2026 INSC 8 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs. OF 2026

(Arising out of SLP (C) Nos. 6024-6025 OF 2022)

NAK ENGINEERING COMPANY PVT. LTD. …APPELLANT(S)

VERSUS

TARUN KESHRICHAND SHAH AND ORS. … RESPONDENT(S)

J U D G M E N T

PANKAJ MITHAL, J.

1. Leave granted.

2. We have heard Shri Chander Uday Singh, senior counsel

assisted by Shri Amarjit Singh Bedi, Advocate-on-Record

for the appellant-NAK Engineering Company Pvt. Ltd.

1 and

Dr. Abhinav Chandrachud, learned counsel assisted by

Shri Surjendu Sankar Das, Advocate -on-Record for the

respondent No.1- Tarun Keshrichand Shah

2.

1

Hereinafter referred to as ‘appellant’

2

Hereinafter referred to as ‘respondent No.1’

2

3. Respondent No.2- Priyalata Keshrichand Shah

3 is reported

to be dead and her interest is represented by respondent

No.1.

4. Respondent No.3- M/s Kishore Engineering Company

4 has

not appeared. It had not even appeared in the Trial Court

or the High Court. It has not even filed any written

statement, despite service of notice.

5. In a Suit No.6117 of 2007 filed by respondent No.1 and

respondent No.2 against respondent No.3, a Notice of

Motion No.1346 of 2018 was moved to add the appellant as

the party defendant to participate and contest the aforesaid

suit. Earlier, a Notice of Motion No. 1925 of 2017 was also

moved by the appellant seeking to set aside the order to

proceed in the said suit ex-parte. Both the said motions

were allowed by the court of first instance vide a common

Order dated 05.10.2018. However, the said order was set

aside by the High Court by the impugned judgment and

3

Hereinafter referred to as ‘respondent No.2’

4

Hereinafter referred to as ‘respondent No.3’

3

order dated 21.02.2022 in exercise of its power under

Article 227 of the Constitution of India.

6. Under challenge in these appeals is thus the above

judgment and order of the High Court dated 21.02.2022

setting aside the order of the court of first instance

permitting impleadment of the appellant as one of the

defendants to the suit meaning thereby that the motion of

addition of the appellant as one of the defendants to the

suit stands rejected.

7. One Keshrichand Shah was the original owner of the

commercial premises admeasuring 1700 sq. feet existing

on the third floor of the Churchgate House, Mumbai. He

was the sole proprietor of M/s Union Commercial

Corporation. The aforesaid Keshrichand Shah through its

proprietorship firm M/s Union Commercial Corporation let

out an area of 525 square feet of the above premises having

five cabins to one M/s Modern Products Pvt. Ltd. The said

M/s Modern Products Pvt. Ltd. licensed or sublet the same

to the respondent no.3. In addition to the rent of Rs.400/-

per month payable to M/s Modern Products Pvt. Ltd., the

4

respondent No.3 also used to pay service charges at the

rate of Rs.2,100/- per month for the use of furniture and

fixtures therein to the owner, Keshrichand Shah. On the

death of Kesharichand Shah, the said service charges were

realized by his heirs, i.e., respondent nos.1 and 2.

8. The respondent Nos.1 and 2 instituted a Suit No.3319 of

2007 on the original civil side of the Bombay High Court

but on account of pecuniary jurisdiction it was later

transferred to the Bombay City Civil Court and re -

numbered as Suit No.6117 of 2017.

9. The aforesaid suit was instituted by respondent Nos.1 and

2 against respondent No.3 for the recovery of service

charges at the rate of Rs.2,100/- per month, amounting to

Rs.75,600/- for the period November 2004 to October

2007.

10. In the aforesaid suit, notice was served upon sole

defendant i.e., respondent no.3 but no one appeared on its

behalf and filed any written statement. Thus, after closing

the evidence on 11.02.2014, the court vide order dated

12.11.2014 proceeded ex-parte in the matter.

5

11. It was much thereafter on 02.04.2018 that the appellant

filed an application for being impleaded as the defendant

in this suit contending that it is a successor of respondent

No.3 under Part IX of the Companies Act, 1956. The

appellant is actually running the business of respondent

No.3. Therefore, it is a necessary party to the suit.

12. The appellant contended that it had acquired knowledge of

the suit only on 02.10.2012 and that it has proceeded ex-

parte against the respondent No.3. There was no proper

service of the notice upon the respondent No.3 or upon the

appellant. It was contended that the appellant has drawn

separate proceedings for getting the ex-parte order set

aside. The appellant had no knowledge of the transfer of

the suit from the Bombay High Court to the City Civil Court

as no notice in this regard was received or served upon it.

