IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF MAY 2019 BEFORE THE HON’BLE MR. JUSTICE SREENIVAS HARISH KUMAR REGULAR FIRST APPEAL No.610 OF 2019 BETWEEN Zuari Agro Chemicals Limited A limited company incorporated under The provisions of the Companies Act 1956 And having its registered office at Jai Kisaan Bhawan, Zuarinagar, Goa-403726 Represented by its Authorized Signatory PT Sudarshan …Appellant (By Sri. Srinivas V. Raghavan, Senior Advocate for Sri. Ajay J. Nandalike, Advocate) AND Mcdowell Holdings Limited, A company incorporated under The provisions of the Companies Act 1956, Having its registered office at UB Tower, Level 12, UB City, 24 Vittal Mallya Road, Bengaluru, Karnataka-560001.
…Respondent (By Sri. Udaya Holla, Senior Advocate, for Ms. Sanjanthi Sajan Poovayya, Advocate) This RFA is filed under Order XLI Rule 1 read with Section 96 of CPC, 1908 against the order dated 16.03.2019 passed on I.A.No.VI and VII in O.S.No.9232/2018 on the file of the XXXV Additional City Civil and Sessions Judge, Bengaluru. allowing I.A.No. VI and VII filed under Order VII Rule 11(d) read with Section 151 of CPC for rejection of plaint.
This RFA having been heard and reserved on 22.04.2019 and coming on for pronouncement for this day, the Court pronounced the following:
JUDGMENT 1. The facts, stated briefly, are as under:
The appellant is the plaintiff in the suit O.S.9232/2018 on the file of City Civil Court, (CCH-36), Bengaluru. It made Inter Corporate Deposit (ICD) of Rs. 20,00,00,000/- with the respondent/defendant. It was repayable to the plaintiff with interest at the rate of 18% per annum, however the plaintiff renewed the deposit till 31.12.2015 upon request of the defendant. The Annual Report of the defendant company for the financial year 2017- 2018 revealed that it was a loss making company and financially distressed. As on 31.10.2018, the defendant owed a sum of Rs.17,87,76,159/- to the plaintiff. As the defendant showed no signs of ability to repay this amount, the plaintiff initiated proceeding under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the defendant before the National Company Law Tribunal Bengaluru. In the mean time, the defendant started selling its share holdings at Mangalore Chemicals and Fertilizers Limited (MCFL). Alerted by the sale of shares, the plaintiff brought the suit for injunction to restrain the defendant from selling its shares at MCFL in order to protect its financial interest. In the said suit, the plaintiff filed an application for temporary injunction to restrain the defendant from selling its shares and also another application under Order 2 Rule 2 of Civil Procedure Code seeking leave of the court to claim recovery of money if necessitated.
2. The trial court granted an order of temporary injunction. The defendant preferred an appeal, MFA No.807/2019 to this court. In the said appeal, the defendant sought stay of order of temporary injunction. The order being stayed by this court, it is alleged by the plaintiff that the defendant started selling its shares. The plaintiff approached the Supreme Court by filing special leave petition.
3. Before the Supreme Court the defendant gave an undertaking that it would not alienate or dispose of its shares at MCFL. The Supreme Court directed the trial court to decide the application for temporary injunction. Thereafter the defendant made two applications, IA. 6 and IA. 7, under Order VII Rule 11(a) and 11(d) respectively for rejecting the plaint. The trial court, while deciding the application, IA.1 for temporary injunction, also decided the other two applications for rejection of plaint. The plaintiff also made an application, I.A.IV for amending the plaint in order to recover ICD amount from the defendant. The two applications filed under Order VII Rule 11 (a) and 11(d) were allowed by impugned order and plaint was rejected without considering the application for amendment of plaint. Hence the plaintiff has preferred this appeal.
4. The defendant does not dispute its liability, but contends mainly that suit is not maintainable. The plaintiff has already initiated proceeding under Section 7 of the Insolvency and Bankruptcy Code, 2016. Sections 63 and 64 of Insolvency and Bankruptcy Code bar the jurisdiction of the civil courts to entertain suits in respect of matters that are cognizable by NCLT. The nature of the dispute also falls within the ambit of the Commercial Courts Act which also bars the jurisdiction of Civil Courts. Hence the suit is not maintainable.
5. I have heard the arguments of Sri. Srinivas Raghavan and Sri. Udaya Holla, learned senior counsel for the appellant and the respondent respectively. They addressed a very elaborate argument by referring to umpteen number of precedents. I do not think there is need to refer to all the points that they have urged and refer to all the rulings they have cited as this appeal can be disposed of on a point which has not been considered by the trial court. Indeed this was the main ground urged on behalf of appellant.
