Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 37033750 OF 2022
ASIAN HOTELS (NORTH) LTD. …APPELLANT(S)
VERSUS
ALOK KUMAR LODHA & ORS. …RESPONDENT(S)
J U D G M E N T
M.R. SHAH, J.
1.0. As common question of law and facts arise in this group
of appeals and as such arise out of the impugned
common judgment and order passed by the High Court,
all these appeals are decided and disposed of together by
Signature Not Verified
Digitally signed by R
Natarajan
Date: 2022.07.12
16:35:08 IST
Reason:
this common judgment and order.
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2.0. Feeling aggrieved and dissatisfied with the impugned
common judgment and order dated 15.09.2021 passed
by the High Court of Delhi in respective applications in
respective Commercial Suits under Order 1 Rule 10 and
Order 6 Rule 17 of the Code of Civil Procedure, by which,
all the aforesaid applications submitted on behalf of the
original plaintiff, the High Court has allowed the said
applications and has permitted the original plaintiff to
amend the respective suits and has also ordered
impleadment of mortgagees (Banks), original defendant
no.1 Asian Hotels (North) Limited has preferred the
present appeals.
3.0. For the sake of convenience, the impugned order passed
by the High Court in IA No.51735174 of 2021 in Civil
Suit (Commercial) No.189 of 2020 shall be treated as the
lead matter. Therefore, for the sake of convenience and
to avoid any repetition, facts arising out of Civil Suit
(Commercial) No.189 of 2020 leading to the present
appeals are narrated, which are as under:
3.1. That the appellant herein granted licenses for individual
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shops at the premises from 1983 onwards to various
shopkeepers including the respondent herein – original
plaintiff. On 29.5.2020 the original plaintiff as a licensor
served a revocation of license notice. Similar notices were
also served on other licensees. Therefore, the respective
licensees had instituted the respective suits before the
Delhi High Court against the appellant – licensor – Asian
Hotels (North) Limited seeking a decree of declaration
that the license in favour of the plaintiff in respect of
shop/ premises is irrevocable and perpetual and the
purported revocation of the License by the defendant is
illegal, void and bad in the eyes of law. A decree is also
sought for a declaration declaring that the plaintiff has
unfettered right to occupy and use the said premises /
shop under the irrevocable license till the documents of
transfer / conveyance are executed by the defendant.
3.2. That the appellant – defendant appeared before the High
Court. The defendant raised verbal objection that the
suit is not maintainable in view of Section 8 of the
Arbitration and Conciliation Act, 1996. The High Court
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vide order dated 21.07.2020 dismissed the suits with
liberty to the parties to avail remedy of arbitration in
view of the arbitration clause in the license agreement on
the verbal plea. The order passed by the High Court
dismissing the suits with the above liberty was a subject
matter of appeal before the Division Bench. The Division
Bench allowed the said appeal and remanded the matter.
Liberty was granted to the defendant to prefer an
application under Section 8 of the Arbitration and
Conciliation Act, 1996. It is reported that such an
application is filed by the defendant and is pending
adjudication.
3.3. During the pendency of the aforesaid suit, the plaintiff
filed present IA No. 5174 of 2021 under Order 6 Rule 17
of the Code of Civil Procedure seeking amendment of the
plaint, by which, the plaintiff proposed to amend the suit
challenging various mortgages created by the defendant
hotel, in favour of certain banks. In the said application,
it is the case on behalf of the plaintiff that the mortgages
created by the defendant in favour of the Financial
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Institutions /Banks are illegal and void abinitio to the
extent it encumbers the interest held by the plaintiff in
the said premises from 2.9.1991. Therefore,
consequential amendments were sought to be made
pertaining to the rights of the plaintiff. By the said
application, prayer clause is also sought to be amended
seeking a decree of declaration against the defendant
that the mortgages including the mortgage deeds which
have been executed in favour of the Banks is void and
illegal to the extent it encumbers any right, title and
interest of the plaintiff in the subject premises.
