Delhi High Court
India Export House Pvt. Ltd. vs M/S Orient Enterprises & Others on 9 August, 1999
Equivalent citations: 1999VAD(DELHI)481, 81(1999)DLT438, 1999(51)DRJ77, ILR1999DELHI178B
Author: Mukul Mudgal
Bench: Mukul Mudgal
ORDER Mukul Mudgal, J.
1. This is an appeal against the order dated 10th September, 1996 passed by the learned Single Judge in IA No. 7725/93 in Suit No.1237/82 filed by the original plaintiffs/appellants, M/s. Indian Export House Pvt. Ltd. (now Ltd.) herein disallowing an application for amendment of the plaint moved by the plaintiff.
2. The brief facts of the case stated by the appellant are that respondent No.1, a partnership firm of Shri K.L. Suri (imp leaded as defendant No.2 in the Suit, since deceased and represented by respondents No. 2A, 2B, 2C, 3 and 4 as his legal heir) and respondents 3 and 4, through its partner, Shri K.L. Suri, represented to be an agent of respondent No. 10 (a firm of respondents No.11 and 12) and induced the appellant to enter into contract dated 11th June, 1979 with respondent No.10 for the import of PVC Resin, arranged a contract with respondent No. 9 in absentia, arranged advance payment on behalf or respondent No. 9 towards margin money for opening the Letter of credit and further entered into contract with the appellant undertaking to open inland Letter of Credit on arrival of shipping documents and to indemnity the appellant towards loss. It is further stated that at the instance of the apellant a letter of Credit No. 1BD/101/8512 dated 15th June, 1979 was issued by respondent No. 6, Punjab and Sind Bank in favour of M/s. Bentrex & Co.of Singapore, respondent No. 10, a firm of respondents No. 11 and 12. The negotiation of the Letter of credit was restricted to Alegemene Bank Netherlands (ABN), respondent No. 7. It is further stated that insurance cover and policy was arranged by respondents 1 to 4 and 9 with respondent No. 5 and premium was paid by the appellant in pursuance to the agreement. Vide cable dated 8th August, 1979, M/s Bentrex & Co., respondent No. 10 informed the appellant that the vessel 'AVERILLA' carrying the goods had sunk. M/s. Llyod's Intelligence Services vide their letter dated 27th June, 1980 confirmed that the said vessel "AVERILLA" alongwith the cargo sank on 5th September,1979. It is further stated that the appellant being totally ignorant of any fraud, asked respondents 1 to 4 to perform their obligations under the contract, but they did not respond. It is stated that the appellant who had full faith and trust in its Banker, believing all the representations made by PSB (respondent No. 6) to be true and having no reason to suspect any conspiracy or fraud, or Bank's involvement their in made a payment of Rs. 39 lakhs to PSB during the period 21st February, 1980 to 2nd September, 1983, in relation to L.C. and under the dictates of the Bank, admitted the liability to pay and even signed the pronotes. It is further stated that the appellant being ignorant of fraud asked the Insurance Company Respondent No. 5 to met the liability under insurance policies but with no result. It is stated that under the aforesaid circumstances, the appellant instituted Suit No. 1237/82 originally against respondents 1 to 3 and subsequently vide order of amendment dated 30th September, 1985 also against respondents 4 & 5. It is further stated that the applicant received letter dated 6th November,1986 from the CBI to the effect that the Export Houses of India including the appellant are victims of fraud of the conspirators. In March 1987, the appellant received copy of the plaint in Suit No. 2554/86 filed by PSB (respondent No. 6) against the appellant and others for recovery of the alleged balance amount pertaining to the same L.C. (Letter of Credit) transaction, with averments in para 3 of its plaint that the documents under the L.C. were presented by ABN (respondent No. 7) and further averment in para 11 of the plaint that it (PSB) had released payment to the foreign bank under the L.C. detailed in para 3. On receipt of the copy of the plaint in the said suit, the appellant scrutinised its records and found that the documents under the L.C. had been negotiated and presented not by ABN which was alone authorised to negotiate as per terms of L.C. but by European Asian Bank-respondent No. 8. vide letter dated 13th March, 1987 and 27th March, 1987 addressed to ABN, dated 1st April, 1987 and 15th April, 1987 addressed to EAB, dated 14th September,1987 and 24th October,1987 addressed to PSB, the plaintiff sought information with respect to aforesaid matter, but with no response. The deliberate withholding of the requisite information by respondents 6 to 8 caused the appellant to suspect some sort of their involvement in the fraud; and all the respondents appeared to be in league and conspiracy to commit fraud. As such, the appellant moved an application being IA No. 8451/87 under Order 1 Rule 10, Order 6 Rule 17: seeking impleadment of respondents 6 to 14 and amendment to the plaint which was allowed on 20th July,1988. In the amended plaint, allegations of fraud against the said Banks were made in general terms which were based on suspicion, speculation and surmises, and particulars of fraud were neither available nor could be incorporated and such general allegations did not amount to a plea of fraud in the eyes of law. In the said situation the plaintiff was advised that the claim for the recovery of Rs. 39 lakhs paid by the appellant to PSB shall not be maintainable, and as such the right to claim Rs. 39 lakhs afterwards, was reserved vide para 22-G of the plaint.
