Asian Hotels (North) Ltd. vs Alok Kumar Lodha

ASIAN HOTELS (NORTH) LTD. …APPELLANT(S)

VERSUS

ALOK KUMAR LODHA & ORS. …RESPONDENT(S)

JUDGMENT

M.R. SHAH, J.

1.0. As common question of law and facts arise in this group

of appeals and as such arise out of the impugned

common judgment and order passed by the High Court,

Signature Not Verified all these appeals are decided and disposed of together by Digitally signed by R Natarajan Date: 2022.07.12

this common judgment and order.

16:35:08 IST Reason: Page 1 of 27 2.0. Feeling aggrieved and dissatisfied with the impugned

common judgment and order dated 15.09.2021 passed

by the High Court of Delhi in respective applications in

respective Commercial Suits under Order 1 Rule 10 and

Order 6 Rule 17 of the Code of Civil Procedure, by which,

all the aforesaid applications submitted on behalf of the

original plaintiff, the High Court has allowed the said

applications and has permitted the original plaintiff to

amend the respective suits and has also ordered

impleadment of mortgagees (Banks), original defendant

no.1 ­ Asian Hotels (North) Limited has preferred the

present appeals.

3.0. For the sake of convenience, the impugned order passed

by the High Court in IA No.5173­5174 of 2021 in Civil

Suit (Commercial) No.189 of 2020 shall be treated as the

lead matter. Therefore, for the sake of convenience and

to avoid any repetition, facts arising out of Civil Suit

(Commercial) No.189 of 2020 leading to the present

appeals are narrated, which are as under:

3.1. That the appellant herein granted licenses for individual

Page 2 of 27 shops at the premises from 1983 onwards to various

shopkeepers including the respondent herein – original

plaintiff. On 29.5.2020 the original plaintiff as a licensor

served a revocation of license notice. Similar notices were

also served on other licensees. Therefore, the respective

licensees had instituted the respective suits before the

Delhi High Court against the appellant – licensor – Asian

Hotels (North) Limited seeking a decree of declaration

that the license in favour of the plaintiff in respect of

shop/ premises is irrevocable and perpetual and the

purported revocation of the License by the defendant is

illegal, void and bad in the eyes of law. A decree is also

sought for a declaration declaring that the plaintiff has

unfettered right to occupy and use the said premises /

shop under the irrevocable license till the documents of

transfer / conveyance are executed by the defendant.

3.2. That the appellant – defendant appeared before the High

Court. The defendant raised verbal objection that the

suit is not maintainable in view of Section 8 of the

Arbitration and Conciliation Act, 1996. The High Court

Page 3 of 27 vide order dated 21.07.2020 dismissed the suits with

liberty to the parties to avail remedy of arbitration in

view of the arbitration clause in the license agreement on

the verbal plea. The order passed by the High Court

dismissing the suits with the above liberty was a subject

matter of appeal before the Division Bench. The Division

Bench allowed the said appeal and remanded the matter.

Liberty was granted to the defendant to prefer an

application under Section 8 of the Arbitration and

Conciliation Act, 1996. It is reported that such an

application is filed by the defendant and is pending

adjudication.

3.3. During the pendency of the aforesaid suit, the plaintiff

filed present IA No. 5174 of 2021 under Order 6 Rule 17

of the Code of Civil Procedure seeking amendment of the

plaint, by which, the plaintiff proposed to amend the suit

challenging various mortgages created by the defendant

hotel, in favour of certain banks. In the said application,

it is the case on behalf of the plaintiff that the mortgages

created by the defendant in favour of the Financial

Page 4 of 27 Institutions /Banks are illegal and void ab­initio to the

extent it encumbers the interest held by the plaintiff in

the said premises from 2.9.1991. Therefore,

consequential amendments were sought to be made

pertaining to the rights of the plaintiff. By the said

application, prayer clause is also sought to be amended

seeking a decree of declaration against the defendant

that the mortgages including the mortgage deeds which

have been executed in favour of the Banks is void and

illegal to the extent it encumbers any right, title and

interest of the plaintiff in the subject premises.

