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Letters Patent Appeal No. 72 of 1959, decided on 22nd October 1959.
O. VI, r. 17‑Amendment of pleadings‑Court to be lenient in dealing with application Bona fide delay to be excused‑Original plea may be withdrawn if taken under misapprehension.
It is a general rule that Courts should be lenient towards applications for amendment of pleadings. It does not even matter very much if the application has been put in after delay provided it is bona fide.
But if it is sought by an amendment to take a plea of fact which is inconsistent with a plea already taken, it is necessary for the applicant to satisfy the mind of the Court that the original wrong statement was the result of a misapprehension.
Inconsistent pleas cannot be taken. But this general propo sition is subject to the proviso that if the original plea was due to a misapprehension it may be withdrawn. However, it must be shown that there was a misapprehension. At the same time, one does expect that an application, which is being put in about six years after the proceedings commenced and at a time when the case had been fixed for orders, should be submitted after the applicant has fully informed itself of the material facts.
Where not much effort had been made on the part of the applicant to find out what are the real facts. Held: the amend ment cannot be allowed.
Abdul Haq for Appellant.
Zahur Ahmad for Respondent.
Date of hearing: 22nd October 1959.
This is a Letters Patent appeal against the order of the Liquidation Judge, allowing an amendment of the written statement in a proceeding under sections 38/184 of the Companies Act.
2. The Central Exchange Bank having gone into liquidation, the State Bank of Pakistan (respondent in this appeal) was appointed its liquidator and it served on the 13th of May 1953 a notice on Sheikh Allauddin appellant, in his capacity as a contributory, to pay the sum of Rs. 15,435 plus Rs. 1,460 as interest. On this the appellant filed the application out of which this appeal arises under section 38/ 184 of the Companies Act. The allegations in this application were that although he was a contributory, he was not the owner of all the shares which were attributed to him. He stated in the application the different lots of shares which he bad acquired, the amount which he had paid and the amount which was due from him. The paragraph of his petition relevant for our purpose is paragraph 6 (d) and (e), wherein he has stated that he had purchased 540 shares of Rs. 50 each in two lots of 160 and 380 shares and that the total sum remaining due from him in respect of these shares was Rs. 9,930‑7‑0. The respondent stated in its reply to paragraph 6 (d) and (e) that the appellant had ‑purchased 540 shares by an application dated the 19th of March 1944 and that on the 22nd of March 1944 the appellant had been debited with a sum of Rs. 8,100 under the head "Pronote Account" which was at that time opened in the name of the appellant and this account had been settled on the 1st of July 1944. The written statement went on to say that in respect of these 540 shares, the petitioner had paid only at the rate of Rs. 15 per share and was liable for the remaining uncalled capital.
3. The application under sections 38/184 of the Companies Act had been submitted on the 11th of September 1953 and the written statement of the respondent had been filed on the 12th of November 1953. The case went to trial, evidence was recorded and arguments were heard. The case had been fixed for orders when on the 21st of March 1959 an application was put in by the respondent wherein it was stated:‑--
(1) that in reply of the respondent to paragraph 6 (d) and (e) of the application it had been inadvertently stated that Rs. 8,100 had been paid by means of a pronote,
(2) that on a perusal of the records it had . been discovered that the appellant had paid only the following four sums of money:‑
(a) Rs. 5,400 on 25‑4‑1944,
(b) Rs. 2,700 on 18‑5‑1944,
(c) Rs. 2,700 on 12‑6‑1944,
(d) Rs. 2,700 on 1‑7‑1944,
(3) that the amount of the pronote, i.e., Rs. 8,100 had been paid in cash and its receipts were not credited towards the price of the 540 shares, and
(4) that it had never been the case of the petitioner that the proceeds of the aforementioned pronote were ever paid towards the purchase of these 540 shares and that he was just trying to take advantage of an erroneous admission.
On these facts it was prayed that permission may be given to amend the written statement so as to delete the admission as to the amount of the pronote having been credited towards the purchase of shares.
4. The learned single Judge came to the conclusion that this admission in the written statement had been made by mistake and, therefore, allowed the respondent to amend the written statement.