3. The fraud played by respondents Banks and co-conspirators was quite secret in its origin and execution. The ppellant had no means of its own to discover such a big fraud. The details of the efforts of the appellant for the discovery of fraud have been set out under item W of para 10 of the amendment application in 16 pages running from page No. 42 to 57. The appellant could discover the fraud only during March 1991 to May 1991 through inspection of the records of the CBI and obtaining copies of some of the documents in pursuance to the order dated 5th July, 1990 of the High Court of Delhi in Criminal Revision No. 53/81.
4. The material particulars of the conspiracy and fraud discovered during March-May, 1991 and even afterwards, which are also corroborated by the documents consisting of 395 pages placed on the records of the suit.
5. The main plea of the appellant in IA No. 7725 of 1993 in seeking the amendment was that the amendment was only sought to give the particulars of the fraud which were not available to the petitioner earlier as these were discovered subsequently to a CBI investigation.
6. In 1985 the application for implement of two more parties i.e. the Insurance Company and one of the partners of defendant No.1, was allowed by the order of this Court on 30th September, 1985. In 1987 the application for amendment of the plaint was made in general terms and defendants 6 to 14 were added, (defendant No. 6, Punjab & Sind Bank, defendant No. 7, ABN Bank and defendant No. 8, European Asian Bank now known as Deutsche Bank). Apart from these bankers the beneficiaries Bentrex & Company and its owners and the shipping agencies were also made parties. In the 1987 amendment, which was allowed against the bankers fraud was pleaded in general term as the intricate details thereof were not known to the plaintiff. However, the plaintiff had reserved its right to raise the claim of Rs. 39 lacs recoverable by the plaintiff from the defendant No. 6, Punjab & Sind Bank. In so far as the role of the Punjab & Sind Bank, respondent No. 6 who is the main opponent to this application for amendment is concerned, the allegations of fraud are briefly stated as under:-
(i) Shri V.K. Jain of Jain Such Vanaspati was the chief architect of the conspiracy to commit fraud and the conspiracy was hatched in Bombay Meeting attended by V.K. Jain,R.K. Jain, K.L. Suri (defendant No. 2) Aujilas of Singapore (defendants 11 & 12) and the share of Jains & Suris in the L.C. proceeds was 50%, margins for Aujilas was 10 to 20% and 30 to 40% was to be spent by Aujilas for managing the affairs.
(ii) Punjab & Sind Bank had also been brought into conspiracy to commit fraud through it's Chairman S. Inderjit Singh. Sh. V.K. Jain was the most influential client of defendant No. 6 Bank. The son of S. Inderjeet Singh had an interest in a nominee company of Sh. V .K. Jain.
(iii) S. Inderjeet Singh the Chairman of defendant No. 6 was being treated as God Father of the bank and there was no question of saying 'no' to his instructions and illegalities were committed under oral instructions of the then chairman.
(iv) Defendant No. 6 Bank had prior knowledge of fraudulent activities of Aujlas of Singapore (defendant 11 & 12) in 1978. The Aujlas had managed scuttling of the ship KATRINA without goods on board giving rise to Suit No. 244/1978 in which PSB was also a party as it had issued L.C. vide order dated 2.5.78, this Court confirmed injunction order restraining PSB from releasing payment in view of the fraud committed by Aujlas.
