Bombay High Court
D.S. Construction Pvt. Ltd. vs Export Credit Guarantee Corporation Of ... on 10 October, 1990
Equivalent citations: (1991)93BOMLR751
JUDGMENT S.M. Jhunjhunwala, J.
1. This is a chamber summons taken out by the defendants for amending extensively their written statement dated 31st January 1988.
2. Briefly stated, the case of the plaintiffs, as pleaded in the plaint filed in the above suit, is as under :
(i) By a contract dated 7th September 1980, executed by and between the Socialist Peoples Libyan Arab Jamahiriyah (Secretariat of Agrarian Reclamation and Land Reconstruction) and Messrs. Kathmann A.G. Ltd. of Switzerland (hereinafter referred to as "the said Kathmann"). The said Kathmann agreed inter alia, to construct poultry farms in 42 cities in Libya
(ii) The plaintiffs, being desirous of participating in the contract dated 7th September 1980 as sub-contractors of the said Kathmann. entered into a contract, being the contract dated 9th December 1980 (hereinafter referred to as "the said contract") with the said Kathmann, whereby the plaintiffs took over liabilities and responsibilities of the said Kathmann under the contract dated 7th December, 1980 entered by and between the said Socialist Peoples Libyan Arab Jamahiriyah (Secretariat of Agrarian Reclamation and Land Reconstruction) and the said Kathmann in so far as the transport from Central Stores in Libya. Civil Works and Erection was concerned.
(iii) In pursuance of the request made by the plaintiffs, the defendants, in the month of June 1981, forwarded to the plaintiffs a proposal form for issuance of "Construction Works Policy" (hereinafter referred to as "the said policy"). On 2nd July 1981 the revised proposal form duly filled in was submitted by the plaintiffs to the defendants. In response thereto, the defendants made an offer dated 19th August, 1981 to insure the plaintiffs against 85% of the amount of any loss that might be sustained by the plaintiffs under the said contract and required the plaintiffs to pay the stipulated premium. The plaintiffs accepted the said offer and paid the premium amount stipulated by the defendants. In pursuance thereof, the defendants issued their insurance policy No. 14056 dated 12th April 1982, whereby the defendants insured and agreed to indemnify the plaintiffs against 85% of the amount of any loss (as defined therein) which might be sustained by the plaintiffs under the said contract due to the causes/risks therein mentioned.
(iv) The plaintiffs proceeded with the contract work and submitted their bills from time to time to the said Kathmann for the work done by the plaintiffs. However, the said Kathmann failed and neglected to pay to the plaintiffs the balance amount of Libyan Dinars 3,337,277/- which was due and payable by the said Kathmann to the plaintiffs towards or under or in respect of the said contract.
(v) The said Kathmann started raising false grounds and wrongfully purported to terminate the said contract. Not only this, but the said Kathmann illegally invoked a guarantee which was furnished by the Indian Overseas Bank at the instance of the plaintiffs for D M 10.416.265 equivalent to Rs. 414 crores
(vi) The plaintiffs initiated proceedings against the said Kathmann in the Civil Court at Tripoli since the negotiations/discussions with the said Kathmann for amicable settlement did not prove fruitful. The plaintiffs also tentatively lodged a claim with the defendants for 7.560 million Libyan Dinars under the said policy. The plaintiffs were able to obtain a judgment and decree in their favour from the Tripoli Court and in 1985. the plaintiffs were able to realise 146.686.313 Libyan Dinars from the said Kathmann. The plaintiffs, however, spent a sum of Libyan Dinars 152,255 on legal charges and court fees and thus, the plaintiffs were unable to recover any amount that was due and payable by the defendants to the plaintiffs from the said proceedings against the said Kathmann. By their letter dated 21st May 1984, the plaintiffs filed their detailed claim with the defendants for Rs. 15.31.07.932/- under or in respect of the said policy. By their letter dated 17th July 1987. The defendants finally rejected the plaintiffs' claim on totally untenable and mala fide grounds By their letter dated 30th November 1987. the plaintiffs pointed out to the defendants that the defendants' rejection of the plaintiffs' claim was ex facie untenable.