3.4. Another application, being IA No.5173 of 2021 was also
filed by the plaintiff under Order 1 Rule 10 of the Code of
Civil Procedure seeking to implead the Banks and the
Financial Institutions as defendant nos. 2 to 7.
3.5. Both the aforesaid applications were opposed by the
defendant on the ground that (i) the mortgage in
question was in 1980’s; there is no challenge to the said
mortgage in the present suit and therefore, the same
cannot be permitted now; (ii) the plaintiff has no right
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against the banks and financial institutions and
therefore, amendment application does not lie; (iii) that
the prayer of the plaintiff for the relief of declaration and
rights in the suit property have to first be adjudicated
before any relief can be claimed against the proposed
defendants no.2 to 7 and it is only after the plaintiff is
successful in claiming any right in the property that the
issue of adjudication of the rights of the third parties
would arise; (iv) that in view of the arbitration clause in
the agreement between the parties, the suit is liable to
be stayed for which an appropriate application has been
filed by the defendant, which is pending adjudication.
3.6. By the impugned common judgment and order and
mainly relying upon the decision of this Court in the
case of Kasturi v. Iyyamperumal & Ors reported in
(2005) 6 SCC 733 and in the case of Revajeetu
Builders and Developers vs. Narayanaswamy and
Sons & Ors reported in (2009) 10 SCC 85 , the High
Court has allowed both the applications i.e. application
under Order 6 Rule 17 of the Code of Civil Procedure
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and application under Order 1 Rule 10 of the Code of
Civil Procedure.
3.7. Feeling aggrieved and dissatisfied with the impugned
common order passed by the High Court allowing
applications under Order 6 Rule 17 of the Code of Civil
Procedure and under Order 1 Rule 10 of the Code of Civil
Procedure, original defendant no.1 licensor has
preferred present appeals.
4.0. Shri Mukul Rohatgi, learned Senior Advocate has
appeared on behalf of the appellant original defendant
and Shri Avishkar Singhvi, learned counsel and Shri
Rahul Gupta, learned counsel have appeared on behalf
of the respective respondents.
5.0. Shri Rohatgi, learned Senior Advocate appearing on
behalf of the appellant – original defendant has
vehemently submitted that in the facts and
circumstances of the case High Court has committed a
serious error in allowing the applications under Order 6
Rule 17 of Code of Civil Procedure and Order 1 Rule 10
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of the Code of Civil Procedure permitting the
respondents to amend their respective plaints to declare
void ab initio all mortgages / charges on the entire
premises and implead the mortgagee banks / financial
institutions.
5.1. It is vehemently submitted by Shri Rohatgi, learned
Senior Advocate that appellant granted license for
individual shops at the premises from 1983 onwards to
various shopkeepers including the respondents herein.
That prior thereto, on 23.09.1982 appellant created
mortgages in favour of financial institutions /banks. The
said mortgages were rolled over, refinanced and replaced
from time to time for ensuring the continuous
development of the Hotel Projects / premises which
requires consistent upkeep, renovations, upgradation
from time to time. It is contended that clause 13 of the
License Agreement recognizes and preserves the power of
the appellant (lessor) to create and continue mortgages.
It is submitted that clause 13 has been retained in every
renewal (every five years) and as such respondents who
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are licensees have continuously ratified all mortgages
from 1982 onwards by signing the License Agreement
and subsequent renewals. It is submitted that licenses
have been revoked on 29.5.2020 by the appellant. It is
urged that at this belated stage it is not open for the
respondents who are only licensees and whose licenses
have been revoked to challenge the mortgages created by
the appellant created in favour of various banks/
financial institutions which have been continued since
1982 onwards.
