State Bank of Patiala vs Bank for Foreign Economic Affairs of USSR

Devinder Gupta, A.C.J.

Order passed on 23.5.2001 by learned Single Judge dismissing the application filed by respondent No. 1/appellant seeking amendment to the written statement is under challenge in this appeal.

Facts in brief are that on 6.12.1997 suit was filed by the Bank for Foreign Economic Affairs of USSR against four defendants State Bank of Patiala, being first defendant; Sumo Exports; Punjab National Bank; I.C.P. Ruslan and Kenwright Limited, being defendants 2 to 5. The plaintiff claimed a decree for Rs.54,17,632/- along with future interest against defendant No. 1 or such other defendants as the Court may deem fit, inter alia, alleging that they were carrying on the business of banking in Russia and abroad. Defendant No. 2 is the exporter and defendant No. 1 is the bank of defendant No. 2. Defendant No. 3 is the designated bank for plaintiff for the purposes of dealing in foreign exchange on its behalf with Reserve Bank of India, in accordance with the inter banking arrangement between the plaintiff bank and Reserve Bank of India signed on 6.9.1993. Defendant No. 4 is the Russian Importer who had contact with defendant No. 2 and defendant No. 5 is the Russian consignee. On 26.9.1995 a contract was entered into between defendant No. 2 and defendant No. 4 for purchase of Indian Long Grain White Rice, which was required to be exported to Russia. plaintiff opened Letter of Credit with defendant No. 1 Bank on 10.10.1995 for an amount of Rs.5,035,000.00 and defendant No. 6 deposited the said amount with the plaintiff It was further alleged that defendant No. 4 issued acceptance letter confirming that it has no objection in accepting the goods shipped against L.C. dated 10.10.1995. Sum of INR 5,035,000.00 was transferred to the account of defendant No. 6 by the plaintiff. Reserve Bank of India through letter dated 29.3.1996 sent statement to the plaintiff up to 5.1.1996 with reference to the said letter of credit. The plaintiff objected to the debit of the amount and filed suit claiming that cause of action had arisen to it against defendant No. 1 when defendant No. 1 did not comply with the terms of Letter of Credit and did not sent shipping documents pertaining to the plaintiff bank neither within 21 days as per the Letter of Credit nor within the validity period of Letter of Credit. It was alleged that cause of action finally arose on 7.3.1997whenthe defendants claimed that they were not responsible and that against defendants 2, 4, 5 and 6 cause of action is alleged to have arisen on 26.9.1996 when defendant No. 1 claimed that documents were sent by defendant No. 2 to defendant No. 5 and that defendant No. 5 had retired the goods. The cause of action also arose when on 19.2.1977 the Customs Authorities in Moscow informed the plaintiff bank that Airway bill representing the said goods have not been handed over by the customs authorities.

3.The suit was resisted by defendant No. 1 who file this written statementon8.12.1998. Replication to the written statement of defendant No. 1 was filed by the plaintiff on 3.12.1999. On the same day an application (IA. No. 12386/99) was filed by the plaintiff under Order 12 Rule 6 read with Section 151 of the CPC praying that decree be passed forthwith against defendant No. 1 or the other defendants because of the alleged admission of defendant No. 1 in its written statement. Notice of this application was directed to be issued to the defendants. Notice could not be served on the defendants for want of process fee. Accordingly, on 13.7.2000fresh notice was directed to be issued, returnable for 11.10.2000.Before this application could be taken up for consideration or reply could be filed by the defendants, defendant No. 1 on 25.9.2000 filed an application under Order 6 Rule 17 read with Section 151 of the CPC seeking leave to amend its written statement.

