Bom HC | Commercial suits — Defendant cannot file written statement beyond expiry of 120 days from service of summon — Law on Or. 8 R. 1 CPC reiterated and clarified

Bombay High Court: S.J. Kathawalla, J. dealt with some ingenious arguments led by a battery of advocates representing both the sides, while sitting in a matter concerning the interpretation of Order 8 CPC (written statement, set off and counter-claim). 

It is pertinent to note at the very outset that the Proviso to Order 8 Rule 1 (written statement), as added by the Commercial Courts Act, 2015, bars the defendant in a commercial suit from filing the written statement (“WS”) beyond a period of 120 days from the date of service of summon. 

Several defendants in various commercial suits before the Commercial Division of the High Court failed to file their WS within the stipulated period of 120 days. Subsequently, these defendants took out various Notice(s) of Motion seeking condonation of delay in filing their respective WS. At the hearing of motions, the plaintiffs opposed taking on record any WS in view of the newly introduced Proviso to Order 8 Rule 1. 

Consequently, the Court published an open court notice framing a question of law in order to settle the controversy in all such matters: Whether in view of the amendment to CPC by Commercial Courts Act, 2015, the defendants can be allowed to file WS after 120 days from the date of service of the writ of summons in a commercial suit?

Extensive arguments were advanced by counsels appearing for both sides. After considering all the arguments; and referring to several decisions of the Supreme Court; and on a holistic reading of various provisions of CPC and the Commercial Courts Act, Justice Kathawalla reached the conclusion: “In Commercial Suits, a written statement by the defendant cannot be taken on record after the expiry of 120 days from the date of service of the writ of summons”. 

It is interesting to look at the manner in which the course of arguments on various points developed in the present matter. Equally important is to know how the Court dealt with the contentions raised by various counsels and the manner in which the question of law was decided along with the necessary clarifications. 

Commercial Courts Act, 2015

It is useful to note that the primary aim and object of the Commercial Courts Act was to provide speedy disposal of high-value commercial disputes in order to reduce the pendency of cases. The Act establishes Commercial Courts at the district level and Commercial Divisions in various High Courts (including those having ordinary original civil jurisdiction), to deal with commercial disputes of a “specified value“, as may be notified by the Central Government. 

Justice Kathawalla observed, “In so far as the Commercial Courts Act is concerned, there can be no manner of doubt that the paramount intent of the legislature was to reduce delay in commercial cases and improve our country’s image from the perspective of ease of doing business in India”.

SCG Contracts (India) (P) Ltd. v. K.S. Chamankar Infrastructure (P) Ltd.

During the intervening period that arguments concluded and the date of the order, the Supreme Court in SCG Contracts (India) (P) Ltd. v. K.S. Chamankar Infrastructure (P) Ltd., 2019 SCC OnLine SC 226 considered the subject provision of Order 8 Rule 1. 

Relying on SCG Contracts, Justice Kathawalla observed, The Apex Court’s pronouncement, in my opinion, concludes the interpretation of the newly introduced amendments to Order 5 Rule 1 and Order 8 Rules 1 and 10 in so far as they are applicable to commercial suits. The Apex Court, whilst reaffirming the view of the Delhi High Court has held that in commercial suits, a written statement cannot be taken on record after the expiry of 120 days from the date of service of the summons”. 

In addition to that, according to Justice Kathwalla, “even a literal reading of the amended provisions of Order 8 Rule 1 suggest that not only are penal consequences provided for upon the defendant failing to file its written statement; but the discretion of the Commercial Court/Commercial Division to take on record a written statement thereafter has also been taken away”. 

Application of the Mischief Rule

Nausher Kohli, Advocate for the plaintiff in one of the cases argued that for a true and correct interpretation of the Commercial Courts Act, the High Court ought to use the Mischief Rule of interpretation of a statute as laid down in the Heydon’s case (1584) 3 Co. Rep. 7a, p. 7b: 76 ER 637 decided in the year 1589, and thereby suppress the mischief of delay in filing of WS whilst advancing the remedy of expeditious disposal of commercial suits. Heydon’s case has acquired the status of a classic rule as recorded by the Supreme Court in Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907. 

Considering the said argument, Justice Kathawalla was of the opinion, “Admittedly, the mischief prior to the Commercial Courts Act was belated filings of written statements on flimsy and frivolous grounds. It is for this reason that penal consequences have now been provided and the discretion of the court taken away”.

