Case Note & Summary
The plaintiff, Edelweiss Asset Reconstruction Company Limited, filed a commercial suit against Meeti Developers Private Limited (defendant No.1) and others for recovery of amounts due under Non-Convertible Debentures (NCDs) and enforcement of a mortgage over the free sale area of a redevelopment project. The suit was filed after defendant No.1 defaulted and the development agreement with the society (defendant No.6) was terminated. Subsequently, the society entered into a new development agreement with Ajmera Luxe Realty Pvt. Ltd., an associate of defendant No.5. The plaintiff filed an application under Order I Rule 10 and Order VI Rule 17 of the Code of Civil Procedure, 1908, seeking to amend the plaint to implead Ajmera Luxe as a party defendant and to add averments regarding the alleged collusion between the defendants and the new developer. The society and Ajmera Luxe opposed the application, arguing that the amendment would change the cause of action, that the suit was barred by the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (since defendant No.1 was admitted to insolvency), and that the plaintiff had no privity of contract with the society. The court allowed the amendment, holding that the proposed defendant was a proper party whose presence was necessary for complete and effectual adjudication of the dispute and to avoid multiplicity of proceedings. The court rejected the objection based on the moratorium, noting that the suit was not solely for recovery against defendant No.1 but also sought enforcement of mortgage and other reliefs against other defendants, and the amendment did not violate the moratorium. The court also found that the amendment did not introduce a new cause of action or change the nature of the suit, as it merely brought subsequent events on record. The court directed that the amendment be carried out within two weeks and that the amended plaint be served on the newly added defendant.
Headnote
A) Civil Procedure - Amendment of Plaint - Order VI Rule 17 CPC - Impleadment - Order I Rule 10 CPC - The court considered whether the plaintiff could amend the plaint to implead a new party and add averments about subsequent events, including a development agreement executed after the suit was filed. The court held that the amendment was necessary for complete and effectual adjudication and to avoid multiplicity of proceedings, as the proposed defendant was a proper party whose presence would enable the court to settle all questions involved in the controversy. (Paras 2, 10-11, 20-21)
B) Insolvency and Bankruptcy Code - Moratorium - Section 14 IBC - The court examined the objection that the suit could not be proceeded with due to the moratorium imposed under Section 14 of the IBC against defendant No.1. The court held that the moratorium does not bar the amendment application as the suit is not solely for recovery against defendant No.1 but also seeks enforcement of mortgage and other reliefs against other defendants, and the amendment does not violate the moratorium. (Paras 17, 20)
C) Civil Procedure - Cause of Action - Change in Nature of Suit - The court considered whether the proposed amendment introduced a new cause of action or changed the nature of the suit. The court held that the amendment only brought subsequent events on record and did not alter the fundamental basis of the suit, which was to enforce the plaintiff's rights under the Debenture Trust Deed and mortgage. (Paras 11, 18, 20)
Issue of Consideration
Whether the plaintiff is entitled to amend the plaint to implead Ajmera Luxe Realty Pvt. Ltd. as a party defendant and incorporate averments regarding subsequent developments, including the execution of a development agreement between the society and the proposed defendant.
Final Decision
The court allowed the amendment application, permitting the plaintiff to amend the plaint to implead Ajmera Luxe Realty Pvt. Ltd. as defendant No.7 and to incorporate the proposed averments and reliefs. The court directed that the amendment be carried out within two weeks and that the amended plaint be served on the newly added defendant.
Law Points
- Amendment of plaint
- Impleadment of party
- Order I Rule 10 CPC
- Order VI Rule 17 CPC
- Necessary and proper party
- Multiplicity of proceedings
- Subsequent events
- Cause of action
- Section 14 IBC moratorium
Case Details
2024 LawText (BOM) (9) 32
Interim Application No. 1319 of 2024 with Interim Application No. 431 of 2024 in Commercial Suit No. 178 of 2023
Mr. Gaurav Joshi, Senior Counsel a/w Mr. Ankit Lohia and Mr. Varun Nathani, Ms. Suchitra Valjee, Ms. Riya Vasa i/by Manilal Kher Ambalal and Co. for Applicant/plaintiff; Mr. Ayush Rajani a/w Khushboo Shah i/by AKR Legal for Defendant No.1; Mr. Zal Andhyarujina Senior Counsel, Mr. Karan Bhide, Mrs. Rati Patni, Mrs. Kathleen Lobo and Mr. Vikrant Dere i/by Wadia Ghandy and Co. for Respondent No.5 and 7; Mr. Sachin Mhatre a/w Rochelle Fernandes i/by Mhatre Law Associates for Defendant No.6
Edelweiss Asset Reconstruction Company Limited
Meeti Developers Private Limited
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Nature of Litigation
Commercial suit for recovery of money and enforcement of mortgage, with an application for amendment of plaint to implead a new party and add averments regarding subsequent developments.