5. One should be lenient towards applications for amendment of pleadings. That is the general rule. It does not even matter very much if the application has been put in after delay provided A it is bona fide. The fact that the applicant is the State Bank of Pakistan whose source of information may be only the records or some instructions from the previous employees of the Central Exchange Bank is also a circumstance in favour of the applicant. But if it is sought by an amendment to take a plea of fact which is inconsistent with a plea already taken, it is necessary for the applicant to satisfy the mind of the Court that the original wrong E statement was the result of a misapprehension. A good deal of authority can be cited in support of the proposition that inconsis tent pleas cannot be taken. But this general proposition is subject to the proviso that if the original plea was due to s misapprehension it may be withdrawn. However, it must be shown that there was a misapprehension. At the same time, one does expect that an application, which is being put in about six year after the proceedings commenced and at a time when the case had been fixed for orders, should be submitted after the applicant has fully informed itself of the material facts. After going through the record and after questioning learned counsel who appears for the respondent, we have little doubt that not much effort has been made on the part of the applicant to find out what are the real facts L The new case is based solely on the fact that in the relevant records of the Bank only the four payments mentioned in the application for amendment appear. But, in the first place, the appellant had produced a receipt dated the 22nd of March 1944, signed by the Managing Director of the Central Exchange Bank, acknowledging the payment of Rs. 8,100 as application money for purchase of 540 shares. This receipt bears a serial number. When it was produced, there was no cross‑examination challenging its genuine ness. In fact, at that time the position of the respondent itself was that Rs. 8,100 had been paid on the 22nd of March 1944 by means of a pronote. This is the question which had been put to the appellant in cross‑examination :‑--
"Question.‑Is it a fact that in respect of 540 shares, some of which are mentioned in paragraph 5 (d) and some in 6 (e) of your petition, you opened a pronote account on the 22nd March 1944 with the Central Exchange Bank and obtained Rs. 8,100 from the Bank on a pronote which amount you paid for these shares and finally adjusted that pronote account on ,the 1st of July 1944 "
6. When the respondent found from its records that only four payments mentioned in the application for amendment had been made, did it make the slightest effort to find out as to whether this receipt was genuine or forged Knowing full well that it had not attacked the receipt as forged, was it not necessary for it to give some explanation of this receipt in the application for amendment This receipt is not even mentioned in the application for amend ment. It is not even now being attacked as forgery. Then, did not somebody realise that this amount of Rs. 8,100 is being described as application money The respondent knew well that without application money there could be no purchase of shares. Under section 101 of the Companies Act, 5yo is the minimum which should accompany the application. Where is the record about the money which was paid as application money by the appellant in respect of these 540 shares None of the four items mentioned in the appli cation for amendment relates to the payment of the application money. It is obvious, therefore, that the stand now taken by the respondent that only four of these payments were made is incorrect and the record of the Exchange Bank wherein are detailed pay ments made by the appellant is incomplete. No effort has also been made to find out what was the minimum application money required by the rules of the Central Exchange Bank because 5% is only the minimum‑ provided in the Companies Act. We find on a calculation that Rs. 8,100 represents 15% of the value of the shares and it may be that the rules of the Central Exchange Bank required 15% as application money. We have questioned learned counsel for the respondent to state as to what is the application money required by the rules of the Central Exchange Bank and he is unable to give any answer. The respondent did not even realize that this was a material fact. Also no attempt has been made to show, as is now alleged, that the amount of Rs. 8,100 was paid in cash. We have questioned learned counsel as to whether he has in his possession records showing that Rs. 8,100 was paid in cash and he is unable to reply in the affirmative. If the appellant received cash, then there should be some receipt executed by him and there would be an entry to that effect in the account books. Either no effort has been made to find out how the entries stand or they are being suppressed.
7. The original written statement had been signed by Mr. M. Anwar, Bar‑at‑Law, who was representing the respondent at that time. Somebody must have given him some instructions that the pronote for Rs. 8,100 had been credited towards the pay ment of the purchase money for these 540 shares. The respondent has in its application for amendment regarded it sufficient to say that there was an inadvertent admission. No material has been placed before us to show that Mr. M. Anwar had committed a mistake. The respondent has not even questioned Mr. M. Anwar as to how he had made this statement. It was necessary for the respondent to explain how the mistake arose. The respondent should first have ascertained the facts and then should have secured an affidavit of Mr. M. Anwar or should have produced him in Court to state how he had made a mistake. 8. It is stated in the application that the payment of Rs. 8,100 by a pronote was not the respondent's case, but it was his case that on the 22nd of March 1944 he had paid Rs. 8,100 and this is the date on which the pronote account was opened. He had produced a receipt of this 22nd March 1944 showing payment of Rs. 8,100. All that he said in reply to a question put in cross‑examination was that he did not remember as to whether the payment was by means of a pronote. He was making the statement after fourteen years and particularly considering that the application for shares was to be accompanied by a particular sum of money, not much importance can be attached to the appellant not remembering whether the money was paid by a pronote.
9. What appears to us is that the mistake was committed not when the original written statement was filed but when the application for amendment was made. The present position of the respondent that the four sums mentioned in the application only represent the sum paid by the appellant cannot, as already stated, be accepted.
10. In the circumstances of the case, we accept this appeal and dismiss the application for amendment. For the purpose of deciding this appeal we have had to make some observations relating to facts. Those observations have been made only for the decision of the question of amendment and are not intended to decide any questions of fact or to affect in any way the merits of the dispute.
K. M. A. Appeal accepted.
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