3.4. Another application, being IA No.5173 of 2021 was also

filed by the plaintiff under Order 1 Rule 10 of the Code of

Civil Procedure seeking to implead the Banks and the

Financial Institutions as defendant nos. 2 to 7.

3.5. Both the aforesaid applications were opposed by the

defendant on the ground that (i) the mortgage in

question was in 1980’s; there is no challenge to the said

mortgage in the present suit and therefore, the same

cannot be permitted now; (ii) the plaintiff has no right

Page 5 of 27 against the banks and financial institutions and

therefore, amendment application does not lie; (iii) that

the prayer of the plaintiff for the relief of declaration and

rights in the suit property have to first be adjudicated

before any relief can be claimed against the proposed

defendants no.2 to 7 and it is only after the plaintiff is

successful in claiming any right in the property that the

issue of adjudication of the rights of the third parties

would arise; (iv) that in view of the arbitration clause in

the agreement between the parties, the suit is liable to

be stayed for which an appropriate application has been

filed by the defendant, which is pending adjudication.

3.6. By the impugned common judgment and order and

mainly relying upon the decision of this Court in the

case of Kasturi v. Iyyamperumal & Ors reported in

(2005) 6 SCC 733 and in the case of Revajeetu

Builders and Developers vs. Narayanaswamy and

Sons & Ors reported in (2009) 10 SCC 85, the High

Court has allowed both the applications i.e. application

under Order 6 Rule 17 of the Code of Civil Procedure Page 6 of 27 and application under Order 1 Rule 10 of the Code of

Civil Procedure.

3.7. Feeling aggrieved and dissatisfied with the impugned

common order passed by the High Court allowing

applications under Order 6 Rule 17 of the Code of Civil

Procedure and under Order 1 Rule 10 of the Code of Civil

Procedure, original defendant no.1­ licensor has

preferred present appeals.

4.0. Shri Mukul Rohatgi, learned Senior Advocate has

appeared on behalf of the appellant­ original defendant

and Shri Avishkar Singhvi, learned counsel and Shri

Rahul Gupta, learned counsel have appeared on behalf

of the respective respondents.

5.0. Shri Rohatgi, learned Senior Advocate appearing on

behalf of the appellant – original defendant has

vehemently submitted that in the facts and

circumstances of the case High Court has committed a

serious error in allowing the applications under Order 6

Rule 17 of Code of Civil Procedure and Order 1 Rule 10

Page 7 of 27 of the Code of Civil Procedure permitting the

respondents to amend their respective plaints to declare

void ab initio all mortgages / charges on the entire

premises and implead the mortgagee banks / financial

institutions.

5.1. It is vehemently submitted by Shri Rohatgi, learned

Senior Advocate that appellant granted license for

individual shops at the premises from 1983 onwards to

various shopkeepers including the respondents herein.

That prior thereto, on 23.09.1982 appellant created

mortgages in favour of financial institutions /banks. The

said mortgages were rolled over, refinanced and replaced

from time to time for ensuring the continuous

development of the Hotel Projects / premises which

requires consistent upkeep, renovations, upgradation

from time to time. It is contended that clause 13 of the

License Agreement recognizes and preserves the power of

the appellant (lessor) to create and continue mortgages.

It is submitted that clause 13 has been retained in every

renewal (every five years) and as such respondents who

Page 8 of 27 are licensees have continuously ratified all mortgages

from 1982 onwards by signing the License Agreement

and subsequent renewals. It is submitted that licenses

have been revoked on 29.5.2020 by the appellant. It is

urged that at this belated stage it is not open for the

respondents who are only licensees and whose licenses

have been revoked to challenge the mortgages created by

the appellant created in favour of various banks/

financial institutions which have been continued since

1982 onwards.

