Insurance Company Liable in case Policy Cancelled after Accident : Supreme Court

Justice RM Lodha
Supreme Court of India

The Supreme Court in United India Insurance Co. Ltd. Vs. Laxmamma was called upon to decide whether an insurer is absolved of its obligations to the third party under the policy of insurance because the cheque given by the owner of the vehicle towards the premium got dishonoured and subsequent to the accident, the insurer cancelled the policy of insurance. While answering the above question, the Supreme Court held as under;

6. Mr. P.R. Ramasesh, learned counsel for respondent no. 4 (owner) supported the view of the High Court. He submitted that on the date of the accident, the policy was subsisting and the liability of the insurer continued and, therefore, the insurer cannot recover the amount paid to the claimants from the insured.

7. Section 64-VB of the Insurance Act, 1938 (for short, ‘Insurance Act’) provides as under: 

“64-VB. No risk to be assumed unless premium is received in advance.-

(1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.

(2) For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer.

Explanation.- Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be.

(3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money order and a proper receipt shall be obtained by the insurer from the insured, and such refund shall in no case be credited to the account of the agent.

(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurers, he shall deposit with, or dispatch by post to, the insurer, the premium so collected in full without deduction of his commission within twenty- four hours of the collection excluding bank and postal holidays.

(5) The Central Government, may, by rules, relax the requirements of sub-section (1) in respect of particular categories in insurance policies.

(6) The Authority may, from time to time, specify, by the regulations made by it, the manner of receipt of premium by the insurer.

The above provision states that no risk is assumed by the insurer unless premium payable is received in advance.

8. The Motor Vehicles Act, 1988 (for short, ‘the M.V. Act’) in Chapter XI deals with insurance of motor vehicles against third party risks. Section 145 in that Chapter provides for definitions:

(a) authorised insurer, (b) certificate of insurance, (c) liability, (d) policy of insurance, (e) property, (f) reciprocating country and (g) third party.

9. Section 146 mandates insurance of a motor vehicle against third party risk. Inter alia, it provides that no person shall use the motor vehicle in a public place unless a policy of insurance has been taken with regard to such vehicle complying with requirements as set out in Chapter XI. The owner of vehicle, thus, is statutorily mandated to obtain insurance for the motor vehicle to cover the third party risk except in exempted and exception categories as set out in Section 146 itself.

10. Section 147 makes provision for requirements of policies and limits of liability. Sub-section (5) thereof is relevant for the present purposes which reads as follows :

‘S. 147.’ Requirements of policies and limits of liability.-

(1) to (4) xxx xxx xxx xxx xxx xxx

(5) Notwithstanding anything contained in any law for the time being in force, an insurer issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons.

11. Section 149 deals with the duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks. Sub-section (1) which is relevant for the present purposes reads as under:

“S.149.- Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.-

(1) If, after a certificate of insurance has been issued under sub-section (3) of section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of section 147 (being a liability covered by the terms of the policy) or under the provisions of section 163A is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.”

12. The above provisions came up for consideration in the case of Inderjit Kaur. That was a case where a bus met with an accident. The policy of insurance was issued by the Oriental Insurance Company Limited on November 30, 1989. The premium for the policy was paid by cheque but the cheque was dishonoured. The insurance company sent a letter to the insured on January 23, 1990 that the cheque towards premium had been dishonoured and, therefore, the insurance company was not at risk. The premium was paid in cash on May 2, 1990 but in the meantime on April 19, 1990 the accident took place, the bus collided with the truck and the truck driver died. The truck driver’s wife and minor sons filed claim petition. A three-Judge Bench of this Court noticed the above provisions and then held in paragraphs 9, 10 and 12 (pages 375 and 376) as under :

“9. We have, therefore, this position. Despite the bar created by Section 64-VB of the Insurance Act, the appellant, an authorised insurer, issued a policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of Sections 147(5) and 149(1) of the Motor Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement (upon which we do not express any opinion) to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured.”

10. The policy of insurance that the appellant issued was a representation upon which the authorities and third parties were entitled to act. The appellant was not absolved of its obligations to third parties under the policy because it did not receive the premium. Its remedies in this behalf lay against the insured.

12. It must also be noted that it was the appellant itself who was responsible for its predicament. It had issued the policy of insurance upon receipt only of a cheque towards the premium in contravention of the provisions of Section 64-VB of the Insurance Act. The public interest that a policy of insurance serves must, clearly, prevail over the interest of the appellant.’

13. In Inderjit Kaur, the Court invoked the doctrine of public interest and held that the insurance company was liable to indemnify third parties in respect of the liability which the policy covered despite the bar created by Section 64-VB of the Insurance Act. The Court did leave open the question of insurer’s entitlement to avoid or cancel the policy as against insured when the cheque issued for payment of the premium was dishonoured.

