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Prashant Jhawar & Others v/s State Bank of India & Others

    GA 750 of 2018 with CS 226 of 2017

    Decided On, 16 July 2018

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE SOUMEN SEN

    For the Petitioners: Ratnanko Banerji, Sr. Advocate, Sakya Sen, Arik Banerjee, R. Mullick, Prakash Sarkar, Advocates. For the Respondents: R4, Mainak Bose, S. Choudhury, N. Jhunjhunwala, R13 & R14, R1, R2 & R3, Rudraman Bhattacharya, Souvik Mazumder, Arif Ali, Advocates.



Judgment Text

This is an application for amendment of the plaint.

The plaintiffs have filed a suit against various defendants including the financial institution. In the original plaint it is stated that plaintiff no. 1 was a promoter shareholder of Usha Martin Limited. He was the erstwhile Chairman of the said company. In the year 1998 the plaintiff no. 1 decided to shift to London to extend the Usha Martin Group Overseas to pursue his business interest in London. The plaintiff nos. 1 and 2 by themselves are through their friends and associates hold about 24.49 per cent of the total issued and paid up share capital of the company. It appears with effect from 1998 the plaintiff no. 2 having regard to is advanced age, distanced himself from the day to day management and affairs of the said company and assumed the role of Chairman Emeritus of the company. On or about 23.12.2009, the plaintiffs and or their family members and or their associate companies referred to Basanta Kumar and Prashant Jhawars' group on the one hand and entered into the share holder's agreement with the defendant nos. 5 and 6 and their family members whereby they inter alia and agreed the parity and equality of the shareholding the management inter alia of the said company had agreed not to act in derogation of such agreement. Prior to August 2011 and with effect from the end of 2010 defendant No. 4 assumed complete control over the affairs of the company and he has been appointing nominees and chosen persons in t

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he Board of Directors of the said Company. On and from 2015, the company under the leadership of defendant no. 4 has incurred extensive loss. It is alleged that defendant no. 4 has completely siphoned the assets of the said company and have completely mismanaged the affairs of the said company. On or about August 2015 the defendant no. 4 and plaintiffs had a meeting with said Arundhati Bhattacharya, the Chairman of the SBI in connection with the request of the said company for release of the additional credit facilities. It is alleged at the said meeting that the additional credit facilities of Rs.1190 crores would be extended only if the patriarch of the group being the plaintiff no. 2 continued to remain in the Board of Directors and continued to advise and guide the Board of Directors as to the road map to be followed for revival of the said company. It was only after the plaintiff no. 2 agreed to continue to guide the said company agreed to grant of additional credit facilities.

At the meeting held by the directors on 22.12.2015 the company acknowledged the fact that the said company in order to revive and/rehabilitate itself required the active support, guidance, wisdom, leadership and experience of the plaintiff no. 2 and requested plaintiff no. 2 to assume an active role in the day to day affairs. It is alleged that having exploited and having utilised the formidable reputation of the plaintiff no. 2 to obtained the said additional credit facilities of Rs.1190 crores, thereafter the defendant nos. 4 and 5 and 7 to 12 colluded and conspired to completely strip and denude the plaintiff no. 2 of all powers and in the process rendered him completely toothless.

