JUDGMENT ON ADMISSIONS: ORDER 12 RULE-6 OF CPC

 

Judgment ON ADMISSIONS: Order 12 RULE-6 OF CPC

The civil litigation, it is often felt, is a tardy and inordinately long process. However, close scrutiny of the provisions of Code of Civil Procedure would suggest that it is not so, provided, the provisions contained therein are adequately utilized in apt cases and judgments are sought in pre-trial stage or in the very initial stage itself. In fact, the courts are empowered to take a suo motu view on the plaint and decide the lis between the parties without going into process of evidence, if ex facie it appears that the judgment could be passed on the basis of admissions. The provisions and principles of judgment on the basis of admissions are contained in order XII Rule 6 of Code of Civil Procedure. The averments in the plaint and written statement shall only have to be gone through for this purpose, apart from documents filed along with the pleadings. It is also not necessary that express admissions by the defendant or the plaintiff shall be necessary. The admission can be implied or constructive. The admissions may come out of pleadings or documents either expressly or by necessary implication. Even the bald and evasive denial shall be construed as admission. Therefore, it is not as if the express admission shall be a sine qua non of invoking the aforesaid principle. The judgments and precedents have spelt out the fait accompli. It is now clear that bald and evasive denial by the opposing parties shall not relegate parties to trial and only if substantive defence stares at the record, the process of trial shall not be warranted.

PRINCIPLES

A.  The principles/provisions of Order XII Rule 6 of the Code of Civil Procedure are reproduced hereunder for ready reference:

ORDER XII­ Rule 6. Judgment on admissions­

(1)    Where admissions of fact have been made either in the pleading or otherwise, whether orally or in writing, the Court may at any stage of the suit, either on the application of any party or of its own motion and without waiting for the determination of any other question between the parties, make such order or give such judgment as it may think fit, having regard to such admissions.

(2)    Whenever a judgment is pronounced under sub­ rule (1), a decree shall be drawn up in accordance with the judgment and the decree shall bear the date on which the judgment was pronounced."

Order VIII Rules 3, 4 and 5 of the Code of Civil Procedure relates to the denials to made by the defendant to the averments made by the plaintiff. The principles of Order VIII Rules 3, 4 and 5 are reproduced hereunder:­

B.  ORDER VIII ­WRITTEN STATEMENT, SET­OFF AND COUNTER­ CLAIM.

Rule 3 : “Denial to be Specific­ It shall not be sufficient for a defendant in his written statement to deny generally the grounds alleged by the plaintiff, but the defendant must deal specifically with each allegation of fact of which he does not admit the truth, except damages”.

Rule 4:  Evasive Denial­: Where a defendant denies an allegation of fact in the plaint, he must not do so evasively, but answer the point of substance. Thus, if it is alleged that he received a certain sum of money, it shall not be sufficient to deny that he received that particular amount, but he must deny that he received that sum or any part thereof, or else set out how much he received. And if an allegation is made with diverse circumstances, it shall not be sufficient to deny it along with those circumstances”.

Specific Denial­

Rule 5.  (1) Every allegation of fact in the plaint, if not denied specifically or by necessary implication, or stated to be not admitted in the pleading of the defendant, shall be taken to be admitted except as against a person under disability:

Provided that the Court may in it discretion require any fact so admitted to be proved otherwise than by such admission."

LAW/Judicial Precedents

SUPREME COURT

The hon’ble Supreme Court in Uttam Singh Duggal & Co. Ltd Vs Union Bank of India, AIR 2000 SC 2740, has held that a litigant should not be made to wait for a decree and a decree can expeditiously be passed on the admissions of the defendant. The relevant observations of the Supreme Court are reproduced here as under:

". As to the object of the Order 12 Rule 6, we need not say anything more than what the Legislature itself has said when the said provision came to be amended. In the objects and reasons set out while amending the said rule, it is stated that where a claim is admitted, the Court has jurisdiction to enter a judgment for the plaintiff and to pass a decree on admitted claim. The object of the rule is to enable the party to obtain a speedy judgment at least to the extent of the relief to which according to the admission of the defendant, the plaintiff is entitled. We should not unduly narrow down the meaning of this rule as the object is to enable a party to obtain speedy judgment. Where other party has made a plain admission entitling the former to succeed, it should apply and also wherever there is a clear admission of facts in the face of which, it is impossible for the party making such admission to succeed."