14. In New India Assurance Co. Ltd. v. Rula and others [(2000) 3 SCC 195], the Court was concerned with a question very similar to the question posed before us. That was a case where the insurance policy was issued by the New India Assurance Co. Ltd. in terms of the requirements of the M.V. Act but the cheque by which the owner had paid the premium bounced and the policy was cancelled by the insurance company but before the cancellation of the policy, accident had taken place. A two-Judge Bench of this Court considered the statutory provisions contained in the M.V. Act and the judgment in Inderjit Kaur. In paragraph 13 (at page 200), the Court held as under :

“13. This decision, which is a three-Judge Bench decision, squarely covers the present case also. The subsequent cancellation of the insurance policy in the instant case on the ground that the cheque through which premium was paid was dishonoured, would not affect the rights of the third party which had accrued on the issuance of the policy on the date on which the accident took place. If, on the date of accident, there was a policy of insurance in respect of the vehicle in question, the third party would have a claim against the Insurance Company and the owner of the vehicle would have to be indemnified in respect of the claim of that party. Subsequent cancellation of the insurance policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party”

(Emphasis supplied)

15. In Seema Malhotra, the Court was concerned with the question whether the insurer is liable to honour the contract of insurance where the insured gave a cheque to the insurer towards the premium amount but the cheque was dishonoured by the drawee bank due to insufficiency of funds in the account of the drawer. In the case of Seema Malhotra2, the above question arose from the following facts : the owner of a Maruti car entered into an insurance contract with National Insurance Company Limited on December 21, 1993; on the same day the owner gave a cheque of Rs. 4,492/- towards the first instalment of the premium; the insurance company issued a cover note as contemplated in Section 149 of the M.V. Act; the car met with an accident on December 31, 1993 in which the owner died and the car was completely damaged; on January 10, 1994 the bank on which the cheque was drawn by the insured sent an intimation to the insurance company that the cheque was dishonoured as there were no funds in the account of the drawer and on January 20, 1994 the business concern of the owner was informed that the cheque having been dishonoured by the bank, the insurance policy is cancelled with immediate effect and the company is not at risk. The widow and children of the owner filed a claim for the loss of the vehicle with the insurance company. When the claim was repudiated, they moved the State Consumer Protection Commission (for short, ‘Commission’). The Commission rejected the claim of the claimants and held that insurer was justified in repudiating the contract as soon as cheque got bounced. The claimants moved the Jammu and Kashmir High Court. The High Court reversed the order of the Commission and held that the insurance company chose to cancel the insurance policy from the date of issuance of communication and not from the date the cheque was issued which got bounced. The matter reached this Court from the above judgment of the High Court. The Court referred to Section 64-VB of the Insurance Act, Sections 25, 51,52,54 and 65 of the Indian Contract Act and the decisions of this Court in Inderjit Kaur1 and Rula4 and held (at pages 156 and 157) as under :

“17. In a contract of insurance when the insured gives a cheque towards payment of premium or part of the premium, such a contract consists of reciprocal promise. The drawer of the cheque promises the insurer that the cheque, on presentation, would yield the amount in cash. It cannot be forgotten that a cheque is a bill of exchange drawn on a specified banker. A bill of exchange is an instrument in writing containing an unconditional order directing a certain person to pay a certain sum of money to a certain person. It involves a promise that such money would be paid.

18. Thus, when the insured fails to pay the premium promised, or when the cheque issued by him towards the premium is returned dishonoured by the bank concerned the insurer need not perform his part of the promise. The corollary is that the insured cannot claim performance from the insurer in such a situation.

19. Under Section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, the insurer is entitled to get the money back.

20. However, if the insured makes up the premium even after the cheque was dishonoured but before the date of accident it would be a different case as payment of consideration can be treated as paid in the order in which the nature of transaction required it. As such an event did not happen in this case, the Insurance Company is legally justified in refusing to pay the amount claimed by the respondents.”

16. In Deddappa, the Court was concerned with the plea of the insurance company that although the vehicle was insured by the owner for the period October 17, 1997 to October 16, 1998 but the cheque issued therefor having been dishonoured, the policy was cancelled and, thus, it was not liable. That was a case where for the above period of policy, the cheque was issued by the owner on October 15, 1997; the bank issued a return memo on October 21, 1997 disclosing dishonour of the cheque with remarks ‘fund insufficient’ and the insurance company, thereafter, cancelled the policy of insurance by communicating to the owner of the vehicle and an intimation to the concerned RTO. The accident occurred on February 6, 1998 after the cancellation of the policy.

17. The Court in Deddappa again considered the relevant statutory provisions and decisions of this Court including the above three decisions in Inderjit Kaur, Rula and Seema Malhotra . In para 24 (at page 601) of the Report, the Court observed as under:

“24. We are not oblivious of the distinction between the statutory liability of the insurance company vis-C -vis a third party in the context of Sections 147 and 149 of the Act and its liabilities in other cases. But the same liabilities arising under a contract of insurance would have to be met if the contract is valid. If the contract of insurance has been cancelled and all concerned have been intimated thereabout, we are of the opinion, the insurance company would not be liable to satisfy the claim.”

Then in para 26 (at page 602), the Court invoked extraordinary jurisdiction under Article 142 of the Constitution of India and directed the insurance company to pay the amount of claim to the claimants and recover the same from the owner of the vehicle.

18. We find it hard to accept the submission of the learned counsel for the insurer that the three- Judge Bench decision in Inderjit Kaur has been diluted by the subsequent decisions in Seema Malhotra and Deddappa. Seema Malhotra and Deddappa turned on the facts obtaining therein. In the case of Seema Malhotra, the claim was by the legal heirs of the insured for the damage to the insured vehicle. In this peculiar fact situation, the Court held that when the cheque for premium returned dishonoured, the insurer was not obligated to perform its part of the promise. Insofar as Deddappa is concerned, that was a case where the accident of the vehicle occurred after the insurance policy had already been cancelled by the insurance company.