At the request made by the company before the defendant no.4, the defendant no.1 on or about 8th December, 2015 agreed to sanction fresh credit facilities to the company. The agreement of corporate loan dated 29th January, 2016 provides for furnishing security. It is manifest from the said two agreements dated 29th January, 2016 that the principal security of the defendant no.1 was the charge of the defendant no.1 over the coal blocks and other fixed assets of the company. The said two agreements would show that the defendant no.1 only insisted on the personal guarantee of the defendant no.4 and not on the personal guarantee of the plaintiffs. The said two agreements pertaining to grant of the fresh credit facilities of Rs.900 crore and Rs.290 crore do not in any manner refer or deal with any previous or past liabilities and/or indebtedness of the company to the defendant no.1. The plaintiff no.1 agreed to pledge 13% of his shares in the said company only to secure due repayment of the fresh credit facilities granted in terms of the letter dated 8th December, 2015 and the agreements dated 29th January, 2016 and not in respect of any other or future borrowings of the said company. Believing and relying upon the representations of the defendant no.4 to the effect that the defendant no.4 would restructure and professionalize the running of the said company and would streamline and optimize the resources thereof, the plaintiff no.1 through himself and his associates agreed to pledge a substantial part of his shareholding with the defendant no.1. The plaintiff no.1 on 28th December, 2015 agreed to pledge 13% of the issued and paid-up share capital of the said company held by him and his associate companies such as Usha Martin Ventures Limited and Peter House Investment India Limited in favour of the defendant no.1. On 9th August, 2016, the plaintiff nos.3 and 4 executed certain pledge or hypothecation documents pledging 13% of Basant Kumar and Prashant Jhawars' Group's shares with the defendant no.1. On the basis of the said documents dated 9th August, 2016 the defendant no.1 accepted the creation of the said pledge and received the said shares by executing a pledge/hypothecation forms dated 10th August, 2016. The defendant no.3, notwithstanding having admitted and acknowledged the fact of pledge of 13% shares and/or interest of the plaintiff no.1 having been created, insisted for execution of a pledge agreement by the defendant no.1. The plaintiff no.1 was compelled to accede to such unreasonable and unconscionably demand of the defendant no.1 to execute a pledge agreement provided however but the said pledge agreement was in conformity and in accordance with the sanction letter dated 8th December, 2015 and said agreements dated 29th January, 2016. The plaintiff no.1 was however surprised to receive a draft pledge agreement on 19th August, 2016 whereby the defendant no.1 had extended the scope of the pledge of the said shares to include all credit facilities provided to the said company not only by the defendant no.1 but by other lenders such as ICICI Bank, Axis Bank, HDFC Bank, IndusInd Bank, RBL Bank Ltd., Bank of Baroda etc. aggregating to approximately Rs.5762 crore. The defendant no.1 could not without the consent of the plaintiffs extend the scope of the said pledge to include the monies due and owing by the said company to other lenders. The plaintiffs allege that the plaintiff no.1 agreed under duress and coercion to execute the pledge agreement forwarded by the defendant no.1 on 19th August, 2016.

Even after agreeing to accept inclusion of clauses 8 and 9 of the pledge agreement, the defendant no.1 on or about 4th October, 2016, once again sent draft pledge agreement to the plaintiff no.1 whereby the defendant no.1 sought to include in the scope of the said pledge all borrowings of the said company even after 31st August, 2016 and till the date of execution of the said pledge agreement. With the said amendment the defendant no.1 sought to effectively include all future borrowings of Usha Martin Ltd. as covered under the credit facilities granted or to be granted by the lenders of the borrower pursuant to Information Memorandum of August, 2015 within the scope of the plaintiff no.1's pledge. The plaintiff no.1 by an email dated 18th October, 2016 informed the defendant no.1 that the plaintiff no.1 and/or his group were not prepared to extend the pledge of their shares to any additional borrowings as they were of the opinion that the business cannot sustain any further debt at this stage.

The plaintiffs in paragraph 64 of the original plaint set out the circumstances which prompted the plaintiffs to execute the pledge agreements although, according to the plaintiffs, the plaintiff no.1 was under no obligation to execute such agreement.

The objections to the proposed amendment are that the pledge agreement between the plaintiff no.1 and SBI constitutes a separate cause of action and is contrary to the original cause of action pleaded in the suit. The proposed added parties namely the defendant nos.13 and 14 are employees of SBI and since the said bank is already a party to the suit, the addition of the said two persons are wholly unnecessary. With regard to the creation of security in connection with loan agreement, it is stated that the loan agreement itself provides for the respondent no.4 and the petitioner no.1 to furnish personal guarantees for disbursement of the said loan. The proposed amendment, if allowed, would change the nature and character of the suit.

