Madras High Court
M/S.Trans Freight Shipping Services vs N.K.Shashikumar on 12 September, 2018
Author: M.Sundar
Bench: M.Sundar
IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved on : 29.08.2018 Date of Decision : 12.09.2018 CORAM THE HON'BLE MR.JUSTICE M.SUNDAR A.No.2793 of 2018 in C.S.No.778 of 2014 M/s.Trans Freight Shipping Services, represented by its Proprietor H.Ramesh, S/o.Late S.Haridas, Plot No.179, TSS Tower, Kavuri Hills, Phase II, Madhapur, Hyderabad-81, Telangana State .. Applicant Vs. N.K.Shashikumar, No.89-A, Santhome High Road, Raja Annamalaipuram, Chennai-28. .. Respondent This Application is filed under Order XIV Rule 8 of Original Side Rules read with Order VI Rule 17 and Section 151 of the Code of Civil Procedure 1908 seeking to amend the plaint in C.S.No.778 of 2014 as detailed in the particulars of amendment in the accompanying judges summons. For Applicant : Mr.Arun C. Mohan for Mr.D.Sai Kumaran For Respondent : Mr.T.Mohan for Ms.Shanthi Meenakshi - - - - - ORDER
In the main suit, i.e., C.S.No.778 of 2014, there is a sole plaintiff and a lone defendant. The sole plaintiff in the main suit is the sole applicant in the instant application and the lone defendant in the main suit is the lone respondent in the instant application. Parties in this application (A.No.2793 of 2018) are referred to by their respective ranks in the main suit for the sake of convenience and clarity.
2 The instant application has been taken out by the plaintiff inter-alia under Order VI Rule 17 of 'The Code of Civil Procedure, 1908' ('CPC' for brevity) with a prayer for carrying out certain amendments in the plaint.
3 Before proceeding further, it may be necessary to set out a panoramic / birds eye view of the nature of the lis i.e., broad facts in C.S.No.778 of 2014 for the limited purpose of better understanding and appreciation of this order.
4 The nature of the lis i.e., broad facts as it unfurls from the plaint are that defendant had promoted two companies in the name and style 'AUM Consultancy Pvt. Ltd.' and 'AUM Agrotech Ltd.', which shall hereinafter be referred to as 'Consultancy Company' and 'Agrotech Company' respectively for the sake of convenience and clarity. It further unfurls from the pleadings that two agreements dated 14.06.2010 styled as 'Share Purchase Agreements' came to be executed between the defendant and the plaintiff with regard to Consultancy company and Agrotech Company. The scope of the Share Purchase agreements broadly are to the effect that the plaintiff would purchase 60% shares in both companies [to be noted, 60% shares is a mandatory requirement under the Companies Act, 2013 (hereinafter referred to as 'New Companies Act' for brevity)] for passing special resolutions. Pursuant to aforesaid Share Purchase agreements, plaintiff had ploughed in Rs.58,80,000/- in the Consultancy company and Rs.46,20,000/- in the Agrotech Company [totalling Rs.1,05,00,000/- (Rs.1.05 Crores)]. Post Share Purchase Agreements, the running of the consultancy and agrotech companies was not smooth. According to the plaintiff, it is primarily owing to wrong representations, indifferent / non cooperative attitude post said share purchase agreements on the part of defendant.
5 Denying this, defendant contends that the plaintiff did not honour various clauses in the said share purchase agreements and did not act in a manner expected of him qua share purchase agreements. It is also to be noted that plaintiff and defendant have lodged police complaints against each other. In this backdrop, aforesaid main suit, i.e., C.S.No.778 of 2014 was filed by plaintiff on 07.11.2014 primarily claiming return of aforesaid Rs.1.05 Crores paid by plaintiff towards 60% shares in the Consultancy and Agrotech companies together with interest on the same, besides lawyer's fee paid to US based lawyers, purchase of automobiles and travelling expenses of defendant. This adds up to Rs.2,70,38,238/-. The other limb of the prayer in the suit is a claim for Rs.2 Crores towards damages for mental agony which according to the plaintiff has been caused by the defendant inter-alia owing to wrong representations and non cooperation post aforesaid Share Purchase agreements. To be noted, both these limbs pertain to both companies, i.e., Consultancy company and Agrotech company.
