A landmark ruling by the Bombay High Court has clarified that a defendant not party to a contract may still be held liable for tortious interference with contractual obligations, rejecting a threshold application to dismiss the plaint under Order VII Rule 11 of the CPC. The judgment reinforces that courts must assess the substance of pleadings, not merely technical party relationships, when evaluating the existence of a cause of action.
Background & Facts
The Dispute
The plaintiff, ICICI Bank Limited acting as Facility Agent for a consortium of lenders, filed a commercial suit seeking injunctive relief and damages against four defendants related to the Mumbai International Airport Limited. The core dispute arose from a rights issue by Defendant No. 3 (Mumbai International Airport Limited), which allegedly diluted the lenders’ 16.16% economic interest in the airport entity. This interest was secured through a pledge structure established under the Interim Solution Undertaking (ISU) and Share Pledge Agreement (SPA) executed between the lenders and Defendant Nos. 1 and 2 (GVK Airport Developers and Holdings Limited).
Procedural History
- March 2017: ISU and SPA executed between lenders and Defendant Nos. 1 and 2, creating a pledge over equity shares in Defendant No. 2 to secure lenders’ interest in Defendant No. 3.
- July 2021: Defendant No. 4 (Adani Airport Holdings Limited) acquired 97.97% of Defendant No. 1, creating a chain of control over Defendant No. 3.
- June 2025: Defendant No. 3 announced a rights issue of INR 3,240 crores, with proceeds primarily used to repay Defendant No. 4’s debt.
- June 30, 2025: Defendant No. 2 notified lenders it would not subscribe to the rights issue, triggering immediate dilution risk.
- July 4, 2025: Plaintiff filed suit seeking urgent injunction against the rights issue and other reliefs.
- July 9, 2025: Plaintiff amended prayers to restrain encumbrances on shares.
- August 12, 2025: Further amendment removed rights issue relief after completion, replacing it with claims for damages and restoration of economic interest.
- November 6, 2025: Application under Order VII Rule 11 CPC for rejection of plaint reserved.
- February 20, 2026: Judgment pronounced.
Relief Sought
The plaintiff sought: (1) injunction against actions prejudicing the pledge structure; (2) direction to Defendant No. 3 to provide additional security to restore lenders’ 16.16% economic interest; and (3) damages for loss of security due to dilution. The suit was filed without compliance with Section 12A of the Commercial Courts Act, 2015, invoking urgency.
The Legal Issue
The central question was whether a plaint can be rejected at the threshold under Order VII Rule 11(a) CPC on the ground that Defendant No. 3, though not a party to the ISU or SPA, has no cause of action against it, and whether the suit’s invocation of urgency under Section 12A of the Commercial Courts Act is valid despite subsequent amendments.
Arguments Presented
For the Appellant/Petitioner (Defendant No. 3)
Defendant No. 3 contended that it was not a signatory to the ISU or SPA, and therefore, no contractual obligation bound it. Relying on M.C. Chacko v. State Bank of Travancore and Cox & Kings Ltd. v. SAP India Pvt. Ltd., it argued that the doctrine of privity of contract bars third parties from being sued for breach of contract. It further asserted that the amended plaint, which removed urgent interim relief prayers, related back to the original filing date under Priti Pal Singh v. Amrik Singh, thereby negating any basis for waiving Section 12A. It cited Church of Christ Charitable Trust v. Ponniamman Educational Trust and Sheela Ram Vidhani v. S.K. Trading Co. to argue that a plaint may be rejected in its entirety against a defendant with no cause of action.
For the Respondent/State (Plaintiff)
The plaintiff countered that the suit was not based solely on contract but on the tort of inducement and procurement of breach. It relied on Naraindas Muthuradas Narielwala v. Mukesh & Co. and Mumbai International Airport Pvt. Ltd. v. Regency Convention Centre to argue that Defendant No. 3, as the hub of the corporate structure and beneficiary of the rights issue, was a necessary party. It emphasized that the pleadings disclosed imminent and irreparable harm to the lenders’ security interest, justifying urgency under Section 12A. The plaintiff argued that amendments were necessitated by subsequent events and did not negate the original urgency, citing Yamini Manohar v. T.K.D. Keerthi and Dhanbad Fuels Pvt. Ltd. v. Union of India.
The Court's Analysis
The Court undertook a comprehensive review of the pleadings, supporting documents, and the factual matrix surrounding the rights issue. It held that the doctrine of privity of contract, while valid, does not preclude liability in tort for intentional interference with contractual relations. The Court emphasized that the plaintiff’s allegations - that Defendant No. 3 knowingly participated in a scheme to dilute the lenders’ security while Defendant No. 2 refused to subscribe, and Defendant No. 4 stood to gain - disclosed a plausible claim in tort.
"The reading of the plaint as a whole reveals that a clear cause of action is disclosed against defendant no.3, and specific and material reliefs have been sought in the plaint against defendant no. 3."
The Court rejected the argument that the amended plaint negated urgency. It held that the test for urgency under Section 12A must be assessed from the plaintiff’s standpoint at the time of filing, not after amendments. The Court noted the immediacy of the threat - the rights issue closed within days of filing - and the lack of prior notice from Defendant No. 2, which together created a credible case of irreparable harm.
The Court also declined to resolve the conflict between Church of Christ and D. Ramachandran regarding partial rejection of plaints, as it found a cause of action existed against Defendant No. 3. It distinguished between a defective cause of action (to be tried) and no cause of action (to be rejected at threshold), holding that the pleadings here crossed the threshold for trial.
The Verdict
The plaintiff won. The Bombay High Court held that a non-contracting party may be sued for tortious interference with contractual obligations, and that urgency under Section 12A of the Commercial Courts Act is determined by the plaintiff’s pleadings at the time of filing, not by subsequent amendments. The application for rejection of the plaint under Order VII Rule 11 CPC was dismissed.
What This Means For Similar Cases
Tortious Interference Extends Liability Beyond Contractual Parties
- Practitioners must now plead tort claims alongside contractual breaches when third parties actively facilitate or benefit from breaches.
- Corporate structures with layered ownership cannot shield entities from liability if they knowingly participate in diluting secured interests.
- Evidence of coordination between entities - such as shared management, funding flows, or simultaneous corporate actions - strengthens tort claims.
Urgency Under Section 12A Is Assessed at Filing, Not After Amendments
- Courts will examine the plaint’s original allegations and supporting documents to determine if urgency was genuinely contemplated.
- Amendments made due to subsequent events do not retroactively negate urgency, provided the original threat was credible and imminent.
- Plaintiffs should clearly articulate the immediacy of harm, including statutory timelines, perishable assets, or irreversible dilution risks.
Threshold Rejection Requires Absolute Absence of Cause of Action
- A plaint cannot be rejected merely because liability is indirect or based on tort rather than contract.
- Courts must avoid premature adjudication on merits; the bar for rejection under Order VII Rule 11(a) is high - only where no legal right is disclosed.
- Allegations of corporate conspiracy or economic unity, if pleaded with specificity, suffice to establish a cause of action against non-signatory entities.