19. In our view, the legal position is this : where the policy of insurance is issued by an authorized insurer on receipt of cheque towards payment of premium and such cheque is returned dishonoured, the liability of authorized insurer to indemnify third parties in respect of the liability which that policy covered subsists and it has to satisfy award of compensation by reason of the provisions of Sections 147(5) and 149(1) of the M.V. Act unless the policy of insurance is cancelled by the authorized insurer and intimation of such cancellation has reached the insured before the accident. In other words, where the policy of insurance is issued by an authorized insurer to cover a vehicle on receipt of the cheque paid towards premium and the cheque gets dishonored and before the accident of the vehicle occurs, such insurance company cancels the policy of insurance and sends intimation thereof to the owner, the insurance company’s liability to indemnify the third parties which that policy covered ceases and the insurance company is not liable to satisfy awards of compensation in respect thereof.

20. Having regard to the above legal position, insofar as facts of the present case are concerned, the owner of the bus obtained policy of insurance from the insurer for the period April 16, 2004 to April 15, 2005 for which premium was paid through cheque on April 14, 2004. The accident occurred on May 11, 2004. It was only thereafter that the insurer cancelled the insurance policy by communication dated May 13, 2004 on the ground of dishonour of cheque which was received by the owner of the vehicle on May 21, 2004. The cancellation of policy having been done by the insurer after the accident, the insurer became liable to satisfy award of compensation passed in favour of the claimants.

Magistrate Need Not Record Reasons While Summoning Accused Persons : Supreme Court

Justice P. Sathasivam
Supreme Court of India

The Supreme Court in Bhushan Kumar Vs. State (NCT of Delhi) has discussed the relevant provisions of the Code of Criminal Procedure, 1973 to answer the questions posed before it; (a) Whether taking cognizance of an offence by the Magistrate is same as summoning an accused to appear? (b) Whether the Magistrate, while considering the question of summoning an accused, is required to assign reasons for the same? While asnwering the aforesaid questions, the Supreme Court held as under;

5. The questions which arise for consideration in these appeals are: 

(a) Whether taking cognizance of an offence by the Magistrate is same as summoning an accused to appear? 

(b) Whether the Magistrate, while considering the question of summoning an accused, is required to assign reasons for the same? 

6. In this context, it is relevant to extract Sections 190 and 204 of the Code of Criminal Procedure, 1973 (hereinafter referred to as the Code) which read as under: 

“190. Cognizance of offences by Magistrates. (1) Subject to the provisions of this Chapter, any Magistrate of the first class, and any Magistrate of the second class specially empowered in this behalf under sub-section (2), may take cognizance of any offence- 

(a) upon receiving a complaint of facts which constitute such offence ; 

(b) upon a police report of such facts; 

(c) upon information received from any person other than a police officer, or upon his own knowledge, that such offence has been committed. 

(2) The Chief Judicial Magistrate may empower any Magistrate of the second class to take cognizance under sub-section (1) of such offences as are within his competence to inquire into or try.” 

“204. Issue of process. 

(1) If in the opinion of a Magistrate taking cognizance of an offence there is sufficient ground for proceeding, and the case appears to be- 

(a) a summons-case, he shall issue his summons for the attendance of the accused, or 

(b) a warrant-case, he may issue a warrant, or, if he thinks fit, a summons, for causing the accused to be brought or to appear at a certain time before such Magistrate or (if he has no jurisdiction himself) some other Magistrate having jurisdiction. 

(2) No summons or warrant shall be issued against the accused under sub-section (1) until a list of the prosecution witnesses has been filed. 

(3) In a proceeding instituted upon a complaint made in writing, every summons or warrant issued under sub-section (1) shall be accompanied by a copy of such complaint. 

(4) When by any law for the time being in force any process-fees or other fees are payable, no process shall be issued until the fees are paid and, if such fees are not paid within a reasonable time, the Magistrate may dismiss the complaint. 

(5) Nothing in this section shall be deemed to affect the provisions of section 87.” 

7. In S.K. Sinha, Chief Enforcement Officer vs. Videocon International Ltd. & Ors., (2008) 2 SCC 492, the expression cognizance was explained by this Court as it merely means become aware of and when used with reference to a court or a Judge, it connotes to take notice of judicially. It indicates the point when a court or a Magistrate takes judicial notice of an offence with a view to initiating proceedings in respect of such offence said to have been committed by someone. It is entirely a different thing from initiation of proceedings; rather it is the condition precedent to the initiation of proceedings by the Magistrate or the Judge. Cognizance is taken of cases and not of persons. 

8. Under Section 190 of the Code, it is the application of judicial mind to the averments in the complaint that constitutes cognizance. At this stage, the Magistrate has to be satisfied whether there is sufficient ground for proceeding and not whether there is sufficient ground for conviction. Whether the evidence is adequate for supporting the conviction can be determined only at the trial and not at the stage of enquiry. If there is sufficient ground for proceeding then the Magistrate is empowered for issuance of process under Section 204 of the Code. 