6 Continuing with the birds eye view of facts, it is to be noticed that the aforesaid suit can be classified as Part A of the proceedings. Pending suit, i.e., Part A of the legal proceedings, what can be classified as Part B, i.e., the second part of the legal proceedings was commenced. This second part, i.e., Part B is a Company Petition being C.P.No.7 of 2016. This Company Petition was filed on 14.10.2016 by the plaintiff in the National Company Law Tribunal, Chennai (hereinafter referred to as 'NCLT' for brevity). This company petition filed by plaintiff was primarily under sections 210, 213, 241, 242 and 243 of 'The Companies Act, 1956' (hereinafter referred to as 'Old Companies Act' for convenience). Also to be noted, the prayer includes an order in accordance with Section 402 of the old Companies Act. In sum and substance, this company petition in NCLT is one complaining of oppression and mismanagement qua consultancy company alone. In other words, plaintiff sought reliefs qua consultancy company alone. It is not in dispute that this company petition complaining of oppression and mismanagement is also predicated on the share purchase agreement dated 14.6.2010, but obviously pertaining to consultancy company. Defendant who has been arrayed as respondent No.2 in the aforesaid company petition in NCLT entered appearance and contested the company petition. Besides contesting the company petition on merits, a preliminary objection pertaining to very maintainability of the company petition was taken by defendant (second respondent in the company petition before NCLT) primarily on the ground that the plaintiff had already sought return of shares purchase money, interest, costs and damages or in other words, plaintiff has already rescinded the share purchase agreements dated 14.6.2010 by filing C.S.No.778 of 2014 (main suit herein) and therefore, cannot now pursue the company petition (filed on 14.10.2016) on grounds of oppression and mismanagement, which for all practical purposes is seeking specific performance of that very share purchase agreement qua consultancy company, which has already been rescinded on 07.11.2014 when the main suit herein was presented / filed.
7 Faced with the above situation, plaintiff has come up with the instant petition seeking amendment of plaint.
8 A perusal of the prayer in the instant amendment application reveals that plaintiff wants to give up that part of the claim, i.e., return of Rs.58,80,000/- paid as consideration for 60% share in the consultancy company alone, wherein and whereby the claim of Rs.2,70,38,238/- being limb No.1 of the suit prayer referred to supra stands reduced to Rs.1,66,60,038/-. To be noted, there is no change in limb No.2 which is the claim for Rs.2 Crores towards damages and for alleged mental agony caused to plaintiff by defendant pertaining to both companies, i.e., consultancy company and Agrotech company. Also to be noted, there is no change in seeking refund of Rs.46,20,000/- towards 60% share purchase agreement in the Agrotech company and interest on that part of monies paid. Also to be noted, three other components, namely, lawyers fee paid to US based lawyer, purchase of automobiles and defendant's travelling expenses paid by the company being Rs.22,50,000/-, Rs.17,55,738/- and Rs.45,00,000/- respectively remain unchanged.
9 The above is a thumbnail sketch of facts as it unfurls from the pleadings, in the backdrop of which the instant application, which shall hereinafter be referred to as amendment application, for the sake of convenience and clarity, has been filed by plaintiff. The amendment application is strongly opposed and resisted by the defendant primarily on the ground that it changes the nature and character of the suit, causes prejudice to defendant and it is time barred. It is also defendant's say that the amendment application, for all practical purposes, is an application for withdrawal of a part of suit claim with leave to institute a fresh proceedings on the same subject matter. In other words, it is the specific say of the defendant that this is an application under sub rule (3) of Rule 1 of Order XXIII of CPC in disguise.
10 Mr.Arun C.Mohan, learned counsel representing the counsel on record for plaintiff and Mr.T.Mohan, learned counsel representing the counsel on record for the defendant were before this Commercial Division and I heard both learned counsel.
