram submits that the allegation of fraud, conspiracy and unlawful means against the defendant No. 1 are not in accordance with Order 6 Rule 4 of the Code of Civil Procedure. There cannot be any doubt that Order 6 Rule 4 requires that complete particulars of fraud shall be stated in the pleadings. The particulars of alleged fraud which are required to be stated in the Plaint will depend upon the facts of each particular case and no abstract principle can be lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that by no means requires that every puzzling artifice or contrivance restored to by one accused of fraud must necessarily be completely unravelled and cleared up and made plain before a verdict can be properly found against him. If these were not so, many a clever and dexterous knave would escape. 92. The plaintiff has given sufficient particulars of fraud, conspiracy and unlawful means whether ultimately the plaintiff would be able to prove such acts at the trial are wholly immaterial. 93. The plaintiff in paragraph 45 of the Plaint has alleged that in utter breach and gross violation of concluded agreements, the defendant Nos. 1 to 38 on the one hand including all the AM Companies and defendant Nos. 39 to 42 on the other, clandestinely on and from the month of April, 2016 began to have various completely illicit negotiations, dealings, and transactions so as to circumvent and abrogate the subsisting contractual rights and entitlements of the plaintiff company. Particulars of such wrong doings are mentioned in the sub-paragraphs. There is a categorical assertion in Paragraph 45(hh) that on and from the month of April, 2016, all the AM companies around the world includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not disclosed. In such facts and circumstances it was held that when the document which forms the basis of the claim in the suit is not produced the plaint can be rejected for nondisclosure of cause of action. 97. In Hardesh Ores (P) Ltd. (supra), the plaintiff failing to produce any document showing renewal of lease after it had expired the plaint was dismissed. In the said matter, the appellant-plaintiffs did exercise their option under the original agreement and claimed renewal. The respondents denied the appellant's right to claim renewal in express terms and also unequivocally stated that the agreement did not stand renewed as contended by the appellants. Thus, a cause of action accrued to the appellant-plaintiffs when their right of renewal was denied by the respondents. This happened in December 2001 and, therefore, within three years from that date they ought to have taken appropriate proceedings to get their right of renewal declared and enforced by a court of law and/or to get a declaration that the agreement stood renewed for a further period of 5 years upon the appellants' exercising their option to claim renewal under the original agreement. The appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection relates to pre-incorporation contracts. Where the promoters of company, that is, the persons who were engaged in setting up the company entered into contracts with parties would procure its formation and such contracts are within the limits of the objects of the company, then the company after its incorporation may sue to enforce the contracts and the other contracting party cannot raise any objection on the ground of privity. Conversely, the company if it ratifies such contract is bound by its obligation. This clause is conversed to Clause (e) of Section 19 of the Specific Relief Act on which Mr. Kapoor has relied on behalf of the plaintiffs. Mr. Kapoor has emphasized on the expression warranted by the terms of the incorporation appearing in the said section and has argued that continuous support by the defendant No. 1 prior and after incorporation of the plaintiff No. 1 and its assurance that all supplies for the AM Companies would be procured solely through the plaintiff No. 1 are now being breached by the defendant No. 1. The other way of looking at is that if a situation arises as to whether the transactions made by the company are ultra vires for which the purposes f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