5.2. It is further submitted by Shri Rohatgi, learned Senior
Advocate that as such in view of the arbitration clause in
the license agreement, suits are not maintainable in view
of Section 8 of the Arbitration and Conciliation Act. That
application filed by the appellant – original plaintiff to
stay the suits are pending adjudication. Therefore, as
such the said application/s under Section 8 of the
Arbitration and Conciliation Act are to be decided first. It
is further submitted that while pleadings were completed
and Section 8 application was partheard, respondents
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filed the present applications in April 2020 to implead
the Banks holding mortgage over the premises and
amend their plaints seeking to challenge such
mortgages. It is submitted that the learned Single Judge
as such, without issuing any notice or granting an
opportunity to file reply, heard arguments and reserved
the judgment which has been pronounced on
15.09.2021.
5.3. Shri Rohatgi, learned Senior Advocate appearing for the
appellant – original defendant has assailed the impugned
judgment and order passed by the High Court mainly on
the following grounds:
I. Impugned judgment has resulted in misjoinder of
causes of action and of parties;
II. Respondents do not have the locus or right to challenge
the mortgages / charges;
III. Challenge to mortgage/ charges is barred by limitation,
delay and laches;
IV. The impleadment and amendment applications are mala
fide filed only to circumvent adjudication pending
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Section 8 of the Act;
V. Impugned judgment has been passed in violation of
principles of natural justice;
5.4. It is vehemently submitted by Shri Rohatgi, learned
Senior Advocate for the appellant that when the first
License Agreement was executed in 1983, the premises
were already mortgaged and the respondents were aware
of the said fact, as is evident from Clause 13 of the
License Agreement. It is submitted that thus, the
respondent’s rights, even as a licensee, are subject to the
preexisting charge perfected thereon with which the
respondents have no concern.
5.5. It is submitted that the respondents – original plaintiffs
are strangers to the mortgage on the premises created by
and between the appellant and its lenders. Respondents
– original plaintiffs have no privity with the mortgagee
banks/ financial institutions. The suits themselves are
based on the License Agreement executed with the
appellant and the rights contained thereunder.
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5.6. It is further submitted that the suits originally sought
declarations that the respondents are irrevocable
licenses or alternatively owners. Thus, the suits
preferred by the plaintiffs only concern the interse
rights between the appellant and the respondent, with
which the banks/ financial institutions impleaded by the
impugned judgment have no concern. But the impugned
judgment has resulted in misjoinder of parties and
causes of action which is incorrect in law.
5.7. It is further submitted by Shri Rohatgi, learned Senior
Advocate that the respondents have no semblance of
right to sue the banks/ financial institutions in the
present case or challenge the mortgage.
5.8. It is further submitted that mortgage over the premises
has been created by and between the appellant and its
lenders. Respondents original plaintiffs are not parties
to said transaction. There is admittedly no privity of
contract between the respondents and original plaintiffs
and its lenders. Therefore, the plaintiffs have no right to
sue the lenders of the appellant against whom reliefs are
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now sought by way of amendment of the plaint.
5.9. It is further submitted that, even otherwise, respondents
are ascertaining their status as irrevocable licensees of
the concerned shops. Therefore, plaintiffs have not locus
or cause to challenge mortgages / charges, which have
been created by the appellant from time to time for
ensuring continuing development of hotel project /
premises.
5.10. It is further submitted by Shri Rohatgi, learned Senior
Advocate that challenge to mortgage / charges now is
barred by limitation, delay and laches. This is because
the first mortgage was created on the premises on
23.09.1982. By the amendment applications, the
principal relief sought to be added by the respondents is
to assail any and all charges / mortgages on the
premises created since 1982 in favour of any person. It
is submitted that first mortgage on the premises was
registered on 23.09.1982 with the RoC as per Section
125 of the Companies Act, 1956. Subsequent charges /
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mortgages were also registered with the RoC. It is
submitted that as per Section 126 of the Companies Act,
1956 and Section 80 of the 2013 Act, the respondents
are deemed to have knowledge and constructive notice of
the said mortgage / charges and there exists a
presumption in law that the respondents had knowledge
of the aforesaid charges.
