Rajendra Kumar Gupta & Ors. vs Shivraj Gupta & Anr.
2010 Latest Caselaw 2809 Del

*                 IN THE HIGH COURT OF DELHI AT NEW DELHI
                                   FAO (OS) No. 350 OF 2010

                                                         Judgment Reserved On: May 21, 2010.
%                                                     Judgment Pronounced On: May 28, 2010.


        RAJENDRA KUMAR GUPTA & ORS.                                           . . . Appellants

                                     through :                   Mr. A.M. Singhvi, Sr. Advocate with
                                                                 Mr. Girish Misra, Mr. N. Nidhiram
                                                                 and Mr. Aneesh Patnaik, Advocates

                                              VERSUS

        SHIVRAJ GUPTA & ANR.                                                        ...Respondents

                                     through:                    Mr.  Vikas  Dhawan     with   Mr.
                                                                 Abhimanyu Mahajan, Advocates.

CORAM :-
    HON'BLE MR. JUSTICE A.K. SIKRI
    HON'BLE MR. JUSTICE AJIT BHARIHOKE

        1.        Whether Reporters of Local newspapers may be allowed
                  to see the Judgment?
        2.        To be referred to the Reporter or not?
        3.        Whether the Judgment should be reported in the Digest?

A.K. SIKRI, J.

1. In this appeal preferred by the appellants under Section 10 (1) of the

Delhi High Court Act, 1966, the appellants impugned the validity of

orders dated 11.03.2010 passed by the learned Single Judge in IA

No.168/2007. That was an application preferred by the respondent

herein (plaintiffs in the suit, hereinafter referred to as „the plaintiffs‟)

under Order VI Rule 17 for amendment of the plaint. By the aforesaid

reasoned order dated 11.03.2010, the learned Single Judge has

accepted the prayer made by the plaintiffs in the said application, which

permitted the plaintiffs to amend the plaint as desired. The appellants

herein are the defendants (hereinafter referred to as „the defendants‟).

Their submission that the suit had become infructuous; the

amendments pleaded and further relief sought based thereon furnished

afresh cause of action, which could be agitated by filing fresh suit, has

not been accepted by the learned Single Judge. Arguments in the

appeal remain the same. Before we take note of the arguments in

detail and put them in perspective, we deem it proper to narrate the

background in which the occasion to file application for amendment

arose.

2. The plaintiff No.1 and the defendant No.1 are the brothers, both of

whom are sons of Late Lala Hansraj Gupta. Plaintiff No.2 is the son of

plaintiff No.1; defendant Nos. 2 & 3 are the sons of defendant No.1 and

Defendant No.4 is a company incorporated under the Indian Companies

Act (hereinafter referred to as „the Act‟) known as M/s. Hansraj Gupta &

Co. Private Limited. Without mentioning the present status of the

plaintiffs and defendant Nos. 1 to 3 in defendant No. 4 Company as that

is the subject matter of dispute, we may mention that both the plaintiffs

and defendants 1 to 3 at one point of time were the Directors in the

Company. They continued to be the share-holders of the said company

as well. A meeting of the Board of Directors of the company was held

on 06.01.2005. In fact, in the Annual General Meeting convened on

10.12.2003, plaintiff No.2 and defendant No.3 were appointed as

Directors, plaintiff No.1 was reappointed as Director, as defendant Nos.

1 and 2 were already the Directors as their terms as Directors had not

come to an end by that date. In this manner, after the AGM held on

10.12.2003, the Board of Directors of the company consisted of

plaintiffs as well as defendant No.1.