4.Defendant No. 1 alleged that after filing of the written statement new facts have come into its knowledge because of which it was necessary to amend the written statement filed earlier and to bring to the notice of the Court new facts, which were absolutely necessary for complete adjudication on the disputes between the parties. The new fact, which according to defendant No. 1 came to its knowledge was that the stocks lifted from Indira Gandhi Airport never reached its destination due to fraud alleged to have been committed by defendant No. 2 and in connivance with defendants 4 and 5. It was prayed that defendant No. 1 be permitted to add preliminary objections No. D, E and F and suitably amend the contents of various paragraphs of its written statement. In the application, it was also alleged that the Airway Company, which lifted the stocks from Indira Gandhi Airport at New Delhi for export to Moscow had not been imp leaded as a party defendant admittedly when the case of the plaintiff has been that the goods exported never reached their destination. In the application seeking amendment, the proposed amendments, which defendant No. 1 wanted to make were not quoted. However, defendant No. 1 filed separately the proposed amended written statement in corporating the amendments. The plaintiff vehemently opposed this application, inter alia, alleging that defendant No. 1 wants to substitute various paragraphs, which cannot be permitted. Moreover, in the application filed under Order 6 Rule 17 CPC precise amendment, which defendant No. 1 wanted to carry out to the original written statement filed by it had not been mentioned. On merits, it was pleaded by the plaintiff that the suit filed by the plaintiff against defendant No. 1 is based on I.C.C. Uniform Customs and Practice for Documentary Credit, 1993 and defendant No. 1 had already admitted that necessary documents were not collected and furnished to the plaintiff by it. Having admitted those facts, defendant No. 1 cannot be permitted to change the plea of admission made in the earlier written statement to a plea of denial in the proposed written statement.

5.Learned Single Judge by the impugned order dismissed the application observing that defendant No. 1, who was seeking amendment to its written statement had failed to assign cogent reasons that why the pleas, which were sought to be raised and which were available to it earlier, had not been raised. Moreover, allowing defendant No. 1 to amend the written statement will have the effect of permitting it to convert the plea of admission into plea of denial, which was not permissible. This order is under challenge in this appeal.

6.We have considered the submissions made at the bar and have also been taken through the entire record.

7.Learned counsel for the plaintiff/respondent No. 1 tried to support the impugned order by making similar submissions, which weighed with learned Single Judge in declining the prayer of defendant No. 1 to amend the written statement. It was contended that the application was not in consonance with the law; precise amendment, which defendant No. 1 wanted to incorporate to the original written statement, had not been quoted verbatim in the application filed under Order 6 Rule 17 C.P.C.; admission had been made by defendant No. 1 and because of those admissions, valuable right had accrued to the plaintiff for which an application under Order 12 Rule 6 C.P.C. was filed praying for decree against defendant No. 1 and in order to make the said application in fructuous and to get over the said admission, defendant No. 1 was seeking to amend its written statement.

Learned counsel for defendant No. 1/ appellant contended that necessity had arisen to seek amendment after defendant No. 1 came to know of certain glaring facts, which go to the root of the case. Defendant No. 1 Bank was not proposing to change its stand by withdrawing the earlier plea but had sought permission to add few facts, which had came to its notice later on. The same does not amount to changing the plea of admission to a plea of denial. Defendant No. 1 bank had not admitted expressly or by necessary implication that necessary documents were not collected and furnished to the plaintiff, as wrongly alleged by the plaintiff. Defendant No. 1 in the earlier written statement had simply pleaded that it was a matter of record. It would not amount to an admission that defendant No. 1 bank had admitted that necessary documents were not collected and furnished to the plaintiff.

Having considered the respective submissions made at the bar, we are of the view that it is a fit case where interference is called for in the impugned order passed by learned Single Judge and defendant No. 1 deserves to be permitted to amend the written statement.

10.Suit is still at the initial stage. Trial has not yet commenced. There is also no doubt that because of the alleged pleas of admission of defendant No. 1 an application under Order 12 Rule 6 C.P.C. has been filed by the plaintiff, which is still under consideration. Before we proceed further precisely it has to be ascertain that whether any admission was made by defendant No. 1 in the written statement filed earlier, because of which it can be said that valuable right had accrued to the plaintiff, which cannot be defeated by amendment. Defendant No. 1 in the written statement filed earlier admitted that the plaintiff bank opened Letter of Credit with defendant No. 1 on 10.10.1995 and further admitted that documents were required to be presented within 21 days of the date of shipping. Defendant No. 1 also admitted that validity of Letter of Credit expired on 4.1.1996 and also admitted that telex dated 28.2.1996 was sent but defendant No. 1 denied its liability to pay the suit amount to the plaintiff. Defendant No. 1 also denied that it had failed to do the needful or that the plaintiff bank was made to suffer on account of the alleged mistake of defendant No. 1. Defendant No. 1 also denied that it had admitted any mistake on its part. It further denied that the plaintiff bank refunded the cover amount to defendant No. 6 due to the alleged negligence, mistake or failure of defendant No. 1 in not sending the documents or not relying on telex messagedated28.2.1996. Defendant No. 1 in fact admitted the plea of the plaintiff that there was a fraud between defendants2 and 5 and also admitted the plaintiff''s case that defendants 4, 5 and 6 were liable to reimburse the amount to the plaintiff Bank as the goods had reached their destination.

