Bombay High Court
Standard Chartered Bank vs Icici Lombard General Insurance ... on 10 August, 2015
Bench: K.R. Sriram
YBG 1
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL JURISDICTION
CHAMBER SUMMONS NO.717 OF 2014
IN
SUMMARY SUIT NO.2468 OF 2012
The State Trading Corporation
of India Ltd. .. Applicant/
Proposed Co-Plaintiff
IN THE MATTER BETWEEN:
Standard Chartered Bank
Versus
ig .. Plaintiff
ICICI Lombard General Insurance
Company Ltd. .. Defendant
and
The State Trading Corporation of
India Ltd. .. Intervenor/
Proposed co-plaintiff
Mr.Sharan Jagtiani with Ms.Neha Prashant i/b. ALMT Legal for
applicant
Mr.Kingshuk Banarjee i/b. Wadia Ghandy & Co. for plaintiffs
Mr.V.Dhond, Senior Advocate with Shyam Kapadia i/b. Tuli & Co. for
defendant
CORAM : K.R.SHRIRAM, J.
Reserved on : 7th July 2015
Pronounced on : 10th August 2015.
P.C.
1] This suit has been filed by the plaintiff to recover from
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the defendants various amounts claimed by the plaintiffs under an
Export Credit Insurance Policy dated 14 th June 2008, issued by the
defendants in favour of the plaintiffs and State
Trading Corporation, the applicant herein. Under the said policy, the
defendant had covered the insured in the sum of Rs.175 Crores
upon the terms and conditions mentioned therein. The insured
mentioned in the said policy is State Trading Corporation of India
Ltd., i.e., the applicant and joint insured is Standard Chartered Bank,
New Delhi, the plaintiff.
2] For the purpose of this chamber summons, brief narration of
the facts is required. The applicant operates, inter alia, as an
intermediary or a cannalising agent for sale and marketing of gold
jewelery and to facilitate and promote its export with foreign buyers.
The applicant is a Government of India Enterprise, operating under
Union Ministry of Commerce and Industry.
3] The applicant had entered into an agreement with one Masumi
Overseas Pvt. Ltd., whereby Masumi Overseas was to obtain export
orders for gold jewelery from prospective buyers in the name of the
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applicant and the applicant would export the jewelery. Pursuant to
this arrangement, documents would be raised upon the applicant
and the applicant would get paid based on the bills raised. Pursuant
to that arrangement, the applicant approached the plaintiff to
discount invoices issued by the applicant in favour of the foreign
buyers and to pay 90% of the value invoiced to the applicant
following the discounting. The plaintiff agreed and executed a
receivables purchase agreement dated 25 th March 2008 with the
applicant. To cover the risk of the foreign buyers defaulting in
payment for the goods supplied by the applicant, the applicant along
with the plaintiff approached the defendant for an insurance cover.
The defendants, pursuant to insurance policy dated 14 th June 2008
agreed to insure the receivables of the applicant/ plaintiff from the
foreign buyers. Subject to the terms and conditions of the policy the
defendant agreed to indemnify the insured viz., the applicant and
the plaintiff, in the event the foreign buyers fail to remit the insured
debt. Under the agreement between the plaintiff and the applicant,
the plaintiff had a right of recourse against the applicant, inasmuch
as, if the foreign buyers did not pay, the plaintiff could look to the
applicant to return the money which the plaintiff has paid by
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discounting the invoice. Under the insurance policy issued by the
defendant read with its amendments, it is provided that the plaintiff
will have an insurable interest under the policy to the extent that the
plaintiff finances specific insured debts. Therefore, the plaintiff will
be entitled to claim under the policy only to such amount which the
plaintiff has paid to the applicant under the receivables discounting
agreement.
4] Since some of the foreign buyers defaulted in making payment
of their respective payment the plaintiff lodged a claim with the
defendant under the insurance policy on 7 th July 2010. The
defendant rejected the claim on 23 rd August 2010. This suit,
therefore, came to be lodged on 9 th October 2010. The claim in the
suit is for a principal amount of Rs.33,27,95,654.51 with interest
thereon at 12% p.a. For the purpose of this chamber summons, we
are not considering the merits of the case. The same could be
considered at the appropriate stage and time.