(vii) By the said policy, the defendants had in consideration of the premium received, insured the plaintiffs against 85% of the amount of any loss which might be sustained by the plaintiffs under the said contract inter alia by the failure or refusal on the part of the said Kathmann to pay the sums payable under the terms of the said contract and/or failure of the said Kathmann to pay any sum due under an arbitration award. The plaintiffs have filed this suit to recover a sum of Rs. 7.84.13.604.40 being the amount held to be due and payable by the Libyan Court judgment which has not been paid by the said Kathmann to the plaintiffs and which amount the defendants are liable to pay to the plaintiffs under the said policy and a further sum of Rs. 4.60.03.543/- being the amount of interest calculated at the rate of 15% per annum on the said sum of Rs. 7.84.13.604.40 from 9th January 1984 till the date of the filing of the suit i.e. 7th December 1987 The plaintiffs have also claimed future Interest on the said principal amount of Rs. 7.84.13.604.40 ps 18% at the rate of 18% per annum till payment and costs of the suit
(viii) After leave to defend unconditionally was granted to the defendants, the defendants have filed their written statement declared on 31st January 1988, in the suit.
3. Briefly stated, the case of the defendants as pleaded in the said written statement is as under:
(i) The contract of insurance on the basis of which the claim has been made by the plaintiffs against the defendants is void ab initio and/or voidable at the instance of the defendants by reason of fraud and/or misrepresentation on the part of the plaintiffs and/or by reason of wilful suppression of facts on the part of the plaintiffs in relation to the effecting of the said insurance and/or failure on the part of the plaintiffs to disclose the relevant tacts to the defendants at the material time
(ii) The plaintiffs led the working group members to believe that the payments by the said Kathmann to the plaintiffs would be secured by irrevocable letters of credit. The basis of the composite financing-cum-insurance arrangement as per Reserve Bank of India's guidelines approved by the Working Group which included also the defendants, was that the plaintiffs would be paid by irrevocable, confirmed and transferable letter of credit.
(iii) On 22nd September, 1980 a meeting of the Working Group which consisted, inter alia of representative of the defendants at which the plaintiff representative Mr. D.S. Narula and Mr. B.S. Narula. Chairman and Managing Director, respectively of the plaintiffs were also present, was held. At the said meeting the plaintiffs proposals were accepted. After said meeting held on 22nd September. 1980 and before the submission of the final proposal in July, 1981. The plaintiffs who had started the work in March 1981. had already effected subtantial and drastic change in the contract structure by doing the work without the security or letters of credit. Thus the entire basis of the acceptance of the Working Group acceptance of the plaintiffs proposal viz. the terms of payment would be upon the opening of the irrevocable letters of credit, was altered by the plaintiffs. The plaintiffs had in tact, undertaken not to change the payment terms without the prior approval of the Working Group which included the defendants. However the plaintiffs did change the vital term of security of payment without obtaining the prior approval from the Working Group and without disclosing the same to the defendant even at the time of obtaining the insurance. The plaintiffs deliberately withheld and concealed the same from the defendants at the time of making the actual proposal for insurance in March/July 1981.
(iv) There was deliberate omission or failure on the part of the plaintiffs to inform the defendants that the execution of the said contract had run into difficulties from the inception and that the plaintiffs ought and obtained the insurance cover knowing full well that the said contract had run into insurmountable difficulties and by suppressing these facts from the defendants. It was only after the project had run into serious problems including payment problems that the plaintitts paid the premium in the last week of March. 1982.
(v) Soon after issue of the said policy by the defendants i.e. after a period of 3½ months from 12th April 1982 to 21st July, 1982, the said Kathmann terminated the said contract. During the period from March 1981 to March 1982, a lot of acrimonious correspondence between the plaintiffs and the said Kathmann adversely affecting insurer's risk (i.e. of the defendants) had taken place, which the plaintiffs did not bring to the notice of the defendants. The contract of insurance being a contract uberrimae fidei i.e. of utmost good faith, it was the duty of the plaintiffs to have disclosed these material facts which were relevant to the risk undertaken by the defendants. Had the plaintiffs disclosed the fact that the project had run into trouble, the defendants would not have proceeded with the issuance of the said policy. The said policy bearing No 14056 dated 12th April 1982, issued by the defendants on receipt of premium on 29th' March 1982 was thus obtained by suppressing vital information from the defendants and is. therefore, void and the defendants are not liable there under to the plaintiffs.
(vi) It is obligatory on the part of the plaintiffs to have taken steps for recovery of the amount allegedly due from the said Kathmann and the failure to do so disentitles the plaintiffs from making any claim on the defendants.
(vii) The defendants have denied their liability to pay any amount to the plaintiffs. On the basis of the pleadings of the plaintiffs and the defendants. Chaudhari. J settled the issues in the suit on 2nd March, 1990 and the hearing of the suit was ordered to be proceeded with on 24th April 1990.