13. It may be not out of context to mention here that the

respondent Nos.1 and 2 apart from instituting the above

suit had also filed a suit for the eviction of the respondent

No.3 and the appellant and its Directors from the premises

in dispute in the Small Causes Court. This apart, a

6

criminal complaint was also lodged against the appellant

and its Director–Himanshu Patwa on account of dishonour

of two cheques of Rs.2,100/- and Rs.400/- issued by them

in respect of the monthly service charges and the rent

respectively in connection with the demised premises.

14. It is in the above background that the court of first instance

vide order dated 05.10.2018 allowed the motion to add the

appellant as one of the defendants to the suit observing

that there is no dispute to the fact that the appellant is in

occupation of the suit premises. The suit premises was

initially let out to the respondent No.3 and is now in

possession of appellant, who claims to be the successor

company that has taken over the business of respondent

No.3. The certificate of incorporation relied upon by the

appellant along with the Memorandum of Association

prima facie reveals that the appellant has taken over and

acquired the business interest of the respondent No.3. The

court accepted the said certificate issued by the Registrar

of the companies opining that it lacked jurisdiction to rule

on the validity of the said certificate.

7

15. The aforesaid order of the court of first instance on being

taken up before the High Court under Article 227 of the

Constitution has been reversed and the impleadment of the

appellant has been revoked on the ground that it is not a

proper or a necessary party to the suit. The suit will not fail

for want of its presence.

16. The High Court proceeded to pass the impugned order on

the premise that no relationship of tenant and landlord

existed between the parties and that the appellant is the

unauthorized occupant that need not be joined as a

defendant to the suit.

17. The High Court further held that the issue of recovery of

arrears of service charges can be decided even in the

absence of the appellant as the respondent No.3 had no

legal sanctity of law to authorize the use of furniture and

fixtures to a third party.

18. It is alleged that the High Court completely ignored the fact

that the appellant is the successor company of the tenant–

respondent No.3 whose complete business has been taken

over by it. The appellant has stepped into the shoes of

8

respondent No.3 and was in possession of the premises in

that capacity and was not an unauthorized occupant.

19. It is in this background that we have been called upon to

consider to decide whether the appellant is a necessary and

proper party to be impleaded in the suit No.6117 of 2007

for the recovery of service charges in respect of the

premises in dispute which was admittedly sublet to the

respondent No.3 to whose business the appellant happens

to be a successor.

20. The first and the foremost argument of Shri Chander Uday

Singh, senior counsel appearing for the appellant is that

the High Court exceeded its jurisdiction under Article 227

of the Constitution in setting aside the judgment and order

of the court of first instance as if it is sitting in appeal. The

order of the Trial Court allowing the impleadment was an

interlocutory order which required no interference by the

High Court in exercise of its supervisory power. The High

Court incorrectly concluded that the appellant is not a

necessary party to the suit, completely ignoring the fact

that the respondent Nos.1 and 2 themselves had arrayed it

9

as one of the defendants in a suit for eviction from the

premises filed before the Small Causes Court. The High

Court also erred in not appreciating that the appellant is a

successor to respondent No.3 under the Companies Act

and that the validity of the certificate of registration issued

by the Registrar of Companies in favour of the appellant

could not have been adjudicated while exercising powers

under Article 227 of the Constitution.

21. It is further contended that the appellant has been paying

service charges through cheque since 1991 and the

respondent nos.1 and 2 were aware of it . Rather, the

service charges from 2004 were received by the respondent

Nos.1 and 2, implying an admission on their part that the

appellant is the person liable to pay the same. Even the

furniture and telephone lines in the premises , which

existed, have been used by the appellant since 1991 with

the knowledge of the respondent No.1. Therefore, the High

Court was not right in holding that since there is no

relationship of tenant and landlord between the parties, the

appellant is not a necessary party. The relationship of

10

tenant and landlord in the matter was not relevant and

material, as it was not a suit for eviction rather a suit for

recovery of service charges.

22. He further argued that, in fact, any decree that may be

passed in the suit in question against the respondent No.3

that is practically defunct, would lead to execution of the

decree against the appellant and as such the appellant is a

necessary and proper party to the suit.

23. Dr. Abhinav Chandrachud, learned counsel appearing for

the respondent No.1 in defense submits that the appellant

has not come up before the court with clean hands rather

with an ulterior motive to legitimize its illegal occupation

over the premises in dispute. The summons in the suit were

served upon the respondent No.3 way back in the year

2008. The acknowledgement bears the signature and the

stamp of the appellant which clearly proves that the

appellant was aware of the institution of the suit but even

then, remained silent for over nine years before seeking

impleadment. The appellant is an unauthorized occupant

of the premises in dispute and therefore, in the suit for

11

eviction, was made one of the defendants so that the

eviction decree if any may be effectively executed. However,

this does not mean that it is also a necessary and proper

party to the present suit for the recovery of arrears of

service charges.