(v) PSB ought not have opened any Letter of Credit in favour of Aujla's firms whose fraudulent activities were within its knowledge. But in pursuance of the conspiracy with Jains & Suris, PSB opened LC in 1979 for US $ 22,50,000/-, US $ 5,10,000/- and US 25,00,000/- (Rs. 2 crores) at the instance of companies of V.K. Jain, R.K. Jain and defendant No. 1 respectively to enable Jains and Suris to recover fraudulent insurance claims before the date of payment under LCs falling due, on 100% profit insurance i.e. double amount of LC amount. For this purpose 180 days after sight draft was made a requirement under L C by PSB against the normal practice.
(vi) The bills of lading pertaining to ship KATRINA had been rejected earlier by PSB vide its communication dated 13.2.78 on the valid ground that there was no indication that the same are "Ocean Shipping Company's bill of lading" as required under LC. (compilation page 118. Vol. 2) Under three LCs relating to Jains and Suris and also under the LC of the plaintiff, there was a requirement of "Ocean Shipping Companies bill of lading", but in he bills of lading pertaining to Ship Averilla there was no such indication and the same also ought to have been rejected. But in connivance with Jains and Suris, PSB did not do so, and communicated acceptance of documents to enable Jains and Suris to lodge fraudulent insurance claims on 100 % profit insurance.
(vii) When events turned i.e. when Insurance Companies suspected fraud, and commercial Crime Divisions CID Singapore and CBI started investigations and Insurance Companies refused to pay under the policies, PSB altered its earlier stand of documents having been accepted, in connivance with Jains and Suris. When payment under their LCs were to fall due in Feb. 1980, in connivance with PSB, Suit No. 89/1980, Suit No. 90/1980 and Suit No. 106/1980 were filed against PSB and ABN seeking injunction against releasing payments under LCs and ex parte injunction orders were obtained. When EAB (defendant No. 8) filed an application for being imp leaded in Suit No. 89/1980 with allegations that it had negotiated the documents, that PSB has communicated acceptance but has not brought these materials to the notice of the court, counsel for PSB made a statement and thus volunteered to suffer injunction.
7. It was thus submitted that as per section 17 of the Contract Act, 0ne of the essential ingredients of the fraud is intent to deceive. According to plaintiff/appellant such intent may be attributable to S. Inderjeet Singh and his role was well known to BS Aujla as well as S. Surjeet Singh Kakkar of Punjab and Sind Bank as per their own statements. The incorporation of such additional particulars of fraud committed by the respondents will reveal the entire conspiracy. The fraud played by defendants 6 to 8 as well as other co conspirators was quite secret in its origin and execution. The plaintiff had no means of its own to discover such a big fraud. The Plaintiff had addressed a series of letters to bankers, defendant Nos. 6 to 8 in the year 1987 and 1988 as disclosed in the internal page Nos. 43 and 44 of the amendment application but said defendants preferred not to disclose any information regarding negotiation of LC which enhanced the suspicion of the plaintiff regarding their role.
8. According to the appellant, the bank, respondent No. 6 obtained pre acceptance on a printed form on 4th September 1979 in pursuance of conspiracy to commit fraud, by misrepresentation, fraud and undue influence.
(i) without, arrival of draft and shipping documents from Singa pore.
(ii) Without examination thereof (There was no indication on the Bill of Lading (Document page 334) that it an ocean shipping company's bill of lading as required under the LC. (at P. 294 of Documents) and PSB might and ought to have rejected as it had done in Ship Katrina's case vide its letter at P-177 of Documents . PSB could not detect the EAB had ceased to be holder of draft by endorsing in favour of ABN. Documents had not been examined by PSB due to non-arrival.
(iii) without presentation thereof to plaintiff for acceptance
(iv) by misrepresenting that -
- it had received the documents
- it had examined them, and
- it had found them in terms of LC.