3. Bone of contention in the CS (OS) 43/2005 filed by the plaintiffs is the

validity of the meeting held on 06.01.2005. According to the plaintiffs,

the term of defendant No.1 as Director of the company expired on

31.12.2004. Since no AGM was held after 10.12.2003 till 31.12.2004,

which should have been held by 31.12.2004, the defendant No.1 stood

retired from office on 31.12.2004. He, therefore, could not attend the

meeting of Board of Directors held on 06.01.2005, as he had ceased to

be the Director of company as on that date. On this ground aforesaid

suit for declaration and permanent injunction has been filed by the

plaintiffs, seeking decree of declaration to the effect that the defendant

No. 1 ceased to be the Director of the company with effect from

31.12.2004 and thus meeting held on 06.01.2005 as well as resolutions

passed in the said meeting are null and void and cannot be given effect

to. The plaintiffs have also sought decree of permanent injunction

against the defendants restraining them from acting in furtherance of

and/or pursuant to the resolution passed in the meeting held on

06.01.2005. Along with this suit, the plaintiffs also sought ad interim

injunction.

4. The Suit was filed on 11.01.2005, i.e., within five days of holding the

aforesaid meeting of the Board of Directors. This suit and IA came up

for preliminary hearing on 14.01.2005. While issuing summons in the

said suit in the application for injunction (IA No.295/2005), the Court

issued notice for 18.01.2005 and also passed the order "Status quo as

of today be maintained by the parties till the next date of hearing".

Counsel for the defendant No.1 had appeared on that date and had

accepted the summons on behalf of the defendant No.1. and after

18.01.2005, the status quo order was extended from time to time by

giving short dates and at the same time awaits the service of summons

to defendant Nos. 2 to 4.

5. We may mention, at this stage, that one of the resolutions passed in the

meeting held on 06.01.2005 was to convene AGM for 05.02.2005, as

the status quo order would have prevented holding of the AGM. When

the matter came up for hearing on 31.01.2005, defendants 1 to 3

argued that status quo order be modified to enable the company to hold

AGM as scheduled. Following order was passed on that date:

"In the meanwhile, the status quo orders dated 14th January, 2005, are modified to the effect that the A.G.M. scheduled to be held on 5th February, 2005, may be held but the decisions in regard to the Directorship of the plaintiffs, if any taken in the A.G.M.

shall not be given effect till the next date of hearing. (emphasis supplied)."

6. In view of the aforesaid order, the AGM meeting scheduled on

05.02.2005 was duly held. On that day, the defendant No.1 was in the

said meeting and the defendant No.1 was reappointed as the Director.

Plaintiff No.2 was also made to retire by rotation.

7. Thereafter, Extraordinary General Meeting (EGM) was held on

04.06.2005, wherein plaintiff No.1 was purportedly to be removed.

According to the plaintiffs, plaintiff No.2 called a meeting of the Board of

Directors of the company to be held on 20.06.2005. One of the agenda

item to be considered in the said meeting was the notice dated

15.06.2005 sent by the defendant No.1, acting as the Director of the

company for convening the meeting of Board of Directors on

21.06.2005. Plaintiffs‟ case is that Board meeting was held on

20.06.2005, but was not attended by the defendant Nos. 1 to 3. A

resolution was passed whereby the defendant No. 1 was called upon by

the company to withdraw the notice dated 15.06.2005. A further

resolution that was passed whereupon it was resolved that the powers

entrusted to the Directors, prior to the status quo order shall continue

to operate. According to the plaintiffs, contrary to the resolution was

passed on 20.06.2005, defendant Nos. 1 to 3 held a meeting of the

Board of Directors on 21.06.2005 as per the notice given by the

defendant No.1. In this meeting, resolutions were purportedly passed

whereby powers of the plaintiff No.1 enjoyed as Director were sought to

be removed. Instead power to call and/or convene a Board Meeting

was exclusively conferred upon Defendant Nos. 1 and 2. According to

the plaintiffs, at no point of time, they were ever informed about the

said resolution allegedly passed in the alleged meeting held on

21.06.2005. They were informed about this only on 21.06.2005 when

another purported meeting of Board of Directors was held. According to

the plaintiffs, they had proposed additional agenda items for the

meeting held on 21.06.2005, which was not included or discussed on

the specific ground that the plaintiff had no power to call and/or

convene board meeting or to propose additional agenda items.

