Supreme Court Sets Aside High Court Order on Impleadment in Recovery Suit: IL&FS Engineering vs. Bhargavarama Constructions (2021)

Date of the Judgment: 16 December 2021

Citation: Civil Appeal No.7639 of 2021

Judges: M.R. Shah, J. and B.V. Nagarathna, J.

Can a High Court overturn a trial court’s judgment simply because it allowed a new party to be added in an appeal? The Supreme Court recently addressed this question in a case involving a recovery suit. The core issue revolved around whether the High Court was correct in setting aside a trial court’s decree solely because it allowed an application to implead a new party in the first appeal, without examining the merits of the original case. The Supreme Court bench comprised Justices M.R. Shah and B.V. Nagarathna, with the judgment authored by Justice M.R. Shah.

Case Background

IL&FS Engineering and Constructions Company Ltd. (the appellant) filed a suit against M/s. Bhargavarama Constructions and others (respondents 1 and 2) for the recovery of ₹47,90,088, along with 18% interest. The trial court ruled in favor of the appellant, decreeing the suit. The respondents then appealed to the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh.

During the appeal, respondents 1 and 2 filed an application to implead A.P. Transco and MAYTAS Infra Pvt. Ltd. as parties, arguing that the work they were contracted for by the appellant was originally given to the appellant by A.P. Transco. The High Court allowed the impleadment application without providing reasons, and subsequently, set aside the trial court’s decree, remanding the case back to the trial court with directions to allow the newly impleaded party to present evidence. This action by the High Court led to the appellant filing an appeal before the Supreme Court.

Timeline

Course of Proceedings

The trial court had initially decreed the suit in favor of the appellant. On appeal, the High Court allowed an application by the respondents to implead A.P. Transco as a party to the appeal as well as the original suit. The High Court, without discussing the merits of the case, set aside the trial court’s judgment and remanded the matter back to the trial court, directing it to decide the suit afresh after allowing the impleaded party to lead evidence. The Supreme Court noted that the High Court did not provide any reasons for allowing the impleadment or for setting aside the trial court’s decree.

Legal Framework

The Supreme Court considered the following legal framework:

• Section 96 of the Code of Civil Procedure (CPC): This section deals with appeals from original decrees.
• Order XLI Rule 31 of the CPC: This rule outlines the requirements for the judgment of an appellate court, including the need to frame points for determination and provide reasons for the decision.

Arguments

The appellant argued that the High Court erred in setting aside the trial court’s decree without considering the merits of the case. The appellant contended that the High Court’s decision was solely based on the impleadment of A.P. Transco, without any discussion on the merits of the original suit or the appeal. The appellant also pointed out that the plaintiff is the dominus litis (master of the suit) and that no issue of non-joinder of parties was raised before the trial court.

The respondents argued that A.P. Transco was a necessary party to the suit as the original contract was between A.P. Transco and the appellant, and therefore, A.P. Transco should be impleaded in the appeal as well as the original suit.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section, but the core issue was:

1. Whether the High Court was justified in setting aside the trial court’s decree solely on the ground that an application for impleadment was allowed, without considering the merits of the case.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issue:

Authorities

The Supreme Court relied on the following authorities:

• K. Karuppuraj Vs. M. Ganesan, Civil Appeal Nos.6014-6015 of 2021: The Supreme Court cited this case to emphasize that a first appellate court cannot dispose of an appeal without framing points for determination, considering both facts and law, and providing proper discussion and reasons, as required under Section 96 of the CPC and Order XLI Rule 31 of the CPC.

Judgment

The Supreme Court allowed the appeal, setting aside the High Court’s order. The Court held that the High Court erred by setting aside the trial court’s decree solely on the basis of allowing the impleadment application, without considering the merits of the case. The Supreme Court emphasized that the High Court should have examined the merits of the appeal and provided reasons for its decision.

Authorities:

• K. Karuppuraj Vs. M. Ganesan [CITATION]: The Court used this authority to emphasize the procedure to be followed by the first appellate court while deciding an appeal under Section 96 of CPC.

What weighed in the mind of the Court?

The Supreme Court was primarily concerned with the procedural impropriety of the High Court’s decision. The High Court had set aside the trial court’s decree without any discussion on the merits of the case, solely based on the impleadment of a new party. This was seen as a deviation from established legal principles, particularly the requirement for appellate courts to provide reasons and consider the merits of the appeal. The Supreme Court emphasized that the High Court should have followed the procedure laid down in Section 96 and Order XLI Rule 31 of the CPC. The Court also noted that the plaintiff is the dominus litis and that no issue of non-joinder of parties was raised before the trial court.

The Supreme Court’s reasoning was primarily based on ensuring that appellate courts adhere to established procedures and consider the merits of the case before setting aside a trial court’s decree. The Court emphasized that the High Court’s decision was not in accordance with the principles of natural justice and the provisions of the CPC.

The Supreme Court quoted the following from the judgment:

• “This is not the manner in which the High Court was required to deal with the first appeal arising out of the judgment and decree passed by the trial court.”
• “There cannot be an automatic allowing of the appeal and quashing and setting aside the judgment and decree passed by the trial court without any further entering into the merits of the appeal.”
• “The High Court shall consider whether such an application in the appeal preferred by the original defendants would be maintainable or not and if so under which provision of Code of Civil Procedure it would be maintainable.”

Key Takeaways

• A High Court cannot set aside a trial court’s decree solely on the basis of allowing an impleadment application in a first appeal.
• Appellate courts must consider the merits of the case before setting aside a trial court’s decree.
• Appellate courts must provide reasons for their decisions, especially when setting aside a trial court’s decree.
• The plaintiff is the dominus litis, and the issue of non-joinder of parties should be raised before the trial court.

Directions

The Supreme Court set aside the High Court’s order and remanded the matter back to the High Court to decide the impleadment application and the first appeal in accordance with the law and on its own merits. The High Court was directed to consider whether the impleadment application was maintainable in the appeal preferred by the original defendants and, if so, under which provision of the Code of Civil Procedure.

Development of Law

The ratio decidendi of this case is that a first appellate court cannot set aside a trial court’s decree solely on the basis of allowing an impleadment application without considering the merits of the case. This judgment reinforces the importance of following the procedure laid down in Section 96 and Order XLI Rule 31 of the CPC. It clarifies that appellate courts must provide reasons for their decisions and consider the merits of the appeal before setting aside a trial court’s decree. This also reinforces the principle that the plaintiff is the dominus litis.

Conclusion

In conclusion, the Supreme Court’s decision in IL&FS Engineering and Constructions Company Ltd. vs. M/s. Bhargavarama Constructions & Ors. underscores the necessity for appellate courts to adhere to procedural norms and consider the merits of a case before overturning a trial court’s judgment. The High Court’s action of setting aside the trial court’s decree solely on the basis of allowing an impleadment application was deemed improper, emphasizing that appellate decisions must be grounded in a thorough examination of the case’s merits and not on procedural technicalities alone. The Supreme Court’s decision ensures that the first appeals are decided in accordance with the law.