5.2. It is further submitted by Shri Rohatgi, learned Senior

Advocate that as such in view of the arbitration clause in

the license agreement, suits are not maintainable in view

of Section 8 of the Arbitration and Conciliation Act. That

application filed by the appellant – original plaintiff to

stay the suits are pending adjudication. Therefore, as

such the said application/s under Section 8 of the

Arbitration and Conciliation Act are to be decided first. It

is further submitted that while pleadings were completed

and Section 8 application was part­heard, respondents

Page 9 of 27 filed the present applications in April 2020 to implead

the Banks holding mortgage over the premises and

amend their plaints seeking to challenge such

mortgages. It is submitted that the learned Single Judge

as such, without issuing any notice or granting an

opportunity to file reply, heard arguments and reserved

the judgment which has been pronounced on

15.09.2021.

5.3. Shri Rohatgi, learned Senior Advocate appearing for the

appellant – original defendant has assailed the impugned

judgment and order passed by the High Court mainly on

the following grounds:

I. Impugned judgment has resulted in mis­joinder of

causes of action and of parties;

II. Respondents do not have the locus or right to challenge

the mortgages / charges;

III. Challenge to mortgage/ charges is barred by limitation,

delay and laches;

IV. The impleadment and amendment applications are mala

fide filed only to circumvent adjudication pending

Page 10 of 27 Section 8 of the Act;

V. Impugned judgment has been passed in violation of

principles of natural justice;

5.4. It is vehemently submitted by Shri Rohatgi, learned

Senior Advocate for the appellant that when the first

License Agreement was executed in 1983, the premises

were already mortgaged and the respondents were aware

of the said fact, as is evident from Clause 13 of the

License Agreement. It is submitted that thus, the

respondent’s rights, even as a licensee, are subject to the

pre­existing charge perfected thereon with which the

respondents have no concern.

5.5. It is submitted that the respondents – original plaintiffs

are strangers to the mortgage on the premises created by

and between the appellant and its lenders. Respondents

– original plaintiffs have no privity with the mortgagee

banks/ financial institutions. The suits themselves are

based on the License Agreement executed with the

appellant and the rights contained thereunder.

Page 11 of 27 5.6. It is further submitted that the suits originally sought

declarations that the respondents are irrevocable

licenses or alternatively owners. Thus, the suits

preferred by the plaintiffs only concern the inter­se

rights between the appellant and the respondent, with

which the banks/ financial institutions impleaded by the

impugned judgment have no concern. But the impugned

judgment has resulted in mis­joinder of parties and

causes of action which is incorrect in law.

5.7. It is further submitted by Shri Rohatgi, learned Senior

Advocate that the respondents have no semblance of

right to sue the banks/ financial institutions in the

present case or challenge the mortgage.

5.8. It is further submitted that mortgage over the premises

has been created by and between the appellant and its

lenders. Respondents­ original plaintiffs are not parties

to said transaction. There is admittedly no privity of

contract between the respondents and original plaintiffs

and its lenders. Therefore, the plaintiffs have no right to

sue the lenders of the appellant against whom reliefs are

Page 12 of 27 now sought by way of amendment of the plaint.

5.9. It is further submitted that, even otherwise, respondents

are ascertaining their status as irrevocable licensees of

the concerned shops. Therefore, plaintiffs have not locus

or cause to challenge mortgages / charges, which have

been created by the appellant from time to time for

ensuring continuing development of hotel project /

premises.

5.10. It is further submitted by Shri Rohatgi, learned Senior

Advocate that challenge to mortgage / charges now is

barred by limitation, delay and laches. This is because

the first mortgage was created on the premises on

23.09.1982. By the amendment applications, the

principal relief sought to be added by the respondents is

to assail any and all charges / mortgages on the

premises created since 1982 in favour of any person. It

is submitted that first mortgage on the premises was

registered on 23.09.1982 with the RoC as per Section

125 of the Companies Act, 1956. Subsequent charges /

Page 13 of 27 mortgages were also registered with the RoC. It is

submitted that as per Section 126 of the Companies Act,

1956 and Section 80 of the 2013 Act, the respondents

are deemed to have knowledge and constructive notice of

the said mortgage / charges and there exists a

presumption in law that the respondents had knowledge

of the aforesaid charges.

