Legal Review and Analysis of NAK Engineering Company Pvt Ltd vs Tarun Keshrichand Shah and Others 2026 INSC 8

Case Synopsis

Case: NAK Engineering Company Pvt. Ltd. vs Tarun Keshrichand Shah and Others, 2026 INSC 8

Synopsis: The Supreme Court refused the impleadment of a company claiming to be the successor of the defendant in a suit for recovery of service charges. The Court held that the applicant was neither a necessary nor a proper party as it failed to prove legal succession and the plaintiff, being dominus litis, could not be compelled to add it. The Court also noted the applicant's inordinate delay in seeking joinder.

1. Heading of the Judgment

Case Name: NAK Engineering Company Pvt. Ltd. vs Tarun Keshrichand Shah and Others
Citation: 2026 INSC 8
Court: Supreme Court of India
Judges: Justice Pankaj Mithal and Justice Prasanna B. Varale
Date: 5th January 2026

2. Related Laws and Sections

The judgment primarily interprets provisions of the Code of Civil Procedure, 1908 and the Companies Act, 1956 concerning the joinder of parties.

• Code of Civil Procedure, 1908:
  Order I Rule 10: Provisions for adding, substituting, or striking out parties.

• Companies Act, 1956:
  Part IX: Provisions relating to the conversion of a partnership firm into a company.

• Constitution of India:
  Article 227: Power of Superintendence of High Courts over all courts and tribunals within their jurisdiction.

• Core Legal Principles: The distinction between a "necessary party" and a "proper party" and the concept of dominus litis (the plaintiff as the master of the suit).

3. Basic Judgment Details

Facts of the Case

• The respondents (original owners) filed a suit (Suit No. 6117 of 2007) against Respondent No. 3, M/s Kishore Engineering Company (a partnership firm), for recovery of arrears of service charges for furniture and fixtures in a commercial premises in Mumbai.

• The appellant, NAK Engineering Company Pvt. Ltd., claimed to be the successor-in-interest of Respondent No. 3, having taken over its business. It sought impleadment as a defendant in the suit.

• The Trial Court allowed the impleadment application. The Bombay High Court, in exercise of its supervisory power under Article 227 of the Constitution, set aside this order, holding the appellant was neither a necessary nor a proper party.

• The Supreme Court appeal was filed challenging the High Court's order.

Issues Before the Supreme Court

1. Whether the appellant was a "necessary party" or a "proper party" entitled to be impleaded in the suit under Order I Rule 10 of the CPC?

2. Whether the High Court exceeded its jurisdiction under Article 227 in interfering with the Trial Court's discretionary order?

Ratio Decidendi (Court’s Reasoning)

• Test for Necessary vs. Proper Party: The Court reiterated the settled legal distinction:
  A necessary party is one without whom no effective decree can be passed. The absence of a necessary party warrants dismissal of the suit.
  A proper party is one whose presence, while not essential, enables the court to adjudicate the dispute completely and effectively. A proper party is not entitled to impleadment as a matter of right.

• Appellant Failed Both Tests:
  Not a Necessary Party: The suit sought recovery of service charges only from Respondent No. 3. The plaintiffs (respondent owners) claimed no relief against the appellant. An effective decree could be passed in the absence of the appellant.
  Not a Proper Party: The appellant's sole claim to standing was based on being the "successor" of Respondent No. 3. The Court found this claim unsubstantiated. The certificate of incorporation did not prove succession, and Respondent No. 3 (the original firm) continued to exist. Therefore, the appellant's presence was not required for a complete adjudication.

• Principle of Dominus Litis: The Court reaffirmed that the plaintiff is the master of the suit and has the prerogative to choose against whom to proceed. A plaintiff cannot be compelled to add a defendant unless the party seeking impleadment conclusively proves it is a necessary party.

• Delay and Conduct: The Court noted the appellant had knowledge of the suit as early as 2008 (evidenced by an acknowledgment stamp) but filed the impleadment application only in 2018, after evidence was closed and an ex-parte order was passed. This inordinate delay was a further ground for refusing impleadment.

• High Court's Jurisdiction under Article 227: While acknowledging that the High Court's power under Article 227 is supervisory and not appellate, the Supreme Court held that since the Trial Court's order allowing impleadment was itself incorrect, the High Court's intervention, though on a narrower ground, did not warrant interference.

4. Core Principle of the Judgment

Title: The Sanctity of Dominus Litis and the Strict Threshold for Impleadment

Main Issue

The core issue was delineating the limited circumstances under which a third party can force its way into a lawsuit as a defendant against the plaintiff's will, particularly when the suit is for a money claim against a specific named defendant.

Supreme Court’s Analysis and Holding

The Supreme Court's judgment is a definitive restatement of the stringent principles governing the impleadment of parties. It underscores that the right to be heard in a suit is not an absolute right for any affected third party.

The Court established a clear, sequential test for such impleadment applications:

1. Burden of Proof: The party seeking impleadment bears the burden of proving it is either a necessary or a proper party.

2. Necessary Party Test: It must demonstrate that the decree cannot be executed effectively in its absence. A mere commercial or possessory interest in the subject property is insufficient if the suit is for a simple money recovery against a specific entity.

3. Proper Party Test: It must show that its presence is indispensable for a complete and final adjudication of all matters in dispute. Vague claims of being a "successor" without concrete, legally admissible proof are inadequate.

4. Primacy of Plaintiff's Choice: The plaintiff's autonomy in framing the suit is paramount. The court cannot rewrite the plaintiff's case by adding defendants unless the aforementioned tests are conclusively met.

The judgment also implicitly cautions against the misuse of impleadment applications to delay proceedings or to legitimize a contested status, as seen in the appellant's conduct of waiting nearly a decade after having knowledge of the suit.

In essence, the Court held that a party claiming to be a successor-in-interest must provide irrefutable legal proof of such succession. A mere certificate of incorporation or continuation of business is not enough to override the plaintiff's choice of defendants in a suit for recovery of a specific debt.

5. Final Outcome

The Supreme Court dismissed the appeals. It upheld the High Court's order refusing the impleadment of the appellant. However, to prevent any potential future injustice, the Court issued a specific direction that any decree passed in the suit shall not be executed against the appellant and shall not affect its rights.

6. MCQ Questions Based on the Judgment

Question 1: In NAK Engineering Company Pvt. Ltd. vs Tarun Keshrichand Shah (2026 INSC 8), the Supreme Court dismissed the appellant's plea for impleadment primarily because?
A. The appellant was the original signatory to the lease agreement.
B. The appellant failed to prove it was a necessary or proper party to the suit for recovery of money.
C. The suit involved a dispute over immovable property possession.
D. The High Court's order under Article 227 was final and non-appealable.

Question 2: The Supreme Court reinforced the principle of dominus litis in this judgment. What does this principle signify?
A. The court is the ultimate master of the proceedings.
B. The defendant has the right to choose the forum of trial.
C. The plaintiff has the prerogative to choose the parties against whom the suit is filed.
D. The tribunal has the power to join any interested party.