11 I have already set out broadly the grounds on which this amendment application is opposed. Learned counsel for plaintiff submitted that the causes of action in the NCLT and in the instant suit are completely different, besides being distinct and therefore, it cannot be gainsaid that this is an application for withdrawal of a part of the suit claim for pursuing some other remedy. To be noted, the defendant resists this application saying that this amendment application is an application under sub-rule (3) of Rule 1 of Order XXIII CPC in disguise and the causes of action are distinct and different.
12 It was argued by learned counsel for plaintiff that no prejudice or hardship would be caused to defendant. It was urged that the amendment sought is live and it has not become stale.
13 In the light of the submissions that have been made before me in the instant application, it may be necessary to extract Rule 17 of Order VI of CPC as well as Rule 1 of Order XXIII of CPC. To be noted, Rule 1 of Order XXIII consists of five sub rules. The same have also been reproduced infra :
Rule 17 of Order VI of CPC :
17.Amendment of pleadings.--The Court may at any stage of the proceedings allow either party to alter or amend his pleadings in such manner and on such terms as may be just, and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties:
Provided that no application for amendment shall 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 before the commencement of trial.
Rule 1 of Order XXIII of CPC :
1.Withdrawal of suit or abandonment of part of claim.(1) At any time after the institution of a suit, the plaintiff may as against all or any of the defendants abandon his suit or abandon a part of his claim:
Provided that where the plaintiff is a minor or other person to whom the provisions contained in rules 1 to 14 of Order XXXII extend, neither the suit nor any part of the claim shall be abandoned without the leave of the Court.
(2) An application for leave under the proviso to sub-rule (1) shall be accompanied by an affidavit of the next friend and also, if the minor or such other person is represented by a pleader, by a certificate of the pleader to the effect that the abandonment proposed is, in his opinion, for the benefit of the minor or such other person.
(3) Where the Court is satisfied,
(a) that a suit must fail by reason of some formal defect, or
(b) that there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject matter of a suit or part of a claim, it may, on such terms as it thinks fit, grant the plaintiff permission to withdraw from such suit or such part of the claim with liberty to institute a fresh suit in respect of the subject-matter of such suit or such part of the claim.
(4) Where the plaintiff
(a) abandons any suit or part of claim under sub-rule (1), or
(b) withdraws from a suit or part of a claim without the permission referred to in sub-rule (3), he shall be liable for such costs as the Court may award and shall be precluded from instituting any fresh suit in respect of such subject-matter or such part of the claim.
(5) Nothing in this rule shall be deemed to authorise the Court to permit one of several plaintiffs to abandon a suit or part of a claim under sub-rule (1), or to withdraw, under sub-rule (3), any suit or part of a claim, without the consent of the other plaintiff.
14 After careful scrutiny of the suit file, instant application and supporting documents placed before me, in the light of the submissions made by both learned counsel, I am of the considered view that the scope of this application turns on a very narrow compass. That narrow compass is to test whether this amendment application has the effect of changing the nature / character of the suit and as to whether it causes any prejudice to defendant. I deem it appropriate to refer to a judgment of Hon'ble Supreme Court in Mount Mary Enterprises Vs. Jivratna Medi Treat Private Limited reported in (2015) 4 SCC 182, wherein Hon'ble Supreme Court had held that exemptions to acceding to the prayer in an amendment application are change in the nature of the suit and some prejudice being caused to the defendant. In other words, in Mount Mary Enterprises case, the principle laid down by Supreme Court is that an amendment application should normally be granted unless by virtue of the amendment, nature of the suit is changed or some prejudice is caused to the defendant. Therefore, the question is whether this amendment application will attract the aforesaid two exemptions to the rule of generally and normally acceding to the prayer for amendment.