5.11. It is submitted that clause 13 of the License Agreements

expressly records the knowledge of the respondents of

the existing charges on the premises and also authorizes

creation of further charges in the future. It is submitted

that this understanding has been renewed and

reaffirmed by the parties in the subsequent Renewal

Agreements. Therefore, the respondents have knowledge

of the mortgages in view of statutory presumption and

express stipulation in Clause 13 of the License

Agreement since 1982, which negates the assertion that

respondents acquired knowledge by pleadings filed in the

proceedings before the High Court. It is further

submitted that considering Article 58, Schedule I of the

Page 14 of 27 Limitation Act, the prayer to challenge mortgages /

charges would be clearly barred by law of limitation and

therefore, liable to be rejected. In support of the above

submission, reliance is placed on the decision of this

Court in the case of Ashutosh Chaturvedi v. Prano

Devi (2008) 15 SCC 610, T.N. Alloy Foundry Co. Ltd

vs. T.N. Electricity Board and Ors (2004) 3 SCC 392

and L.J.Leach & Co Ltd vs. M/s. Jardine Skinner &

Co. AIR 1957 SC 357. Making above submissions, it is

prayed to allow the present appeals.

6.0. While opposing the present appeals and supporting the

impugned order passed by the High Court, allowing the

applications under Order 6 Rule 17 of the Code of Civil

Procedure and Order 1 Rule 10 of the Code of Civil

Procedure, learned counsel for the respondents have

vehemently submitted that in the facts and

circumstances of the case. The impugned order is just

and proper. It is contended that it is necessary to

implead banks which are mortgagees of the suit

property, while plaintiffs are claiming ownership interest

Page 15 of 27 and that the trial has not yet commenced and the suit is

at preliminary stage where the defendant has even not

filed its written statement therefore, no prejudice can be

said to be caused to the defendant if the application for

amendment as well as impleadment applications are

allowed. That no error has been committed by the High

Court in the peculiar facts and circumstances of the

case.

6.1. It is vehemently submitted by the learned counsel for the

respondents that as such the plaintiff is the dominus

litus in the suit. That in view of the position in law, when

the applications submitted by the original plaintiffs

under Order 1 Rule 10 of the Code of Civil Procedure

have been allowed, the same may not be interfered with

by this Court. Reliance is placed on the decision of this

Court in the case of Kasturi v. Iyyamperumal & Ors

reported in (2005) 6 SCC 733.

6.2. It is further submitted by learned counsel for the

respondents ­original plaintiffs that cogent reasons have

Page 16 of 27 been given by the High Court while allowing the

applications under Order 6 Rule 17 and Order 1 Rule 10

of the Code of Civil Procedure, which in a nutshell are as

under:

I. that it is necessary to implead the banks who are

mortgagees of the suit property wherein the Plaintiffs are

claiming ownership interest;

II. the trial has not yet commenced and the suit is at the

preliminary stage where the Petitioner has not even filed

its written statement;

III. no prejudice can be said to be caused to the

Petitioner if the abovesaid applications are allowed;

IV. that the plaintiff is the dominus litus in the suit;

VI. the fact that the Petitioner themselves had pleaded

before the learned Single Judge of the Hon'ble High

Court that the suit was bad for non­joinder of parties

without the banks being parties;

VII. at the stage of allowing the amendment the Court should

not be concerned with the merits and demerits of such

amendments;

Page 17 of 27 VIII. it is imperative that the Hon'ble Courts are liberal in

their view of amendment of pleadings especially when

the parties are necessary and required to be present to

protect the subject matter of the relief;

6.3. Relying upon the decisions of this Court in the case of

Rajesh Kumar Aggarwal & Ors vs. K.K.Modi & Ors AIR

2006 SC 1647 and in the case of Revajeetu Builders

and Developers Vs. Narayanaswamy and Sons & Ors

(2009) 10 SCC 84, it is vehemently submitted by the

learned counsel for the respondents – original plaintiffs

that as observed and held by this Court while

considering whether an application for amendment

should or should not be allowed, Court should not go

into the correctness or falsity of the case in the

amendment. It is further observed and held that

likewise, it should not record a finding on the merits of

the amendment and the merits thereof sought to be

incorporated by way of amendment are not to be

adjudged at the stage of allowing the prayer for

amendment.