In M/s Gian Chand Brothers Vs Rattan Lal, (2013) 2 SCC 606, the Supreme Court held that it shall not be sufficient for a defendant to deny generally the averments by the plaintiff, but he must be specific with each allegation of fact. It was further held that where there is evasive denial, the defendant cannot be permitted to lead evidence, when nothing is stated in the pleadings.

The hon’ble Supreme Court in  Badat & Co. v. East India Trading Co. AIR 1964 SC 538 has while referring to Rules 3, 4 and 5 of Order 8 of the Code has observed :­

"These three rules form an integrated code dealing with the manner in which allegations of fact in the plaint should be traversed and the legal consequences flowing from its non­ compliance. The written ­statement must deal specifically with each allegation of fact in the plaint and when a defendant denies any such fact, he must not do so evasively, but answer the point of substance. If his denial of fact is not specific but Civil Suit No. 1259/2018 7 of 18 evasive, the said fact shall be taken to be admitted. In such an event, the admission itself being proof, no other proof is necessary. The first paragraph of R. 5 is a re­production of O. XIX, R. 13 of the English rules made under the Judicature Acts. But in mofussil Courts in India, where pleadings were not precisely drawn, it was found in practice that if they were strictly construed in terms of the said provisions, grave injustice would be done to parties with genuine claims. To do justice between those parties, for which Courts are intended, the rigor of R. 5 has been modified by the introduction of the proviso thereto. Under that proviso the Court may, in its discretion, require any fact so admitted to be proved otherwise than by such admission. In the matter of mofussil pleadings, Court, presumably relying upon the said proviso, tolerated more laxity in the pleadings in the interest of justice. But on the Original side of the Bombay High Court, we are told, the pleadings are drafted by trained lawyers bestowing serious thought and with precision. In construing such pleadings the proviso can be invoked only in exceptional circumstances to prevent obvious injustice to a party or to relieve him from the results of an accidental slip or omission, but not to help a party who designedly made vague denials and thereafter sought to rely upon them for non ­suiting the plaintiff. The discretion under the proviso must be exercised by a Court having regard to the justice of a cause with particular reference to the nature of the parties, the standard of drafting obtaining in a locality, and the traditions and conventions of a Court wherein such pleadings are filed."

In the case of Roop Kumar Vs Mohan Thedani, ( 2003) 6 SCC 595 wherein the scope and meaning of the Evidence Act has been discussed in great details, it was held as follows:

"13. Section 91 relates to evidence of terms of contract, grants and other disposition of properties reduced to from of document. This section merely forbids proving the contents of a writing otherwise than by writing itself; it is covered by the ordinary rule of law of evidence, applicable not merely to solemn writings of the sort named but to others known some times as the "best evidence rule". It is is in really declaring a doctrine of the substantive law, namely, in the case of a written contract, that of all proceedings and contemporaneous oral expressions of the thing are merged in the writing or displaced by it”.

                          DELHI HIGH COURT

In ITDC Ltd. v. M/s. Chander Pal Sood and Sons, 84 (2000) DLT 337 DB, the Hon'ble Delhi High Court of held as under:­

"17. Order 12 Rule 6 of Code gives a very wide discretion to the Court. Under this rule the Court may at any stage of the suit either on the application of any party or of its own motion and without determination of any other question between the parties can make such order giving such judgment as it may think fit on the basis of admission of a fact made in the pleadings or otherwise whether orally or in writing...."

It may be noted that the principles of Rule 6 clearly spelt out that judgment on the basis of admissions of fact mad in the pleading or otherwise could be passed. This clearly shall imply that admissions through documents and by necessary implication shall also follow judgment on admission and bare denial in pleading shall be meaningless.

In Allora Electric & Cable Co. Vs M/s Shiv Charan 72 (1998) DLT 761, Hon'ble High Court held that a party is expected to expressly deny the fact which is within its knowledge and a general denial is not a specific denial by "necessary implication". The relevant portion of the judgment is reproduced hereunder:

"11. The object of this provision is to narrow the issues to be tried in the case and to enable either party to know what the real point is to be discussed and decided. The word "specifically" qualifies not only the word "deny" but also the words "stated to be not admitted" and therefore a refusal to admit must also be specifically stated. A defendant can admit or deny the several allegations made in the plaint and if he decides to deny any such allegations, he must do so clearly and explicitly. A vague or evasive reply by the defendant cannot be considered to be a denial of fact alleged by the plaintiff. A party is expected to expressly deny the fact which is within its knowledge and a general denial is not a specific denial by "necessary implication". In other words, the denial should be definite and unambiguous.

