2006 Supreme(SC) 250

2006(3) Supreme 507
SUPREME COURT OF INDIA
(From Delhi High Court)
H.K. Sema and Dr. A.R. Lakshmanan, JJ.
Rajesh Kumar Aggarwal & Ors.—Appellants
versus
K.K. Modi & Ors.—Respondents
Civil Appeal Nos. 5350-5351 of 2002
Decided on 22-3-2006
Counsel for the Parties :
For the Appellants : Mukul Rohtagi, Sr. Advocate, B.L. Wali, Ms. Inklee Barooah and Ms. Bina Gupta, Advocates.
For the Respondents : S. Ganesh, Sr. Advocate, Praveen Bahadur, Ms. Meghalee Barthakur, Mr. Rajan Narain, Ms. Kanika Gomber, Ms. Bharti Badesra, Ms. Rupa Barmola and M/s. O.P. Khaitan & Co., Advocates.

IMPORTANT POINTS
1. While deciding when amendment of the pleadings is necessary or not, the real controversy is the basic or cardinal test and it is the primary duty of the Court to decide whether an amendment is necessary to decide the real dispute between the parties.
2. The amendment to pleading should be liberally allowed since procedural obstacles ought not to impede the dispensation of justice.
3. The merits of the amendment sought to be incorporated by way of amendment are not to be adjudged at the stage of allowing prayer for amendment.

Headnote:(i) Civil Procedure Code, 1908—Order VI, Rule 17 rw/s 151—Amendment of Plaint—Primary duty of Court to decide whether such an amendment is necessary to decide the real dispute between the parties—Court should also take notice of subsequent events in order to shorten the litigation, to preserve and safeguard rights of both parties and to sub-serve the ends of justice—While considering an application for amendment, the Court should not go into the correctness or falsity of the case in the amendment—The amendment to pleading should be liberally allowed since procedural obstacles ought not to impede the dispensation of justice—Merits of the amendment sought to be incorporated by way of amendment are not to be adjudged at the stage of allowing prayer for amendment.

       Held : This rule declares that the Court may, at any stage of the proceedings, allow either party to alter or amend his pleadings in such a manner and on such terms as may be just. It also states that such amendments should be necessary for the purpose of detemining the real question in controversy between the parties. The proviso enacts that no application for amendment should be allowed after the trial has commenced, unless the Court comes to the conclusion that in spite of due diligence, the party could not have raised the matter for which amendment is sought before the commencement of the trial. The object of the rule is that Courts should try the merits of the case that come before them and should, consequently, allow all amendments that may be necessary for determining the real question in controversy between the parties provided it does not cause injustice or prejudice to the other side. Order VI Rule 17 consist of two parts whereas the first part is discretionary (may) and leaves it to the Court to order amendment of pleading. The second part is imperative (shall) and enjoins the Court to allow all amendments which are necessary for the purpose of determining the real question in controversy between the parties. In our view, since the cause of action arose during the pendency of the suit, proposed amendment ought to have been granted because the basic structure of the suit has not changed and that there was merely change in the nature of relief claimed. We fail to understand if it is permissible for the appellants to file an independent suit, why the same relief which could be prayed for in the new suit cannot be permitted to be incorporated in the pending suit.(Paras 15 to 18)

       While considering whether an application for amendment should or should not be allowed, the Court should not go into the correctness or falsity of the case in the amendment. Likewise, it should not record a finding on the merits of the amendment and the merits of the amendment sought to be incorporated by way of amendment are not to be adjudged at the stage of allowing the prayer for amendment. This cardinal principle has not been followed by the High Court in the instant case.(Para 20)