24. Further, the certificate of incorporation of the appellant is

not a proof of successorship to the respondent No.3 and

that the certificate annexed with the appeal is a new and

different document which was not part of the record before

the courts below. The respondent No.3 still continues to be

a registered company and is still in existence and therefore,

the appellant cannot be accepted to be its successor more

particularly when it is only a firm and not even a company.

25. Lastly, it has been submitted that the respondent Nos.1

and 2 who instituted the suit are dominus litis in the matter

and cannot be compelled to add a defendant against their

wishes if they do not desire to seek any relief against such

a person.

26. Undisputedly, the suit in question has been filed by the

owners of the property to recover service charges for the

12

use of furniture and fixtures from the respondent No.3 that

was inducted as a sub-tenant in the premises in dispute by

M/s Modern Products Pvt. Ltd. The dispute is not regarding

recovery of rent or arrears of rent. Therefore, the

relationship of landlord and tenant between the parties is

completely alien to the controversy in question.

27. The dispute is essentially with regard to payment of service

charges between the owners of the property and its user

i.e. respondent No.3. Therefore, no other person has any

right to be impleaded so as to defend the suit regarding

payment of service charges.

28. The appellant claims to be the successor of respondent

No.3 and as such, wants to defend the suit on its behalf or

as its representative.

29. The respondent No.3, though stated to be a private limited

company, is only a partnership firm having only four

members. There is no authentic proof on record that the

above partnership firm was ever converted into a company.

The conversion of a partnership firm into a company as

under Part IX of Companies Act, 1956 requires fulfilment

13

of strict conditions such as having at least seven

partners/members and execution of certain deeds. The

respondent No.3 was having only four partners and as such

was ineligible for conversion under the relevant law.

Further, there is nothing on record to indicate that the

aforesaid firm respondent No.3 has ceased to exist or has

become extinct. The extract of respondent No.3 firm dated

20.09.2016 from the office of the Registrar of Firms reveals

that respondent No.3 continues to exist as a partnership

firm even though appellant may have been incorporated as

a new company.

30. The appellant has relied upon the Certificate of

Incorporation dated 22.02.1988 to claim that it has

succeeded the respondent No.3. No doubt, a company

comes into existence as a body corporate from the date of

its incorporation having perpetual succession and a

common seal. However, its incorporation or its Certificate

of Incorporation in no way conclusively proves that it has

come into existence as a successor of respondent No.3. In

such circumstances, appellant cannot be accepted to be

14

the successor of respondent No.3 so as to permit it to be

impleaded and to defend the suit for the recovery of service

charges.

31. The appellant has nowhere established its independent

right to be impleaded to defend the suit except for claiming

to be the successor of respondent No.3 which, in our

opinion, has no legs to stand.

32. The above discussion takes us to another aspect of the

matter as to whether the appellant is a necessary or a

proper party to be impleaded. The governing principles and

law in this regard are well-settled.

33. The fundamental distinction between a "necessary party"

and a "proper party" was succinctly explained in Ramesh

Hirachand Kundanmal v. Municipal Corporation of

Greater Bombay

5, wherein this Court held:

“6… A necessary party is one without whom no order

can be made effectively. A proper party is one in whose

absence an effective order can be made but whose

5

(1992) 2 SCC 524

15

presence is necessary for a complete and final decision

on the question involved in the proceeding.”

34. In Kasturi v. Iyyamperumal

6, this Court crystallized the

twin tests for a necessary party:

“…the question of jurisdiction of the court to invoke

Order 1 Rule 10 CPC to add a party who is not made a

party in the suit by the plaintiff shall not arise unless a

party proposed to be added has direct and legal interest

in the controversy involved in the suit. … two tests are to

be satisfied for determining the question as to who is a

necessary party. The tests are: (1) there must be a right

to some relief against such party in respect of the

controversies involved in the proceedings; (2) no

effective decree can be passed in the absence of such

party.”

35. This principle has been consistently reiterated. In Mumbai

International Airport (P) Ltd. v. Regency Convention

Centre & Hotels (P) Ltd.