9. A summon is a process issued by a Court calling upon a person to appear before a Magistrate. It is used for the purpose of notifying an individual of his legal obligation to appear before the Magistrate as a response to violation of law. In other words, the summons will announce to the person to whom it is directed that a legal proceeding has been started against that person and the date and time on which the person must appear in Court. A person who is summoned is legally bound to appear before the Court on the given date and time. Willful disobedience is liable to be punished under Section 174 IPC. It is a ground for contempt of court. 

10. Section 204 of the Code does not mandate the Magistrate to explicitly state the reasons for issuance of summons. It clearly states that if in the opinion of a Magistrate taking cognizance of an offence, there is sufficient ground for proceeding, then the summons may be issued. This section mandates the Magistrate to form an opinion as to whether there exists a sufficient ground for summons to be issued but it is nowhere mentioned in the section that the explicit narration of the same is mandatory, meaning thereby that it is not a pre-requisite for deciding the validity of the summons issued. 

11. Time and again it has been stated by this Court that the summoning order under Section 204 of the Code requires no explicit reasons to be stated because it is imperative that the Magistrate must have taken notice of the accusations and applied his mind to the allegations made in the police report and the materials filed therewith. 

12. In Kanti Bhadra Shah & Anr. vs. State of West Bengal (2000) 1 SCC 722, the following passage will be apposite in this context: 

12. If there is no legal requirement that the trial court should write an order showing the reasons for framing a charge, why should the already burdened trial courts be further burdened with such an extra work. The time has reached to adopt all possible measures to expedite the court procedures and to chalk out measures to avert all roadblocks causing avoidable delays. If a Magistrate is to write detailed orders at different stages merely because the counsel would address arguments at all stages, the snail-paced progress of proceedings in trial courts would further be slowed down. We are coming across interlocutory orders of Magistrates and Sessions Judges running into several pages. We can appreciate if such a detailed order has been passed for culminating the proceedings before them. But it is quite unnecessary to write detailed orders at other stages, such as issuing process, remanding the accused to custody, framing of charges, passing over to next stages in the trial (emphasis supplied) 

13. In Smt. Nagawwa vs. Veeranna Shivalingappa Konjalgi & Ors. (1976) 3 SCC 736, this Court held that it is not the province of the Magistrate to enter into a detailed discussion on the merits or demerits of the case. It was further held that in deciding whether a process should be issued, the Magistrate can take into consideration improbabilities appearing on the face of the complaint or in the evidence led by the complainant in support of the allegations. The Magistrate has been given an undoubted discretion in the matter and the discretion has to be judicially exercised by him. It was further held that once the Magistrate has exercised his discretion, it is not for the High Court, or even this Court, to substitute its own discretion for that of the Magistrate or to examine the case on merits with a view to find out whether or not the allegations in the complaint, if proved, would ultimately end in conviction of the accused. 

14. In Dy. Chief Controller of Imports & Exports vs. Roshanlal Agarwal & Ors. (2003) 4 SCC 139, this Court, in para 9, held as under: 

9. In determining the question whether any process is to be issued or not, what the Magistrate has to be satisfied is whether there is sufficient ground for proceeding and not whether there is sufficient ground for conviction. Whether the evidence is adequate for supporting the conviction, can be determined only at the trial and not at the stage of inquiry. At the stage of issuing the process to the accused, the Magistrate is not required to record reasons. This question was considered recently in U.P. Pollution Control Board v. Mohan Meakins Ltd.(2000) 3 SCC 745 and after noticing the law laid down in Kanti Bhadra Shah v. State of W.B. (2000) 1 SCC 722, it was held as follows: (SCC p. 749, para 6) 

The legislature has stressed the need to record reasons in certain situations such as dismissal of a complaint without issuing process. There is no such legal requirement imposed on a Magistrate for passing detailed order while issuing summons. The process issued to accused cannot be quashed merely on the ground that the Magistrate had not passed a speaking order.” 

15. In U.P. Pollution Control Board vs. Dr. Bhupendra Kumar Modi & Anr., (2009) 2 SCC 147, this Court, in paragraph 23, held as under: 

“23. It is a settled legal position that at the stage of issuing process, the Magistrate is mainly concerned with the allegations made in the complaint or the evidence led in support of the same and he is only to be prima facie satisfied whether there are sufficient grounds for proceeding against the accused.” 

16. This being the settled legal position, the order passed by the Magistrate could not be faulted with only on the ground that the summoning order was not a reasoned order. 

17. It is inherent in Section 251 of the Code that when an accused appears before the trial Court pursuant to summons issued under Section 204 of the Code in a summons trial case, it is the bounden duty of the trial Court to carefully go through the allegations made in the charge sheet or complaint and consider the evidence to come to a conclusion whether or not, commission of any offence is disclosed and if the answer is in the affirmative, the Magistrate shall explain the substance of the accusation to the accused and ask him whether he pleads guilty otherwise, he is bound to discharge the accused as per Section 239 of the Code. 

18. The conclusion of the High Court that the petition filed under Section 482 of the Code is not maintainable cannot be accepted in view of various decisions of this Court. (vide Pepsi Foods Ltd. & Anr. vs. Special Judicial Magistrate & Ors. (1998) 5 SCC 749, Dhariwal Tobacco Products Ltd. & Ors. vs. State of Maharashtra & Anr. (2009) 2 SCC 370 and M.A.A. Annamalai vs. State of Karnataka & Anr. (2010) 8 SCC 524). 