In case written statement filed by defendant No. 1 earlier is read as a whole, it cannot be said that defendant No. 1 at ay point of time expressly or impliedly admitted that necessary documents were not collected by it and furnished to the plaintiff. Therefore, to say that there was any plea of admission due to which the plaintiff had acquired valuable right will not be correct on a careful reading of the written statement filed by defendant No. 1.

12.It is also a fact that defendant No. 1 in the application seeking amendment has not quoted the amendments sought to be raised but has appended to the application proposed written statement specifically stating in the application that what paras are sought to be added as preliminary objections and in which paragraphs of the written statement filed earlier amendments are sought to be incorporated. Though it would have been appropriate that the proposed amendments ought to have been separately quoted in the application, but the purpose of law can be said to have been duly served by appending to the application the proposed amended written statement.

The decision of Supreme Court in Heeralal Vs. Kalyan Mal and Others, relied upon by learned counsel for plaintiff/respondent No. 1 would not be applicable to the facts and circumstances of the case. There can be no dispute with the proposition that when amendment sought for in the written statement is of a nature as to displace the plaintiff''s case, it cannot be allowed in view of ratio of the decision of Supreme Court in Modi Spinning and Weaving Mills Co. Ltd. and Another Vs. Ladha Ram and Co., , but before the said principle is applied to the facts of the case, it must be ensured that there is an admission made by defendant in the written statement, which if allowed, will have the effect of displacing the plaintiff''s case. In the instant case, defendant No. 1 is not deleting the pleas, which had already been raised in the earlier written statement. Defendant No. 1 is expanding its pleas, which it had taken in various paragraphs. No part of the earlier written statement was sought to be deleted. Addition of the pleas can be said to be an elaboration to the earlier written statement with complete facts and figures because of the information, which defendant No. 1 is stated to be now possessed with respect to the transaction in question. The proposed amendments rather go to elaborate the alleged fraud, alleged to have been committed by the other defendants, as has been pleaded by plaintiff/respondent No. 1 in its plaint.

The principle, which would apply, in the instant case ,would be as enunciated in B.K.N. Narayana Pillai Vs. P. Pillai and Another, that Courts are more generous in allowing the amendment of the written statement as the question of prejudice is less likely to operate in that event. The defendant has a right to take alternative plea in defense which, however, is subject to an exception that by the proposed amendment the other side should not be subjected to injustice and that any admission made in favor of the plaintiff is not withdrawn. All amendments of the pleadings should be allowed, which are necessary for determination of the real controversies in the suit provided the proposed amendment does not alter or substitute a new cause of action on the basis of which the original lis was raised or defense taken. Inconsistent and contradictory allegations in negation to the admitted position of facts or mutually destructive allegations of facts should not be allowed to be incorporated by means of amendment of the pleadings.

The proposed amendment, in our view, are necessary for complete adjudication of the rights of the parties and in order to fix liability on any of the defendants, if any, liable to the plaintiff for the amount claimed in the suit. Reading of the written statement has to be purposeful and meaningful, which has to be read as a whole. On a careful reading of the written statement, as originally filed by defendant No. 1, it cannot be said that defendant No. 1 admitted its liability or that it admitted that it had neglected or failed to discharge its obligation. As such, it cannot be said that there is an admission because of which a valuable right had accrued to the plaintiff. The mere fact that an application under Order 12 Rule 6 CPC was filed to which reply had not yet been filed by defendant No. 1, that by moving an application it cannot be said that seeking amendment in such circumstance would defeat the right of the plaintiff to seek adjudication on the application. Incase defendant No. 1 is otherwise entitled to seek amendment, it would be entitled to seek indulgence of the Court irrespective of the fact that an application under Order 12 Rule 6 C.P.C. was pending.

Thus we are of the view that the impugned order is liable to be set aside. As cogent reasons have been assigned by defendant No. 1 in seeking amendment that new fact came to its knowledge, which fact is not disputed on behalf of the plaintiff. Defendant No. 1 is entitled to carry out the proposed amendment, which do not change the nature of defense.

Consequently, the appeal is allowed. The impugned order is set aside. Application under Order 6 Rule 17 C.P.C. (IA.9529/2000) of defendant No. 1/appellant is allowed. The proposed amended written statement is directed to be taken on record. Parties are left to bear their respective costs.