Sidharth Sareen & Anr. vs M/S Hira Realtors Pvt Ltd & Ors.
2010 Latest Caselaw 1628 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                        Reserved on: February 16, 2010

                                        Decided on: March 23, 2010

+     FAO(OS) 93/2009

      SIDHARTH SAREEN & ANR.             ..... Appellants
                   Through: Mr. Jayant Bhushan, Sr. Advocate with
                             Mr. Amitabh Chaturvedi, Advocates.

                   versus


      M/S HIRA REALTORS PVT LTD & ORS.         ..... Respondents
                    Through: Mr. R.K.Aggarwal, Adv. for R1 to R6
                             Mr. Pankaj Kumar Singh, Advocate for
                             R-7, 8, 9 and 11.
                             Mr. Jeevesh Nagrath Advocate for R-
                             10.
                             Mr. M.R. Shamshad, Advocate for R-
                             12.

CORAM:
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MS. JUSTICE MUKTA GUPTA

1. Whether the Reporters of local papers may
   be allowed to see the judgment?                       Yes

2. To be referred to Reporter or not?                    Yes

3. Whether the judgment should be reported
   in the Digest?                                        Yes




FAO (OS) 93/2009                                                     Page 1 of 15
 MUKTA GUPTA, J.

1. The plaintiffs/Respondent Nos.1 to 6 herein (hereinafter called `the

contesting Respondents') filed a suit being CS (OS) No.260/2008 inter alia

praying as under:

"A)Declare that the Forms filed by the Defendants with the Registrar of Companies, as mentioned herein above, are invalid, illegal and null and void; B) Grant permanent injunction against the defendants restraining them from acting, representing and/or holding out themselves as directors/shareholders of plaintiff no.1 company;

C) Grant permanent injunction restraining the defendants from interfering or dealing with in any manner with the affairs, business and properties of the plaintiff company, and D) Pass such other and further order/ orders as this Hon'ble court may deem fit, proper and necessary on the facts and circumstances of the present case."

2. Subsequently, an application being IA No.5611/2008 was filed by the

contesting Respondents under Order 6 Rule 17 of the CPC for the amendment

of the plaint. After hearing the parties, the learned Single Judge, vide order

dated 22nd October, 2008 permitted the amendments on the ground that the

amendments sought were clarificatory in nature and purport to give better

particulars of the transactions, subject matter of the suit and the suit is at the

initial stage. It is also observed that the counsel for the contesting

Respondents has stated that neither any admission is being withdrawn by way

of the amendments nor any stand contradictory to the stand taken in the plaint

is being taken. The Appellants herein filed an application being IA

No.14255/2008, for review of order dated 22nd October, 2008. The said

review application was also dismissed vide order dated 13th February, 2009.

The orders of the learned Single Judge dated 22 nd October, 2008 and 13th

February, 2009 are the orders impugned before us.

3. Learned counsel for the Appellants has contended that the amendments

seek to withdraw the admissions made by the contesting Respondents herein

and thus take away a vested right which has accrued to the Appellants. Not

only does the amendment seek to withdraw the admission but also set up a

new case and hence in terms of the law laid down by the Hon'ble Supreme

Court and this Court the amendments should not be allowed. Reliance in this

regard is placed on the decisions rendered in the cases of Rajesh Kumar

Aggarwal and others v. K.K.Modi and others, 2006 (4) SCC 385 and Madhu

Sudan Gupta v. Dinesh Gupta, 133 (2006) DLT 459 (DB).

4. Respondents No.7,8,9,10 and 11 in the present appeal, who are also the

Defendants in the suit, have supported the claim of the Appellants and

according to them the Respondent No. 1company was floated as a special

purpose vehicle, which admission is sought to be withdrawn besides setting

up a new case, by the contesting Respondents herein.