Page 18 of 27

6.4. Learned counsel for the respondent no.1 has further

submitted that the amendments did not seek any direct

injunctions against the banks for creation of the

mortgage but has only sought reliefs against the

defendant hotel whose property is mortgaged to the

banks. That the mortgage has not been challenged by

the respondents but only the undeniable interest of the

respondent is sought to be protected by having

mortgagees as a party to the suit. It is submitted that

idea is to see that in the event banks enforce the

mortgage then they will step into the shoes of the

appellant.

6.5. It is further submitted by the learned counsel for the

plaintiffs that in the suit original plaintiffs are seeking

perpetual ownership rights in the premises of the

appellant hotel. Therefore, if the mortgages with respect

to the very property are not challenged, in that case, in

future they may affect the rights of the plaintiffs and

therefore, to protect their rights, the impleadment of the

mortgagee banks / financial institutions and the

Page 19 of 27 amendments are very much necessary. That as such,

Banks / Financial Institutions (mortgagees) can be said

to be necessary and proper parties for giving the ultimate

effective relief in favour of plaintiffs. That respondents –

original plaintiffs after final adjudication of the suit may

be held to be owners as they are the perpetual lessee

who hold irrevocable licenses executed in their favour to

operate their respective shops. It is submitted that the

plaintiffs have paid the premium at the time of execution

of the License Agreement and hence this is not a case of

mere license but it is a case of irrevocable and perpetual

license. Therefore, no error has been committed by the

High Court while passing the impugned orders and

allowing the applications under Order 6 Rule 17 and

Order 1 Rule 10 of the Code of Civil Procedure.

7.0. We have heard learned Senior Advocate appearing on

behalf of the appellant and learned counsel appearing on

behalf of the respective respondents ­ original plaintiffs

at length.

7.1. By the impugned orders, the High Court has allowed the

Page 20 of 27 applications filed by the original plaintiffs under Order 6

Rule 17 and Order 1 Rule 10 of the Code of Civil

Procedure permitting the original plaintiffs to amend

their respective plaints so as to declare void ab­initio all

the mortgages / charges on the entire premises in

question and also implead mortgagee banks / financial

institutions for that purpose.