9. As per terms of LC documents were required to be dispatched by Airmail. On 4.9.79 documents were either at Singapore or in transit. Had the PSB, respondent No. 6 been in possession of the documents it might have and ought to have obtained the assent of the plaintiff on the draft itself as required under Negotiable instruments Act. Since, the draft was not in possession of respondent No. 6, it could obtain merely a Pre acceptance on a printed form. The Ship AVERILLA was scuttled without goods on board on 5th September, 1979 and the bank, respondent No. 6 released payment on 5th September 1979 with prior knowledge of schedule of scuttling. Even after presenting the printed form of preacceptance on 4th September, 1979 which was unaccompanied by any draft or documents, the Bank was required under law to afford 48 hours time to appellant which was to expire on 6th September 1979 i.e. after the ship was scuttled. In pursuance of the onspiracy, the bank respondent No. 6, had to release payment in haste and did not afford the 48 hours time and obtained are acceptance on 4th September, 1979. The signing of the so called are acceptance letter dated 4th September, 1979 on bank's printed form by the plaintiff, was not in itself the cause for making payment by PSB to EAB, but on the other hand the fraudulent release of payment to be effected by PSB on 5th September, 1979 was the very cause for the bank for procuring pre acceptance on 4th September, 1979. The respondent No. 6 has not discharged its duties and obligations under and in accordance with the contract with it, terms and conditions of Letter of Credit and Uniform Customs & Practice of Documentary Credits Revision 1974, but has committed fraud by various acts and omissions in pursuance to the conspiracy. The misrepresentations made by PSB, respondent No. 6 that it has discharged its obligations as required, were believed by the plaintiff to be true having had full faith in the bank and under the said belief the plaintiff made payments in installments for a total sum of Rs. 39 lakhs being ignorant of the fraud. On discovery of the particulars of conspiracy and fraud, the plaintiff is entitled to recover that amount from the banks involved. It is stated that no party is entitled to derive unjust enrichment and to reap the benefits of its own fraud. If the respondent No. 6 had not unrestricted the Letter of Credit, the documents so rejected by the ABN Bank would have been lying in Singapore and had the banks not committed fraud in pursuance of the conspiracy, the appellant would not been a victim of fraud. The appellant has derived clear and definite knowledge of the fraud committed by defendants-respondents Nos. 6 to 8 in pursuance of the conspiracy, through discovery in March to May 1991 and such discovery is a subsequent event during the pendency of the suit which necessitated the filing of the present application. By the amendment application in question the appellant has sought leave of the court for the following :
(i) to incorporate in the plaint the particulars of the fraud and minor changes incidental or consequential thereto.
(ii) to mould the relief-
(a) by introducing as prayer clause (a) the main relief against the respondents 6 to 8 for the recovery of Rs. 91,44,534.79 i.e. the principal sum of Rs. 39 lacs with interest thereon and Rs. 16,08,671.50 i.e. Rs. 5,74,570.50 towards loss of profit with interest thereon as detailed at pages 37 and 38 of the application.
(b) by shifting the existing Prayer Clause (a) under prayer clause (b) as the alternative relief against defendants-respondents 1 to 5 and 9 to 14 excluding the bankers, defendants/respondents 6 to 8.
10. On behalf of the respondents the principal resistance to the amendment is on behalf of the original defendant No. 6/respondent No. 6 Punjab & Sind Bank on the basis that the amendment cannot be allowed as the claim is barred by time. The other ground of resistance was that the proposed amendment substitutes altogether a new case in place of what was set up in the original plaint which was based on the contract between the plaintiff and defendants 1 to 5 and by the amendment an altogether new case is set up on a different cause of action. It is further stated that the amendment in question is not necessary for deciding the real question in controversy in the original suit.
11. It was further submitted by the respondent No. 6 that the proposed amendments do not fail within Order VI Rule 4 CPC as these are not further and better particulars of fraud already alleged because in view of the plaintiff's averments in para 5 at page 36 the averments in the previously amended plaint were no averments in the eye of law and consequently the question of their further and better particulars cannot arise. It is also submitted that on the plaintiff's own showing, defendant No. 6 was not a party to the conspiracy. It is submitted that the conspiracy alleged between the Chairman of the defendant No. 6 and the other defendants cannot be laid at the door of the defendant No. 6 and the other defendants cannot be laid at the door of the defendant No. 6 which cannot be held liable for the tort of its Chairman in the absence of the Chairman being a party to the suit. It was further pleaded on behalf of respondent No. 6 that the order dated 20.7.88 in IA 8451/87 joining respondent No. 6 Punjab & Sind Bank, as a party is not binding on it as the order joining it was passed without notice of the application. Furthermore it is submitted that the order joining respondent No. 6 is without jurisdiction as there is no finding that in the suit as originally instituted respondent No. 6 was either a necessary or proper party. It is also submitted that the application was allowed on ground of non opposition by defendants 1 to 5 and cannot constitute resjudicata. The respondent No. 6 also submitted that the amendment was not warranted under Order I Rule 10(4) of the CPC as the said amendment replaced the original suit by an altogether new suit.