5. Per contra, learned counsel for the contesting Respondents states that

neither any admission has been withdrawn nor a new case set up. According

to him paragraphs 5 (a) (b) and (c) brought in by way of amendment are

historical facts, relevant for the decision of the case and are permitted in view

of the plain reading of Order 6 Rule 17 CPC. It is further contended that the

suit is at the initial stage wherein written statement has not been filed as yet

and hence no prejudice is caused to the Appellants herein, who are at liberty

to set up the defence they wish to. It is further contended that the amended

prayer is only elaboration and clarification of prayers (a) and (b) made in the

original plaint.

6. It is well settled proposition of law that in a plaint if the Plaintiff wants

to withdraw his admissions or set up a new case then the amendments cannot

be permitted. The Hon'ble Supreme Court in Revajeetu Builders &

Developers vs. Narayanaswamy & Sons, 2009 (10) SCC 84 laid down the

following basic principles which ought to be considered while allowing or

rejecting the application for amendment:

"63. On critically analyzing both the English and Indian cases, some basic principles emerge which ought to be taken into

consideration while allowing or rejecting the application for amendment:

(1) whether the amendment sought is imperative for proper and effective adjudication of the case;

(2) whether the application for amendment is bona fide or mala fide;

(3) the amendment should not cause such prejudice to the other side which cannot be compensated adequately in terms of money;

(4) refusing amendment would in fact lead to injustice or lead to multiple litigation;

(5) whether the proposed amendment constitutionally or fundamentally changes the nature and character of the case; and

(6) as a general rule, the court should decline amendments if a fresh suit on the amended claims would be barred by limitation on the date of application.

These are some of the important factors which may be kept in mind while dealing with application filed under Order VI Rule

17. These are only illustrative and not exhaustive.

64. The decision on an application made under Order VI Rule 17 is a very serious judicial exercise and the said exercise should never be undertaken in a casual manner. We can conclude our discussion by observing that while deciding applications for amendments the courts must not refuse bona fide, legitimate, honest and necessary amendments and should never permit mala fide, worthless and/or dishonest amendments.

7. The amendments sought to be made in the plaint are reproduced as

under in a tabular form:

Para under Pre-Amendment Post- Amendment Amendment Para 4 That sometimes in the Plaintiffs state that month of July 2005, Shri sometimes in the Siddharth Sareen and month of July, 2005,

defendant nos. 1 and 2 (Shri Siddharth herein approached the Sarin) and Defendant plaintiffs herein and No. 2 (Shri Shravan evinced interest in Gupta) approached purchasing land in the plaintiff No. 2 (Shri area of Najafgarh. The Hira Prasad Mishra) defendants conveyed to (Promoter and the plaintiffs that they Chairman of

area for quite some time Company) and and they had failed their represented before attempts to purchase any him that they are an land in the said area established business because the land owners house in Delhi, in the said area were which is engaged in either not willing to sell the business of the land to them or they developing real estate were demanding under the flagship of unreasonable prices from MGF Group of the defendants. Thus, the Companies. The defendants requested the above named plaintiffs to assist them in Defendants further purchasing the land in the represented that they said area. The plaintiffs, have been surveying therefore, assisted the area surrounding defendants to purchase Najafgarh for buying over 125 acres of land for land in order to different group develop commercial companies of defendant properties. However, nos.1 and 2 on mutually in spite of their agreed terms and repeated efforts they conditions. had failed to buy any substantial portion of land as the land

owners in the area were either not willing to sell the land to them or they were demanding exorbitant rates as the cost of the land.

Therefore, the Defendants requested Plaintiff No. 2 (Shri Hira Prasad Mishra) to collaborate as working partner for purchasing land in around Delhi.

