The Commercial Courts Act, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Commercial Courts Act) has amended the Code of Civil Procedure, 1908 (Code of Civil Procedure) in its application to commercial disputes. In this article, we analyse whether non-commercial suits will fall under the ambit of the amended provisions of the Code of Civil Procedure.
A three-judge bench of the Supreme Court of India (Supreme Court) in a recent decision titled as Desh Raj v. Balkishan (D) Through Proposed LR Ms. Rohini1 has analyzed whether the mandatory time-line of 120 (one hundred and twenty) days for filing written statement, prescribed in the amended provisions of the Code of Civil Procedure is applicable to non-commercial suits.
The appellant and the respondent were brothers and owned 1 (one) floor each of the ancestral property in Delhi. The ground floor of the said property was possessed and owned by the respondent, whereas the first floor was in the name of the appellant.
The respondent allegedly approached the appellant in February, 2017, offering to purchase the first floor of the ancestral property. Subsequently, an agreement to sell was entered into between the respondent and the appellant on 17 March 2017 for a total consideration of INR 7,50,000 (Rupees seven crores and fifty lakhs), out of which an amount of INR 1,00,000 (Rupees one lakh only) was paid as earnest money to the appellant. Alleging that the said agreement had not been honored, the appellant served a legal notice dated 13 April 2017 upon the respondent, calling him to accept the balance sale consideration and perform his part of the contract.
Claiming that the appellant was attempting to sell the suit property to third parties, the respondent subsequently approached the civil court praying for a decree of specific performance of the agreement to sell dated 17 March 2017 , directing the appellant to receive the balance sale consideration and execute the sale deed in favour of the respondent. Additionally, the respondent sought to permanently injunct the appellant from alienating the property in favor of any third party.
The respondent was served on 01 May 2018 and he appeared through counsel on 15 May 2017, wherein the civil court granted the appellant 30 (thirty) days to file his written statement. On 17 July 2017, noting that no written had been filed till that date, the civil court granted the appellant a final opportunity of 2 (two) weeks to file his written statement.
On 18 September 2017, the civil court noted that no written statement had been filed despite the last opportunity having been accorded 2 (two) months ago. Nonetheless, the civil court granted another final opportunity, subject to payment of INR 3,000 (Rupees three thousand) as costs and the matter was posted for 11 October 2017. On 11 October 2017, the appellant yet again failed to file any written statement or deposit costs. The civil court, therefore, closed the appellant's opportunity of filing written statement and struck off his defence.
The aggrieved appellant approached the High Court of Delhi (High Court) in revision, which noted the fact that the appellant, despite having been granted repeated opportunities, failed to file its written statement within 120 (one hundred and twenty) days from notice. Relying upon the decision of its co-ordinate bench in Oku Tech Pvt. Ltd. v. Sangeet Agarwal and Ors.2 ,wherein it was held that there was no discretion with courts to extend the time for filing written statement beyond 120 (one hundred and twenty) days from service of summons, the High Court summarily dismissed the petition.
FINDINGS OF THE SUPREME COURT
The Supreme Court, at the outset noted that Section 16 of the Commercial Courts Act had amended the Code of Civil Procedure in its application to commercial disputes. It opined that post coming into force of the Commercial Courts Act, there are 2 (two) regimes of the Code of Civil Procedure. While all commercial disputes, as defined under Section 2(c) of the Commercial Courts Act are governed by the Code of Civil Procedure, as amended by Section 16 of the Commercial Courts Act, all other non-commercial disputes fall within the ambit of the unamended or original provisions of the Code of Civil Procedure.
The Supreme Court held that even though the decision of Oku Tech (supra), upheld by the Supreme Court in SCG Contracts India Pvt. Ltd. v. KS Chamankar Infrastructure Pvt. Ltd.3 , was good in law, however, its ratio concerning the mandatory nature of the timeline prescribed for filing of written statement and the lack of the court's discretion to condone any delay was applicable only to commercial disputes.
As regard the timeline for filing of written statement in a non-commercial dispute, it was held that observations of the Supreme Court in a catena of decisions, most recently in Atcom Technologies Ltd. v. Y.A. Chunawala and Co.4 hold the field. The Supreme Court took the view that for non-commercial disputes, the unamended Order VIII Rule 1 of the Code of Civil Procedure, 1908 continues to be directory and does not take away the inherent discretion of courts to condone certain delays.
The Supreme Court, however, went on to clarify that although the unamended Order VIII Rule 1 of the Code of Civil Procedure, 1908 is directory, it cannot be interpreted to bestow a free hand to any litigant or lawyer to file written statement at their own sweet-will, or to prolong the lis. It was held that the legislative objective behind prescription of timelines under the Code of Civil Procedure must be given due weightage so that the disputes are settled in a time-bound manner.
With regard to the facts of the case at hand, the Supreme Court noted that the non-commercial nature of the dispute had not been contested by the respondent and even otherwise, there was no doubt that the dispute did not fall within the parameters specified under Section 2(c) of the Commercial Courts Act. Therefore, the appellant was correct in contending that the High Court had overlooked the nature of the dispute and mistakenly applied the ratio of a case rendered in light of a modified version of the Code of Civil Procedure, which would only be applicable to commercial disputes.
However, it was clear from the facts on record that despite numerous opportunities having been accorded to the appellant, no attempt was made to comply with the process of law. The only defence taken to the repeated and blatant lapses was that the appellant's counsel was not turning up and no attempt was made on the part of the appellant to proffer a reasoned justification or explanation. The Supreme Court held that such a conduct ought not to be permitted by courts and that courts must act stringently to ensure that all proceedings are decided within reasonable time.
The Supreme Court opined that routine condonations and cavalier attitudes towards the process of law affects the administration of justice as it affects docket management of courts and causes avoidable delays, cost escalations and chaos. It was held that the effect of such delays is not only borne by litigants, but also by the public-in-general that spends decades mired in technical processes.
Based on the aforesaid findings, the Supreme Court came to the conclusion that nothing prevented the appellant from filing the written statement through counsel or in person, even though the appellant is right in his submission that the High Court erroneously relied upon the ratio in Oku Tech (supra). Having held so, the Supreme Court took a lenient view, given the unique circumstances of the case and directed that the written statement belatedly filed by the appellant be taken on record, subject to payment of costs of INR 25,000 (Rupees twenty-five thousand only).
This decision of the Supreme Court provides much needed clarity in respect of the applicability of the mandatory timeline for filing of written statement to non-commercial disputes. It has been clarified that when it comes to commercial suits, this timeline is directory and not mandatory in nature. In holding so, the Supreme Court has made it clear that all non-commercial disputes fall within the ambit of the unamended provisions of the Code of Civil Procedure.
1 Civil Appeal No. 433 of 2020 arising out of Special Leave Petition (Civil) No. 6217 of 2019; (2020) 2 SCC 708
2 2016 SCC OnLine Del 6601
3 (2019) 12 SCC 210
4 (2018) 6 SCC 639
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