K.K. Modi vs Shri K.N. Modi And Ors.
1998 Latest Caselaw 375 Del

ORDER

S.N. Kapoor, J.

1. Heard parties counsel on this application for amendment of the plaint.

2. Mr.Rajiv Sawhney, learned senior counsel appearing on behalf of defendant No.10, states that they are not opposing the amendment.

3. The plaintiff and the defendant Nos. 1, 2 and 10 to 15 belong to Modi family and are interested in 20 limited companies known as 'The Modi Ground of Companies'. Late Sh.Gujar Mal Modi and Sh.Kedar Nath Modi, the two brothers started their venture. Sh.Gujar Mal Modi died in 1976 leaving behind his sons, namely, KK. Modi, plaintiff and his brothers Mr.V.K. Modi, Mr.S.K. Modi, Mr.B.K. Modi and Mr.U.K. Modi (Group'B' for short). Mr.M.K. Modi, Defendant No. 2, Mr.Y.K. Modi, Defendant No.14 and D.K. Modi, defendant No. 15 are sons of Sh.Kedar Nath Modi, defendant No.1. Some disputes and differences arose in the family about proper management and control of the companies. The Govt. of India through financial institutions is also involved for they have lent some advances to this group of companies and it was thought that Modi Group of Companies be split between Group A i.e. Sh.K.N. Modi and his sons and Group B companies of the plaintiff and his brothers to ensure their better management and profitability. A Memorandum of Understanding (M.O.U.) was executed on 24th January, 1989 in the office of the Finance Secretary, Government of India relating to 20 companies mentioned in paragraph 3 of the plaint. That M.O.U. (Annexure-A) was duly acted upon by both the Groups A and B as well as financial institutions and the Board of Directors of Modi Group of Companies. Necessary resolutions were passed by the concerned companies accordingly. However, certain disputes could not be decided then and there and in pursuance of the said M.O.U., M/s. Billmoria & Company were supposed to prepare valuation report in respect of various companies determining the net worth of each company for the purpose of settlement of inter company group accounts and they accordingly prepared valuation report dated 29th January, 1991 (Annexure-C). M/s.Bansi S. Mehta & Company also prepared scheme of arrangement for Modi Spinning & Weaving Mills Company Limited and Modi Industries Limited in pursuance of Clauses 5 and 6 of the said M.O.U. after circulating a draft scheme of arrangement to the two Groups, namely, Group A and Group B before finalising it. It is alleged that Chairman and Managing Director, Industrial Financial Corporation Ltd. ('IFCI' for short) instead of accepting the valuation report and the scheme of arrangement substituted the same by his own valuation and scheme of arrangement.

4. Feeling aggrieved by this, the plaintiff filed the present suit and also filed arbitration proceedings on the same date treating the decision of Chairman and Managing Director (CMD), IFCI as an award.

5. Seeing that excepting one paragraph 55, all paragraphs in the two were verbatim the same, a single Judge of this Court holding that it amounts to abuse of the process of law struck down the plaint. The matter ultimately went up to the Supreme Court in appeal. The following extracts of the judgment of the Supreme Court dated 4th February, 1998 in Civil appeal No.613 of 1998, K.K. Modi Vs. K.N. Modi are relevant in this regard:-

"This perception of the Learned Judge may be substantially correct though not entirely so. Undoubtedly, if the plaint in the suit is viewed as challenging only the arbitration award, a suit to challenge the award would be re-litigating the issues already raised in the arbitration petition....

The plaint in the suit, to the limited extent that it challenges the decision as a decision, would not amount to abuse of the process of Court.... The court will also have to consider the binding nature of such a decision particularly when no mala fides have been alleged against the CMD, IFCI. If ultimately it is found that even on the alternative plea, the claim is not maintainable the court may pass appropriate orders in accordance with law. But to the limited extent that the suit raises an alternative independent plea, it cannot be considered as re-litigation of the same issue or an abuse of the process of court.

Therefore, the suit, if and to the extent that it challenge in accordance with law, the impugned decision as a decision, cannot be treated as an abuse of the process of the court.

In order to obviate any dispute, the parties have agreed that the entire working out of this agreement will be subject to such directions as the Chairman, IFCI may give pertaining to the implementation of Memorandum of Understanding. He is also empowered to give clarifications and decide any differences relating to the implementation of the Memorandum of Understanding. Such a family settlement which settles disputes within the family should not be lightly interfered with especially when the settlement has been already acted upon by some members of the family. In the present case, from 1989 to 1995 the Memorandum of Understanding has been substantially acted upon and hence the parties must be held to the settlement which is in the interest of the family and which avoids disputes between the members of the family. Such settlement have to be viewed a little differently from ordinary contracts and their internal mechanism for working out the settlement should not be lightly disturbed. The respondents may make appropriate submissions in this connection before the High Court. We are sure that they will be considered as and when the High Court is required to do so whether in interlocutory proceedings or at the final hearing.

