BANKERS EQUITY LIMITED Having Its CENTRAL OFFICE AT DAVIS ROAD, LAHORE
This matter concerns petitions for leave to appeal against a High Court judgment that set aside an order allowing a secured creditor to be impleaded as a defendant in money recovery suits. The core legal question was whether a secured creditor, holding a first charge over the defendant company's assets, qualifies as a "necessary or proper party" under Order I, Rule 10 of the Code of Civil Procedure 1908 in a suit filed by another party against the same debtor. The Supreme Court upheld the High Court's decision, holding that the petitioner was neither a necessary nor a proper party. The Court reasoned that the outcome of the plaintiffs' recovery suits would not adversely affect the secured creditor's existing decree or its prior charge over the assets. Furthermore, the petitioner's presence was not required for the effective adjudication of the issues between the original parties. The key principle laid down is that impleadment under Order I, Rule 10, CPC is restricted to parties whose presence is essential for the complete and effective determination of the questions involved in the suit.
- Is a secured creditor a necessary or proper party to be impleaded in a money recovery suit filed against their debtor?
- Under what circumstances can a third party be impleaded in a suit under Order I Rule 10 of the Code of Civil Procedure 1908?
- Does the existence of a first charge over a defendant's assets automatically entitle a secured creditor to be impleaded in a separate recovery suit against that defendant?
- Order I Rule 10, Code of Civil Procedure 1908
ORDER
KHALIL-UR-REHMAN KHAN, J.- By this order we propose to dispose of three petitions (C.P.L.A. No. 2089-L, 2090-L and,2091-L of 1999) as question involved therein is one and the same.
2. Relevant facts, briefly stated, are that respondent No. 1 (Roohullah Khan in C.P. No. 2089-L/99, Ehsanullah Khan in C.P. No. 2099-L/99 and Shaukatullah Khan in C.P. No, 2091-L/99) had filed three separate suits against respondent No. 2 (M/s. National Sugar Industries Limited) for recovery of money on the allegations that the said respondent had borrowed the amount in the year 1991 subject to the terms agreed between the parties and the said amount was repayable with mark- up at the rate of 13% per annum on six monthly basis and as the amount was not repaid the suits were filed for recovery of the same.
3. M/s. National Sugar Industries Limited, respondent No. 2, in its written statement raised various objections through the validity and the executability of the agreement though the borrowing of the amount was not denied.
4. Learned Trial Court framed necessary issues arising out of the pleadings of the parties and recorded the evidence produced by them. When these suits were at the stage of hearing of arguments for which different dates were fixed, Bankers Equity Limited/petitioner filed an application in each suit under Order I, Rule 10, CPC for being impleaded as a party. These applications were Contested by the plaintiffs/respondent No. 1 in each petition but were allowed by the learned Trial Court vide order dated 11.5.1999. This order was, however, set aside on revision petitions filed by the plaintiffs/respondent No. 1 in each case, by the learned Judge of the High Court vide impugned judgment dated 25.11.1999. Hence these petitions for leave to appeal.
5. The plea of the petitioner before the learned Courts below as well as before us is that it is a secured creditor of M/s National Sugar Industries Limited, the defendant in the suits, having a first charge over its assets and that a decree in the sum exceeding Rs. 56,00,00,000/- (rupees fifty-six Crores) was passed in their favour and against the said defendant/respondent by the Banking Tribunal, Lahore, which amount is payable in accordance with the schedule of repayment laid down by the said Tribunal. It is asserted that in this situation it is interested party and was rightly allowed by the learned Trial Court to be impleaded as a defendant in the suits, ir the interest of justice to look after its interest over assets of the defendant/respondent company.
6. Learned Judge of the High Court was of the opinion that the learned Trial Court by impleading the petitioner as a defendant in the suits has completely misdirected itself as even the assertions made in the applications for impleadment do not make the petitioner a necessary or even proper party to the suits between respondent No. 1 in these petitions and M/s. National Sugar Industries Limited/defendant/respondent No. 2 herein.
This view of the learned Judge of the High Court is perfectly valid as the suits filed by respondent No. 1 (M/s. Roohullah Khan, Ehsanullah Khan and Shaukatullah Khan respectively) even if decreed are not to adversely affect the interest of the Bankers Equity/petitioner as it has already equipped itself with a decree against M/s. National Sugar Industries Limited, the assets of which are under the first charge of the Bankers Equity and as the said decree is to be discharged in accordance with the repayment schedule given by the Banking Tribunal. Plaintiffs/respondent No. 1 in each petition has not even made any application for attachment before judgment of the said assets of the defendant company. Moreover, the presence of the petitioner for determination of the questions raised in the suit is neither required nor is proper nor is necessary. As such there is no basis for allowing the Bankers Equity to join the proceedings of the said suits.
7. Learned Judge of the High Court was perfectly justified in accepting the revision petitions and in dismissing the application under Order I Rule, 10, CPC filed by the petitioner. Leave to appeal is refused and all the three petitions are dismissed.