4. On 2nd July. 1990 the defendants have taken out the above chamber summons to. amend extensively their said written statement. In support of the said chamber summons, the defendants have filed an affidavit of one Mr. Ramchandran. the secretary of the defendants affirmed on 2nd July, 1990. The defendants have filed the affidavit of one Mr. Balbir Singh Narula, managing director of the plaintiffs affirmed on 17th July 1990 in reply thereto. An affidavit in rejoinder of the said Mr. Ramchandran affirmed on 17th August 1990 has been filed on behalf of the defendants.
5. Broadly speaking, the draft amendments to the said written statement of the defendants as suggested by the defendants can be summarised as under:
(a) that the plaint does not disclose any cause of action and/or the plaintiffs do not have any cause of action against the defendants, inasmuch as:
(i) the risk intended and/or agreed to be covered by the policy of insurance was only a political risk and not any other risk:
(ii) it was through oversight and/or inadvertence that the defendants forwarded to the plaintiffs a commercial risks policy along with their letter dated 23rd April, 1982;
(iii) the plaintiffs, despite the knowledge of the fact that risk agreed to be insured was only political risk, with mala fide and ulterior motive and with a view to take advantage of the inadvertence and/or lapse on the part of the defendants, executed the policy enclosed along with the defendants' letter dated 23rd April, 1982, along with the same to the knowledge of the plaintiffs, was not the intended/agreed policy:
(iv) the plaintiffs' debts were not insured against 85% of the amount of any loss which might be sustained by the plaintiffs under the said contract with the said Kathmann inter alia by the failure or refusal on the part of the said Kathmann to pay the sums payable under the terms of the said contract and/or failure on the part of the said Kathmann to pay any sum due under an arbitration award:
(v) by Clause 3 of the said policy dated 12th April, 1982. The validity of the contract of insurance was conditional upon full disclosure of all material facts affecting the risks insured both at the time of giving of the policy as well as during the operation of the policy and since the plaintiffs failed and/or neglected to disclose all material facts affecting the risks insured both at the time of giving of the policy as well as during the operation of the policy, the policy in question could not be said to be valid and/or enforceable:
(vi) the liability of the defendants under the said policy was clearly conditional upon terms and conditions mentioned in Clause 4(ii) of the policy being satisfied and/or fulfilled and since the conditions precedent to the liability of the defendants were not fulfilled and/or satisfied the suit as filed is not maintainable;
(b) that the defendants are not liable for any alleged loss allegedly suffered by the plaintiffs inasmuch as the plaintiffs have failed and/or neglected to make a claim and/or file the suit within the period of one year from the due date of payment as provided for by Clause 6 of the said policy.
(c) that the suit as filed is barred by the law of limitation;
(d) that the defendants deny that the plaintiffs submitted a valid claim to the defendants;
(e) that the defendants specifically deny that the claim of the plaintiffs was legitimate or that it was rejected on untenable and/or mala fide grounds.
6. In support of the said chamber summons. Mr. Mody. the learned Counsel for the defendants, has strenuously submitted that:
(i) most of the facts pleaded in the draft amendments find place in the written statement of the defendants already filed and as such, no new or inconsistent defence to the suit is sought to be pleaded by the draft amendments;
(ii) the defendants had in fact offered to cover only political risks and not any other risks, which fact is even evident from the affidavit in reply to the summons for judgment taken out by the plaintiffs in the suit. Wherein the defendants have explicitly stated that the defendants had not intended to cover any commercial risk under the said contract and that whilst drafting the said written statement, the said plea seems to have through inadvertence or oversight escaped the notice of the draftsman of the said written statement as well as the defendants and has thus remained to be included in the said written statement:
(iii) some of the draft amendments are in the nature of amplifications of the averments already made in the said written statement,
(iv) the amendments sought are for the purpose of determining the real questions in controversy between the parties to the suit;
(v) the rules of procedure are intended to be a handmaid to the administration of justice and a party cannot be refused just relief merely because of some mistake, negligence, inadvertence or even infraction of the rule of procedure;
(vi) the amendments to written statement are to be more liberally granted;
(vii) the plaintiffs are not taken by surprise by the proposed defences;
(viii) the amendments which even non-suited the plaintiffs, are allowed; and as such, the defendants should be permitted to amend their said written statement in terms of the draft amendments mentioned in the schedule annexed to the said chamber summons
7. In support of his submissions, Mr. Mody, has relied upon the following cases:
(i) Nrisingh Prasad Paul v. Steel Products Ltd. ;
(ii) Amolakchand Mohanlal v. Firm of Sadhuram Tularam and Ors. 1994 NLJ 101 : AIR 1954 Nag. 200;
(iii) Girdharilal v. Krishan Dutt ;
(iv) Mohamed Shamim Farooqi and Anr. v. Delhi Wakf Board ;
(v) Manoharlal v. NBM Supply, Gurgaon. ;
(vi) Ishwardas v. State of MP. AIR 1979 SC 551 and
(vii) Panchdeo Narain Srivastava v. Ku. Jyoti Sahay and Anr. .