8. It is these subsequent events, viz., holding of AGM dated 05.02.2005,

Extraordinary General Meeting dated 04.05.2005, purported Board

Meetings on 21.06.2005 and 26.09.2005, which led the plaintiffs to file

application for amendment of the pleadings with a view to incorporate

those subsequent events and on that basis add following three prayers:

"(ca) pass a decree of declaration in favour of the Plaintiffs and against the Defendants declaring that Plaintiff No.1 continues to be a „Director-In-Charge‟ of the Defendant No.4 Company till his status is changed and/or is removed by a special resolution passed in a General Meeting of the Defendant No.4 Company;

(cb) pass a decree of declaration in favour of the Plaintiffs and against the Defendants declaring that the resolution passed in the Extraordinary General Meeting of the Defendant No.4 Company held on 4.6.2005 as well as the resolution passed in the meetings of the Board of Directors of the Defendant No.4 Company held on 14.2.2005, 21.6.2005 and 21.9.2005 are null and void and cannot be given effect to;

(cc) pass a decree of permanent injunction against the Defendants, their agents and employees restraining them from acting in furtherance of and/or pursuant to and/or giving effect to and/or implementing any of the resolutions passed in the meeting held on 14.2.2005, 21.06.2005 and 26.09.2005 purporting to be a meeting of the Board of Directors of the Defendant No.4 Company."

9. The defendants did not file reply to this application even after last

opportunity was granted for this purpose vide orders dated 01.04.2008

passed by the learned Single Judge. However, at the time of hearing

this application was hotly contested. We may also mention at this stage

that when this application was heard by the learned Single Judge,

various other applications were pending, details whereof are

enumerated by the learned Single Judge in the impugned order. The

learned Single Judge has also recorded that three other applications

were also heard along with aforesaid IA No.168 of 2007 under Order VI

Rule 17 of the Code of Civil Procedure. However, the learned Single

Judge was of the opinion that before taking up other applications, it was

necessary to decide application for amendment, as the outcome of this

application would have bearing on other applications. This is how

impugned order is passed on this application thereby allowing the same.

10. As pointed out above, the plank of attack launched by the defendants 1

to 3 was that the suit filed by the plaintiffs challenging the validity of

meeting held on 06.01.2005 had become infructuous inasmuch as the

grievance of the plaintiffs was that the defendant had ceased to be the

Director of the company whereas the defendant No.1 was in any case

re-elected in AGM held on 05.02.2005. It was also argued that AGM

was convened with the permission of the Court granted vide orders

dated 31.01.2005. It was also argued that agenda of the meeting

dated 06.01.2005 was very limited to the extent that it was for taking a

decision as regards the illegal occupation by plaintiff No.1 of the

farmhouse which belongs to the company. Since plaintiff No.1 was in

illegal occupation Criminal Contempt as well as Suit for this purpose had

already been filed by the defendants. The plaintiffs, on the other hand,

argued that all these subsequent meetings held by the defendant and

resolution passed thereon was illegal and in violation of status quo

passed by the Court. Therefore, it was permissible for the plaintiffs to

bring these subsequent events on record in order to determine the real

controversies between the parties. While accepting these submissions

of the plaintiffs, the learned Single Judge observed as under:

"17. After considering the rival submissions of the parties I agree with the learned counsel for the plaintiffs that at the stage of amendment of the plaint, merit of the case may not be looked into. As regards the objections raised by the defendants that the ambit of the suit is very limited therefore amendment should not be allowed, I am of the view that since the plaintiffs have sought amendment on the basis of subsequent events which have occurred after passing of the status quo order, there is no impediment in bringing the said facts on record as the main controversy between the parties is already mentioned in the plaint. Whether the suit is maintainable or not, the said issue is a matter of merit which cannot be decided at this stage, therefore, the amendment application cannot be rejected on the objections raised by the defendants."