Amendments introduced in Order 8 Rule 1 are mandatory

Specifying the mandatory nature of the amendments, the Court after considering SCG Contracts and the Mischief Rule, stated, “the Proviso to Order 8 Rule 1 introduced by the Commercial Courts Act, is mandatory. In this respect, I am bound by the view of the Apex Court. I, therefore, reiterate that the amendments introduced by the Commercial Courts Act to Order 5 Rule 1 and Order 8 Rules 1 and 10 are mandatory in nature”.

Commercial Courts Act vis-a-vis Bombay High Court (Original Side) Rules

Senior Advocate J.P. Sen, Senior Advocate V. Anturkar and Zal Andhyarujina, Advocate representing different defendants argued that the High Court can still exercise its powers under the Bombay High Court (Original Side) Rules, 1980 notwithstanding the Commercial Courts Act, to condone the delay and take on record a WS in a commercial suit even after the expiry of 120 days. Per contra, Mr Kohli argued that this contention failed to stand scrutiny when read with the explicit provisions of the Commercial Court Act. Relying on Sections 16 and 21 of the Commercial Courts Act, he argued that the amendments brought forth by the Commercial Courts Act to CPC, ought to prevail over the Bombay High Court (Original Side) Rules in instances where the provisions of these Rules are in conflict with the provisions of CPC as amended by the Commercial Courts Act.

Holding that the provisions of the Commercial Courts Act have primacy over the Bombay High Court (Original Side) Rules, the Justice Kathawalla observed,  “I am concerned with a dispute between 2 special acts, viz. the Bombay High Court (Original Side) Rules and the Commercial Courts Act. … the Commercial Courts Act is a special act promulgated several decades after the Bombay High Court (Original Side) Rules and would trump the provisions of the former in the event of a conflict”. While concluding the discussion on this point, the Court held, “this Court cannot exercise its powers under the Bombay High Court (Original Side) Rules to condone the delay in filing of a written statement over and above the statutorily mandated period of 120 days”.

“Rule” versus “Rules”

Another argument of the defendants was that Section 16 of the Commercial Courts Act uses the phrase “Rule of the jurisdictional High Court”. According to them, the word Rule has not been defined under the Commercial Courts Act. In this situation, they relied on Section 2(2) of the Commercial Courts Act which provides that words used and not defined in the Commercial Courts Act but defined in CPC, shall have the same meaning as assigned to them in CPC. They then placed reliance on Section 2(18) CPC where rules has been defined. That section had been interpreted by the Supreme Court in Iridium (India) Telecom Ltd. v. Motorola Inc., (2005) 2 SCC 145 to exclude the rules of the High Court on its Original Side. They hence argued that the phrase “Rule of the jurisdictional High Court” in Section 16 of the Commercial Courts Act does not include the Bombay High Court (Original Side) Rules. 

In so far as this submission is concerned, the Court noted that Section 16(3) in fact uses the word Rule as opposed to rules in Section 2(18) CPC. In fact, the term rule finds reference under Section 3(51) of the General Clauses Act, 1897 which reads: 

 (51) “rule” shall mean a rule made in exercise of a power conferred by any enactment, and shall include a Regulation made as a rule under any enactment;

Hence, Justice Kathawalla did not agree with the defendants that the word Rule as used in Section 16(3) is the same as defined under Section 2(18) CPC and does not, therefore, include the High Court’s Original Side Rules. On the contrary, given the scheme of the Commercial Courts Act and especially Section 16, it would appear that Section 16(3) in fact covers the Bombay High Court (Original Side) Rules.

In summation, the Court held, “only those rules of the Bombay High Court (Original Side) Rules which are in conflict with the provisions introduced by the Commercial Courts Act, will stand superseded by the introduction of the Commercial Courts Act. All other rules (which are not in conflict with the provisions introduced by the Commercial Courts Act) will continue to apply to commercial as well as non-commercial suits”.

Interplay of Order 8 Rule 1 with Order 8 Rule 9 

In addition to the aforesaid arguments, Rashmin Khandekar, Firdosh Pooniwala and Rohan Kelkar, Advocates argued that it is only the right of the defendant to file a WS that is forfeited under Order 8 Rule 1, whereas Order 8 Rules 9 and 10 do not circumscribe the power of the Court to take on record a belated WS despite the amendments introduced by the Commercial Courts Act. Thus, the argument flowed that the Court can exercise its discretion under Rule 9 to take on record a belated WS.