The appeal of the appellants from the judgment of the Learned Judge striking out the plaint is, therefore, partly allowed and the suit, to that extent that it challenges independently the decision of the Chairman, and Managing Director, IFCI as a decision and not as an award, is maintainable in the sense that it is not an abuse of the process of the court. We make it clear that we are not examining the merits of the claim nor whether the plaint in the suit discloses a cause of action in this regard. The plaint leaves much to be desired and it is for the trial court to decide these and allied questions.

Pending the hearing and final disposal of the suit in the Delhi High Court and/or until any further orders are passed by the trial court if the exigencies of the situation then prevailing so require, no meeting of the Modipon Board shall be held for considering any matter relating to the decision of the CMD, IFCI dated 8.12.1995. Also the defendants in the said suit (Group A) shall not sell any shares held in Godfrey Phillips India Ltd. provided that the plaintiffs in the suit deposit in the Delhi High Court a sum of Rs.5 crores (Five Crores) within four weeks from the date of this order."

These extracts were required to be quoted to consider the extent to which amendment can be allowed.

6. It is submitted that this application for leave to amend the plaint has been filed in the above said background to incorporate the proposed amendments set out in paragraph 3 of the application, specially in view of the authoritative interpretation of clause 9 of M.O.U. dated 24.1.1989, by the Supreme Court, which is the subject matter of the above suit. These amendments are necessary to clarify the confusion between 'award' and 'decision' and to distinguish these proceedings from that of arbitration proceedings filed separately. They are necessary for substantial justice between the parties. The defendants could be compensated with cost.

7. The application for amendment is being opposed on the ground that a new cause of action is being introduced. What has been rejected by the learned single Judge and by the Supreme Court, the plaintiff wants to rely on those very facts but in slightly different words by setting up new ideas. The plaint does not disclose any cause of action in case all those paragraphs which were compared by the learned single Judge and by the Supreme Court are ignored. Since the cause of action does not exist it would not be proper to allow the application for amendment.

8. Following appears to be the settled legal position in view of A.K. Gupta and Sons Ltd. Vs. Damodar Valley Corporation, , M/s.Ganesh Trading Co. Vs. Moji Ram, , Gangamal Ramchand Vs. The Hongkong & Shanghai Banking Corporation, for the purpose of considering any prayer for amendment of the pleadings:

(i) The object of the rule is to decide the rights of parties and not to punish them for their mistakes. Procedural law is intended to facilitate and not to obstruct the course of substantive justice.

(ii) If the amendment sought is necessary for just decision of the real dispute between the parties, the amendment should be allowed.

(iii) The general rule no doubt is that a party is not allowed by amendment to set up a new case or a new cause of action, particularly when a suit on new case or cause of action is barred.

(iv) The expression "cause of action" for the present purpose only means a new claim made on new basis constituted by new fact.

Any other view would make the rule futile. The words "new case" have been understood to mean new set of ideas.

(v) Mere failure to set up even essential facts does not by itself constitute a new cause of action. A cause of action is constituted by whole bundle of essential facts which the plaintiff must prove before he can succeed in his suit. Defective pleadings are generally curable. Future cause of action which was sought to be brought out was not ab initio completely absent. Even very defective pleadings may be permitted to be cured so as to constitute cause of action where there was none, provide necessary conditions, payment of either any additional court fee which may be payable or of cost of the other side are complied with.

(vi) A different or additional approach to the same facts could be allowed by amendment even after the expiry of the statutory period of limitation, for no question of limitation, strictly speaking, arises in such a case. What is sought to be brought in is merely a clarification of what is already there in the pleadings.

(vii) However, amendment cannot be allowed where any vested right has been created on account of expiry of time. No amendment would be allowed to introduce a new set of ideas to the prejudice of any right acquired by any party by lapse of time.

However, how far contractual/statutory waiver or estoppel by conduct would be appropriate to refuse the amendment is a point which is yet to be settled.