12. Before dealing with these averments it is necessary to dispose of the plea by the respondent No. 6 relating to the validity of the order dated 20.7.88 passed in IA 8451/87 by this Court joining respondent No. 6 as a party. These pleas questioning the order dated 20.7.88 are untenable because these pleas have been taken collaterally only in defense to the application for amendment and in this view of the matter as of today the order dated 20.7.88 stands, it is not necessary to consider these pleas for the decision of the application for amendment.
13. The learned single Judge while disallowing the application for amendment has inter alia given the following brief reasons:
(a) the application for amendment is filed 11 years after the institution of the suit.
(b) that the pendency of the case filed in June 1982 had been taken advantage of by the plaintiff.
(c) on the date of the application the suit against the defendants would be barred by time.
(d) the plaintiff ought to have made all the inquiries of the particulars about the fraud.
(e) while there is no limitation in cases of fraud, but there are cases and cases and in some cases in order to get over the plea of limitation allegations of fraud are alleged against the defendants and the present case is such a case.
14. Dealing with the judgment of the learned Single Judge we take up the first reason of the learned Single Judge that the application for amendment is filed 11 years after the institution of the suit. The learned Single Judge is not right in throwing out the amendment on the ground of the purported delay. The learned Single Judge has not dealt with the plea of the plaintiff that the plaintiff came to know of the fraud committed by the defendant only in 1993. The learned Single Judge has, in our view, failed to deal with this plea and has held in the answer to the plea that there is no question of limitation on the plea of fraud by observing that there are cases and cases and to get over the plea of limitation some allegations are alleged against the defendant. In our view the learned Single Judge was not right in coming to this conclusion particularly when it was pleaded that it was only pursuant to the inquiries made by the CBI and only after the inspection of the records of the CBI inquiry by the plaintiff as well as the investigation by the Crime Division CTD Singapore, that the plaintiff was alerted to the fraud committed in the present case. The learned Judge in our view has erred in not dealing with this plea though it was noticed in the judgment. The learned Single Judge has also not dealt with the pleas in the application for amendment stating the averred role of respondent No. 6 and in our view the application for amendment has been wrongly declined by the learned Single Judge by merely relying on the delay without dealing with the plea for the cause of delay to the effect that there was fraud and the subsequent discovery of the fraud consequent to the investigation by the CID Singapore as well as CBI. The learned Single Judge has not appreciated that the conspiracy being international in character involving two sovereign countries, and their investigative agencies, the delay was capable of explanation and was indeed explained by the plaintiff in the application for amendment. Since we are only dealing with the application for amendment we do not propose to deal with the merits of the issue in any detail so as to avoid prejudicing the trial of the suit before the learned Single Judge.
15. Learned counsel for the respondent has inter alia relied upon to the judgment AIR 1996 SC 642 and JT 1996 (2) SC 238. Learned counsel for respondent No. 6 has also relied upon the judgment of the Hon'ble Supreme Court in case to contend that the irrevocable letter of credit should not be interfered with except under very exceptional circumstances. There cannot be any dispute with the proposition advanced by the petitioner based upon the said judgment of the Hon'ble Supreme Court. However, it is very clear that the averment of fraud, if substantiated clearly falls within the ambit of the 'exceptional circumstances' referred to in the aforesaid judgment of the Hon'ble Supreme Court. The learned counsel has also raised several other objections to the amendment but all of them would invite a more detailed inquiry into the evidence which at this stage is neither necessary or desirable. The learned counsel has further stated that the proposed amendment cannot be permitted as it substituted altogether as new case as contrasted with the case set up in the original plaint.