15 In my considered opinion, a chronicle of some of the dates will act as a tell-tale mechanism in search of answers to the aforesaid two questions, i.e., two exemptions. Those dates are as follows :
Sl.No. Date Events 1 07.11.2014 Main suit C.S.No.778 of 2014 presented in this Court.2
14.10.2016 C.P.No.7 of 2016 filed in NCLT by plaintiff.3
07.11.2016 Second respondent before NCLT who is the sole defendant before this Court filed counter affidavit in C.P.No.7 of 2016.4
15.05.2017 Sole defendant herein (second respondent before NCLT) took out a petition seeking rejection of C.P.No.7 of 2016 on the ground that specific performance of share purchase agreements cannot be sought in the guise of complaint of oppression and mismanagement after rescinding the same in the instant suit.5
08.12.2017 NCLT passed an order stating that plaintiff would submit a detailed affidavit explaining that the relief claimed in the civil suit and company petition, i.e., C.S.No.778 of 2014 and C.P.No.7 of 2016 are not overlapping and in case, any of the reliefs are seen to be overlapping, plaintiff will not press the same.6
12.02.2018 NCLT passed a further order, obviously after hearing both sides on the aforesaid overlap between civil suit and company petition, directing the plaintiff to make an amendment in the instant suit and give up reliefs in relation to consultancy company pertaining to abrogation of contract and file proof of same.7
26.03.2018 Instant amendment application filed in this Court.
16 The short and simple point or in other words, the very narrow compass on which this amendment application turns is, whether the instant amendment application has been filed only owing to the aforesaid two orders made by NCLT or is it only a simple decision on the part of plaintiff to withdraw and unconditionally give up a part of the claim pertaining to consultancy company alone.
17 Emphasising that the instant amendment application is only owing to the aforesaid two orders of NCLT, i.e., orders dated 08.12.2017 and 12.02.2018, it was argued by defendant that plaintiff would not have filed the instant application, but for the aforesaid orders. In other words, it was argued that the amendment application has been filed by plaintiff only for the purpose of proceeding with the company petition in the NCLT. In support of this contention, learned counsel for defendant drew my attention to Section 64 of the Indian Contract Act, 1872, which reads as follows :
64.Consequences of rescission of voidable contract.--When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit thereunder from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received. 18 Referring to Section 64 of the Indian Contract Act, it was submitted that when a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise thereunder. In other words, it was submitted that the share purchase agreement is voidable at the instance of plaintiff and plaintiff has chosen to rescind the same by filing the instant suit being C.S.No.778 of 2014 on 07.11.2014. After doing so, there was no obligation on the part of the defendant to perform in accordance with any of the covenants in the share purchase agreement qua consultancy company and therefore, the company petition is not maintainable. On being confronted with the offensive defence (if one may say so) that company petition is not maintainable, plaintiff has filed the instant amendment application. It was also urged that a party rescinding the voidable contract should, if he receives any benefit thereunder from the other party, restore such benefits.
19 A compilation of citations consisting of seven case laws was placed before me by learned counsel for defendant. However, two out of seven case laws were pressed into service. They are K.Manickam Vs. R.Palanisamy reported in (1993) 2 LW 522 : (1994) 1 MLJ 199, wherein learned Single Judge of this Court had held that a party who had cancelled an agreement by issuing notice and demanded refund of amount of advance said to have been paid, cannot make a volte-face thereafter and seek relief of specific performance of the same agreement. This is articulated in paragraph 6 of the said judgment and that part of paragraph 6 which is of relevance reads as follows :