7.2. At the outset, it is required to be noted that mortgages

have been created in favour of different mortgage banks/

financial institutions since 1982 onwards which have

been extended and / or rolled over, refinanced and

replaced from time to time. The mortgages are created

not only with respect to the shops / premises occupied

by the original plaintiffs, but with respect to the entire

premises / Hyatt Residency Hotel. The respective original

plaintiffs are granted licenses for individual shops which

are part of entire premises. According to the appellant,

first mortgage was created in the year 1982. At that time,

none of the original plaintiffs were license holders. They

have been granted license for individual shops at the

Page 21 of 27 premises from 1983 onwards to various shopkeepers

including respondents­ original plaintiffs. The appellant,

being owner – licensor, has terminated the respective

licenses granted in favour of respective license holders –

original plaintiffs. The revocation of the license is subject

matter of respective suits. Therefore, the only

controversy / issue in the respective suits is with respect

to revocation of the respective licenses. By way of an

amendment of the plaint the plaintiffs now want to

challenge the mortgages / charges on the entire

premises created by the appellant. As such, the original

plaintiffs are not at all concerned with the mortgages

created by the appellant which is required for the

continuous development of the hotel. By the purported

amendment, the original plaintiffs have now prayed to

declare that all the mortgages / charges created on the

premises as void ab­initio. Even such a prayer can be

said to be too vague. How the original plaintiffs can now

can be permitted to challenge various mortgages /

charges created from time to time. At this stage, it is

required to be noted that even under the License

Page 22 of 27 Agreement (clause 13) the Licensor shall have the right

to create charges / mortgages as and by way of first

charge on its land, premises and the buildings (including

shops) constructed and to be constructed, in favour of

financial institutions and banks as security for their

terms loan advanced / to be advanced to the licensor for

the completion of its hotel project. Therefore, in fact

original plaintiffs being the licensee are aware that there

shall be charges / mortgages on the entire premises and

the buildings including the shops. In that view of the

matter, now after a number of years, plaintiffs cannot be

permitted to challenge the mortgages / charges created

on the entire premises including shops.

8.0. The High Court while allowing the amendment

application in exercise of powers under Order 6 Rule 17

of the Code of Civil Procedure has not properly

appreciated the fact and / or considered the fact that as

such, by granting such an amendment and permitting

plaintiffs to amend the plaints incorporating the prayer

clause to declare the respective charges / mortgages void

Page 23 of 27 ab­initio, the nature of the suits will be changed. As per

the settled proposition of law, if, by permitting plaintiffs

to amend the plaint including a prayer clause nature of

the suit is likely to be changed, in that case, the Court

would not be justified in allowing the amendment. It

would also result in misjoinder of causes of action.

9.0. From the impugned order passed by the High Court, it

appears that what has weighed with the High Court is

that plaintiffs, is the dominus litus and heavy reliance is

placed in the case of Kasturi (supra). However, the

principle that the plaintiffs is the dominus litus shall be

applicable only in a case where parties sought to be

added as defendants are necessary and / or proper

parties. Plaintiffs cannot be permitted to join any party

as a defendant who may not be necessary and / or

proper parties at all on the ground that the plaintiffs is

the dominus litus.

9.1. Even otherwise, High Court has materially erred in

relying upon the decision in the case of Kasturi (supra).

Page 24 of 27 In the case of Kasturi (supra) before this Court the suit

was for specific performance of the agreement to sell and

the subsequent purchasers purchased the very property

for which decree for specific performance was sought.

Therefore, on facts said decision is not applicable to the

facts of the case on hand.

10. In view of the above and for the reasons stated above,

High Court has committed serious error in allowing the

application under Order 6 Rule 17 and under Order 1

Rule 10 of the Code of Civil Procedure by permitting

original plaintiffs to amend the plaint including prayer

clause by which, the plaintiffs have now prayed to

declare the charges / mortgages on the entire premises

as void­ab initio and permitting the original plaintiffs to

join / implead the respective banks / financial

institutions as party defendant. The alleged rights of the

plaintiffs as perpetual license holders are yet to be

adjudicated upon. The licenses of the original plaintiffs

have been revoked. Therefore, in a suit challenging

revocation of the respective licenses, the plaintiffs cannot

Page 25 of 27 be permitted to challenge the respective mortgages /

charges created on the entire premises as void ab­initio.

It is the case on behalf of the appellant that apart from

the fact that first charge was created in the year 1982,

thereafter said mortgages have been rolled over,

refinanced and replaced from time to time for ensuring

the continuous development of the Hotel Project /

premises which requires consistent upkeep, renovation

and upgradation from time to time. Under the

circumstances, the impugned orders passed by the High

Court allowing the application under Order 6 Rule 17

and under Order 1 Rule 10 of the Code of Civil Procedure

are unsustainable, both on facts as well as on law.

11. In view of above and for the reasons stated above, all

these appeals succeed. The impugned orders passed by

the High Court allowing the application under Order 6

Rule 17 and Order 1 Rule 10 of the Code of Civil

Procedure in respective suits preferred by the

respondents herein original plaintiffs are hereby quashed

and set aside. Present appeals are allowed accordingly,

Page 26 of 27 However, there shall be no order as to costs.

……………………………….J. [M.R. SHAH]

……………………………….J. [B.V. NAGARATHNA] NEW DELHI;

JULY 12, 2022

Page 27 of 27