The Delhi High Court in  Universal Finance Traders Ltd Vs Lunar Diamond Ltd & Ors, 193 (2012) DLT 613, has held that if the defence taken by the defendant is devoid of any merit or of a kind which is not recognized by law, a decree on admission can be passed.

Further, in the judgment of Ved Prakash & Anr Vs M/s Marudhar Services Ltd & Anr 2000 (54) DRJ 654, it was held by the Delhi  High Court that the court is not powerless to review the entire defence presented in the written statement and the admission must be drawn from the totality of the circumstances. It was further held that it would be a pedantic approach to maintain that an admission can only be considered to have been made where a particular party specifically agrees to the correctness of the statement made in pleadings by an opposite party. Furthermore, the Court would not be justified to exercise the discretionary powers where no triable issues have arisen.

The Division bench of Delhi High Court in a matter reported as Vijaya Myne Vs Satya Bhushan Kaura, 142 (2007) Delhi Law Times 483 (DB), wherein it was observed :

"12. It is not necessary to burden this judgment by extracting from the aforesaid authoritative pronouncement as the learned Single Judge has accomplished this exercise with prudence and dexterity. Purpose would be served by summarizing the legal position which is that the purpose and objective in enacting the provision like Order 12 Rule 6, CPC is to enable the Court to pronounce the judgment on admission when the admissions are sufficient to entitle the plaintiff to get the decree, inasmuch as such a provision is enacted to render speedy judgments and save the parties from going through the rigmarole of a protracted trial. The admissions can be in the pleadings or otherwise, namely in documents, correspondence etc. These can be oral or in writing. The admissions can even be constructive admissions and need not be specific or expressive which can be inferred from the vague and evasive denial in the written statement while answering specific pleas raised by the plaintiff. The admissions can even be inferred from the facts and circumstances of the case. No doubt, for this purpose, the Court has to scrutinize the leadings in their detail and has to come to the conclusion that the admissions are unequivocal, unqualified and unambiguous. In the process, the Court is also required to ignore vague, evasive and unspecific denials as well as inconsistent pleas taken in the written statement and replies. Even a contrary stand taken while arguing the matter would be required to be ignored."

The Division bench of Delhi High Court in Parivar Seva Sansthan Vs Dr Ms Veena Kalra AIR 2000, Delhi 349 DB in which it was observed:

"Bare perusal of the above Rule shows that it confers very wide powers on the Court to pronounce judgment on admissions at any stage of the proceedings. The admission may have been made either in pleadings or otherwise. The admission may have been made orally or in writing. The Court can act on such admissions either on an application of any party or on its own motion without determining the other questions. Even constructive admission firmly made can be made the basis. Any plea raised against the contents of the documents only for delaying the trial being barred by Ss.91 and 92 of the Evidence Act or other statutory provisions can be ignored. These principles are well settled by catena of decisions in Dudh Nath Pandey Vs Suresh Chandra  AIR 1986 SC 1509, in  Surjit s. Kazakhstan ISP Ltd. Vs Charanjit Lal 1998.2.DLT 476; Laxmi kant vs MN Dastur 1998.4.AD (Delhi) 10. The use of the word any stage in the rule itself shows that the intention of legislature is to give widest possible meaning. Thus, mere framing of issues cannot by itself deter the Corut to pass judgment on admissions under O.12 R.6 CPC ".

In Laxmikant S (HUF) Vs MN Dastur Co., 1998 Rajdhani Law Reporter 171, wherein it was observed in para 11:

"11. As noticed earlier the discretion has to be exercised reasonably and not arbitrarily. If a triable issue of entitle to a judgment under this Rule and discretion will necessarily be exercised against such claimant. However, if the plea is malafide or preposterous, or vexatious and can be disposed of without going into facts or is contrary to law or settled legal position will it be justified for the Court to keep its hand off and allow the game of the defendant to have its away? In my view the answer is No."

