HC allows partial amendment to add defendant but bars security interest enforcement under IBC section 14

The HC partially allowed an application to amend the plaint and implead a party as Defendant No. 7. The court applied established principles that amendments necessary for determining real controversies between parties should be allowed, particularly at pre-trial stages where amendments are liberally permitted. However, the court found that portions of the proposed amendment seeking to enforce security interests created by a corporate debtor were barred under section 14 of the Insolvency and Bankruptcy Code, which prohibits actions to enforce security interests during moratorium periods. The amendment was allowed only to the extent it did not involve enforcement of such security interests.

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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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