8. Mr. Ramaswamy, the learned Counsel for the plaintiffs, while showing cause to the said chamber summons, has vigorously argued that:
(i) the plea of the defendants to the effect that the defendants offered to cover only 'political risks' though taken up by the defendants in their application for grant of leave to defend, has been intentionally and deliberately given up and/or abandoned by the defendants and as such, not taken up in the said written statement and hence the defendants' application to amend the said written statement so as to now incorporate and/or take up the abandoned defence should not be granted:
(ii) there is nothing on record to show except the bare statement of the said Mr. Ramchandran, who himself does not say that he is personally conversant with the facts of the case, that the plea of the defendants that the defendants intended and/or agreed to cover only 'political risks' and no other risk under the said contract escaped attention of the draftsman as well as the defendants through inadvertence or oversight whilst drafting the said written statement;
(iii) the defences now sought to be taken up by the defendants by the proposed amendments, are not only entirely different and new but even inconsistent with the defences as contained in the said written statement;
(iv) the defendants have in terms admitted in the said written statement that the defendants did enter into the said contract of insurance with the plaintiffs, where under the defendants did agree to insure the plaintiffs against 85% of the amount of any loss that might be sustained by the plaintiffs under the said contract entered with the said Kathmann due to the causes/risks mentioned in the said Policy No. 14056 dated 18th April, 1982 and the proposed amendment which deprives the plaintiffs of the valuable right which has accrued to the plaintiffs from the admissions made by the defendants in the said written statement, if granted will prejudice the plaintiffs irretrievably and constitute a new and different case and as such, should not be granted;
(v) the application for amendments of the said written statement now made is mala fide inasmuch as the same has been made to overcome the difficulties felt by the defendants when the issues in the suit were framed and settled before Chaudhari. J on 2nd March, 1990 and as such, the Court should not exercise its discretion vested under Order VI. Rule 17 of the Code of Civil Procedure, 1980, in favour of the defendants.
9. In support of his submissions, Mr. Ramaswamy has on selective basis relied upon the following cases:
(i) Biua's Put. Ltd. v. West Bengal Khadi and Village Industries Board ;
(ii) Shriram Sadarmal Didwanivs Gaurishankar @ Rameshwar Joharmal ;
(iii) Mody Spg. and Wvg. Mills Co. Ltd. vs. Lodha Ram and Co. .
10. As observed by Earl of Halsbury LC in the case of Quinn v. Leathem (1901) AC 495 every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law. but governed and qualified by the particular facts of the case in which such expressions are to be found and that a case is only an authority for what it actually decides. These observations of Earl of Halsbury L C lay down correct proposition of law and have stood to the test of time. Our Courts have followed these observations without any hesitation. I also adopt the same. Accordingly, on the facts and circumstances of the present case, it is to be considered as to:
(i) how far the proposed amendments to the said written statemtent are for the purpose of determining real questions in controversy between the parties to the suit;
(ii) whether the proposed amendments, if .granted would convert the defences contained in the said written statement to another of entirely different new and inconsistent character;
(iii) whether the proposed amendments, if granted, would deprive the plaintiffs of the valuable rights accruing to the plaintiffs from admissions, if any, made by the defendants in their said written statement and would prejudice the plaintiffs irretrievably and cause injustice to the plaintiffs;
(iv) whether the proposed amendments, if granted, would have the effect of displacing the plaintiffs suit.
11. As per the averments made by the defendants in the said written statements, the defendants have admitted that:
(i) the plaintiffs did submit to the defendants duly filled in proposal form dated 1st July, 1981 for issuance of a policy of insurance covering the said contract (i.e. the contract dated 9th December, 1980 by and between the plaintiffs and the said Kathmann):
(ii) in response to the said proposal of the plaintiffs, the defendants made their offer, being the offer dated 19th August, 1981 to insure the plaintiffs against 85% of the amount of any loss that might be sustained by the plaintiffs under the said contract and required the plaintiffs to pay the stipulated premium:
(iii) the plaintiffs accepted the said offer of the defendants and paid the premium amount stipulated by the defendants and
(iv) in pursuance thereof, the defendants issued their said insurance Policy No. 14056 dated 12th April 1982. whereby the defendants insured and agreed to indemnify the plaintiffs against 85% of the amount of any loss which might be sustained by the plaintiffs under the said contract (i.e. the contract dated 9th December 1980 by and between the plaintiffs and the said Kathmann) due to causes/risks therein mentioned
12. In other words, the defendants have admitted that a contract of Insurance was entered into by and between the plaintiffs and the defendants as evidenced by the said policy being Construction Works Policy (Government Buyer) bearing No. 14056 dated 12th April 1982, a copy whereof is annexed and marked as Ex. A to the plaint. However, according to the defendants, the said contract of insurance is void ah initio and/or voidable at the instance of the defendants by reason of:
(i) fraud alleged to have been played by the plaintiffs;
(ii) and/or alleged misrepresentation on the part of the plaintiffs;
(iii) and/or by reason of alleged wilful suppression of facts on the part of the plaintiffs in relation to effecting of the said insurance;
(iv) and/or alleged failure on the part of the plaintiffs to disclose the relevant facts to the defendants at the material time.