In P.P.A. Impex Pvt. Ltd Vs. Mangal Sain Mittal, 166 (2010) Delhi Law Times 84 (DB), wherein it was observed in para 9 :

"9. It appears to us that the approach to be taken under Order XII Rule 6 is akin to what has been enunciated by the Supreme Court in Mechala Engineers & Manufacturers Vs. Basic Equipment Corporation, 13 (1977) DLT 90 (SC)=(1976) 4 SCC 687, in the context of Order 37 of the CPC with regard to granting leave to defend a summary suit. This is that if a defence amounting to moonshine has been presented, it should be summarily dismissed by not granting leave to defend and by decreeing the suit forthwith. The Courts are already groaning under the weight of bludgeoning and exponentially increasing litigation. The weight will unvaryingly increase if moonshine defence are needlessly permitted to go to trial."

The Division Bench of the Delhi  High Court had the occasion to interpret the expression 'otherwise' as used under Order 12 Rule 6 of CPC in the case of Rajiv Srivastava Vs Sanjiv Tuli and Anr reported as 119 (2005) DLT 202 (DB). It was observed as below :

"Para 10. The use of the expression 'otherwise' in the aforesaid context came to be interpreted by the Court. Considering the expression the Court had interpreted the said word by stating that it permits the Court to pass judgment on the basis of the statement made by the parties not only on the pleadings but also de hors the pleadings i.e. either in any document or even in the statement recorded in the Court. If one of the parties' statement is recorded under Order 10 Rules 1 and 2 of the Code of Civil Procedure, the same is also a statement which elucidates matter in controversy. Any admission in such statement is relevant not only for the purpose of finding out the real dispute between the parties but also to ascertain as to whether or not any dispute or controversy exists between the parties. Admission if any is made by a party in the statement recorded, would be conclusive against him and the Court can proceed to pass judgment on the basis of the admission made therein.............”

In Assocham Vs Y.N Bhargava 185(2011) Delhi Law Times 296 wherein it was observed in para 7 :

"7. When the Civil Court deals with an application under Order 12 Rule 6, CPC, the Court is entitled to see, not only the pleadings but also documents in order to find out the admitted position emerging from the record. This is because of the expression 'or otherwise' as found in Order 12 Rule 6, CPC. The issue is now sufficiently pronounced upon by the Supreme Court and the leading judgment in this regard is the decision in the case of Uttam Singh Duggal & Co. Ltd. Vs. United Bank of India, 2008 (7) SCC 120. In fact, subsequently, the Supreme Court in the case of Charanjit Lal Mehra & Ors. Vs. Kamal Saroj Mahajan & Anr., 118 ( 2005) DLT 396 (SC)=III ( 2005) SLT 131= (2005) 11 SCC 279, hs gone to the extent of stating ( in a case where the premises were in Delhi and falling outside the Delhi Rent Control Act, 1958) that even an implied admission can be looked into for the purpose of Order 12 Rule 6, CPC....."

 

CONCLUSION

The provisions under Order 12 Rule 6 of Code of Civil Procedure have evolved over the space of time and the principles of Rule 6 has been widened in due course and what constitute admission by the other side is adequately amplified. The scope of judicial discretion is also enlarged and it is successively held now that the admissions can not only be in the pleadings, but otherwise,, namely in documents, correspondence etc. These can be oral or in writing. The admissions shall not only be clear or unambiguous but principles of constructive admissions has also evolved. The admissions need not be specific or expressive, but it can also be inferred from the vague and evasive denial in the written statement while answering specific pleas raised by the plaintiff. Not only that the admissions can even be inferred from the facts and circumstances of the case. The Court is required to ignore vague, evasive and unspecific denials as well as inconsistent pleas taken in the written statement and replies. What therefore emerges from the foregoing discussion is that the fact that any opposite party to a lis shall inevitably oppose the plea of plaintiff and whether such a plenary denial shall be enough to relegate the matter to trial? The answer is a clear “No”. Since bald and evasive denial is meaningless and the admissions can be inferred not only on the basis of pleadings and documents but also on the basis of facts and circumstances. The principles under Order 12 Rule 6 of Code of Civil Procedure is not contingent on the clear admissions of opposite parties, but the court is accorded the amplitude to discern the same and even if admissions are inferred or constructive admission is plausible, the courts can pass judgment ad decree based on such inference. The very object of the principles is to truncate the need of trial when admission by the opposite side is clear or the same can be inferred. It is now no res integra that relegating a party to suffer the peril of trial when the same is avoidable in the touchstone of the above principles, in such a circumstances judicial discretion is required to be applied.