11. The learned Single Judge has also taken support from the following

judgments while allowing the amendment:

(i) Sarbjyot Kaur Saluja & Ors. Vs. Rajender Singh Saluja [148 (2008) DLT 650];

(ii) Rajesh Kumar Aggarwal & Ors. Vs. K.K. Modi [(2006) 4 SCC 385];

(iii) Lakha Ram Sharma Vs. Balar Marketing Pvt. Ltd.

[2006 (2) SCALE 363].

12. Dr. A.M. Singhvi, learned Senior Counsel appeared for the

appellants/defendants. His submission was that with the reappointment

of the defendant No. 1 as Director in the AGM held on 05.02.2005,

bottom of the cause of action which led to filing of the suit itself had

been knocked out and therefore, it was not permissible for the Court to

allow the amendment in respect of the events which took place

subsequent to the filing of the plaint. He buttressed the submission by

pointing out that the AGM was held pursuant to the orders dated

31.01.2005 passed by the learned Single Judge vide which the status

quo order granted earlier was modified and thus when the AGM was

held with the permission of the Court, the resolution passed thereon

was not even challenged even on the application for amendment, there

was no ground to make challenge to subsequent Extraordinary General

Meeting or the meetings of the Board of Directors. He also submitted

that in any case, if the plaintiff wanted to question the legality of the

EGM held on 04.06.2005 or the meeting of the Directors held on

14.02.2005, 21.06.2005 and 26.09.2009, this provided fresh cause of

action to the plaintiffs for which proper course was to file another suit

and it was not permissible to amend the present suit. In support of this

submission, he referred to the judgment of Supreme Court in Usha

Balashaheb Swami and Ors. Vs. Kiran Appaso Swami and Ors.

[AIR 2007 SC 1663] and particularly Paras 18 and 19 thereof, which

reads as under:

"18. It is equally well settled principle that a prayer for amendment of the plaint and a prayer for amendment of the written statement stand on different footings. The general principle that amendment of pleadings cannot be allowed so as to alter materially or substitute cause of action or the nature of claim applies to amendments to plaint. It has no counterpart in the principles relating to amendment of the written statement. Therefore, addition of a new ground of defence or substituting or altering a defence or taking inconsistent pleas in the written statement would not be objectionable while adding, altering or substituting a new cause of action in the plaint may be objectionable.

16. Such being the settled law, we must hold that in the case of amendment of a written statement, the courts are more liberal in allowing an amendment than that of a plaint as the question of prejudice would be far less in the former than in the latter case [see B.K. Narayana Pillai v. Parameswaran Pillai (2000 (1) SCC

712) and Baldev Singh and Ors. v. Manohar Singh (AIR2006SC2832). Even the decision relied on by the plaintiff in Modi Spinning (supra) clearly recognises that inconsistent pleas can be taken in the pleadings. In this context, we may also refer to the decision of this Court in Basavan Jaggu Dhobi v. Sukhanandan Ramdas Chaudhary (Dead). In that case, the defendant had initially taken up the stand that he was a joint tenant along with others. Subsequently, he submitted that he was a licensee for monetary consideration who was deemed to be a tenant as per the provisions of Section 15A of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. This Court held that the defendant could have validly taken such an inconsistent defence. While allowing the amendment of the written statement, this Court observed in Basavan Jaggu Dhobi's case (supra) as follows:

As regards the first contention, we are afraid that the courts below have gone wrong in holding that it is not open to the defendant to amend his statement under Order 6 Rule 17 CPC by taking a contrary stand than was stated originally in the written statement. This is opposed to the settled law open to a defendant to take even contrary stands or contradictory stands, the cause of action is not in any manner affected. That will apply only to a case of the plaint being amended so as to introduce a new cause of action."