5] Before the plaintiff filed the suit, the plaintiff had, under its
receivables purchase agreement dated 25 th March 2008, also called
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upon the applicant to pay the amount which is being claimed in the
present suit. The applicant did not pay and hence, the plaintiff filed
an application under the Recovery of Debts Due to Banks and
Financial Institutions Act. Though the applicant initially opposed
the claim made by the plaintiff against the applicant in the Debt
Recovery Tribunal, New Delhi, the applicant and the plaintiff filed
consent terms on 6th September 2013. As per the consent terms,
the applicant paid to the plaintiff a sum of Rs.23,29,56,958.15. This
constituted 70% of the principal amount. It was also agreed
between the applicant and the plaintiff that upon receipt of the said
sum of Rs.23,29,56,958.15, the suit filed by the plaintiff, being the
present suit, will be prosecuted by the applicant and the applicant
would be joined as co-plaintiff. It was also agreed that if the
applicant cannot be joined as co-plaintiff, the plaintiff will give such
authority to the applicant as required, to prosecute the present suit
in the name of the plaintiff by the applicant. It was also agreed that
the balance of 30% of the amount, if the applicant succeeds by
getting a decree in the present suit, shall be shared between the
plaintiff and applicant, whereby the applicant will pay 30% of the
principal amount aggregating to a sum of Rs.9,98,38,696.36 or 30%
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of the decretal amount, whichever is lower.
6] The applicant having paid that amount to the plaintiff, has
taken out the present chamber summons, praying to be impleaded
as co-plaintiff in this suit and, thereafter to permit amendments to
the plaint as per the schedule annexed to the chamber summons.
In the affidavit in support of the chamber summons, the approach of
the plaintiff is very simple, i.e., the applicant is an insured under the
policy issued by the defendant and hence has to be joined as co-
plaintiff. It is also stated that the right to relief in respect of the
applicant is same and identical to the relief sought by the plaintiff
and also arises under the same transaction against common
opposite party and, therefore, common question of law and fact
arise requiring adjudication qua the plaintiff.
7] The defendant has opposed the chamber summons on two
main grounds, viz., the chamber summons is an attempt to by-pass
the law of limitation and second, the applicant has no cause of
action against the defendant.
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According to the defendant, the pleaded case of the plaintiff
arises out of an insurance policy as a result of the defendant's
refusal to pay the claim made by the plaintiff and the applicant
stands exactly in the same position insofar as its alleged right to sue
is concerned. It is further contended by the defendant that the
cause of action arose on the date the claim was rejected, i.e., 23 rd
August 2010 and since the present chamber summons has been
filed by the applicant only on 25 th July 2014, after a period of three
years and 327 days, the applicant's claim is ex- facie barred by law
of limitation. Therefore, the applicant ought not to be allowed to
profess its time barred claim by joining the plaintiff in this suit.
8] On the stand of no cause of action, it is the case of the
defendant that the applicant has been paid the amount due to it
under the receivables purchase agreement by the plaintiff and the
plaintiff's endorsement to the policy is providing that any amount
payable by the defendant would be paid only to the plaintiff whose
receipt alone shall be a full and valid discharge for all the insured,
unless the plaintiff specifically instructs the defendant that monies
are required to be paid to the applicant. In view thereof, the
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applicant has not suffered any loss and, therefore, has no cause of
action. It was also submitted very vociferously by the Counsel for
the defendant that the applicant had taken a stand in the
proceedings filed by the plaintiff before the DRT, New Delhi that by
virtue of the endorsement of the policy in favour of the plaintiff, the
applicant has by way of endorsement transferred/ relinquished all its
rights under the insurance policy in favour of the plaintiff and once
having relinquished the rights, cannot call itself an insured under the
policy. The Counsel for the defendant, at this stage it is necessary
to mention, had in the beginning of the arguments conceded that the
applicant was also an insured under the policy. But his argument
was even if the applicant is shown as an insured under the policy, by
virtue of the endorsement on the policy and the stand taken by the
applicant in the DRT proceedings that it had transferred and
relinquished all its rights in favour of the bank, the applicant is no
more an insured under the policy.