5.11.It is submitted that clause 13 of the License Agreements
expressly records the knowledge of the respondents of
the existing charges on the premises and also authorizes
creation of further charges in the future. It is submitted
that this understanding has been renewed and
reaffirmed by the parties in the subsequent Renewal
Agreements. Therefore, the respondents have knowledge
of the mortgages in view of statutory presumption and
express stipulation in Clause 13 of the License
Agreement since 1982, which negates the assertion that
respondents acquired knowledge by pleadings filed in the
proceedings before the High Court. It is further
submitted that considering Article 58, Schedule I of the
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Limitation Act, the prayer to challenge mortgages /
charges would be clearly barred by law of limitation and
therefore, liable to be rejected. In support of the above
submission, reliance is placed on the decision of this
Court in the case of Ashutosh Chaturvedi v. Prano
Devi (2008) 15 SCC 610, T.N. Alloy Foundry Co. Ltd
vs. T.N. Electricity Board and Ors (2004) 3 SCC 392
and L.J.Leach & Co Ltd vs. M/s. Jardine Skinner &
Co. AIR 1957 SC 357. Making above submissions, it is
prayed to allow the present appeals.
6.0. While opposing the present appeals and supporting the
impugned order passed by the High Court, allowing the
applications under Order 6 Rule 17 of the Code of Civil
Procedure and Order 1 Rule 10 of the Code of Civil
Procedure, learned counsel for the respondents have
vehemently submitted that in the facts and
circumstances of the case. The impugned order is just
and proper. It is contended that it is necessary to
implead banks which are mortgagees of the suit
property, while plaintiffs are claiming ownership interest
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and that the trial has not yet commenced and the suit is
at preliminary stage where the defendant has even not
filed its written statement therefore, no prejudice can be
said to be caused to the defendant if the application for
amendment as well as impleadment applications are
allowed. That no error has been committed by the High
Court in the peculiar facts and circumstances of the
case.
6.1. It is vehemently submitted by the learned counsel for the
respondents that as such the plaintiff is the dominus
litus in the suit. That in view of the position in law, when
the applications submitted by the original plaintiffs
under Order 1 Rule 10 of the Code of Civil Procedure
have been allowed, the same may not be interfered with
by this Court. Reliance is placed on the decision of this
Court in the case of Kasturi v. Iyyamperumal & Ors
reported in (2005) 6 SCC 733 .
6.2. It is further submitted by learned counsel for the
respondents original plaintiffs that cogent reasons have
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been given by the High Court while allowing the
applications under Order 6 Rule 17 and Order 1 Rule 10
of the Code of Civil Procedure, which in a nutshell are as
under:
I. that it is necessary to implead the banks who are
mortgagees of the suit property wherein the Plaintiffs are
claiming ownership interest;
II. the trial has not yet commenced and the suit is at the
preliminary stage where the Petitioner has not even filed
its written statement;
III. no prejudice can be said to be caused to the
Petitioner if the abovesaid applications are allowed;
IV. that the plaintiff is the dominus litus in the suit;
VI. the fact that the Petitioner themselves had pleaded
before the learned Single Judge of the Hon'ble High
Court that the suit was bad for nonjoinder of parties
without the banks being parties;
VII. at the stage of allowing the amendment the Court should
not be concerned with the merits and demerits of such
amendments;
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VIII. it is imperative that the Hon'ble Courts are liberal in
their view of amendment of pleadings especially when
the parties are necessary and required to be present to
protect the subject matter of the relief;
6.3. Relying upon the decisions of this Court in the case of
Rajesh Kumar Aggarwal & Ors vs. K.K.Modi & Ors AIR
2006 SC 1647 and in the case of Revajeetu Builders
and Developers Vs. Narayanaswamy and Sons & Ors
( 2009) 10 SCC 84 , it is vehemently submitted by the
learned counsel for the respondents – original plaintiffs
that as observed and held by this Court while
considering whether an application for amendment
should or should not be allowed, Court should not go
into the correctness or falsity of the case in the
amendment. It is further observed and held that
likewise, it should not record a finding on the merits of
the amendment and the merits thereof sought to be
incorporated by way of amendment are not to be
adjudged at the stage of allowing the prayer for
amendment.