6. ...... What transpires from the stand of the plaintiff in the notices dated 23.4.1985 and 28.1.1986 and also the plaint is, though on 23.4.1985, the plaintiff might have entertained a desire to have the agreement dated 1.2.1983 specifically enforced, the idea of securing that relief had been given up by him by the unilateral cancellation of the agreement by notice dated 28.1.1986 and demanding a refund of the amount of advance said to have been paid. It is thus seen that though the plaintiff was aware of the reliefs which he could secure under the agreement dated 1.2.1983, he deliberately opted to cancel the agreement putting an end to the obligations on his part and also on the part of the defendant under the agreement and had sought recovery of the advance amount paid. This would undoubtedly amount to an election on the part of the plaintiff so as to preclude him from making a volte face and asking or the inclusion of the relief of specific performance earlier abandoned. It is in this connection, the decision in Sundaramayyar v. Jagadeesan, (1965) 1 M.L.J. 562, I.L.R. (1964) 2 Mad 876: AIR 1965 Mad. 85, is relevant. In that case, it had been pointed out that where a party to the contract of sale made a claim for damages, on the footing of the breach by the other party, it would amount to definite election on his part to treat the contract as at an end and thereafter no suit for specific performance can be maintained by him, for, by such election, he had disabled himself from making the averment that he had always been ready and willing to perform his part of the contract. Similar is the situation in this case, where the plaintiff was fully aware of the reliefs available to him owing to the alleged non-performance of the obligations by the defendant under the terms of the agreement dated 1.2.1983, but he had chosen in the first instance to secure the relief of specific performance in the first notice dated 23.4.1985, though in the second notice dated 28.1.1986, he had cancelled the agreement and had demanded only the refund of the advance amount and some Other amount. This would amount to an election on the part of the plaintiff treating the agreement as cancelled and seeking to recover only the advance amount paid thereby disabling himself from claiming the relief of specific performance. 20 The other judgment pressed into service in the hearing is Roop Chand Chaudhari Vs. Ranjit Kumari reported in AIR 1991 P&H 212. It was very pithily held that plaintiff suing for specific performance can alternatively sue for damages, but converse is not true. Roop Chand Chaudhari case was rendered by a Division Bench of Punjab and Haryana High Court. To be noted, Roop Chand Chaudhari case in turn has followed a judgment of our High Court reported in AIR 1965 Madras 85 being Sundaramayyar Vs. Jagadeesan case.
21 In the light of the limited scope of the instant amendment application, suffice to say that in the instant case, it is argued that plaintiff who has rescinded the share purchase agreement qua consultancy company is now attempting to enforce the same.
22 From the narrative thus far, it emerges clearly that the nature and character of the lis will stand changed and some prejudice will be caused to the defendant if this amendment is only for the purpose of pursuing the company petition. If the amendment sought by plaintiff is merely for giving up a part of the claim pertaining to consultancy company and if the plaintiff is not going to pursue the oppression and mismanagement complaint in NCLT which in effect is for specific performance of share purchase agreement, then it does not change the nature of the suit and it does not cause any prejudice to defendant. In this context, I am of the considered view that the changing of the nature of the suit would necessarily mean the changing of the nature of lis between the parties. In the instant case on hand, the prayer for refund of money and damages pursuant to rescission and enforcement of share purchase agreement are not in the same form, but are in different forms and in different fora too owing to obtaining statutory position. Therefore, changing the nature of suit has to necessarily be understood as change in the nature of lis or in other words, change in the character of the prayer that is being sought against defendant.
23 To ascertain whether this amendment application is only for changing the relief / prayer of plaintiff, i.e., from rescission to enforcement, I applied a twofold litmus test.
24 Before adverting to the twofold litmus test that was applied, one interesting aspect of the matter which also has a bearing on the litmus test and answer that has flowed from such test is to be noted. As mentioned supra, the plaint consists of two limbs. The second limb of prayer as alluded to supra is for damages of Rs.2 Crores which is with regard to both companies, i.e., consultancy company and Agrotech company as alluded to supra. Vide instant amendment application, plaintiff is not seeking any amendment in the prayer or in other words, plaintiff continues to persists and pursue the prayer for damages qua consultancy company also. Therefore, if this prayer in the amendment is acceded to, it will have the effect of plaintiff pursuing remedy of enforcement in the share purchase agreement in NCLT and also seeking damages by rescinding the same on the ground of non performance by defendant. There is no dispute or disagreement that the suit prayer is also for damages for a sum of Rs.2 Crores pertaining to both companies, i..e, consultancy company and Agrotech company.