                                          ----------------------

                               Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

MISUSE OF PENALTY MEASURES UNDER THE CONSUMER PROTECTION ACT

 

MISUSE OF pENALTY measures UNDER THE Consumer Protection Act

 

The Consumer Protection Act 1986 was enacted with a view to bestow the consumers with a window for the rederessal of their grievances. The objective was achieved as well and the consumer awareness could be reckoned now as never before. To cater to the needs over the space of time, subsequently, the Act have undergone periodical changes by way of successive amendments, until the Act itself was re-written with a comprehensive change and the new Act so enacted was named as Consumer Protection Act 2019. The existing provisions were overhauled and several additions and modifications are made and to include all such provisions, the new Act was necessitated. However, there is a fillip side to it as well and some time it is noticed that punitive measures as prescribed under the Act was unleashed for raising vendetta and still there are occasions, where the Consumer Commission has driven itself too far. The underlying object of punitive measures are not to inflict punishment, rather to avoid it and the same are only stipulated to be used as a compliance seeking machinery. In practice, some time it is different. The concern in the present write up is limited to  Section 72 and Section 73 of the Consumer Protection Act 2019 which correspond to Section 27 and 27 –A of Consumer Protection Act 1986, as para materia the provisions are one and same. The Section 72 and 73 of 2019 Act as it correspond to Section 27 and 27 A of Consumer Protection Act 1986 has a trap of criminal proceedings, in as much as under the aforesaid provisions, the District Consumer Commission shall be construed as deemed Magistracy and the Consumer Commissions can secure the attendance of the accused for non-compliance of their order in case execution petition seeking punitive measures u/s 27 of 1986 Act or Section 72 of 2019 Act as the case may be, are applied for by the complainant. The pertinent issue, however, shall be as to who will be the necessary party in execution petition, more particularly under the above referred provisions and whether that should completely correspond with the Memo of Party in complaint and orders passed in the complaint. That part, upon notice issued as per the principles of Section 61 of Cr.P.C and pursuant thereto, whether any different parameter are set, in the event of  compliance of the order passed by the Commission is complied with or if it is not complied with. Whether continuance of Section 27 or Section 72 proceedings (depending on whether the action was initiated under 1986 Act or 2019 Act) could nevertheless continue irrespective of compliance. The thrust of the present writing shall be in a narrow compass limited to the aspects as referred to above, since, it is noticed that some time the District Commission opted to continue with the proceedings under the above referred provisions, despite compliance.

To begin with, it will be worthwhile to note the features of Section 27 and 27-A of 1986 Act and Section 72 and 73 of 2019 Act to find out, if there are any departure in the latter Act.

Consumer Protection Act 1986

Consumer Protection Act 2019

Section 27 Penalties   Punishment prescribed for one month and can go for three years. Or fine not less than Rs 2000 but may extend to Rs 10,000/- or both. Notwithstanding anything contained in Cr.P.C The District Forum , State Commission and National Commission shall have the power of judicial magistrate of the First Class for trial of offences under the Act and the Consumer Forum and Commission shall be deemed to be a judicial magistrate of the First Class for the purpose of Cr.P.C. Trial shall be summary in nature. Section 27-A Provision of appeal before state commission against order passed by District Forum u/s 27, both on facts and law. Similarly, order passed by State Commission shall be appealable before National Commission and finally before Supreme Court. No other appeal is provided, except in the manner as aforesaid. Appeal is to be preferred within Thirty (30) days. Though, the delay beyond period of Thirty (30) days could be condoned for “sufficient reasons” shown.

Section 72 Penalties for non compliance of order. This may be noted that here, penalty prescribed is for non-compliance of order and that is made specific. The minimum fine is Rs 25,000/- and may be extended to Rs 1 Lakh or with both. The provisions are otherwise similar to 1986 Act. The deemed Judicial Magistrate or summary procedure clause are the same in both the Act i.e 1986 Act and 2019 Act             Section 73 Provision of Appeal corresponding to section 27-A of 1986 Act and the provisions are same as Section 27-A. .

 

LAW & PROCEDURE

Ambit of Section 27 of Consumer Protection act 1986 and Section 72 of Consumer Protection act 2019

The Section 27 of 1986 act corresponding to Section 72 of the 2019 Act may need further deliberation. The Hon'ble Supreme Court in a matter captioned as State of Karnataka Vs. Vishwabharathi House Building Coop. Society & Ors. (2003) SCC 412 has noted:

"58. Furthermore, Section 27 of the Act also confers an additional power upon the Forum and the Commission to execute its order. The said provision is akin to Order 39 Rule 2-A of the Code of Civil Procedure or the provisions of the Contempt of Courts, Act or Section 51 read with Order 21 Rule 37 of the Code of Civil Procedure. Section 25  should be read in conjunction with Section 27. A Parliamentary statute indisputably can create a tribunal and might say that non-compliance of its order would be punishable by way of imprisonment or fine, which can be in addition to any other mode of recovery.