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6.4. Learned counsel for the respondent no.1 has further
submitted that the amendments did not seek any direct
injunctions against the banks for creation of the
mortgage but has only sought reliefs against the
defendant hotel whose property is mortgaged to the
banks. That the mortgage has not been challenged by
the respondents but only the undeniable interest of the
respondent is sought to be protected by having
mortgagees as a party to the suit. It is submitted that
idea is to see that in the event banks enforce the
mortgage then they will step into the shoes of the
appellant.
6.5. It is further submitted by the learned counsel for the
plaintiffs that in the suit original plaintiffs are seeking
perpetual ownership rights in the premises of the
appellant hotel. Therefore, if the mortgages with respect
to the very property are not challenged, in that case, in
future they may affect the rights of the plaintiffs and
therefore, to protect their rights, the impleadment of the
mortgagee banks / financial institutions and the
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amendments are very much necessary. That as such,
Banks / Financial Institutions (mortgagees) can be said
to be necessary and proper parties for giving the ultimate
effective relief in favour of plaintiffs. That respondents –
original plaintiffs after final adjudication of the suit may
be held to be owners as they are the perpetual lessee
who hold irrevocable licenses executed in their favour to
operate their respective shops. It is submitted that the
plaintiffs have paid the premium at the time of execution
of the License Agreement and hence this is not a case of
mere license but it is a case of irrevocable and perpetual
license. Therefore, no error has been committed by the
High Court while passing the impugned orders and
allowing the applications under Order 6 Rule 17 and
Order 1 Rule 10 of the Code of Civil Procedure.
7.0. We have heard learned Senior Advocate appearing on
behalf of the appellant and learned counsel appearing on
behalf of the respective respondents original plaintiffs
at length.
7.1. By the impugned orders, the High Court has allowed the
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applications filed by the original plaintiffs under Order 6
Rule 17 and Order 1 Rule 10 of the Code of Civil
Procedure permitting the original plaintiffs to amend
their respective plaints so as to declare void abinitio all
the mortgages / charges on the entire premises in
question and also implead mortgagee banks / financial
institutions for that purpose.
7.2. At the outset, it is required to be noted that mortgages
have been created in favour of different mortgage banks/
financial institutions since 1982 onwards which have
been extended and / or rolled over, refinanced and
replaced from time to time. The mortgages are created
not only with respect to the shops / premises occupied
by the original plaintiffs, but with respect to the entire
premises / Hyatt Residency Hotel. The respective original
plaintiffs are granted licenses for individual shops which
are part of entire premises. According to the appellant,
first mortgage was created in the year 1982. At that time,
none of the original plaintiffs were license holders. They
have been granted license for individual shops at the
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premises from 1983 onwards to various shopkeepers
including respondents original plaintiffs. The appellant,
being owner – licensor, has terminated the respective
licenses granted in favour of respective license holders –
original plaintiffs. The revocation of the license is subject
matter of respective suits. Therefore, the only
controversy / issue in the respective suits is with respect
to revocation of the respective licenses. By way of an
amendment of the plaint the plaintiffs now want to
challenge the mortgages / charges on the entire
premises created by the appellant. As such, the original
plaintiffs are not at all concerned with the mortgages
created by the appellant which is required for the
continuous development of the hotel. By the purported
amendment, the original plaintiffs have now prayed to
declare that all the mortgages / charges created on the
premises as void abinitio. Even such a prayer can be
said to be too vague. How the original plaintiffs can now
can be permitted to challenge various mortgages /
charges created from time to time. At this stage, it is
required to be noted that even under the License
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Agreement (clause 13) the Licensor shall have the right
to create charges / mortgages as and by way of first
charge on its land, premises and the buildings (including
shops) constructed and to be constructed, in favour of
financial institutions and banks as security for their
terms loan advanced / to be advanced to the licensor for
the completion of its hotel project. Therefore, in fact
original plaintiffs being the licensee are aware that there
shall be charges / mortgages on the entire premises and
the buildings including the shops. In that view of the
matter, now after a number of years, plaintiffs cannot be
permitted to challenge the mortgages / charges created
on the entire premises including shops.