Remedy Sought
The plaintiff sought to amend the plaint to implead Ajmera Luxe Realty Pvt. Ltd. as a party defendant and to incorporate averments regarding the execution of a development agreement between the society and the proposed defendant, which allegedly prejudiced the plaintiff's rights.
Filing Reason
The plaintiff filed the amendment application because subsequent events revealed that the society had entered into a development agreement with Ajmera Luxe, an associate of defendant No.5, which the plaintiff believed was collusive and prejudicial to its rights under the Debenture Trust Deed and mortgage.
Previous Decisions
The development agreement between the society and Meeti Developers was terminated, and the termination was upheld by this Court in Commercial Arbitration Petition (L) No.12837 of 2023 on 12th September 2023. The plaintiff had also filed a company petition under IBC against Meeti Developers, which was admitted on 5th April 2024, imposing a moratorium under Section 14 of the IBC.
Issues
Whether the plaintiff is entitled to amend the plaint to implead Ajmera Luxe Realty Pvt. Ltd. as a party defendant and add averments regarding subsequent events.
Whether the proposed amendment is barred by the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016.
Whether the proposed amendment introduces a new cause of action or changes the nature of the suit.
Submissions/Arguments
Plaintiff: The amendment is necessary for complete and effectual adjudication and to avoid multiplicity of proceedings. It does not change the nature of the suit or cause of action. The impleadment of Ajmera Luxe is required as it is a proper party.
Society (D6): There is no privity of contract between the plaintiff and the society. The development agreement with Meeti was lawfully terminated, and the plaintiff cannot claim any rights. The amendment would delay redevelopment and cause irreparable loss to society members.
Ajmera Luxe (R7): The proposed defendant has no nexus to the dispute and is neither a necessary nor a proper party. The development agreement was executed pursuant to court permission. The suit is barred by moratorium under Section 14 IBC. The amendment introduces a new cause of action and changes the nature of the suit.
Ratio Decidendi
The court held that the proposed amendment was necessary for complete and effectual adjudication of the dispute and to avoid multiplicity of proceedings. The impleadment of Ajmera Luxe as a proper party would enable the court to settle all questions involved in the controversy. The amendment did not introduce a new cause of action or change the nature of the suit, as it merely brought subsequent events on record. The moratorium under Section 14 IBC did not bar the amendment because the suit was not solely for recovery against defendant No.1 but also sought enforcement of mortgage and other reliefs against other defendants.
Judgment Excerpts
This is an application for amendment of the plaint under order I Rule 10 and order VI Rule 17 of the Code of Civil Procedure, 1908 (The Code) to implead Ajmera Luxe Realty Pvt. Ltd.(R7) as a party Defendant No.7 and make certain averments and seek additional reliefs.
The plaintiff avers that the proposed amendment neither changes the nature of the Suit nor the cause of action is altered.
The plaintiff thus asserts the alleged transaction sought to be entered into by Defendant Nos.5 and 6 and Respondent No.7 is prejudicial to the rights of the plaintiff.
Procedural History
The plaintiff filed Commercial Suit No. 178 of 2023 on 2nd November 2023 seeking recovery and enforcement of mortgage. The plaintiff also filed Interim Application No. 431 of 2024 for interim reliefs. Subsequently, the plaintiff filed Interim Application No. 1319 of 2024 for amendment of the plaint to implead Ajmera Luxe Realty Pvt. Ltd. and add averments. The society and Ajmera Luxe filed replies opposing the amendment. The court heard the parties and passed the order allowing the amendment on 3rd September 2024.
Acts & Sections
- Code of Civil Procedure, 1908: Order I Rule 10, Order VI Rule 17
- Insolvency and Bankruptcy Code, 2016: Section 14