9] Under Order I Rule 1 of the Code of Civil Procedure, 1908, all
persons may be joined in one suit as plaintiffs where any right to
relief in respect of or arising out of the same act or transaction or
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series of acts or transaction is alleged to exist in such persons,
whether jointly or severally or in the alternative; and if such persons
brought separate suits any common question of law or fact would
arise.
10] In the present case, the indisputable fact or the admitted fact
was that the applicant is the insured under the policy issued by the
defendant and the plaintiff is the joint insured. The claim is for non
payment of a claim made under the insurance policy issued by the
defendant. The applicant's claim against the defendant is the same
as that of the plaintiff and arises out of the same transaction and any
question of fact and law which may arise either in the present suit
qua the plaintiff and the applicant shall be the same and if the
applicant would have been a co-plaintiff at the beginning itself, the
defendant could not have ever objected to the same. The applicant's
claim is based on condition of its status as a co-insured under the
insurance policy issued by the defendant. Therefore, as the policy
stands, there can be no objection if the applicant joins as a co-
plaintiff. If one looks at it the other way, if the defendant had paid
the claim under the policy, the defendant would have, by virtue of
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the endorsement, paid to the plaintiff the amount to the extent
plaintiff had discounted and the balance amount to the applicant.
This position in my view would not be altered under any
circumstances, even if the applicant had taken a stand before the
DRT that it was not bound or liable to pay any amount to the plaintiff.
If the situation was for e.g. when the applicant had issued 10
invoices and discounted only 8 with the plaintiff and all the 10
invoices were not paid by the foreign buyers, certainly, the amount
under the claim would have been payable to both the applicant and
the plaintiff in the proportion of 2 : 8.
11] In any event, even though the applicant had taken a stand that
it was not liable under the policy or it had relinquished all its claims,
transferred and/or relinquished all its rights under the insurance
policy to the plaintiffs, the fact is that the applicant realised that it
was not a correct stand and entered into consent terms. Moreover,
whether the applicant relinquished and transferred its rights to the
plaintiff or not is essentially an issue between the plaintiff and the
applicant and defendant is not at all concerned with that. The
defendant is only liable to pay, if at all it is liable, to the insured
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named in the policy, i.e., the applicant and the plaintiff and that
payment will also be in the proportion as agreed between the
plaintiff and the applicant and endorsed as such in the policy.
12] Besides, relinquishment/transfer also has to be effected by an
instrument or writing. The defendant cannot rely on pleadings
which pleadings also has been given a go-bye in view of the
consent terms entered into between the plaintiff and the applicant in
the Debt Recovery Tribunal proceedings. In the present case, there
is no instrument of relinquishment or transfer and in any case the
defendant is not party to any such understanding between the
plaintiff and the applicant. It is also necessary to note that the
insurance premium for the present policy was of Rs.2.50 Cores
which has been paid by the applicant to the defendant.
13] Under Order I Rule 10, sub-rule (2), the Court may at any
stage of the proceedings, either upon or without the application of
either party, and on such terms as may appear to the court to be
just, order that the name of any party improperly joined, whether as
plaintiff or defendant, be struck out, and that the name of any person
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who ought to have been joined, whether as plaintiff or defendant, or
whose presence before the court may be necessary in order to
enable the court effectually and completely to adjudicate upon and
settle all the questions involved in the suit, be added.
14] Mr.Dhond, Senior Counsel for the defendant submitted that
the name of a party can be struck out or added only by the court on
its own accord or upon an application of either party viz., the plaintiff
or the defendant and not a third party because sub-rule 2 says
"applicant or either party". I disagree with the submissions of the
learned Senior Counsel because the sub-rule (2) says ".... either
upon or without the application of either party....", which would mean
that upon the application of either party or upon the application of
parties who are not parties to the suit. If we have to accept
Mr.Dhond's submission, then, no third party who would suffer
prejudice by any order passed in any suit can apply for leave to
intervene in the proceedings.