8.0. The High Court while allowing the amendment
application in exercise of powers under Order 6 Rule 17
of the Code of Civil Procedure has not properly
appreciated the fact and / or considered the fact that as
such, by granting such an amendment and permitting
plaintiffs to amend the plaints incorporating the prayer
clause to declare the respective charges / mortgages void
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abinitio, the nature of the suits will be changed. As per
the settled proposition of law, if, by permitting plaintiffs
to amend the plaint including a prayer clause nature of
the suit is likely to be changed, in that case, the Court
would not be justified in allowing the amendment. It
would also result in misjoinder of causes of action.
9.0. From the impugned order passed by the High Court, it
appears that what has weighed with the High Court is
that plaintiffs, is the dominus litus and heavy reliance is
placed in the case of Kasturi (supra). However, the
principle that the plaintiffs is the dominus litus shall be
applicable only in a case where parties sought to be
added as defendants are necessary and / or proper
parties. Plaintiffs cannot be permitted to join any party
as a defendant who may not be necessary and / or
proper parties at all on the ground that the plaintiffs is
the dominus litus .
9.1. Even otherwise, High Court has materially erred in
relying upon the decision in the case of Kasturi (supra ).
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In the case of Kasturi (supra) before this Court the suit
was for specific performance of the agreement to sell and
the subsequent purchasers purchased the very property
for which decree for specific performance was sought.
Therefore, on facts said decision is not applicable to the
facts of the case on hand.
10. In view of the above and for the reasons stated above,
High Court has committed serious error in allowing the
application under Order 6 Rule 17 and under Order 1
Rule 10 of the Code of Civil Procedure by permitting
original plaintiffs to amend the plaint including prayer
clause by which, the plaintiffs have now prayed to
declare the charges / mortgages on the entire premises
as voidab initio and permitting the original plaintiffs to
join / implead the respective banks / financial
institutions as party defendant. The alleged rights of the
plaintiffs as perpetual license holders are yet to be
adjudicated upon. The licenses of the original plaintiffs
have been revoked. Therefore, in a suit challenging
revocation of the respective licenses, the plaintiffs cannot
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be permitted to challenge the respective mortgages /
charges created on the entire premises as void abinitio.
It is the case on behalf of the appellant that apart from
the fact that first charge was created in the year 1982,
thereafter said mortgages have been rolled over,
refinanced and replaced from time to time for ensuring
the continuous development of the Hotel Project /
premises which requires consistent upkeep, renovation
and upgradation from time to time. Under the
circumstances, the impugned orders passed by the High
Court allowing the application under Order 6 Rule 17
and under Order 1 Rule 10 of the Code of Civil Procedure
are unsustainable, both on facts as well as on law.
11. In view of above and for the reasons stated above, all
these appeals succeed. The impugned orders passed by
the High Court allowing the application under Order 6
Rule 17 and Order 1 Rule 10 of the Code of Civil
Procedure in respective suits preferred by the
respondents herein original plaintiffs are hereby quashed
and set aside. Present appeals are allowed accordingly,
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However, there shall be no order as to costs.
……………………………….J.
[M.R. SHAH]
……………………………….J.
[B.V. NAGARATHNA]
NEW DELHI;
JULY 12, 2022
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