Mr Kohli submitted that the arguments put forth by the defendants would result in absurdity or an anomalous situation. He argued that such interpretation ought to be rejected. He further argued that if Order 8 was given the same wide and unbridled interpretation as was sought to be canvassed by the defendants, the distinction if any between a commercial suit and non-commercial suit would only lie in their respective cause titles. Taking on record a WS under Rule 9 despite the expiry of the stipulated period of 120 days under Rule 1, would effectively negate the scheme, object, intent and purpose of the Commercial Courts Act. 

“A” versus “The”

Mr Kelkar submitted that there is a difference in the WS envisaged under the amended Rule 1 and that under Rules 9 and 10. As per him, a written statement as envisaged under Rule 9 refers to a WS separate from the written statement under Rules 1 and 10 and thus, the bar under Rule 1, if mandatory, applies only to the written statement and not a written statement under Rule 9 and hence, the discretion of the Court to allow for WS is kept alive even after the right of the defendant is closed under Rules 1 and 0.

Rejecting this argument, Justice Kathawalla observed, “While an ingenious argument has been canvassed, if I were to allow it, I would find that my decision would be directly in the teeth of the legislative mandate of the Commercial Courts Act, its provisions and legislative intent. … what has been prohibited from being done directly, cannot be allowed to be done indirectly. If this Court has been expressly divested of its powers to take on record ‘the’ written statement after the expiry of 120 days, allowing the same to be taken on record in another way, i.e. under the cover of it being ‘a’ written statement would be a travesty of procedure as well as a mockery of the legislative mandate. It would be ridiculous to imagine that, what the legislature prohibited in one rule, would be allowed to be circumvented via another rule in the same order of CPC”.

Non-commercial suits

The Court was of the opinion that since the amendment to CPC as applicable to commercial suits has been brought about by a special act, a general rule under Rule 9 would have to yield to it. However, it was clarified that Rules 9 and 10 would continue to be discretionary powers in non-commercial suits to condone the delay in filing of a belated WS as the provisions introduced by the Commercial Courts Act will not apply to non-commercial suits.

Court of Equity

In addition to the above, Mr Kelkar submitted that eventually, the Court is one of equity and that it cannot ignore emergent circumstances that a defendant may undergo due to which it would be unable to file its WS.

The Court noted that the Supreme Court in a catena of decisions has held that considerations of equity cannot be grounds/reasons/justifications to not follow the law as laid down by the legislature. It was of the opinion that no matter how harsh the result, if a statute stipulates that an act must be performed within a certain period of time and provides for no exceptions, then the Courts must not allow such an act to be performed after the expiry of the time mandated by the statute, directly or indirectly.

Plaintiff’s obligation

Considering another important aspect of the matter, the Court was of the view that the provisions of the Commercial Courts Act will be given full credence, only in the event strict timelines are imposed not only on defendants but also on plaintiffs invoking the Commercial Courts Act. It was observed, “If a defendant’s right to file its written statement stands forfeited after the expiry of 120 days, the plaintiff too ought to adhere to strict timelines. Hence, it is recommended that such provisions and rules are introduced so as to ensure that in a commercial suit filed before a Commercial Court/Commercial Division, the plaintiffs are directed to remove all office objections and have the commercial plaint numbered within the time limit so prescribed. … In the event the plaintiff and its advocates fail to adhere to these timelines, the commercial suits so filed and belatedly numbered/served ought to be dismissed without any further reference to the Commercial Court/Commercial Division”.

Parties’ consent cannot vest jurisdiction

Having answered the question of law as above, it was clarified that there may be instances wherein the plaintiff is ready and willing for a belated WS to be taken on record subject to payment of costs. However, it is important to note that parties cannot by consent, vest the court with discretion/jurisdiction/powers which it otherwise is barred from exercising under statute. Jurisdiction can be vested only by statute and not by consent and acquiescence. It is well settled that jurisdiction cannot be conferred on a court by consent, acquiescence or waiver where there is none, nor can it be ousted where there is.

Commencement of 120 days period

The Court thought it necessary to clarify when the aforesaid period of 120 days commences? 

It was stated, “the period of 120 days will commence from the date of service of the writ of summons and not the date a defendant first enters appearance. However, in order to ensure expeditious disposal of commercial suits and in order to save time of this Court as also the office of Prothonotary & Senior Master of this Court, in the event a defendant/its advocate enters appearance and by consent, agrees to waive service, the period of 120 days will commence from the date of such waiver”.

After having an in-depth discussion, the Court delivered the 158-pages long judgment covering the very many aspects on the subject. The matter was disposed of after deciding the question of law in the manner above. [Axis Bank Ltd. v. Mira Gehani, 2019 SCC OnLine Bom 358, dated 27-2-2019]  

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