Saraswat Bank’s Late Bid to Add Co-op Act Notice-Bar Plea in Auction-Deposit Suit Fails, Karnataka HC Upholds Rejection

The respondent sued the petitioner-Bank to recover deposits made in connection with an auction of mortgaged properties; the auction did not proceed to completion and the deposits remained with the Bank.

After initially being placed ex parte, the Bank filed a written statement and pursued an application under Order VII Rule 11 CPC, which was dismissed.

After the plaintiff’s evidence had commenced, the Bank sought to amend its written statement to plead that the suit was barred for non-compliance with Section 115 of the Multi-State Co-operative Societies Act, 2002 (“the Act”).

The Commercial Court rejected the amendment application, and the Bank challenged that order under Articles 226 and 227 of the Constitution.

Order VI Rule 17 CPC permits amendment of pleadings to enable effective adjudication, but its proviso restricts amendments sought after commencement of trial unless the applicant establishes that, despite due diligence, the matter could not have been raised earlier; the court must also consider bona fides and prejudice to the opposing party.

In Basavaraj v. Indira (2024) 3 SCC 705, the Supreme Court emphasised due diligence and held that amendments causing prejudice or taking away an accrued right should not be permitted.

Usha Balashaheb Swami v. Kiran Appaso Swami (2007) 5 SCC 602 recognises a comparatively liberal approach to amendments of written statements, including inconsistent pleas, subject to the other requirements governing amendment.

Section 115 of the Act bars institution of a suit without the prescribed notice where the issues relate to the society’s constitution, management or business; the provision does not apply merely because a defendant is a multi-state co-operative society.

The Court distinguished State of A.P. v. Pioneer Builders (2006) 12 SCC 119, concerning Section 80 CPC, because the wording of Section 80 and Section 115 is not identical.

It also relied on Saraswat Co-operative Bank Ltd. v. Mulani Associates, 2026 SCC OnLine Bom 7462, for the principle that the dispute must directly relate to the society’s constitution, management or business for Section 115 to apply.

The Bank’s 18-page written statement challenged the suit’s maintainability on other grounds but did not plead that the Bank was governed by the Act or that Section 115 applied; neither did the amendment application explain why the plea could not have been raised earlier despite due diligence.

The chronology—including the Bank’s successive applications and the late amendment request after the plaintiff’s evidence had begun—supported the conclusion that the application was not bona fide and would delay the suit.

The proposed plea could also prejudice the respondent, particularly because a finding that notice was required could raise limitation issues if the suit had to be re-presented after compliance.

Independently, the Bank did not establish even prima facie that the dispute concerned its constitution, management or business: the suit concerned repayment of a deposit made in an auction that did not fructify, and the Bank had not pleaded that auction sales constituted its business.

The liberal approach to written-statement amendments did not displace the requirements of due diligence and absence of prejudice.

It held that the Bank had not established due diligence or bona fides, and had not shown a prima facie basis for applying Section 115 of the Act to the dispute.

The impugned order rejecting the amendment disclosed no error or infirmity warranting supervisory interference; the writ petition was dismissed.