13. Mr. Vikas Dhawan, learned counsel appearing for the

plaintiffs/respondents countered the aforesaid arguments and submitted

that the approach of the learned Single Judge was perfectly in order and

there was no reason to interfere with the exercise done in allowing the

application for amendment. His arguments proceeded on the premise

that it was a continuing cause of action and in order to avoid multiplicity

of proceedings, the plaintiffs were within their rights to bring the

subsequent events emanating from same cause of action on record by

filing the application for amendment. He further submitted that the

challenge to the validity of these meetings was led, inter alia on the

ground that these meetings were held in violation of the status quo

order granted on 14.01.2005 inasmuch as modification thereof was

limited only to the convening of AGM and not any further meetings.

14. We have considered the aforesaid submissions of the learned counsel

for the parties. The first question which arises for consideration is as to

whether suits filed by the plaintiffs have become infructuous. We think

that it is not so. In this suit, business transacted in the meeting held on

06.01.2005 is challenged on the ground that defendant No.1 could not

have attended that meeting, as he ceased to be the Director on

31.04.2004. The Court had granted status quo order as prayer of the

plaintiffs in the suit was to restrain the defendants from acting any

furtherance of the resolution passed in the meeting held on 06.01.2005.

What would be the effect if this suit is decreed ultimately? Naturally,

any action taken pursuant to the resolutions passed on 06.01.2005 shall

be rendered legally. One of the resolutions passed in that meeting was

that AGM be held on 05.02.2005. Thus, if the suit is decreed, it would

have direct bearing of the outcome of AGM which was held on

05.02.2005. In this view, we have to take note of the interim orders

dated 14.01.2005 and 31.01.2005. On 14.01.2005 status quo as on

that date was directed to be maintained by the parties. Moreover, it is

also to be borne in mind that according to the plaintiffs, these meetings

are held in violation of status quo order and therefore for this purpose,

even contempt application is filed which is pending in the Court. This

order was modified only to the extent that AGM could be held on

05.02.2005, as scheduled. However at the same time, it was also

clarified that the decision in respect of the Directorship to the AGM, if

any, shall not be given effect to, in the meantime. No doubt, Dr.

Singhvi argued that the only embargo put by the Court were limited to

the decision with regard to the directorship of the plaintiffs and no other

business, which was to be transacted on 05.02.2005, we have to keep

in mind that these are the interim orders. That would not mean that all

other decisions taken on 05.02.2005 automatically become legal only

because the Court had permitted the AGM to go ahead. It is stated at

the cost of repetition that this AGM convened on 05.02.2005 is a sequel

to the resolution passed on 06.01.2005, validity whereof is the subject

matter of the suit. Therefore, the outcome of the suit will have direct

bearing on the AGM held on 05.02.2005. Subsequent meetings, viz.,

EGM held on 04.06.2005 and board meetings held on 14.02.2005,

21.06.2005 and 26.09.2005 are the off shoots of the said AGM. Thus, it

is clear that the events which have taken place subsequent to the board

meeting held of 06.01.2005 form one single chain. These are the

incessant and continuous events arising out of the same transaction.

Amendment based on such subsequent events is permissible and is to

be allowed to do complete justice in the matter (See S.N. Kapoor

(dead) by LRS Vs. Basant Lal Khatri & Other (2001) 1 SCC 329 and

Bajaj Auto Limited Vs. Vikram Singh Mehta & Anr. 91 (2001) DLT

593.

15. In these circumstances, it cannot be said that either the suit has

become infructuous or the subsequent events form separate cause of

action interconnected with cause of action pleaded in the suit. The

judgments cited by the learned counsel for the appellant, therefore,

would not apply to the present case.

16. We, thus, hold that the amendment has rightly been allowed. Finding

no merit in this appeal, we dismiss the same with costs quantified @

Rs.25,000/-.

(A.K. SIKRI) JUDGE

(AJIT BHARIHOKE) JUDGE MAY 28, 2010/pmc