7, this Court reiterated:

“15. A “necessary party” is a person who ought to have been

joined as a party and in whose absence no effective decree

could be passed at all by the court. If a “necessary party” is

not impleaded, the suit itself is liable to be dismissed. A

6

(2005) 6 SCC 733

7

(2010) 7 SCC 417

16

“proper party” is a party who, though not a necessary party,

is a person whose presence would enable the court to

completely, effectively and adequately adjudicate upon all

matters in dispute in the suit, though he need not be a person

in favour of or against whom the decree is to be made. If a

person is not found to be a proper or necessary party, the

court has no jurisdiction to implead him, against the wishes

of the plaintiff. The fact that a person is likely to secure a

right/interest in a suit property, after the suit is decided

against the plaintiff, will not make such person a necessary

party or a proper party to the suit for specific performance.”

36. Thereafter, in Vidur Impex & Traders (P) Ltd. v. Tosh

Apartments (P) Ltd.

8, the broad principles governing

impleadment were summarized:

“41.2. A necessary party is the person who ought to be joined

as party to the suit and in whose absence an effective decree

cannot be passed by the court.

41.3. A proper party is a person whose presence would

enable the court to completely, effectively and properly

adjudicate upon all matters and issues, though he may not be

a person in favour of or against whom a decree is to be made.

41.4. If a person is not found to be a proper or necessary

party, the court does not have the jurisdiction to order his

impleadment against the wishes of the plaintiff.”

8

(2012) 8 SCC 384

17

37. In the case at hand, the respondent Nos.1 and 2 are not

claiming any relief against the appellant. There is no iota of

material to indicate that the relief, as claimed in the suit

against respondent No.3, if granted, would be implemented

against the appellant. Therefore, the appellant is not a

necessary party to the suit.

38. The appellant cannot also be construed as a proper party

once it has failed to establish that it is a successor to the

respondent No.3. In the absence of any evidence to prove

that respondent No.3 has ceased to exist or cannot be

represented in the suit on its own to contest it on merits,

we are of the opinion that the appellant is not even a proper

party to provide any assistance to the court in the suit.

39. This apart, the respondent Nos.1 and 2 who have instituted

the suit are dominus litis and it is for them to choose their

adversaries. If they do not array the proper and necessary

parties to the suit, they do it at their own risk. However,

they cannot be compelled to add a party to defend a suit

against their wishes. The decree, if any, passed in the suit

would be binding only between the parties to the suit and

18

would not infringe upon any right of a third party, much

less of the appellant that is not a party to the suit.

40. This conclusion is reinforced by the fundamental principle

laid down in Kanaklata Das v. Naba Kumar Das

9,

wherein this Court has observed:

“11.4. …the plaintiff being a dominus litis cannot be

compelled to make any third person a party to the suit, be

that a plaintiff or the defendant, against his wish unless such

person is able to prove that he is a necessary party to the suit

and without his presence, the suit cannot proceed and nor

can be decided effectively. In other words, no person can

compel the plaintiff to allow such person to become the co-

plaintiff or defendant in the suit. It is more so when such

person is unable to show as to how he is a necessary or

proper party to the suit and how without his presence, the suit

can neither proceed and nor it can be decided or how his

presence is necessary for the effective decision of the suit.

11.5. … a necessary party is one without whom, no order can

be made effectively, a proper party is one in whose absence

an effective order can be made but whose presence is

necessary for a complete and final decision on the question

involved in the proceeding.”

9

(2018) 2 SCC 352

19

41. In the above facts and circumstances, if the High Court, for

one reason or the other, has set aside the order of

impleadment passed by the court of first instance, we do

not consider it to be illegal so as to set it aside and restore

the order of the Trial Court.

42. There is one another reason for not interfering with the

impugned judgment and order of the High Court. The

summons issued in the suit meant to be served upon

respondent No.3, were served in the year 2008. The seal

and signatures on the acknowledgement on the said

summons is of the appellant which clearly indicates that

the appellant had acquired knowledge of the suit in the

year 2008. However, the appellant kept silent and moved

the motion for impleadment only after the evidence was

closed in the year 2014 and the court had directed to

proceed ex-parte in the matter. The impleadment

application was filed almost after nine years of the

knowledge of the pendency of the suit. Thus, the

impleadment has been rightly refused to the appellant by

the High Court.

20

43. We are conscious of the fact that the jurisdiction of the

High Court under Article 227 is simply supervisory in

nature and that the High Court ought not to have

intervened in the matter. However, once the order has been

interfered with, and rightly so, we do not wish to commit

another illegality by restoring an incorrect order passed by

the court of first instance.

44. In view of the above discussion, we are of the opinion that

the appeals lack merit and are dismissed but with the

direction that the decree passed in the suit would not be

used against the appellant and would not be implemented

against it.

45. The appeals are dismissed with no order as to cost.

46. Pending application(s), if any, shall stand disposed of.

………………………………………...J.

[PANKAJ MITHAL]

………………………………………...J.

[PRASANNA B. VARALE]

NEW DELHI;

JANUARY 5, 2026.