15] Mr.Dhond also submitted that only such persons can be added
whose presence may be necessary in order to enable the court
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effectually and completely to adjudicate upon and settle the question
involved in the present suit and this suit can be effectually and
completely adjudicated upon without adding the applicant as party.
According to Mr.Dhond, the plaintiff is also a co-insured and if the
plaintiff continues, then, there is no need to add the applicant as co-
plaintiff. This submission of Mr.Dhond is also not acceptable
because the admitted fact is that the applicant is the insured under
the policy. The applicant has paid Rs.2.50 Crores as insurance
premium. The applicant has paid Rs.23,29,56,958.15 and odd to
the plaintiff as per the consent terms filed in the DRT. The applicant
is the exporter, whose risk of non payment by the foreign buyers is
covered under the policy and, therefore, the applicant is certainly
necessary for effectually and completely adjudicate upon and to
settle all the questions involved in the suit.
16] The Counsel for the plaintiff and the defendant harped a lot on
the expression "at any stage of the proceedings" used in sub-rule (2)
of Order I Rule 10. The Counsel for the applicant also relied upon
the judgement of the Divison Bench of this Court in the matter of
Kahini Developers Pvt. Ltd. Vs. Mukesh Morarji Panchamatia &
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Ors.1 The Counsel for the defendant stated that if the applicant had
filed an independent suit, the suit would be barred by limitation and,
therefore, that has to be considered first before the court decided on
the chamber summons. Whereas, the counsel for the applicant
relied upon this judgement in the case of Kahini Developers (supra)
and submitted that the applicant has to be first added as plaintiff and
only after being added as plaintiff, should the court look into the
aspect as to whether the suit as far as the applicant is concerned, is
barred by limitation or not.
17] In the case of Kahini Developers (supra), the plaintiff sought
to amend a suit for specific performance to add a claim for
damages. Reliance was placed on, inter-alia, the proviso to Section
21(5) of the Specific Relief Act, that states that such amendment be
allowed at 'any stage of the proceedings'. The amendment was
opposed by raising a plea of limitation. In this context, the Division
Bench of this Court stated :
"1 ... Even as a matter of first principle an
application for amendment must be distinguished
from the cause of action which is sought to be set
up by the amendment. As a matter of general
principle, though an application for amendment is
allowed, the question as to whether the cause of
1 (2013) 3 Mah.L.. 440: (2013) 3 Bom C.R. 646
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action is within limitation would have to be
determined and adjudicated upon. While allowing an
amendment, it is always open to a Civil Court to
direct that the amendment shall not relate back to
the institution of the proceeding. The Court would
therefore have to determine at trial whether the
cause of action is within limitation or is barred."
(Emphasis Applied)
Therefore, from this judgment, it does appear that the Court can and
ought to consider the issue of limitation only at the stage of Trial.
The similarity in the language of Order 1 Rule 10(2) of the CPC and
to the proviso to Section 21(5) of the Specific Relief Act, i.e., "Any
stage of the proceedings" is also relevant.
18] Section 21 of the Limitation Act, 1963 reads as under:-
"21. Effect of substituting or adding new plaintiff or
defendant.--(1) Where after the institution of a suit, a
new plaintiff or, defendant is substituted or added, the
suit shall, as regards him, be deemed to have been
instituted when he was so made a party:"
Provided that where the court is satisfied that the
omission to include a new plaintiff or defendant was due
to a mistake made in good faith it may direct that the suit
as regards such plaintiff or defendant shall be deemed to
have been instituted on any earlier date.
