Bombay High Court Allows Impleadment and Sets Aside Ex-Parte Order in Service Charges Dispute. Applicant Company Held to be Necessary Party as Successor-in-Interest of Defendant Firm Under Order 1 Rule 10 CPC.

Civil writ petitions challenging orders of the City Civil Court allowing impleadment of a party and setting aside an ex-parte order in a suit for recovery of service charges.

Petitioners (original plaintiffs) sought to quash the trial court orders allowing impleadment of respondent no. 2 and setting aside the ex-parte order against the defendant.

The trial court allowed the applicant company to be impleaded as a party defendant and set aside the order declaring the defendant ex-parte, which the petitioners believed was erroneous.

The City Civil Court passed two orders on 05/10/2018 in Suit No. 6117 of 2007: one allowing Notice of Motion No. 1346 of 2018 for impleadment, and another allowing Notice of Motion No. 1925 of 2017 to set aside the ex-parte order and closed evidence.

Whether the applicant company is a necessary or proper party for adjudication of the suit under Order 1 Rule 10 CPC. Whether the order declaring the defendant ex-parte and closing its evidence should be set aside under Order 9 Rule 7 CPC.

Petitioners argued that there is no privity of contract between them and the applicant, and the applicant is not concerned with the service charges dispute. Petitioners contended that the applicant's certificate of incorporation under Part IX of the Companies Act, 1956 is invalid as Section 565 was not complied with. Respondent no. 2 argued that it is the successor-in-interest of the defendant firm and has taken over its business and liabilities, making it a necessary party. Respondent no. 2 submitted that the defendant firm was dissolved and the applicant took over, which constitutes sufficient cause for setting aside the ex-parte order.

An applicant claiming to be the successor-in-interest of the defendant, having taken over its business and liabilities, is a necessary party under Order 1 Rule 10 CPC for complete and effective adjudication of the suit. The certificate of incorporation under Part IX of the Companies Act, 1956 is prima facie evidence of compliance, and its validity cannot be challenged in an impleadment application. The dissolution of the defendant firm and takeover by the applicant constitutes sufficient cause for setting aside an ex-parte order under Order 9 Rule 7 CPC.

The issue involved in these petitions is :- a) As to whether the impleadment of applicant is necessary for adjudication of the dispute involved in that suit. b) Whether order to proceed Ex-parte need to be set aside. There is no privity of contract between the plaintiffs on one hand and the applicant on the other hand. The applicant can neither be considered as necessary nor proper party. The certificate of Incorporation produced by the applicant cannot be said to be a proper certificate issued under the Part IX of the Companies Act, 1956. On bare reading of that certificate it cannot be said that provisions of Section 565 of the Companies Act were fulfilled either by erstwhile Company/sole defendant or by alleged successor/applicant.

The original plaintiffs filed Suit No. 6117 of 2007 in the City Civil Court at Bombay for recovery of service charges against M/s. Kishore Engineering Co. During the suit, Nak Engineering Company Pvt. Ltd. filed Notice of Motion No. 1925 of 2017 to set aside the order declaring the defendant ex-parte and closing its evidence, and Notice of Motion No. 1346 of 2018 for impleadment. The trial court allowed both motions on 05/10/2018. The plaintiffs challenged these orders by filing Writ Petition No. 3456 of 2019 and Writ Petition No. 3455 of 2019 in the Bombay High Court, which were heard together and dismissed on 21/02/2022.

• Code of Civil Procedure, 1908 (CPC): Order 1 Rule 10, Order 9 Rule 7
• Companies Act, 1956: Section 565, Part IX