In Ramesh G. Kohali vs Shivanand Shanbag, NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION  NEW DELHI IN APPEAL EXECUTION NO. 105 OF 2019 decided on 9 January, 2020 has held that:

 

“29.As noted earlier, Section 27 of the CP Act was amended with effect from 15.3.2003.  While deleting the proviso which permitted imposition of a less than the minimum term of imprisonment and less than the minimum amount of fine, the legislature also added sub-section(2), thereby conferring the powers of Judicial Magistrate of the First Class upon the District Forum, the State Commission or the National Commission, as the case may be, for trial of the offences under the CP Act and also provided that the District Forum, State Commission or the National Commission shall be deemed to be a Judicial Magistrate of the First Class for the purpose of Code of Criminal Procedure.  Sub-Section (3) was also added to provide that the offences under the CP Act may be tried summarily.  Considering the aforesaid amendment, and bound by the decision of the Hon'ble Supreme Court in Kamlesh Aggarwal (supra), taking therein the view that the District Forum was required to follow the procedure prescribed in Section 262 read with Chapter XX and Section 251 of the Code of Criminal Procedure, we have no hesitation in holding that after amendment with effect from 15.3.2003, the proceedings initiated under Section 27 of the CP Act are regulated by the procedure prescribed in the above-referred provisions of the Cr.PC.  Though, in Kamlesh Aggarwal (supra), the Hon'ble Supreme Court exercised its plenary powers under Article 142 of the Constitution, what needs to be noted is that the said power was exercised because the District Forum had not followed the procedure prescribed in Section 262 read with Chapter XX and Section 251 of the Cr. P.C”.

The Delhi High Court has held in Ravi Kant vs National Consumer Disputes Commission  66 (1997) DLT 13 has held:

21. In fact, Section 27 of the Act has created a statutory offence the non-compliance of on order of a duty constituted Tribunal under the Consumer Protection Act 1986 - and has made the said non - compliance an offence punishable with simple imprisonment or fine. A statute can create a Tribunal and might say that non - compliance with the orders of the Tribunal is an offence and is punishable by the way of imprisonment or fine (as in Section 27) and this penal provision can be in addition to any other mode of recovery (as in Section 25). Section 25 permits recovery as a civil court and may also permit arrest under Section 51 and Order 25 Rule 37 as a mode of recovery. But under Section 25 no statutory offence is created; while under Section 27 a separate offence is created if Section 25 order is not implemented. We are, therefore unable to hold that Section 27 is either bad or that the order of punishment of simple imprisonment passed against the petitioner is violative of Article 21 . Point 3 is held against the petitioners.

Thus, it may appear that without recourse to section 25 corresponding to Section 71 of 2019 Act, invocation of Section 27 or section 72 as the case may be, is contrary to the spirit of the Consumer Protection act 1986 or Consumer Protection act 2019.

 

Execution in individual name whether permitted?

 

This brings us to another leg of the discussion i.e relating to summoning the Managing Director or CEO of a company or corporation in Execution petition and seeking their personal presence

(1) Hon'ble Supreme Court in case H.K. Singla v. Avtar Singh Saini & Ors. I (2019) CPJ 3 (SC) held in Para-9 (relevant portion) as under:

"9. In this appeal, it is to be noticed that there is no order passed against the appellant herein by the District Forum in its individual capacity. The appellant was shown as Secretary of the Society during the relevant period. For the default committed by the Society and in absence of any personal liability imposed on the appellant, the appellant is to be imprisoned under Section 27 of the Act is doubtful. In view of the pendency of the appeal filed before the State Commission, we do not wish to record any definite finding on the same. Prima facie, we are of the view that for the default committed by the society, no order for imprisonment can be ordered against the appellant herein..............."