9. Learned counsel for the defendants relies upon Patasibai and Others Vs. Ratan Lal, (1990) 2 S 42. In that case, the plaint did not disclose any cause of action giving rise to any triable issue for setting aside a compromise decree assailing the decree as nullity. Suit was filed not on ground of the consent decree being obtained by fraud, coercion or misrepresentation but merely on the basis of certain procedural lapses in deciding the earlier suit which were not material. An application for amendment was moved on grounds which were raised unsuccessfully in the earlier appeals against the compromise decree and those findings on the said grounds had become final and concluded. The trial court did not reject the plaint. High Court also confirmed the approach of the learned trial court. The Supreme Court held that trial court could not be allowed to proceed in view of the fatal defect.

10. But in this case, the facts are totally different. Nearly all the averments have been made in the plaint itself. The Supreme Court did not reject the plaint as had been done in Patasibai Vs. Ratan Lal (supra). Instead it held that the suit was maintainable. In such circumstances, I find it difficult to accept the contention of the learned senior counsel for the defendants and to say that the plaint has to be rejected in view of the judgment in Patasibai v. Ratan Lal (supra).

11. It may be mentioned here that by order dated 4th February, 1998, the Supreme Court has not rejected the plaint as a whole. It did not reject by ordering deletion of any of the paragraphs. What was rejected was challenge to the arbitration award, for a suit to challenge the award would be relitigating the issues already raised in the arbitration proceedings. The plaint in the suit is now limited to challenge the decision as a decision would not amount to abuse of the process of the court. This court is also supposed to consider the binding nature of "decisions". It is also notable that no mala fides is alleged against the CMD, IFCI in giving the said decision. It has also been clarified that the suit if and to the extent that it challenges in accordance with law, the impugned decision cannot be treated as an abuse to the process of the court. In such a circumstance, one has to take into consideration the existing plaint as it is and consider it along with proposed amendments.

12. Learned senior counsel appearing on behalf of both the parties do not challenge the M.O.U. dated 24th January, 1989. According to the plaintiff, the CMD, IFCI exceeded the limits of the authority given under M.O.U. This kind of a family arrangement has to be respected so long the parties adhere to the terms of the M.O.U.. This very case was pleaded in the entire plaint but the decision has been termed as award. The only difference is that now, the petitioner seeks to use the word decision in place of award in paragraphs 32, 33, 35, 36, 37, 38, 39, 40, 41, 42, 43, 45, 46, 48, 52, 52A, 53 and in the grounds pof paragraphs 55, 56, 58 treating the decision of the CMD, IFCI as a decision instead of an award. The plaintiff seeks to make various amendment to confine this case to the decision within the terms of the judgment of the Supreme Court. No new idea is being set up which did not already exist. There is virtually no new case to reject any of the amendments mentioned in paragraph 3 for any reason.

13. There cannot be any doubt that the idea of decision and the award was so mixed up that it may be difficult to separate each sentence and each word. But and in such a situation the amendment sought should be rejected would be too much. The decision of the CMD, IFCI was already under challenge. The grounds are already mentioned in paragraph 58. The amendment which is sought in paragraph 58 is just a clarification regarding subsequent event of the judgment/order of the Supreme Court and clarification of the stand taken by the plaintiff. To that extent one can say that there is certainly a better presentation of the same ideas and same pleas in the light of subsequent events of authoritative interpretation of lause 9 of M.O.U. It appears that this amendment is also essential for just decision of the case, specially when this Court is supposed to consider the binding nature of the decision, specially in absence of any allegation regarding mala fides.

14. It may be mentioned that so far as amendment of paragraph 55 is concerned, the learned senior counsel for the defendants did not dispute deletion of a part of paragraph 55 but he opposed addition at the end of paragraph 55.

15. The binding nature can be decided only after considering whether all the parties adhered to the M.O.U., including the CMD, IFCI.

16. Besides, the question of estoppel by conduct and representatives referred to by the defendants and plaintiff in their pleadings and their effect cannot be decided at this stage without recording evidence. As such, it cannot be held at this stage whether the decision given by CMD, IFCI is in accordance of M.O.U. and its clause 9 and one must not be swayed by literal meaning of clause 9 in isolation and dehorse of other clause and conduct of parties. However, since vested right can be created by estoppel and waiver also as a legal proposation, it appears plausible to say that amendment sought to nullify such vested right, should not be entertained.

17. If one considers all the amendments mentioned in paragraph 3 of the application, they appear to be necessary for just decision of the case.

18. The defendants can be compensated by appropriate cost for causing confusion initially by filing simultaneously two suits and challenging the impugned decision as an award in the present suit. Accordingly, I allow the amendments subject to payment of cost of Rs.25,000/- to be shared by the defendants.