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Sub-section 1 provides that where after the institution of a suit, a
new plaintiff or defendant is substituted or added, the suit shall, as
regards him, be deemed to have been instituted when he was so
made a party. The expression used is "substituted or added". It is
used in past-tense. Therefore, only when a party is added as a
plaintiff, can the suit as regards him be deemed to have been
instituted when he was so made a party. Therefore, in my view,
whether a suit as regards the applicant is time barred or not is not
relevant for adding applicant as party plaintiff. I also gain support for
this view of mine from the proviso to sub-section 1, because that
empowers the court to conclude that even if a party is added as
plaintiff after the institution of the suit, the suit as regards such
plaintiff can be deemed to have been instituted at an early date. For
the court to come to the conclusion that the suit shall be deemed to
have been instituted on an earlier date by the applicant, the
applicant should be given a chance to prove its case by leading
evidence on the issue of limitation which is a mixed question of law
and facts. Therefore, the applicant has to be certainly added first,
before we consider the issue of limitation.
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19] Mr.Dhond submitted that the proviso will also get triggered
only if it was due to a mistake made in good faith and the applicant
has not stated anywhere that it was not added as plaintiff earlier due
to mistake made in good faith. Mr.Dhond submitted that in any
event such a statement can be made only by the plaintiff and not by
the applicant. I am afraid, I cannot agree on this count also with
Mr.Dhond because section 21(1) nowhere states that an application
has to be made only by the plaintiffs. More over, just because the
applicant has not used the expression that it was not added as
plaintiff by mistake or it was under a bonafide belief that it need not
be joined as plaintiff in the suit makes no difference because this
point will come up for consideration only when the issue of limitation
vis-a-vis the applicant comes up for consideration at a later stage
and for that to be considered, the applicant certainly has to be
added as party to the suit. It has to be remembered and as rightly
observed by this court in the matter of Nutech Engineering
Technologies Ltd. & Anr. (respondents) in the matter between:
Nevada Properties Pvt. Ltd. Vs. Alice Infrastructure Pvt. Ltd. &
Ors..2 the reason for having provisions like Order I Rule 10 is to
minimise litigation and determine the real controversy in a suit. It is
2 2014 (4) Bom. C.R. 466
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also to be noted that by adding the applicant to the suit as a co-
plaintiff no prejudice is going to be caused to the defendants. The
plaintiff who is dominus litus also has no objection to joining the
applicant as co-plaintiff. In fact, the plaintiff wants the applicant to
be joined as co-plaintiff for the applicant having paid Rs.23 Crores
and odd is certainly exposed to the risk that is covered under the
policy and, therefore, is justified in seeking the prayer as sought in
this chamber summons.
20] In this case of Nutech Engineering (supra), the Court was
considering a chamber summons to substitute a defendant under
Order 1 Rule 10 of the CPC. The proposed defendant raised the
plea that the said substitution was barred on account of Section 21
of the Limitation Act, 1963 since the suit against the proposed
defendant would have been barred on the date on which the
amendment was sought. Significantly, the judgment emphasised
that the enquiry to decide the issue of addition of the party under
Order 1 Rule 10 of the CPC is different and distinct from the enquiry
into the proviso to Section 21 of the Limitation Act. The Ld. Single
Judge was pleased to hold that an amendment sought by a party
could not be denied on the ground that the proposed substitution
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would barred by the law of limitation and the question of limitation
was reserved to be adjudicated at the trial.
The Court considered Section 21 of the Limitation Act, 1963 as
well as Order I, Rule 10(2) as follows :
"10. Proviso to Section 21(1) of the Limitation Act
permits the court to treat the suit as having been
instituted on any earlier date (i.e., earlier to the date of
application for joinder) on being satisfied that the
omission to include the proposed defendant was due to
a mistake made in good faith. The question that needs
to be examined in the present case is whether, either
due to a bona fide error in description or any other
mistake made in good faith, as claimed by the plaintiff,
the proposed defendants were not actually included in
the suit herein.
11 This question is different from the one to be considered
for the case of joinder under Order 1 Rule 10 : Whereas
under Order 1 Rule 10 the question is whether there is
lack of good faith in the application for new joinder,
under the proviso to Section 21 the question is whether
there is good faith in the earlier non-joinder. The plaintiff
must show that despite exercise of good faith, a
mistake was made by not joining the correct defendant.