Para 5 That while the above said 5(a) That the Plaintiff land was purchased for states that the defendant nos. 1 and 2, itPlaintiff No.2 (Shri Hira Prasad Mishra) was realized by the agreed to the request defendants that even afterof the aforesaid getting assistance from Defendants and in the plaintiffs, they were partnership with Shri Hira Prasad Mishra still facing lot of hurdles in purchasing land from (in his individual the farmers because they capacity), the Defendants purchased were not agreeing to sell more than 100 acres their lands to unknown of land in around persons and, therefore, Najafgarh, Delhi, in the defendants requested the name of M/s.

Logical Estate Private the plaintiffs that let the required land Limited and M/s.

be purchased in the name of Prosperous Buildcon Limited.

the plaintiff Company on the terms and conditions 5(b) That the Plaintiff appearing hereinafter, on states that the said the clear understanding 100 acres of land was purchased over a

that while purchasing period of time from land in the name of the July-August 2005 up plaintiff company, the to June-July 2006 and also included land role of the defendants belonging to Shri would be limited as Hira Prasad Mishra, financiers and who agreed to sell his representatives of the 61 Bighas and 4 plaintiff company. Biswas land, total admeasuring to 12.75 acres by way of an agreement to sell dated 18.08.2005 which were purchased prior to the further deal of purchase of more than 100 acres of land in partnership in individual capacity.

5(c) That the Plaintiff states that in spite of purchasing more than 100 acres of land in around the area, the aforesaid Defendants represented before the Plaintiff No.2 that they were still having huge cash resources at their end and they wanted to invest the same. However, they represented that as they have already invested heavily in land in around Najafgarh, they were not inclined to put

any further investment in real estate as that would cause maximum exposure of capital in real estate business alone and would accordingly invest the money as lender in some company to make short term gains.

Para 6 That while the above said That the Plaintiff land was purchased for states that on defendant nos. 1 and 2, it 07.12.2005, the Plaintiff No.2 (Shri was mutually decided Hira Prasad Mishra) that in future whatever alongwith the land would be purchased Plaintiff No.3 (Shri with the assistance of the Abhay Kumar plaintiff, it would be Mishra) incorporated purchased in the name of the Plaintiff No.1 plaintiff Company. company in the name and style of Hira Realtors Private Limited, having its registered office at R ZC-3/189, Mahavir Enclave-1, New Delhi. The authorized share capital of the Plaintiff No.1 company was initially Rs.1,00,000/- which was divided into 10,000 equity shares of Rs.10 each. The entire paid up share capital of the Plaintiff No.1 Company was

subscribed and issued by the Plaintiff No.2 (Shri Hira Prasad Mishra) and Plaintiff No.3 (Shri Abhay Kumar Mishra) who held 5000 equity shares of Rs.10 each respectively. Plaintiff No.2 (Shri Hira Prasad Mishra) and plaintiff No.3 (Shri Abhay Kumar Mishra) were also appointed as the first Directors of the Plaintiff No.1 Company.

Para 7 As the Plaintiffs wanted 7(a) Plaintiff states to have their interest that once the secured so that they Defendants came to know that Plaintiff might not be duped or No.2 (Shri Hira cheated by the defendants Prasad Mishra) along in future, it was clearly with his family understood between the members had parties that whatever land incorporated the would be purchased in Plaintiff No.1 the name of the Plaintiff Company for sale/purchase and Company with the development of land, financial assistance of the the Defendants defendants and sold to showed their interest different developers at to invest in the the then prevailing Plaintiff No.1 market price of the land Company as in question, the lender/investor. In consideration of their defendants would be paid loan/investment the 25% commission on such Defendants proposed

sales land, over and that they were above their investment. interested in 25% of The plaintiff company, the profits earned by Plaintiff No.1 therefore, passed a rd Company from Resolution dated 23 selling the land February, 2006, whereby purchased from the the defendant nos.1 and 2 money lent by the were authorized as Defendants. representatives of the plaintiff Company to 7(b) That the Plaintiffs state that purchase the land in the they believed the name of the plaintiff intentions of company only. Defendants to be bonafide accepted their proposal and accordingly the

started lending money to the Plaintiff No.1 Company. In the course of its business the Defendants No.1 & 2 proposed that the Plaintiff No.1 Company may also authorize them to purchase land on behalf of the Plaintiff No.1 Company as it would only help in timely completion of transaction and would be beneficial for the Plaintiff No.1 Company. The Plaintiffs who were still at very good

terms with the

further accepted their proposal and accordingly in the meeting of the Board of Directors of the Plaintiff No.1 Company held on 23.02.2006,

were duly authorized to purchase land on behalf of the Plaintiff No.1 Company.