19. In the light of the above discussion, we conclude that the petition filed before the High Court under Section 482 of the Code was maintainable. However, on merits, the impugned order dated 30.07.2010 passed by the High Court of Delhi is confirmed, consequently, the appeals fail and the same are dismissed. In view of the dismissal of the appeals, MM/South East 02, Patiala House, New Delhi is free to proceed further in accordance with law, uninfluenced by any observation made in these appeals.

Amendment of Plaint : Principles Reiterated

Justice P. Sathasivam
Supreme Court of India

We have already dealt with similar posts on the principles to be kept in mind for amending the pleadings. The Supreme Court in Rameshkumar Agarwal Vs. Rajmala Exports Pvt. Ltd. has summarily examined the broad principles for amending the plaint. While referring to previous judgments passed by the Supreme Court, it was held as under;

6. Order VI Rule 2 of the Code of Civil Procedure, 1908 (hereinafter referred to as "the Code") makes it clear that every pleading shall contain only a statement in a concise form of the material facts on which the party pleading relies for his claim or defence but not the evidence by which they are to be proved. Sub-rule (2) of Rule 2 makes it clear that every pleading shall be divided into paragraphs, numbered consecutively, each allegation being, so far as is convenient, contained in a separate paragraph. Sub- rule (3) of Rule 2 mandates that dates, sums and numbers shall be expressed in a pleading in figures as well as in words. 

7. Order VI Rule 17 of the Code enables the parties to make amendment of the plaint which reads as under; 

"17. Amendment of pleadings - The Court may at any stage of the proceedings allow either party to alter or amend his pleadings in such manner and on such terms as may be just, and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties: 

Provided that no application for amendment shall be allowed after the trial has commenced, unless the Court comes to the conclusion that in spite of due diligence, the party could not have raised the matter before the commencement of trial." 

8. Order I Rule 1 of the Code speaks about who may be joined in a suit as plaintiffs. Mr. Shekhar Naphade, learned senior counsel for the appellant, after taking us through the agreement for sale dated 02.02.2006, pointed out that the parties to the said agreement being only Rameshkumar Agarwal, the present appellant and Rajmala Exports Pvt. Ltd., respondent No.1 herein and the other proposed parties, particularly, Plaintiff Nos. 2 & 3 have nothing to do with the contract, and according to him, the Courts below have committed an error in entertaining the amendment application. In the light of the said contention, we have carefully perused the agreement for sale dated 02.02.2006, parties to the same and the relevant provisions from the Code. We have already pointed out that the learned single Judge himself has agreed with the objection as to proposed defendant Nos. 3-5 and found that they are not necessary parties to the suit, however, inasmuch as the main object of the amendment sought for by the plaintiff is to explain how the money was paid, permitted the other reliefs including impleadment of plaintiff Nos. 2 & 3 as parties to the suit. 

9. In Rajkumar Gurawara (Dead) Through L.Rs vs. S.K. Sarwagi & Company Private Limited & Anr. (2008) 14 SCC 364, this Court considered the scope of amendment of pleadings before or after the commencement of the trial. In paragraph 18, this Court held as under:- 

"...........It is settled law that the grant of application for amendment be subject to certain conditions, namely, 

(i) when the nature of it is changed by permitting amendment; 

(ii) when the amendment would result in introducing new cause of action and intends to prejudice the other party; 

(iii) when allowing amendment application defeats the law of limitation........." 

10. In Revajeetu Builders & Developers vs. Narayanaswamy & Sons & Ors. (2009) 10 SCC 84, this Court once again considered the scope of amendment of pleadings. In paragraph 63, it concluded as follows: 

"Factors to be taken into consideration while dealing with applications for amendments 

63. On critically analysing both the English and Indian cases, some basic principles emerge which ought to be taken into consideration while allowing or rejecting the application for amendment: 

(1) whether the amendment sought is imperative for proper and effective adjudication of the case; 

(2) whether the application for amendment is bona fide or mala fide; 

(3) the amendment should not cause such prejudice to the other side which cannot be compensated adequately in terms of money; 

(4) refusing amendment would in fact lead to injustice or lead to multiple litigation; 

(5) whether the proposed amendment constitutionally or fundamentally changes the nature and character of the case; and 

(6) as a general rule, the court should decline amendments if a fresh suit on the amended claims would be barred by limitation on the date of application. These are some of the important factors which may be kept in mind while dealing with application filed under Order 6 Rule 17. These are only illustrative and not exhaustive." 

11. It is clear that while deciding the application for amendment ordinarily the Court must not refuse bona fide, legitimate, honest and necessary amendments and should never permit mala fide and dishonest amendments. The purpose and object of Order VI Rule 17 of the Code is to allow either party to alter or amend his pleadings in such manner and on such terms as may be just. Amendment cannot be claimed as a matter of right and under all circumstances, but the Courts while deciding such prayers should not adopt a hyper-technical approach. Liberal approach should be the general rule particularly, in cases where the other side can be compensated with costs. Normally, amendments are allowed in the pleadings to avoid multiplicity of litigations.

