Case Note & Summary
The petitioner, Engineers Combine, a registered partnership firm, entered into an agreement dated 23-2-2004 with respondent no.1, Goa State Infrastructure Development Corporation Ltd. (a Government company), for construction of a bridge at Pushavati River in Sanguem Taluka. The petitioner alleged breach of contract by both respondent no.1 and respondent no.2, the State of Goa, and filed Special Civil Suit No.3/2008 seeking recovery of Rs.5,85,022/- with interest at 18% from 15-1-2005. Respondent no.2 did not contest the suit, but respondent no.1 filed a written statement taking a preliminary objection of mis-joinder of parties, contending there was no privity of contract between the petitioner and respondent no.2. The trial court framed a preliminary issue: 'Whether the suit has to be dismissed as against defendant no.2, State of Goa, not being a necessary party to the suit.' By order dated 8-10-2008, the learned District Judge-4, Margao decided the issue against the petitioner, holding that respondent no.2 was not a necessary party, and ordered deletion of respondent no.2. The trial court further directed that the suit be presented to the Court of Civil Judge, Senior Division within whose jurisdiction the cause of action arose, under Section 26 of the Civil Court's Act, 1965. The petitioner challenged this order by way of writ petition. The High Court noted that respondent no.1 is a Government company fully owned and controlled by respondent no.2, and that a Government company is a separate legal entity as per Steel Authority of India Ltd. v. Shri Ambica Mills Ltd. (AIR 1998 SC 418). However, the High Court observed that the trial court had not considered whether respondent no.2 was a necessary party for effective relief, especially given the control of the State over the company. The High Court set aside the impugned order and remanded the matter to the trial court for fresh consideration of the preliminary issue, directing that the suit be restored to its original number and that the trial court decide the issue afresh after hearing both sides.
Headnote
A) Civil Procedure - Necessary Party - Mis-joinder - Order 1 Rule 10 CPC - The court considered whether the State of Goa was a necessary party in a suit for breach of contract where the contract was with a Government company fully owned by the State. The trial court had deleted the State as not necessary, but the High Court held that the State may be necessary for effective relief, especially when the Government company is fully owned and controlled by the State. The High Court set aside the deletion and remanded the issue for fresh consideration. (Paras 5-8) B) Government Company - Separate Legal Entity - Lifting the Corporate Veil - The court noted that a Government company is a separate legal entity as per Steel Authority of India Ltd. v. Shri Ambica Mills Ltd. (AIR 1998 SC 418), but observed that when the company is fully owned and controlled by the State, the State may still be a necessary party for effective adjudication. (Para 4)
Issue of Consideration
Whether the State of Goa is a necessary party to a suit for breach of contract where the contract was entered into with a Government company fully owned and controlled by the State.
Final Decision
The High Court allowed the writ petition, set aside the impugned order dated 8-10-2008, and remanded the matter to the trial court for fresh consideration of the preliminary issue. The suit was directed to be restored to its original number, and the trial court was to decide the issue afresh after hearing both sides.
Law Points
- Necessary party
- Mis-joinder of parties
- Government company as separate legal entity
- Section 26 Civil Court's Act 1965
- Order 1 Rule 10 CPC