In the proposed amendment, the petitioners want to add defendant nos. 13 and 14. The proposed addition of the defendant nos. 13 and 14 in the entire gamut of original cause of action is something which is more than what meets the eyes. The introduction was completely abrupt and has nothing to do with the original cause of action. Although the power of the Court in allowing amendment of the plaint and addition of a party is wide, but it is a discretionary relief. On a reading of the entire plaint, it appears that introduction of the defendant nos. 13 and 14 by way of amendment is mala fide and has nothing to do with the original cause of action. However insofar as the other amendments are concerned which relate to the existing parties, they furnish certain particulars which may or may not succeed at the trial. If the entire plaint is read as a whole, it is difficult at this stage even to come to a conclusion that the defendant nos. 13 and 14 are proper or necessary parties. The Court should be very cautious in adding a party as the said party would be required to defend the suit and has to bear all the expenses. He should not be unnecessarily impleaded. The mere involvement of an officer does not necessarily mean that such officer is guilty of collusion. The proposed addition of the defendant nos. 13 and 14 is contrary to the pleadings made in paragraph 33 and the other paragraphs of the original plaint which explained the circumstances under which the pledge agreement was executed.

The essential dispute is between the two groups of shareholders. The application for amendment has been filed after the financial institution has entered appearance and file its written statement. The dispute is essentially to be resolved upon interpretation of the several pledge agreements for which the presence of the defendant nos. 13 and 14 is wholly unnecessary. The essential dispute in the suit is whether the plaintiffs are discharged of their obligations under the pledge agreement or are bound in respect of future borrowings as well. The original plaint did not even refer to the defendant nos. 13 and 14. The other two bank officials mention here presumably on the ground that the defendant no.2 was a nominee director. A complete new dimension is now being sought to be given with regard to the disbursement of the loan which was not even alleged to have been done improperly by the bank. The addition of parties is governed by the principle that the presence of the said party is either necessary or proper for adjudication of the dispute.

Order 1 Rule 10 of the Code of Civil Procedure deals with addition of parties. A necessary party is one without whom no order can be effectively made. A proper party is one whose presence is absolutely necessary to effectually and completely adjudicate upon the disputes. The most basic underlying test that is applicable to both the concepts of necessary and proper party is that the parties in question must have some legally enforceable right which would be affected if he is not a party to the suit. There is, however, a subtle distinction between the concepts of necessary and proper parties. A necessary party has to be one against whom there exists some right to relief in respect to the matter in question while a person may be deemed a proper party despite there being no relief claimed against such a party. Parties also cannot be introduced so as to alter the nature of a suit or so as to introduce a new cause of action.

The bank itself is represented. There is growing tendency to add officers of juristic bodies without any rhyme or reason. The impleadment of defendant no.1 is good enough unless a case is made out that individual persons being employees of such legal entity have acted in a manner detrimental to the interest of the plaintiffs and thereby has caused loss and damages. That would be a separate cause of action and the principle of vicarious liability or doctrine of indoor management may not apply.

As stated earlier, the attempt to add defendant nos. 13 and 14 does not fit into the original cause of action and it is totally unnecessary to add such parties. Despite the broad scope given to parties to amend their plaints, there exist several major limitations to such scope. The most relevant of these limitations, in the present application are as follows:

(a) The proposed amendments cannot substitute the original cause of action, that is, as per the proposed amendment, a new claim may not be made on the basis of new facts and;

(b) The proposed amendment cannot change the nature of the case.

The plaintiffs have failed to establish that the omission to join the said parties is not due to bona fide mistake. There was no allegation in the original plaint that the defendant nos.13 and 14 have colluded with the defendant nos.1 to 4 in procuring the pledge agreement dated 2nd May 2017 from the plaintiffs. The collusion and conspiracy with regard to such pledge agreement or of additional credit facilities as it appears from paragraph 38 of the plaint are of defendant nos.4 and 5 and 7 to 12. The plaintiffs have nowhere alleged in the original plaint that in respect of the future borrowings the proposed defendant no.13 had any role to play or was instrumental, which is contrary to the proposed amendment.

The proposed amendment with regard to the defendant nos. 13 and 14 militates against the original cause of action as pleaded in the plaint and gives a clear indication that the proposed amendment is not honest and bona fide. The proposed amendment, if allowed, would completely give a new twist to the case.

In view of the inconsistencies and having regard to the fact that this Court is of the view that the addition of the defendant nos.13 and 14 is not required and such addition is mala fide, the application is dismissed with costs assessed at 500 GMs to be paid to the proposed defendant nos. 13 and 14 individually as they are represented in Court today. Since under the present order it would not be possible to carry out the other amendments as proposed the plaintiffs are at liberty to file a fresh application without addition of the defendant nos. 13 and 14, if so advised.

The application is dismissed.
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