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Amendment of Pleadings : Broad Principles

Amendment of Pleadings : Written Statement v. Plaint : The Law

Appeals to the Supreme Court of India from Judgment / Orders of Armed Forces Tribunal : The Law

Justice T.S. Thakur
Supreme Court of India

The Supreme Court in Union of India Vs. Brigadier P.S. Gill has examined the procedure for preferring an appeal against a final decision or order passed by the Armed Forces Tribunal to the Supreme Court. For the uninitiated, the Armed Forces Tribunal Act 2007 requires a party to apply for leave to appeal against the orders passed by the Armed Forces Tribunal under Section 31 of the Armed Forces Tribunal Act. The question therefore raised was whether an aggrieved party can file an appeal against any such final decision or order of the Tribunal under Section 30 of the Act before the Supreme Court without taking resort to the procedure prescribed under Section 31. While examining the procedural requirements for filing an appeal to the Supreme Court, the court held as under;

A common question of law as to the maintainability of an appeal before this Court against a final decision and/or order of the Armed Forces Tribunal arises for consideration in these two appeals that purport to have been filed under Section 30 of the Armed Forces Tribunal Act, 2007. 

2. The question precisely is whether an aggrieved party can file an appeal against any such final decision or order of the Tribunal under Section 30 of the Act aforementioned before this Court without taking resort to the procedure prescribed under Section 31 thereof. The appellant's case is that since the orders under challenge in these appeals are final orders of the Tribunal, an appeal against the same lies to this Court as a matter of right, no matter the right to file such an appeal under Section 30 of the Act is subject to the provisions of Section 31 thereof. The respondents, on the other hand, contended that a conjoint reading of Sections 30 and 31 of the Act leaves no manner of doubt that an appeal under Section 30 is maintainable only in accordance with and subject to the provisions of Section 31. In as much as Section 31 provides for an appeal to this Court either with the leave of the Tribunal or with the leave of this Court, no absolute right of appeal against even a final order or decision is available to the aggrieved party except in cases where the order passed by the Tribunal is in exercise of its jurisdiction to punish for contempt. What is the true legal position would necessarily require a careful reading of the two provisions that may be extracted at this stage: 

"30. Appeal to Supreme Court: 

(1) Subject to the provisions of Section 31, an appeal shall lie to the Supreme Court against the final decision or order of the Tribunal (other than an order passed under Section 19): Provided that such appeal is preferred within a period of ninety days of the said decision or order: Provided further that there shall be no appeal against an interlocutory order of the Tribunal. 

(2) An appeal shall lie to the Supreme Court as of right from any order or decision of the Tribunal in the exercise of its jurisdiction to punish for contempt: Provided that an appeal under this sub-section shall be filed in the Supreme Court within sixty days from the date of the order appealed against. 

(3) Pending any appeal under sub-section (2), the Supreme Court may order that– 

(a) the execution of the punishment or the order appealed against be suspended; 

(b) if the appellant is in confinement, he be released on bail: Provided that where an appellant satisfies the Tribunal that he intends to prefer an appeal, the Tribunal may also exercise any of the powers conferred under clause (a) or clause (b), as the case may be. 

31. Leave to appeal: 

(1) An appeal to the Supreme Court shall lie with the leave of the Tribunal; and such leave shall not be granted unless it is certified by the Tribunal that a point of law of general public importance is involved in the decision, or it appears to the Supreme Court that the point is one which ought to be considered by that Court. 

(2) An application to the Tribunal for leave to appeal to the Supreme Court shall be made within a period of thirty days beginning with the date of the decision of the Tribunal and an application to the Supreme Court for leave shall be made within a period of thirty days beginning with the date on which the application for leave is refused by the Tribunal. 

(3) An appeal shall be treated as pending until any application for leave to appeal is disposed of and if leave to appeal is granted, until the appeal is disposed of; and an application for leave to appeal shall be treated as disposed of at the expiration of the time within which it might have been made, but it is not made within that time." 

3. A plain reading of Section 30 would show that the same starts with the expression "subject to the provision of Section 31". Given their ordinary meaning there is no gainsaying that an appeal shall lie to this Court only in accordance with the provisions of Section 31. It is also evident from a plain reading of sub-section (2) of Section 30 (supra) that unlike other final orders and decisions of the Tribunal, those passed in exercise of the Tribunal's jurisdiction to punish for contempt are appealable as of right. The Parliament has made a clear distinction between cases where an appeal lies as a matter of right and others where it lies subject to the provisions of Section 31. We are not, in the present case, dealing with an appeal filed under Section 30 sub-section (2) of the Act, for the Tribunal has not passed the orders under challenge in exercise of its jurisdiction to punish for contempt. The orders passed by the Tribunal and assailed in these appeals are orders that will be appealable under Section 30(1) but only subject to the provisions of Section 31. 

4. Section 31 of the Act extracted above specifically provides for an appeal to the Supreme Court but stipulates two distinct routes for such an appeal. The first route to this Court is sanctioned by the Tribunal granting leave to file such an appeal. Section 31(1) in no uncertain terms forbids grant of leave to appeal to this Court unless the Tribunal certifies that a point of law of general public importance is involved in the decision. This implies that Section 31 does not create a vested, indefeasible or absolute right of filing an appeal to this Court against a final order or decision of the Tribunal to this Court. Such an appeal must be preceded by the leave of the Tribunal and such leave must in turn be preceded by a certificate by the Tribunal that a point of law of general public importance is involved in the appeal. 