6. The learned senior counsel for appellant argued that the suit for permanent injunction is maintainable notwithstanding pendency of application under Section 7 of Insolvency and Bankruptcy Code before NCLT, as according to him the NCLT cannot pass any interim order till application is admitted. This argument is rebutted by learned senior counsel for respondent. If the nature of dispute between the parties is seen, it becomes evident that the appellant’s interest lies in recovery of the deposit that it has made with the respondent and therefore it should have instituted a suit for that purpose. The suit for permanent injunction is no remedy at all. And in that view, as also for the reason that a proceeding is pending before NCLT, the suit as has been brought by the appellant is not maintainable; the trial court’s conclusion in this regard cannot be said to be incorrect. But the appellant wanted to amend the plaint and for this reason he made an application. The question therefore is whether the trial court is justified in rejecting the plaint without deciding the application for amendment? The learned senior counsel for appellant argued that the application for amendment should have been decided before deciding application under Order 7 Rule 11 CPC, for, in case the application for amendment had been allowed, it would have saved the suit. The learned senior counsel for respondent argued that the amendment should not be granted as it would change the nature of the suit; and the suit, even if amendment had been permitted, would still be not maintainable as after the amendment, the suit would assume the nature of a commercial dispute for adjudication of which a separate court has been established.
7. The argument of learned senior counsel for respondent touches the merits of the application for amendment. His argument cannot be considered, because it is for the trial court to decide the said application, and in the absence of findings of the trial court on the application for amendment, it is improper to express any opinion. Therefore the question to be examined tapers to the point whether the trial court is justified in rejecting the plaint under Order 7 Rule 11 of Civil Procedure Code without deciding application for amendment of plaint. In this context I find it useful to refer to some of the decided cases cited by learned senior counsel for appellant.
8. The High Court of Calcutta, in the case of AHMAD HOSSEIN vs CHEMBELLI AND OTHER (AIR 1951 CAL 262) has held as below “6……. The object of Order 7, Rule 11 therefore is really to prevent the ordinary consequences of dismissal viz., to prevent the filing of another suit on the same cause of action that is to say prevent another suit filed on the same cause of action from being barred. If such is the object, it cannot be defeated by allowing the plaint to be amended so as to remove the defect and prevent the operation of Order 7, Rule 11. The result of saying that when Order 7, Rule 11 applies the plaint cannot be amended would be to say that it was the intention of the Legislature that the parties would be compelled to have the suit dismissed and start afresh and made to throw away large costs incurred in the first suit. It strikes me as absurd to say that this was what the Legislature intended. In my view therefore Order 7, Rule 11 does not in the least affect or take away the Court's powers or duties as to amendment and all necessary amendments should be made even if Order 7, Rule 11 applies”.
9. The Hon’ble High Court of Bombay has also taken the same view in the case of GAGANMAL RAMCHAND VS. THE HONGKONG & SHANGHAI BANKING CORPORATION (AIR 1950 BOM. 345). It is held as below “3. …….I see no reason whatever why the power of the Court to allow amendment of pleadings should be in any way restricted or controlled by the provisions contained in O. 7, R.
11. It is perfectly true that it is incumbent upon the Court to reject a plaint that does not disclose a cause of action, but it does not allow a plaint to be amended so that it should disclose a cause of action. It is only when a plaint does not disclose a cause of action that the Court is called upon to exercise its power under O. 7, R. 11. But the Court may prevent the operation of O. 7, R. 11, and may save the plaint being rejected by exercising its power under O. 7, R. 11, and allowing the plaint to be amended…..”
10. The High Court of Chhatisgarh, following the above judgment of High Court of Bombay, also came to same conclusion in the case of MAHESH KUMAR AGGARWAL & OTHERS VS. DINESH KUMAR CHOUKSEY & OTHERS (2009 (4) CGLJ 229).
“14. We are in respectful agreement with the principle of law laid down by the Bombay High Court in the aforesaid judgment and we hold that the trial court was duty bound to decide the application for amendment (I.A.No.9) filed by the plaintiffs on 28.12.2008 before deciding the application under Order 7 Rule 11 Code of Civil Procedure subsequently preferred by the defendants for dismissal of the plaint”.
11. I find absolute reason in the above analogy. If after rejection of plaint, Order 7 Rule 13 of Civil Procedure Code provides for filing of a new suit, why an amendment to plaint should not be permitted to save the suit from being rejected?
12. Therefore the conclusion is that trial court has committed an error in rejecting the plaint without deciding the application for amendment of plaint. It is for the trial court to decide whether to grant an amendment of plaint or not. If it comes to conclusion that amendment can be permitted, the question of maintainability of the suit will still be open for examination. Appeal is therefore allowed. The impugned order of the trial court is set aside. The suit is restored to the file of trial court and remanded. The trial court is directed to decide the application for amendment. There is no order as to costs.
The parties are directed to appear before the trial court on 24.06.2019.
The interim order granted by this court will continue till 24.06.2019.
SD/- JUDGE sd