16. There is no merit in this plea of the respondent No. 6 as the amendment could not be sought earlier as the appellant was prevented from setting up any plea now sought to be incorporated by the amendment against the respondent No. 6 because as per its averment the intricacies of the fraud were unravelled and revealed only after the investigation by the C.I.D, Singapore and the C.B.I. In these circumstances the respondent's plea that altogether a new case is being set up is devoid of merit. The plaintiff/appellant has by the proposed amendment sought to give particulars of the role of the respondent No. 6 in the fraudulent actions alleged against the respondents 1 to 5. This cannot by any stretch of imagination be termed as setting up altogether a new case. The learned counsel for respondent No. 6 has also pointed out that the amendment in question does not determine the real question of controversy in the original suit. We are unable to agree with the learned counsel for respondent No. 6 because in fact if the averments made by the plaintiff qua the respondent No. 6 are correct then respondent No. 6 was an integral part of the conspiracy and the real question of controversy in the original suit can only be determined by scrutinizing the role of respondent No. 6 Bank.
17. In the case of Muni Lal Vs. The Oriental Fire & General Insurance Company Ltd. and another relied upon by the respondent No. 6 a truck owner had asked for declaration against an Insurance Company that on the truck not being returned to him he was entitled to payment for the loss of the truck. The amendment had sought the consequential relief of payment of quantified amount. The Hon'ble Supreme Court held that since relief's sought had become time barred at that stage the appellant cannot be permitted to amend the plaint after the proposed claim in the suit in question was barred by time during the pendency of the proceedings. It is difficult to see how this case helps the respondent No. 6 . The question of limitation as stated already does not come in the way in the manner suggested by the learned counsel for respondent No. 6 as there is no bar of limitation when fraud is alleged.
18. Learned counsel for the respondent No. 6 also relied upon the judgment in the case of Radhika Devi Vs. Bajranj Singh & Ors. . In this case in a partition suit the defendants had in their written statement dated June 15, 1998 pleaded that a property in question had been bequeathed to them and on November, 11, 1992 an application for amendment was sought seeking the declaration that the gift was fraudulently and illegally obtained and did not bind the original plaintiff. The Court held that since after three years no steps were taken to file the amendment application the rights accrued in favour of the defendants cannot be defeated by the amendment. The ration of this case also does not apply to the facts of the present case. It is not in dispute that there is no discussion in this judgment of the effect of fraud in avoiding the bar of limitation when an amendment is sought. Accordingly the ratio, of this judgment does not apply to the present case, particularly, when a fraud having international ramifications is alleged.
19. The learned counsel for the appellant has inter-alia relied upon a judgment of the Hon'ble Supreme Court reported as Ramesh Kumar Vs. Kesho Ram in which the law in respect of incorporation of subsequent events and pleadings has been laid down as follows :
"The normal rule is that in any litigation the rights and obligations of the parties are adjudicated upon as they obtain at the commencement of the lis. But this is subject to an exception. Wherever subsequent events of fact or law which have a material bearing on the entitlement of the parties to relief or on aspects which bear on the moulding of the relief occur, the court is not precluded from taking a 'cautious cognizance' of the subsequent changes of fact and law to mould the relief."
20. The above position of law would squarely apply to the facts of the present case because if the averments in the proposed amendment regarding subsequent events such as discovery of fraud though the CBI investigations, are correct, then the proposed amendment is not only essential for determining the real question in controversy but is also necessary for the appropriate moulding of the relief and would justify the amendments sought by the appellant.
21. If the case of the plaintiff/appellant is believed a pernicious conspiracy involving a public sector bank was hatched and executed. In this view of the matter we are of the view that the application for amendment filed by the plaintiff ought to have been allowed and is hereby allowed. The defendants can and ought to be compensated by payment of costs and it is accordingly directed that the plaintiff will pay costs of Rs. 10,000/- to the respondent No. 6. Accordingly the appeal is allowed. The order of the learned Single Judge dated 10th September, 1996 is set aside .
22. IA 7725/93 is allowed and the amended plaint filed alongwith the application be taken on record. The suit is remanded for disposal to the learned Single Judge in accordance with law.
23. The appeal stands disposed of accordingly.