5. The second and the only other route to access this Court is also found in Section 31(1) itself. The expression "or it appears to the Supreme Court that the point is one which ought to be considered by that Court" empowers this Court to permit the filing of an appeal against any such final decision or order of the Tribunal. 

6. A conjoint reading of Sections 30 and 31 can lead to only one conclusion viz. there is no vested right of appeal against a final order or decision of the Tribunal to this Court other than those falling under Section 30(2) of the Act. The only mode to bring up the matter to this Court in appeal is either by way of certificate obtained from the Tribunal that decided the matter or by obtaining leave of this Court under Section 31 for filing an appeal depending upon whether this Court considers the point involved in the case to be one that ought to be considered by this Court. 

7. An incidental question that arises is whether an application for permission to file an appeal under Section 31 can be moved directly before the Supreme Court without first approaching the Tribunal for a certificate in terms of the first part of Section 31(1) of the Act. In the ordinary course the aggrieved party could perhaps adopt one of the two routes to bring up the matter to this Court but that does not appear to be the legislative intent evident from Section 31(2) (supra). A careful reading of the section shows that it not only stipulates the period for making an application to the Tribunal for grant of leave to appeal to this Court but also stipulates the period for making an application to this Court for leave of this Court to file an appeal against the said order sought to be challenged. It is significant that the period stipulated for filing application to this Court starts running from the date beginning from the date the application made to the Tribunal for grant of certificate is refused by the Tribunal. This implies that the aggrieved party cannot approach this Court directly for grant of leave to file an appeal under Section 31(1) read with Section 31(2) of the Act. The scheme of Section 31 being that an application for grant of a certificate must first be moved before the Tribunal, before the aggrieved party can approach this Court for the grant of leave to file an appeal. The purpose underlying the provision appears to be that if the Tribunal itself grants a certificate of fitness for filing an appeal, it would be unnecessary for the aggrieved party to approach this Court for a leave to file such an appeal. An appeal by certificate would then be maintainable as a matter of right in view of Section 30 which uses the expression "an appeal shall lie to the Supreme Court". That appears to us to be the true legal position on a plain reading of the provisions of Sections 30 and 31. 

8. Mr. Vivek Tankha, Additional Solicitor General, however, contended that Section 30 granted an independent right to file an appeal against the final decision or order of the Tribunal and that Section 31 was only providing an additional mode for approaching this Court with the leave of the Tribunal. We regret to say that we have not been able to appreciate that argument. If Section 30 of the Act confers a vested right of appeal upon any person aggrieved of a final decision or order of the Tribunal and if such appeal can be filed before this Court without much ado, there is no reason why the Act would provide for an appeal being filed on the basis of a certificate issued by the Tribunal nor would it make any sense for a party to seek leave of this Court to prefer an appeal where such an appeal was otherwise maintainable as a matter of right. The interpretation suggested by Mr. Tankha shall, therefore, have the effect of not only re- writing Section 30 which specifically uses the words "subject to the provisions of Section 31" but would make Section 31 wholly redundant and meaningless. The expression "subject to the provisions of Section 31" cannot be rendered a surplusage for one of the salutary rules of interpretation is that the legislature does not waste words. Each word used in the enactment must be allowed to play its role howsoever significant or insignificant the same may be in achieving the legislative intent and promoting legislative object. Although it is unnecessary to refer to any decisions on the subject, we may briefly re-count some of the pronouncements of this Court in which the expression "subject to" has been interpreted. 

9. In K.R.C.S. Balakrishna Chetty & Sons & Co. v. State of Madras (1961) 2 SCR 736 this Court was interpreting Section 5 of the Madras General Sales Tax Act, 1939 in which the words "subject to" were used by the legislature. This Court held that the use of words "subject to" had reference to effectuating the intention of law and the correct meaning of the expression was "conditional upon". To the same effect is the decision of this Court in South India Corporation (P) Ltd. v. The Secretary, Board of Revenue (1964) 4 SCR 280 where this Court held that the expression "subject to" conveyed the idea of a provision yielding place to another provision or other provisions to which it is made subject. In State of Bihar v. Bal Mukund Sah (2000) 4 SCC 640 this Court once again reiterated that the words "subject to the provisions of this Constitution" used in Article 309, necessarily means that if in the Constitution there is any other provision specifically dealing with the topics mentioned in the said Article 309, then Article 309 will be subject to those provisions of the Constitution. In B.S. Vadera v. Union of India (1968) 3 SCR 575, this Court interpreted the words "subject to the provisions of any Act", appearing in proviso to Article 309 and observed: 

"It is also significant to note the proviso to art. 309, clearly lays down that 'any rules so made shall have effect, subject to the provisions of any such Act'. The clear and unambiguous expression, used in the Constitution, must be given their full and unrestricted meaning, unless hedged-in, by any limitations. The rules, which have to be 'subject to the provisions of the Constitution', shall have effect, 'subject to the provisions of any such Act'. That is, if the appropriate Legislature has passed an Act, under Art. 309, the rules, framed under the Proviso, will have effect, subject to that Act; but, in the absence of any Act, of the appropriate Legislature, on the matter, in our opinion, the rules, made by the President, or by such person as he may direct, are to have full effect, both prospectively and, retrospectively." 

