2024 (9) TMI 330 - HC - Insolvency and Bankruptcy

Application for amendment of the plaint under order I Rule 10 and order VI Rule 17 of the Code of Civil Procedure, 1908 to implead Ajmera Luxe Realty Pvt. Ltd. (R7) as a party Defendant No. 7 - plaintiff avers that the proposed amendment neither changes the nature of the Suit nor the cause of action is altered - HELD THAT - The overarching principles, which govern the decision to permit a party to amend the pleadings are that, the proposed amendment is necessary for the determination of the real question in controversy between the parties, and the potentiality of prejudice and injustice which is likely to be caused to the other side in the event the amendment is allowed. All the amendments which are necessary for the determination of real question in controversy between the parties are required to be allowed. Whether the proposed amendment has the propensity to fundamentally change the nature and character of the suit and whether a fresh suit on the amended claim would be barred by limitation or any other statutory provision, are the others considerations which weigh with the Court in considering the prayer for amendment. Ordinarily the amendments at a pre-trial stage, where the interdict contained in the proviso to Order VI Rule 17 of the Code has no application, are liberally allowed. In the case at hand, the suit is at a pre-trial nay at a nascent stage. The prayer for amendment of the plaint is contested on two counts. One, the bar under section 14 of IBC to the institution and continuation of the suit or proceedings or initiating of an action to enforce the security interest. Two, that the proposed amendment fundamentally changes the nature and character of the suit. The import of the bar envisaged by clauses (a) and (c) of sub section 14 (1) of IBC deserves to be appreciated. From the text of section 14 (1) (1) (a) it becomes evident that the institution of the suits or continuation of pending suits or proceedings against corporate debtor, is barred once the adjudicating authority orders the moratorium upon admission of insolvency resolution Petition. The bar contained in clause (c) of sub section (1) of section 14 is, however, against the action to foreclose, recover or enforce any security interest created by the corporate debtor. It is trite law that, at the stage of considering the prayer for amendment in the pleadings, the merits of the case, sought to be incorporated by way of amendment, are not required to be delved into. Yet, by way of abundant caution, it is clarified that this Court may not be construed to have delved into the merits of the claim of the plaintiff that it is entitled to seek a declaration as to the validity of the subsequent development agreement by the Society (D6) in favour of Ajmera Luxe (R7). The proposed amendment to the extent it partakes the character of enforcement the security interest created by Meeti (D1) in favour of the plaintiff, cannot be allowed - Application allowed in part.

Issues Involved:
1. Amendment of the plaint to implead Ajmera Luxe Realty Pvt. Ltd. (R7) as a party Defendant No. 7.
2. Allegations of collusion between Defendant Nos. 5, 6, and Respondent No. 7.
3. Validity of the termination of the development agreement by the Society (D6).
4. Applicability of the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC).
5. Whether the proposed amendment changes the nature and character of the suit.

Detailed Analysis:

1. Amendment of the plaint to implead Ajmera Luxe Realty Pvt. Ltd. (R7) as a party Defendant No. 7:
The plaintiff sought to amend the plaint under Order I Rule 10 and Order VI Rule 17 of the Code of Civil Procedure, 1908, to implead Ajmera Luxe Realty Pvt. Ltd. (R7) as a party Defendant No. 7. The plaintiff argued that the amendment was necessary to include subsequent developments and allegations of collusion between Defendant Nos. 5, 6, and Respondent No. 7. The plaintiff asserted that the amendment would not change the nature of the suit or alter the cause of action and was essential for a complete and effectual adjudication of the dispute.

2. Allegations of collusion between Defendant Nos. 5, 6, and Respondent No. 7:
The plaintiff alleged that the transaction between Defendant Nos. 5, 6, and Respondent No. 7 was prejudicial to its rights. It was revealed that Ajmera Luxe (R7) is an associate/subsidiary company of Ajmera Realty (D5). The plaintiff contended that the collusion necessitated the amendment to bring these developments on record. The Society (D6) and Ajmera Luxe (R7) resisted the application, arguing that the proposed amendment was misconceived and that there was no privity of contract between the plaintiff and the Society (D6).

3. Validity of the termination of the development agreement by the Society (D6):
The Society (D6) terminated the development agreement with Meeti (D1) due to gross breaches committed by Meeti (D1). This termination was upheld by the court in a previous judgment. The Society (D6) argued that the plaintiff could not claim any right, title, or interest in the free sale area over which encumbrance was created by Meeti (D1), the erstwhile developer. The plaintiff sought to challenge the subsequent development agreement between the Society (D6) and Ajmera Luxe (R7).

4. Applicability of the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC):
Defendant Nos. 5 and 6 and Respondent No. 7 argued that the suit could not proceed due to the moratorium under Section 14 of the IBC, which prohibits the institution or continuation of suits or proceedings against the corporate debtor. The plaintiff countered that the moratorium should not apply to third parties like Defendant Nos. 5 and 6 and Respondent No. 7. The court noted that the moratorium under Section 14 of the IBC is intended to preserve the assets of the corporate debtor during the resolution process. The court concluded that the proposed amendment, to the extent it sought to enforce the security interest created by Meeti (D1), fell within the prohibition under Section 14(1)(c) of the IBC.

5. Whether the proposed amendment changes the nature and character of the suit:
The court considered whether the proposed amendment fundamentally changed the nature and character of the suit. The plaintiff argued that the amendment was a continuation of the assertion of rights under the Debenture Trust Deed (DTD). The court found that the additional prayer sought by the proposed amendment was in continuation of the relief claimed in the original plaint and did not fundamentally alter the character of the suit. The court allowed the amendment to the extent it did not pertain to enforcing the security interest created by Meeti (D1).

Conclusion:
The court partly allowed the application for amendment. The plaintiff was permitted to amend the plaint and interim application to incorporate certain averments, excluding those related to enforcing the security interest created by Meeti (D1). The court ordered that the necessary amendment be carried out within three weeks and that the amended copy of the plaint and interim application be served on Defendant Nos. 1 to 6 and newly impleaded Defendant No. 7 within three weeks thereafter. Costs were to be in the cause.

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