Para 29A NOT PLEADED That the plaintiff states that illegality committed by the Defendants is further apparent from the fact that the Defendants have also filed false and fabricated documents with other statutory bodies, like Securities and Exchange Board of India (SEBI).

                                 Plaintiffs state that in
                                 the Red Herring
                                 Prospectus       (RHP)
                                 filed by EMAAR-
                                 MGF Land Limited
                                 (a            company
                                 controlled by the
                                 above-named
                                 Defendants),         the
                                 Defendants         have
                                 shown the Plaintiff
                                 No.1 Company as

                                                 their group company
                                                as on 31.03.2006,
                                                (even though the

                                                were            neither
                                                Additional Director
                                                in the Plaintiff No.1
                                                Company nor were
                                                they shareholder. It
                                                be may not be out of
                                                place to mention that
                                                in the said RHP of
                                                EMAAR MGF Land
                                                Limited,            the

                                                have not declared
                                                their       contractual
                                                interest with the
                                                Plaintiff         No.1
                                                Company in terms of
                                                the provisions of the
                                                Companies Act, 1956
                                                in case the said
                                                defendants        were
                                                directors/ shareholder
                                                in the Plaintiff No.1
                                                Company.

8. Thus on a comparison of the averments in the original and amended

plaints, it is apparent that the following admissions have been withdrawn and

new facts introduced in the amended plaint by the contesting Respondents:

i. The admission in paras 4 and 5, that 125 acres of land was purchased

for the Appellants has been withdrawn. The admission that the contesting

Respondents assisted the Appellants to purchase over 125 acres of land for

different group companies of Defendant No. 1 and 2 on mutually agreed terms

and condition have been withdrawn.

ii. The clear admission in para 6 that while the above said land (i.e. 125

acres) was purchased for Appellants, it was mutually decided that in future

whatever land would be purchased with the assistance of the plaintiff, it would

be purchased in the name of Respondent No.1 company has been withdrawn.

iii. The status of contesting Respondents from assistance in purchasing 125

acres of land for Appellants on mutually agreed terms has been converted to

collaboration as working partners.

iii. Out of the land purchased from unknown farmers, it has been stated in

the amended plaint that the lands include the lands belonging to Respondent

No. 2.

v. In para 5 of the original plaint, the status of the Appellants is that of

financers for future transactions. However, in the amended plaint their status

has been converted to that of investors and money lenders for the entire

transactions.

vi. New facts that more than 100 acres of land was purchased in and

around Nazafgarh in the name of M/s Logical Estate Private Limited and M/s

Prosperous Buildcon Limited have been introduced.

9. Thus, it would be apparent from the facts narrated above, that vital

admissions relevant for the determination of the prayer (c) with regard to the

status of Appellants as owners qua 125 acres of land have been withdrawn and

a new case is sought to be put up in the amended plaint thereby causing

prejudice to the Appellants. The amendments propose to constitutionally and

fundamentally change the nature of the case.

10. Consequently, the appeal is allowed. Orders dated 22nd October, 2008

and 13th February, 2009 passed by the learned Single Judge are set aside. IA

No. 5611/2008 in CS (OS) No. 260/2008 is hereby dismissed.

11. No order as to costs.

(MUKTA GUPTA) JUDGE

(MADAN B.LOKUR) ACTING CHIEF JUSTICE MARCH 23, 2010 mm