10. In Chandavarkar S.R. Rao v. Ashalata S. Guram (1986) 4 SCC 447, this Court declared that the words "notwithstanding" is in contradistinction to the phrase 'subject to' the latter conveying the idea of a provision yielding place to another provision or other provisions to which it is made subject. 

11. There is in the light of the above decisions no gainsaying that Section 30 of the Act is by reason of the use of the words "subject to the provisions of Section 31" made subordinate to the provisions of Section 31. The question whether an appeal would lie and if so in what circumstances cannot, therefore, be answered without looking into Section 31 and giving it primacy over the provisions of Section 30. That is precisely the object which the expression "subject to the provisions of Section 31" appearing in Section 30(1) intends to achieve. We have, therefore, no hesitation in rejecting the submission of Mr. Tankha that the expression "subject to the provisions of Section 31" are either ornamental or inconsequential nor do we have any hesitation in holding that right of appeal under Section 30 can be exercised only in the manner and to the extent it is provided for in Section 31 to which the said right is made subject. 

12. Mr. P.P. Rao, learned senior counsel appearing for the respondent in Criminal Appeal D. No. 38094 of 2011 also drew our attention to several other statutes in which an appeal is provided to the Supreme Court but where such provision is differently worded. For instance, Section 116-A of the Representation of the People Act, 1951 provides for an appeal to this Court and reads as under: 

"116-A. Appeals to Supreme Court – 

(1) Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie to the Supreme Court on any question (whether of law or fact) from every order made by a High Court under Section 98 or Section 99." 

13. So also the Consumer Protection Act, 1986 provides for an appeal to this Court under Section 23 thereof which reads as under: 

"23. Appeal - Any person, aggrieved by an order made by the National Consumer in exercise of its powers by sub-clause (i) of clause (a) of Section 21, may prefer an appeal against such order to the Supreme Court within a period of thirty days from the date of the order." 

14. Even the Terrorists Affected Areas (Special Courts) Act, 1984 providing for an appeal to the Supreme Court under Section 14, starts with a non obstante clause and creates an indefeasible right of appeal against any judgment, sentence or order passed by such Court both on facts and law. Similar was the case with Terrorist and Disruptive Activities (Prevention) Act, 1987 which provided an appeal to the Supreme Court against any judgment, sentence or order not being an interlocutory order of a Designated Court both on facts and law. Section 55 of the Monopolies and Restrictive Trade Practices Act, 1969 also provided an appeal to this Court on one of the grounds specified in Section 100 of the Code of Civil Procedure, 1908. The Advocates Act, 1961, The Customs Act, 1962 and the Central Excise Act, 1944 provide that an appeal shall lie to this Court using words different from those that have been used in Sections 30 and 31 of the Armed Forces Tribunal Act. 

15. It follows that the question whether an appeal lies to the Supreme Court and, if so, in what circumstances and against which orders and on what conditions is a matter that would have to be seen in the light of the provisions of each such enactment having regard to the context and the other clauses appearing in the Act. It is one of the settled canons of interpretation of statutes that every clause of a statute should be construed with respect to the context and the other clauses of the Act, so far as possible to make a consistent enactment of the whole statute or series relating to the subject. Reference to the decisions of this Court in M. Pentiah v. Muddala Veeramallapa (1961) 2 SCR 295 and Gammon India Ltd. v. Union of India (1974) 1 SCC 596 should in this regard suffice. In Gammon India Ltd. (supra) this Court observed: 

"Every clause of a statute is to be construed with reference to the context and other provisions of the Act to make a consistent and harmonious meaning of the statute relating to the subject-matter. The interpretation of the words will be by looking at the context, the collocation of the words and the object of the words relating to the mattes." 

16. We may also gainfully extract the following passage from V. Tulasamma v. Sesha Reddy (1977) 3 SCC 99 where this Court observed: 

"It is an elementary rule of construction that no provision of a statute should be construed in isolation but it should be construed with reference to the context and in the light of other provisions of the Statute so as, as far as possible, to make a consistent enactment of the whole staute..." 

17. Mr. Tankha, Additional Solicitor General and Ms. Rachana Joshi Issar, counsel appearing for the appellants in the connected matters lastly argued that there may be circumstances in which urgent orders may be required to be issued in which event an application for grant of certificate before the Tribunal may prevent the aggrieved party from seeking such orders from this Court. The answer to that question lies in Section 31(3) according to which an appeal is presumed to be pending until an application for leave to appeal is disposed of and if the leave is granted until the appeal is disposed of. An application for leave to appeal is deemed to have been disposed of at the expiration of the time within which it may have been made but is not made within that time. That apart an application for grant of certificate before the Tribunal can be made even orally and in case the Tribunal is not inclined to grant the certificate prayed for, the request can be rejected straightaway in which event the aggrieved party can approach this Court for grant of leave to file an appeal under the second part of Section 31(1). Once such an application is filed, the appeal is treated as pending till such time the same is disposed of. 

18. In the result these appeals are dismissed reserving liberty to the appellants to take recourse to Section 31 of the Act. To effectuate that remedy we direct that the period of limitation for making an application for leave to appeal to this Court by certificate shall start from the date of this order. We make it clear that we have not heard learned counsel for the parties on merits of the controversy nor have we expressed any opinion on any one of the contentions that may be available to them in law or on facts. No costs.