13. It is not the case of the defendants in the said written statement that the contract of insurance as evidenced by the said Policy No. 14056 dated 12th April 1982 was never entered into or that the defendants did not agree to insure the plaintiffs against 85% of the amount of any loss which might be sustained by the plaintiffs under the said contract (i.e. the contract dated 9th December 1980 between the plaintiffs and the said Kathmann) due to risks insured as mentioned therein.
14. In law, an amendment of a written statement which deprives a plaintiff of the valuable right accruing to him from the admissions made in the written statement and which prejudices the plaintiffs irretrievably and causes injustice to the plaintiff which cannot be compensated by awarding costs in favour of the plaintiffs, should not be granted. Similarly, an amendment of a written statement which has the effect of displacing plaintiffs' suit should not be granted. So also, an amendment of a written statement which will amount to completely changing of front in the defence, should not be granted. An amendment, which is unnecessary to determine real controversy between the parties should not be granted.
15. By the proposed amendments contained in sub-paras (i) and (vi) of the main paragraph I as also in main paragraph VI, in portion bracketed in red ink of main paragraph IX as also in main paragraph X of the Schedule annexed to the said" chamber summons (hereinafter for brevity's sake annexed to the said chamber summons (hereinafter for brevity's sake referred to as 'the said draft amendments"), the defendants intend to:
(i) withdraw their admissions contained in the said written statement pertaining to the defendants having entered into a contract of insurance with the plaintiffs covering commercial risks as provided for in the said insurance Policy bearing No. 14056 dated 12th April, 1982 admittedly issued by the defendants;
(ii) introduce entirely new case inconsistent with the defences already taken in the said written statement by denying that the plaintiffs' debts were insured at all:
(iii) change the basic structure of the defences already taken in the said written statement.
16. In my view, the said draft amendments, if granted would deprive the plaintiffs of the valuable rights accruing to them from the admissions of the defendants made in the said written statement and would prejudice the plaintiffs irretrievably and cause injustice to the plaintiffs which cannot be compensated by awarding costs in favour of the plaintiffs. The said draft amendments, if permitted, would introduced a totally different, new and inconsistent case and would convert the defences already taken up by the defendants into another of a different and inconsistent character. It will also amount to changing of front in the defence. Moreover, I am satisfied that as regards the said draft amendments, the defendants are not acting bona fide and theory of alleged inadvertence or oversight on the part of the draftsman of the said written statement as well as on the part of the defendants put forward by the defendants in the said affidavit of the said Mr. Ramchandran is neither convincing nor acceptable. The said draft amendments are even not for the purpose of determining the real questions in controversy between the parties to the suit.
17. Accordingly, on the facts and circumstances of the case. I am not inclined to exercise my discretion to grant the said draft amendments.
18. As regards the proposed amendment contained in sub-para (vii) of the main paragraph 1 in the said schedule, although it intends to introduce a new case. I am inclined to grant the same having regard to the provisions of section of the Limitation Act, 1963.
19. So far as rest of the proposed amendments contained in the said Schedule are concerned, the same being in the nature of amplification of the defences already taken up by the defendants in their said written statement. I am inclined to grant the same.
20. Accordingly, leave is granted to the defendants to amend their written statement dated 31st January, 1990 filed In the suit only in terms of the draft amendments mentioned in sub-paras (ii), (iii), (iv), (v) and (vii) of main para 1 as well as in main paragraphs II, III, IV, V, VII, VIII and IX except the portion bracketed in red ink therein of the Schedule annexed to the Chamber Summons No 610 of 1990 dated 2nd July 1990. Leave to amend the said written statement in terms of the rest of the draft amendments mentioned in the said schedule is hereby refused The chamber summons is accordingly partly allowed and party disallowed The defendants to carry out the amendments granted within two weeks from today. The suit to be on board for directions on 29th October, 1990. In the circumstances of the case, there shall, however, be no order as to costs of the chamber summons