25 Now, I proceed to discuss twofold litmus test.
26 An option was given to plaintiff to withdraw the instant amendment application and revive the prayer if advised to do so after disposal of C.P.No.7 of 2016 on the file of NCLT. This option was not taken by the plaintiff. On the contrary, it was specifically pointed out that certain submissions and concessions have been made before NCLT culminating in the order dated 12.2.2018 made by NCLT. To be noted, order dated 12.2.2018 made by NCLT reads as follows :
Counsels for both the parties are present. Counsel for the Petitioner has submitted an affidavit; copy of which is given to the other side. The Petitioner is directed to make an amendment in the suit and give up the reliefs in relation to the 1st Respondent Company pertaining to the abrogation of the contract and file proof of the same before this Bench. Put up on 01.03.2018 at 10.30 A.M. 27 Therefore, it emerges clearly that this is the reason why the plaintiff has not chosen to abandon the suit claim under sub rule 1 of Rule 1 of Order XXIII CPC. It is not just the reason behind this amendment application, but it is the sole stimulus. Therefore, it clearly buttress the submission of defendant that this amendment application is effectively an application under sub rule (3) of Rule 1 of Order XXIII CPC in disguise. In any event, even if the plaintiff has abandoned a part of the suit claim under sub rule (1) of Rule 1 of Order XXIII CPC, it does not advance the plaintiff's case owing to second limb of plaint prayer being damages for Rs.2 Crores, which admittedly pertains to both consultancy company and Agrotech company, remains unaltered.
28 It has been mentioned supra that a twofold litmus test was applied. The second limb of the litmus test is the point of time or in other words, the date on which the instant amendment application has been filed. As alluded to supra, a short chronicle of some dates which has been given in a tabular form supra is a tell-tale mechanism in this regard. A reference to chronicle of dates given in the tabular form supra will reveal that the plaintiff may have had a stateble case if the instant amendment application had been filed prior to 07.11.2016, i.e., prior to defendant filing a counter in C.P.No.7 of 2016 in NCLT. However, the matter does not rest there. The plaintiff did not file the instant amendment application even immediately after 07.11.2016. After 07.11.2016, defendant took out an application for rejection of company petition on 15.5.2017 which was followed by aforesaid two orders of NCLT dated 08.12.2017 and 12.02.2018. Therefore, it becomes absolutely clear as daylight from the sequence / chronicle of events that the plaintiff has filed the instant application on 26.03.2018 only for the purpose of pursuing his remedy in NCLT.
29 Before concluding, it is deemed appropriate to write that I have also noticed that a Division Bench of Punjab and Haryana High Court in Roop Chand Chaudhari case has followed the judgment of Madras High Court. It is also to be noticed that besides Madras High Court judgment, Punjab and Haryana High Court has also followed the principle laid down by Supreme Court in Jawahar Lal Wadhwa Vs. Haripada Chakroborty reported in AIR 1989 SC 606 : (1989) 1 SCC 76. The principle laid down by Supreme Court in Jawahar Lal Wadhwa case is to the effect that once there is alleged breach and a prayer for damages has been sought for by a party, then that party cannot pray for specific performance of the same contract. This is precisely what the plaintiff is attempting to do in the instant case by pursuing this amendment application. In other words, if the prayer in the amendment application is acceded to, it would tantamount to permitting the plaintiff to seek for specific performance of share purchase agreement dated 14.6.2010 qua consultancy company after rescinding the alleged breach and seeking damages for the same. Further to be noted, the plaintiff is continuing to seek damages qua Consultancy company. In effect, acceding to the prayer in the instant application would tantamount to allowing the plaintiff to do what they are prohibited from doing in the light of the principle laid down by Supreme Court in Jawahar Lal Wadhwa case.
30 As a concluding remark before spelling out the decision in this amendment application, this Commercial Court is reminded of the observation of Hon'ble Supreme Court in Mumbai International Airport Private Limited Vs. Golden Chariot Airport and another reported in (2010) 10 SCC 422 where Hon'ble Supreme Court held that action of law is not a game of chess.
31 Owing to all that have been set out supra, this amendment application being A.No.2793 of 2018 fails and the same is dismissed. Considering the nature of litigation, parties are left to bear their respective costs.
12.09.2018 Speaking order Index : Yes vvk M.Sundar, J.
vvk order in A.No.2793 of 2018 in C.S.No.778 of 2014 12.09.2018