SAMPO FROZEN FOODS Vs. KARNATAKA BANK LTD

JUDGEMENT

(1.) The short point that arises for consideration is: What are the conditions to be satisfied for impleading one as an additional defendant in a suit under O.1 R.10(2) of the Code of Civil Procedure, 1908 even if the plaintiff opposes Defendants 1 to 4 in a suit for realisation of amounts advanced as shipping loan, term loan and packing credit, filed by the 1st respondent Bank are the petitioners in the Civil Revision. The grievance of the petitioners is against the order of the Trial Court dismissing their application to implead the Export Credit and Guarantee Corporation Ltd. as an additional defendant in the suit. The petitioners are exporters. The 1st respondent Bank had insured with the ECGC the credit advanced to the petitioners for rupees seven lakhs under the Packing Credit Guarantee (PC). The petitioners in their written statement filed in the suit disputed the claims made in the plaint on various grounds. It is stated in the written statement that the default in repayment arose because of the abeyance in export due to reasons beyond the control of the defendants and that the credit has been insured with the ECGC. A contention that because of the above insurance a substantial portion of the plaint claim stands discharged, has also been taken. In the written statement the defendants did not raise a contention that the ECGC should be impleaded or that the suit was not maintainable without the ECGC on the party array. No issue was raised regarding the maintainability of the suit without the ECGC as a defendant. After the suit was included in the ready list the defendants filed the impleading application in question. The 1st respondent plaintiff filed a counter affidavit contending that the ECGC is neither a necessary nor a proper party to the suit and that it is willing to take the risk, if any, in not impleading the ECGC and pointing out that the application for impleading was filed for delaying the trial of the suit. The Trial Court dismissed the application for impleading. It was under the above circumstances that defendants 1 to 4 approached this Court with this Civil Revision.

(2.) Shri N. Viswanatha Iyer, the learned counsel for the petitioners, contended that the credits given to the petitioners exporters were insured with ECGC under the Packing Credit Guarantee (PC) and the 1st respondent Bank was entitled to recoup the loss resulting from the abeyance of the business of the petitioners and hence the ECGC is a necessary party to the suit. According to the learned counsel, under O.1 R.10(2), the Trial Court was bound to implead the ECGC as a defendant as their presence is necessary for the effective and complete adjudication and settlement of the questions involved in the suit. Shri C. P. Damodaran Nayar, the learned counsel for the 1st respondent bank, contended that the Packing Credit Guarantee is for the benefit of the bank who is the insured and as per the scheme, the ECGC will give cover for 66.23 per cent of the maximum liability for loss, if any, sustained by the bank due to failure of the exporter to pay the bank the insured debt. It was then contended that the Packing Credit Guarantee did not absolve the petitioners from the liability to repay the loan given to them and as per the scheme the respondent bank was bound to sue the petitioners, realise whatever that can be realised and share the same between the bank and the ECGC in the proportion of 1:2. The Packing Credit Guarantee issued by the ECGC in this case was made available to the court by the learned counsel. According to the learned counsel, the presence of the ECGC is not necessary for deciding the real controversy involved in the case and hence the 1st respondent plaintiff cannot insist that ECGC should be impleaded as a defendant.

(3.) O.1 R.10(2) of the Code of Civil Procedure, 1908, reads: