Full Judgment Text
.* HIGH COURT OF DELHI : NEW DELHI
+ I.A No. 4979/2007 in CS (OS) No. 1372/2005
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Reserved on: 31 July, 2009
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% Decided on: 8 September, 2009
Anil Nanda & Anr. ...Plaintiffs
Through : Mr. Sandeep Sethi, Sr. Adv. with
Mr. T.K. Ganju, Mr. P.K. Bansal and
Mr. Sindhu Sinha, Advs.
Versus
M/s Escorts Ltd. & Ors. ...Defendants
Through: Ms. Simran Mehta, Adv. for D-1, D-3
and D-5
Mr. Rajiv Nayyar, Sr. Adv. with
Mr. Rohit Puri, Adv. for D-2
Mr. Sanjeev Puri, Sr. Adv. with
Mr. Anshul Tyagi, Adv. for D-9
Ms. Shawana Bari and Ms. Monica
Garg, Advs. for UOI
Coram:
HON'BLE MR. JUSTICE MANMOHAN SINGH
1. Whether the Reporters of local papers may
be allowed to see the judgment? No
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be reported Yes
in the Digest?
MANMOHAN SINGH, J.
1. By this order I shall dispose of I.A. No. 4979/2007 filed on
behalf of the plaintiffs under Order VI Rule 17 read with Section 151 of
the Civil Procedure Code, 1908 for amendment of the plaint.
2. The plaintiffs filed the present suit seeking the following
reliefs:
CS (OS) No. 1372/2005 Page 1 of 12
1A) a decree of declaration declaring that no amalgamation of
EHIRC-Delhi took place with EHIRC-Chandigarh;
a) a decree of declaration declaring the amalgamation of
EHIRC Delhi with EHIRC Chandigarh as non-est, void and
bad in law in view of the provisions contained in the
Societies Registration Act, 1860;
b) a decree of declaration thereby declaring the conversion of
EHIRC Chandigarh (post amalgamation) into a Limited
Company under the Companies Act, 1956, as being void
and contrary to law;
c) a decree if permanent injunction in favour of the plaintiffs
and against the defendant no. 9, injuncting its officers,
agents and employees from transferring, alienating or
otherwise creating any third party rights or interest with
respect to the shares held by the defendant no. 9 in
defendant no. 2;
d) a decree of permanent injunction in favour of the plaintiffs
and against defendant no. 2, its officers, agents and
employees from registering any transfer of shares effected
by the defendant no. 9;
e) a decree of mandatory injunction directing the restoration of
the assets, properties and facilities of the second defendant,
and its ownership, management and control and its
CS (OS) No. 1372/2005 Page 2 of 12
character and structure to its original status of a public
charitable institution, dedicated wholly and exclusively to
public service;
f) award costs of the suit in favour of the plaintiffs and against
the defendants.
3. The brief facts leading up to the present application are stated
hereafter. EHIRC-Delhi was registered as a Charitable Society in 1981
under the Societies Registration Act, 1860 with the objective of making
international standard heart specialists accessible to the general public
and to carry on medical research and development in related areas. The
said organization was allotted prime real estate at very subsidized rates
by the Government due to its charitable motives, as well as several other
tax benefits and exemptions.
4. In November 1999, another body by the name of EHIRC-
Chandigarh was registered by defendant nos. 4 and 5. The objects of the
two bodies, as contained in their respective Memorandum of
Associations, were identical with the sole exception being that EHIRC-
Chandigarh did not have the clause dealing with the leading intention of
EHIRC-Delhi, i.e. that the proceeds/income of the society shall be used
for promotion of the charitable aims and objects of the society. The
necessary implication here, which is also the basic premise on which the
present suit is filed, is that the income of EHIRC-Chandigarh would not
be used for charitable purposes but for profit-making for personal use. In
June 2001, the two societies were amalgamated. The Chandigarh society
CS (OS) No. 1372/2005 Page 3 of 12
had assets worth Rs.7000/- whereas the income (aside of assets) of the
Delhi society was to the tune of Rs. 110 Crores as on March 31, 2000.
Therefore, the amalgamation of the two societies afforded EHIRC-
Chandigarh, a non-charitable society, the perfect opportunity to
misappropriate the funds and assets of a charitable society for its
personal use and gain.
5. The plaintiffs had originally prayed that the above-stated
amalgamation be declared non-est and bad in law. However, later on,
vide order dated March 6, 2006, Ld. Single Judge of this court allowed
the amendment sought by the plaintiffs subject to the payment of cost of
Rs, 20,000/- to the effect that the amalgamation was sought to be
declared non-existent (viz. prayer clause 1A of the plaint).
6. Further, EHIRC-Chandigarh was converted into a Limited
Company under Part IX of the Companies Act, 1956 with a paid up
share capital of Rs. 20.06 Lac prior to formal incorporation, which
increased to Rs. 200.03 Lac in six days due to transfer/allotment of
shares to defendant no. 1 and other companies controlled by defendant
nos. 4 and 5. This closing balance of the Chandigarh society was now
the opening balance of the new limited company (present defendant no.
2). In this way, the charitable society EHIRC-Delhi with funds worth
more than 110 Crores was converted into a Limited Company with
defendant no. 1 as its 80% owner, the same having paid about Rs. 2
Crores.
CS (OS) No. 1372/2005 Page 4 of 12
7. The plaintiffs had also filed I.A No. 3983/2007 seeking
impleadment of Fortis Healthcare Ltd. as defendant no. 9 and the same
was allowed by this court vide order dated April 4, 2007.
8. The present application of the plaintiff is for an amendment
of its plaint as regards certain disclosure concerning defendant no. 9. It
has been submitted by the plaintiff that during the hearing proceedings
of the present suit on September 30, 2005, the defendants disclosed that
90% of the shares of defendant no. 2 that were held by defendant no. 1
and certain other entities have been divested in favour of defendant no. 9
on September 28, 2005 for consideration of Rs. 585 Crores, in lieu of a
share purchase agreement dated September 25, 2005. The plaintiff has
contended that the above-mentioned share-purchase agreement as well
as the issuance of shares of defendant no. 2 to defendant no. 9 is illegal
and fraudulent as both acts are based on the fraudulent conversion of
EHIRC-Delhi into a Limited Company. Since the assets and funds of
EHIRC-Delhi were wrongly vested in defendant no. 2 in the first
instance, the same cannot be again illegally transferred to defendant no.
9. The said shares of defendant no. 2 have allegedly been sold to
defendant no. 9 for a consideration of Rs. 585 Crores. Further, the
plaintiffs have alleged that the defendants have now raised more than Rs.
500 Crores from the public by issuing equity shares of defendant no. 9
@ 10/- each. In view of these events, the plaintiffs have prayed for
amendments to be allowed in the plaint by addition of certain paras to
the effect of what has been stated above, addition of the court fee para
CS (OS) No. 1372/2005 Page 5 of 12
and addition of two prayers. The additional prayers sought by the
plaintiffs by way of this amendment application are as follows:
“1B) pass a decree of declaration thereby declaring that
the transfer of 90% shares held by defendant no. 1 and
certain other entities in defendant no. 2, in favour of
defendant no. 9 under the share purchase agreement dated
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25 September, 2005, is illegal, non-est and bad in law;
1C) pass a decree of declaration declaring that the
Public Issue by defendant no. 9, which opened on
16.04.2007 and closed on 20.04.2007, is illegal, non-est,
void and bad in law.”
10. In its reply to the present application, defendant no. 1 has
issued an outright denial of the alleged illegal conversion of EHIRC-
Delhi into a Limited Company stating that the same was neither illegal
nor a fraud. As per defendant no. 1, Plaintiff no. 1 was its Vice
Chairman and Managing Director as well as on the Board of Governors
on EHIRC-Delhi, and the documents evidencing the conversion of the
society into a company as also the answering defendants’ investment in
defendant no. 2 are all signed by plaintiff no. 1.
11. As regards the plaintiff’s allegation of a sum of Rs. 500
Crores being raised by the defendants, defendant no. 1 has submitted that
as it is not a party to the said transaction (since it relates to defendant no.
9 and issuance of its equity shares to the public), it is in no position to
comment on the same.
12. The main contention of the plaintiff based on which the
present amendment has been sought i.e. the disinvestment by the
answering defendant of the shares held by it in defendant no. 2 in favour
of defendant no. 9, the defendants have submitted that the said factum of
CS (OS) No. 1372/2005 Page 6 of 12
disinvestment was stated before this court at the date of the first hearing
of the present suit itself. The plaintiffs had full knowledge of the above-
stated disinvestment on September 30, 2005 and despite having the said
knowledge, the plaintiffs failed to include the current amendment sought
in its amendment application being I.A. No. 1614/2006 which was
allowed by this court vide order dated March 6, 2006. In view of this, the
answering defendant has stated that the application suffers from delay
and laches and is thus liable to be dismissed.
13. The defendants have further contended that the plaintiffs are
seeking to amend their plaint in a piece-meal fashion only in an attempt
to prolong the process of the court and in order to abuse it. It has been
pointed out that the plaintiffs’ application reveals no reason as to why
the amendment being sought now was not included in the earlier
amendment application.
14. In the reply filed by the defendants it is also stated that the
amendment sought by the plaintiffs, if allowed, would entirely change
the nature and character of the suit as the plaintiffs are trying to
incorporate a new case by way of this amendment. It is also stated that
the main subject matter of challenge in the suit was the process of
amalgamation of the two societies and subsequent registration of the
amalgamated society and all the reliefs prayed for in the suit were in
relation to the said subject matter. However, in the present application,
the plaintiffs are seeking relief with reference to a controversy that arose
after the filing of the suit and is in relation to defendant no.1, which is
CS (OS) No. 1372/2005 Page 7 of 12
not connected in any manner with the process of incorporation of
defendant no.2, which in fact is the main subject matter of the suit. It is
stated that in this manner, the plaintiffs are seeking to add fresh reliefs
based on allegations which admittedly even as per the plaintiffs pertain
to a fresh cause of action and for the period subsequent to the filing of
the suit and, therefore, the plaintiffs should not be allowed to completely
change the nature and character of the suit.
15. I have gone through the contentions of both parties. As far as
the first objection of the defendants regarding delay and laches in filing
of the present application is concerned, it cannot be disputed that the
plaintiffs had full knowledge about the disinvestment on September 30,
2005. However, it can also not be disputed that an earlier amendment
application being I.A. No. 1614/2006 was allowed by this court vide
order dated March 6, 2006 but subsequent to this order defendant no. 9
was ordered to be impleaded as a party vide order April 4, 2007 in I.A.
No. 3983/2007. When this application was being considered, the
defendants had raised, inter alia , objections regarding non-joinder of
necessary parties as well as the maintainability of the suit and the court
deciding the application, inter alia , had observed as under:-
“.............The defendants appeared in the suit and
objected to the maintainability of the suit inter alia on the
ground of non-joinder of necessary party at the initial
stages itself. It was urged by the defendants that the
shareholding of the defendant no.1 in the defendant no.2
stood transferred to M/s.Fortis Healthcare Ltd. under a
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Share Holders Agreement dated 28 December, 2005.
Detailed submissions in this behalf were made in this
court at the time of hearing of IA no.7817/2005 filed by
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the plaintiff on 30 September, 2005. This court noticed
CS (OS) No. 1372/2005 Page 8 of 12
the objections raised by the defendant and the submission
to the effect that the share holding of defendant no.1 in
the defendant no.2 stood transferred to a third party. The
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order of status quo was passed on 30 September, 2005
against the defendants.”
16. The above-mentioned order of impleadment of defendant no.
9 was passed on April 4, 2007 and the present application for
amendment was filed on August 4, 2007. It is no doubt that the plaintiffs
had knowledge about the disinvestment on 30 September, 2005 and the
delay in filing of the application is apparent, however, it appears from
the record that the plaintiffs at the first instance intended to implead the
defendant no.9 in the present matter, the amendment application being
filed subsequent to the impleadment application. It is well settled law
that mere delay cannot be the sole ground for refusal of amendment
unless the delay defeats the rights of the opponent party and if the same
is perpetrated with mala fide intention as observed in Sampath Kumar
v. Ayyakannu, AIR 2002 SC 3369 at page 3371 .
17. The next submission of the defendants is that the amendment
sought by the plaintiffs will change the nature and character of the suit,
if granted. It is a matter of fact that defendant no. 9 was impleaded as a
party to the present matter vide order dated April 4, 2007 and the
plaintiffs by virtue of this amendment desire to elaborate the factum of
disinvestment. It is also argued by the learned counsel for the defendants
that the amendments sought by the plaintiff in paras 1B and 1C of the
prayer clause are contrary to law as no decree for declaration can be
passed against the other entities, who have 10% remaining shares of the
CS (OS) No. 1372/2005 Page 9 of 12
defendant no.1 unless the said other entities are also impleaded as
defendants in the present case. According to the defendants, a decree
cannot be passed in the absence of the said other entities and therefore
the said prayer sought by the plaintiffs is without any substance. I agree
with the learned counsel for the plaintiffs that as far as the merit of the
present case is concerned, the same is not to be gone into while deciding
the present application. It is also well settled law, as observed in Lakha
Ram Sharma v. Balar Marketing Pvt. Ltd. 2003 (27) PTC 175 (SC)
that while considering an application for amendment, the merit of the
case is immaterial.
18. The above view is supported by the findings of the Apex
Court in the matter reported as Usha Devi v. Rijwan Ahmad & Ors.
AIR 2008 SC 1147 wherein it is held as follows:-
“As to the submissions made on behalf of the
respondents that the amendment will render the suit non-
maintainable because it would not only materially change
the suit property but also change the cause of action it
has only to be pointed out that in order to allow the
prayer for amendment the merit of the amendment is
hardly a relevant consideration and it will be open to the
defendants-respondents to raise their objection in regard
to the amended plaint by making any corresponding
amendments in their written statement.”
19. It is settled law that the object of the rule is that the court
should try the merits of the case that come before it and should,
consequently, allow all amendments that may be necessary for
determining the real question in controversy between the parties
provided it does not cause injustice or prejudice to the other side.
CS (OS) No. 1372/2005 Page 10 of 12
20. In the case of Om Prakash Gupta v. Ranbir B. Goyal AIR
2002 SC 665 it was observed as follows :
“11. The ordinary rule of civil law is that the rights of
the parties stand crystallised on the date of the
institution of the suit and, therefore, the decree in a suit
should accord with the rights of the parties as they stood
at the commencement of the lis. However, the Court has
power to take note of subsequent events and mould the
relief accordingly subject to the following conditions
being satisfied: (i) that the relief, as claimed originally
has, by reason of subsequent events, become
inappropriate or cannot be granted; (ii) that taking note
of such subsequent event or changed circumstances
would shorten litigation and enable complete justice
being done to the parties; and (iii) that such subsequent
event is brought to the notice of the court promptly and
in accordance with the rules of procedural law so that
the opposite party is not taken by surprise.
12. Such subsequent event may be one purely of law or
founded on facts. In the former case, the court may take
judicial notice of the event and before acting thereon put
the parties on notice of how the change in law is going
to affect the rights and obligations of the parties and
modify or mould the course of litigation or the relief so
as to bring it in conformity with the law. In the latter
case, the party relying on the subsequent event, which
consists of facts not beyond pale of controversy either as
to their existence or in their impact, is expected to have
resort to amendment of pleadings under Order 6 Rule 17
CPC. Such subsequent event, the Court may permit
being introduced into the pleadings by way of
amendment as it would be necessary to do so for the
purpose of determining real questions in controversy
between the parties.”
21. After due consideration of the matter, I am of the view
that by allowing the amendment sought by the plaintiffs, the nature
and character of the suit would not be changed. Rather, the
amendment sought by the plaintiffs is necessary for the purpose of
deciding the real dispute between the parties.
CS (OS) No. 1372/2005 Page 11 of 12
I.A. No. 4979/2007 is allowed accordingly.
CS (OS) No. 1372/2005
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List this matter before the Court on 15 October, 2009.
MANMOHAN SINGH, J.
SEPTEMBER 8, 2009
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CS (OS) No. 1372/2005 Page 12 of 12