       (ii) Civil Procedure Code, 1908—Order VI, Rule 17 rw/s 151—Trusts Act—Sections 60 and 61—Amendment of Pleadings—By a Deed of Trust, a Trust was formed for the general benefit of employees employed in the company—Purpose of the Trust was to provide benefits to such employees and dependent members of their families—Trust purchased equity shares of Godfrey Philips (India) Limited (GPI) in the name of respondent 1 in his capacity as a Trustee of the Trust—GPI issued bonus shares to its existing shareholders—According to appellants, beneficiaries of the Trust, bonus shares have not been forwarded to the Trust—Allegations made that a new account was opened by respondent 1 in his name and not in the name of the Trust and is being operated by him—Appellants beneficiaries filed a suit for declaration, permanent injunction against respondents—Written statement was filed on behalf of respondents 1 and 5—Appellants filed an application for amendment of plaint—Whether Appellate Court was justified in dismissing application of appellants for amendment of plaint on ground that proposed amendment introduces a totally different, new and inconsistent case—(No).

       Held : The real controversy test is the basic or cardinal test and it is the primary duty of the Court to decide whether such an amendment is necessary to decide the real dispute between the parties. If it is, the amendment will be allowed; if it is not, the amendment will be refused. On the contrary, the learned Judges of the High Court without deciding whether such an amendment is necessary has expressed certain opinion and entered into a discussion on merits of the amendment. In cases like this, the Court should also take notice of subsequent events in order to shorten the litigation, to preserve and safeguard rights of both parties and to sub-serve the ends of justice. It is settled by catena of decisions of this Court that the rule of amendment is essentially a rule of justice, equity and good conscience and the power of amendment should be exercised in the larger interest of doing full and complete justice to the parties before the Court.(Para 19)

       The amendment sought was necessary for the purpose of determining the real controversy between the parties as the beneficiaries of the Trust. It was alleged that respondent No.1 is not only in exclusive possession of 57,942 shares of GPI and the dividend received on the said shares but has also been and is still exercising voting rights with regard to these shares and that he has used the Trust to strengthen his control over GPI. Therefore, the proposed amendment was sought in the interest of the beneficiaries and to sell the shares and proceeds invested in Government bonds and or securities. A reading of the entire plaint and the prayer made thereunder and the proposed amendment would go to show that there was no question of any inconsistency with the case originally made out in the plaint. The Court always gives leave to amend the pleadings of a party unless it is satisfied that the party applying was acting malafide. There are a plethora of precedents pertaining to the grant or refusal of permission for amendment of pleadings. The various decisions rendered by this Court and the proposition laid down therein are widely known. This Court has consistently held that the amendment to pleading should be liberally allowed since procedural obstacles ought not to impede the dispensation of justice. The amendments sought for by the appellants has become necessary in view of the facts that the appellants being the beneficiaries of the Trust are not deriving any benefit from the creation of the Trust since 1991-92 and that if the shares are sold and then invested in Government bonds/securities the investment would yield a minimum return of 10-12%. It was alleged by the appellants that respondent No.1 is opposing the sale in view of the fact that if the said shares are sold after the suit is decreed in favour of the appellants, he will be the loser and, therefore, it is solely on account of the attitude on the part of respondent No.1 that the appellants have constrained to seek relief against the same.(Para 21)

       It is thus seen that the entire case of the plaintiff revolves around the equity shares of GPI and that the dividend declared thereon are not accounted for. Therefore, a further prayer by way of amendment was sought to amend the plaint and to incorporate clause 12a after the existing para 12 and also to incorporate the relief of mandatory injunction as per prayer b-1 directing the defendants to sell shares of GPI held by the Trust and use the sale proceeds thereof for the benefit of the beneficiaries. Thus, it is clearly seen from the above narration of facts that the amendment sought for does not introduce a new cause of action inconsistent with the case made out in the original plaint.(Para 26)

       Since the Court has entered into a discussion into the correctness or falsity of the case in the amendment, we have no other option but to interfere with the order passed by the High Court. Since it is settled law that the merits of the amendment sought to be incorporated by way of amendment are not to be adjudged at the stage of allowing prayer for amendment, the order passed by the High Court is not sustainable in law.(Para 28)