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Basic principles to be followed by court while deciding application for addition of parties

IN THE HIGH COURT OF BOMBAY

Chamber Summons No. 326 of 2000 in Suit No. 2792 of 2000

Decided On: 27.03.2002

P.M.A. Hakeem,
Vs.
U.P. Co-operative Spinning Mills Federation Limited and Ors.

Hon’ble Judges/Coram: S.A. Bobde, J.
Citation: 2002(3) ALLMR 389

1. This Chamber Summons is taken out by a Staff Association called “The Co-operative Textiles Mills Limited Staff Association” for being impleaded as a defendant in the suit filed by Shri P.M.A. Hakeem, Chairman of the Maharashtra State Road Transport Corporation and other Trustees against the U.P. Co-operative Spinning Mills Federation Limited (hereinafter referred to as “the Federation”). The suit is for a recovery of approximately a sum of Rs. 12 crores which are meant for the terminal benefits of the employees of the Maharashtra State Road Transport Corporation out of which Rs. 10,52,00,000/- is due. The amount is invested by the plaintiffs in bonds issued by the federation.

2. The Federation has about 11 member mills of which one of the mill is at Bulundshar. The applicant who seeks to be impleaded as a defendant is not even one of the member mill of the defendant Association but claims to be a Staff Association of one of the member Mill i.e. the Bulundshar.

3. This Court has passed an injunction on 30th June, 2000 which was confirmed on 3rd December, 2001 in terms of prayer Clauses (B) and (C). The effect of injunction admittedly is to restrain the defendants Federation from disposing of, parting with or encumbering any of its properties.

4. The main ground urged on behalf of the applicant is that they would be entitled to payment under a Voluntary Retirement Scheme (VRS) from the Bulundshar Mill if the Government of U.P. gives it a loan. According to the applicants/interveners the loan cannot be taken by the Federation and thereafter paid by the federation to the Bulundshar Mill for the VRS because one of the terms of the proposed loan is that the Federation would have to make repayment to the Government from the amount received from the disposal/sale of the two spinning mills including the one situated at Bulundshar.

5. The only evidence on record is Exhibit B-1 addressed by the Dy. Secretary, U.P. Government to the Director, Handloom and Textile Industry. Mr. Govilkar, learned Counsel for the defendants states that the loan has not even been received by the defendants federation till date.

6. Having regard to these circumstances, I am of the view that the applicant Staff Association has no direct or substantial legal interest in the present suit which is filed by the plaintiffs i.e. the Trustees of the MSRTC against the Federation for recovery of a sum of money. The Staff Association or the workers have no direct or substantial legal interest at stake in the suit. Whether the suit is decreed or otherwise it would not directly or substantially affect any of the rights of the applicant Staff Association. I see no substance in the contention that if the Staff Association is not allowed to be impleaded as a party it would disable their employer from repaying the loan which is promised to their federation by the U.P. Government on the ground that one of the terms on which the Government proposed to give loan is the fact that the repayment would take place upon disposal/sale of assets of the employers of the applicant. It seems that the argument is based on the fact that this Court has granted an injunction restraining the defendant Federation from disposing of any of its assets and that the injunction would deter the Government of U.P. from giving a loan to the Federation.

7. Mr. Jha, learned Counsel for the applicant, relied on a judgment of this Court in State Bank of India v. The Podar Mills Limited and others MANU/MH/0018/1989 : AIR1989Bom21 , in which this Court held that in a suit between the company and its creditors the workers of the company can be added as necessary and proper parties where the decree in favour of the plaintiffs deprives the workers of some benefits. The situation in the present case is very different. The present application for impleadment is not being made by the workers of a company which is being sued by its creditors. It is made by the workers/staff association of one of the member Mill of a Federation against whom the present plaintiffs have filed a suit. The decision relied upon has no application to the present case.

8. In fact the more appropriate case seems to be the decision of this case (sic Court) in State Bank of India v. The Podar Mills Limited and others MANU/MH/0064/1991 : AIR1991Bom370 , in which a Division Bench of this Court considered the question whether an application for impleadment by the trade union should be allowed in a suit filed by the State Bank of India against the Podar Mills Limited and the National Textile Corporation to recover a sum of Rs. 14.76 crores advanced by the Bank to the Mill. The workmen claimed that they had a direct interest in the subject matter of the suit, limited though it was to the sale of the mortgaged and hypothecated property. They further contended that it was possible for them to revive and revitalise the undertaking and make it a profitable enterprise. Therefore, they contended that they were a necessary party. The Division Bench of this Court recorded the statement on behalf of the Counsel for the workmen that the workmen could not help in answering the issued in the suit. Relying on the decision of the Supreme Court in Udit Narain Singh v. Board of Revenue MANU/SC/0045/1962 : AIR1963SC786 , in which the Supreme Court said that a necessary party was one without whom no order could be made effectively and a proper party was one in whose absence an effective order could be made but whose presence was necessary for a complete and final decision on the question involved in the proceedings, the Division Bench came to the conclusion that the workmen did not satisfy the requirement. It, therefore, concluded that on principle the workmen union was neither necessary nor a proper party. I find that judgment squarely applicable to the present case.

9. If the applicant’s arguments were to be accepted it would mean that in a pending suit for recovery of an amount due, in which a Court has passed an injunction restraining defendants from disposing of its assets the Staff Association of one of the defendants would have a right to enter the arena and contest the litigation on the ground that a certain financier will not advance a loan to the defendant unless his assets, i.e. of their employer can be used for repayment of loan and that the party has an interest in the loan being granted, the interest being that it would get some benefit from it. This in my view is a remote and unsubstantial interest. Such a party cannot be treated as a necessary or a proper party. Mr. Andhyarujina, learned Counsel for the plaintiff referred to a decision of the Supreme Court in Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay and others MANU/SC/0493/1992 : [1992]2SCR1 , where the Supreme Court has observed that a party which seeks to be impleaded in a litigation may have an interest in supporting one or the other side “but that does not amount to any legal interest in the subject matter in the sense that the order, if any, either in favour of the appellant or against the appellant would be binding on this respondent” i.e. the party seeking to be joined. Applying the ratio of this decision to the present case, it is clear that though the Staff Association may have an interest in receiving VRS which is proposed to be funded by a loan from the Government of U.P. to the federation and that therefore the property of the Federation must not be encumbered for the repayment of the loan, it cannot be said that the Staff Association has such a legal interest in the subject matter that the order, if any, in favour of the plaintiff or against it would be binding on the respondent.

10. A party seeking to be impleaded as a party to a suit must demonstrate that it has a direct and substantial interest in the subject-matter of the suit and that such interest would be affected directly by the decree that may be passed in the suit or that its presence as a party to the suit must be necessary for answering the issues arising in the suit. These factors must demonstrably exist before the party applying can be allowed to be impleaded as a party to the suit. These are factors which must be taken into account while considering whether the presence of a party is necessary before an effective order is made or is proper for a complete and final adjudication of the suit. In the present case, the applicant does not answer any of the descriptions above.

11. Chamber summons is accordingly dismissed. No order as to costs.

P.A. to give ordinary copy of this order to the parties concerned.

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