In other words, despite exercise of due diligence, the
plaintiff could not find out who the correct defendant
ought to be. Both the plaintiff and the defendants have
relied upon various documents which throw light on the
aspect of due diligence or otherwise on the part of the
plaintiff in omitting to implead the correct defendants.
The matter obviously requires to be proved at the trial
by leading of evidence. That question cannot be
decided, or at any rate, need not be decided, at this
stage, since it would involve leading of extensive
evidence. Subject to the plea of limitation being kept
open, the proposed defendants can always be added."
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In allowing the amendment application whilst keeping
the issue of limitation open the Court placed reliance on
the decision of the Apex Court in Ragul Thilak D. John.
V. S. Rayappan, (2001) 2 SCC 472, which was affirmed
in Baldev Singh V. Manohar Singh, (2006) 6 SCC
498.
21] In the light of the above, the appropriate stage for considering
the issue of limitation and due diligence, mistake or good faith, must
be after allowing the present amendment and impleading the
applicant as a co-plaintiff to the present suit.
22] Mr. Dhond relied upon a judgement of the Madras High Court
in the matter of R. Lucas S/o.Rajamanickam and Anr. Vs.
Jayachandra W/o. A.K.V.Nityanandam and Anr.,3 to submit that
when there is nothing to indicate that the mistake in not impleading
another plaintiff in time was a bonafide mistake, the suit would be
regarded as having been commenced by the new plaintiff at the time
when it was first instituted. There is no quarrel with this proposition..
But the fact is that we can consider this aspect only after the
applicant is joined as co-plaintiff. Mr.Dhond also relied upon a
judgement of this Court in the case of Shekhar s/o.Govindrao
3 (2001) 2 M.L.J. 307
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Kinkhede Vs. Shweta wd/o. Shekhar Kinkhede and Ors., 4 to submit
that where there is a conscious decision on the part of the plaintiff
not to add the applicant as plaintiff while executing the suit, it cannot
be a mistake as required under the proviso to section 21 of the
Limitation Act. This decision also does not take the case of
Mr.Dhond any further. First of all, facts in that case were totally
different from the facts in the present case. In that case, despite
being called upon, the plaintiff refused to add the applicant as co-
plaintiff. In this case, the plaintiff in view of the fact that it had
discounted the bills of the applicant, had filed a suit in its own name
as per the policy. The applicant having paid part of that amount to
the plaintiff, certainly will be entitled to make a claim under the
policy. Moreover, as to why the plaintiff did not add the applicant
etc. can be considered only after adding the applicant as plaintiff.
23] The counsel for the plaintiff made a big issue on the omission
of the applicant to forward a copy of the miscellaneous application
filed by the application in the Debt Recovery Tribunal as willful
suppression. I find nothing turns out on this point in view of the fact
that the plaintiff and the applicant had entered into consent terms
4 2009 (6) Mh.L.J. 217
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and there was no writing or instrument relinquishing the rights.
24] It is also mentioned in the recital of the bankers' endorsement
to the policy issued by the defendant that to the extent that the bank
finances specific insured debts the plaintiff will have an insurable
interest under the policy. The defendant acknowledges that the bank
has received a sum of Rs.23,29,56,958.19 from the applicant. To
that extent, the defendant will contend at the hearing of the suit that
the plaintiff has no insurable interest under the policy. To avoid any
such plausible situation and without getting into the said issue on
merits, this would also be an alternative reason to permit the
applicant to be impleaded as co-plaintiff.
25] In the circumstances and in the interest of justice, the chamber
summons had to be allowed and is made absolute in terms of prayer
clauses (a) and (b). It is also clarified that the issue of limitation as
regards the applicant is kept open.
26] Amendments to be carried out by the applicants/ plaintiffs
within one week from today. Copy of the amended plaint be served
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upon the defendant within one week thereafter. Applicant has to,
however, pay to the defendant costs for this application in the sum
of Rs.25,000/- within four weeks by cheque drawn in favour of the
Advocate for the defendant.
( K.R.SHRIRAM, J.)