 

(2)  III (2012) CPJ 164-Abhay Kumar Singh & Ors Vs Tushar Dhananjay Mandlekar ( Maharashtra State Commission)

The Maharashtra State Commission has held as under:

“4. In fact, Abhay Kumar Singh was not a party to the said proceeding. In respect of corporate bodies or co-operative societies whenever complainant is filed u/s 27 of Consumer Protection Act 1986 the opponents are required to follow the procedure as laid down under section 305 of Cr.P.C and the same view was taken by State Commission in case of Revision Petition No. 60/2010 captioned as M/s Kesari Tours Private Ltd Vs Mr Harish Chandra Babulal Daspute decided on 6.5.2001.The application u/s 27 should have been filed only as against the SBI Card and Payment Services Pvt Ltd and two others as were shown parties in the complaint and the said private ltd company would have followed section 305 of Cr.P.C and nominated its representative to represent in said proceedings. Therefore it is not necessary in each and every case that Chief Executive Officer of the said company or corporate body shall appear before consumer for a. It is further to be noted that in respect of  corporate body, under these circumstances the punishment of imprisonment cannot be imposed as against the representative nominated under Section 305, Cr.P.C. Only punishment of penalty can be imposed and that too not against the person, who represented the said body, but it will be said punishment against a corporate body and forum has overlooked this provision and committed an error in directing Abhay Kumar Singh to remain present before District Consumer Disputes Redressal Forum.”

 

(3).    The State Commission, Chandigarh, in a matter captioned as Shri Paramjit Singh vs The Whemley'S Cooperative House in Execution Application No.397 of 2018 and upon subsequent to enactment of Consumer Protection Act 2019 on 18 December, 2020 in an application u/s 72 of 2019 Act bearing Misc. Applications No.2016 & 2022 of 2020 has held on similar line.

Effect of Compliance of order in complaint and continuance of Section 27 or Section 72 proceedings?

 

The National Commission in a matter reported as  III (2015) CPJ 125 (NC) captioned as Syed Nizam Ali Vs Anita Pradeep & Anr has held as under:

10. The learned counsel for the petitioner states that in compliance of the interim order passed by this Commission, they have already deposited a sum of Rs 5 Lakhs with District Forum on 09.09.2014. The interest therefore will be payable only till 09.09.2014. The balance amount if any payable in terms of the order shall be in terms of this order shall be calculated and deposited before the district forum within four weeks from today. The District Forum shall verify the deposit dated 09.09.2014. Thereafter the District Forum shall pay the amount deposited earlier and the additional amount if any to be deposited by the complainant in terms of this order and terminate the proceedings initiated under section 27 of the Consumer Protection Act…”  

ANALYSIS

What is borne out from the aforesaid judgment is that provisions of Section 27 of 1986 Act corresponding to Section 72 of Consumer Protection Act 2019 are meant for securing compliance of the order passed in a complaint. The Execution Petition under Section 25 of 1986 Act corresponding to Section 71 of 2019 Act are contemplated in the event of non compliance of order and only thereafter, Section 27 (1986 Act) or Section 72 (2019 Act) as the case may be, could be invoked. As may be evident from the above judgment that upon compliance of the order, underlying object of the Consumer Protection Act 1986 or 2019 Act is to terminate the proceedings rather than act as a criminal courts and continue with the proceedings and continue with trial. The object of the Consumer Protection Act is not that and upon compliance of the order as per complaint the penalty proceedings are required to be terminated. The Consumer Forum is bestowed with power of Magistrate and are treated as deemed Magistrate only with a view to secure that object and the provision is not meant for inflicting tyranny on the opposite parties. The Consumer Forums or Commission therefore shall not be akin to the court of Magistrate in wholesome manner.

Besides that, the Managing Director or CEO of the company in a routine manner are not required to be summoned and the trap of section 305 of Cr.P.C is required to be invoked, when corporation or registered society is an accused. Section 305 (1) of Cr.P.C clearly stipulates that corporation shall means an incorporated company or other body corporate and include a society registered under the Societies Registration Act, 1860. Further Section 305(2) contemplates appointing representative for the purpose of inquiry or trial and as per section 305 (5) Cr.P.C such appointment in writing by Managing Director is a sufficient compliance and such representative could be examined.

REMARK

The aforesaid discussion leads to an inescapable conclusion that the compliance of the order passed by the Consumer Commission is the object of the Consumer Protection Act 1986 or Consumer Protection act 2019. No doubt, the Consumer Commission is clothed with power of Magistrate and are construed as deemed Magistrate but, the same is only with a limited purpose to secure compliance of order in a penalty proceedings and not to involve or indulge in seeking personal presence of Managing Director or CEO of a company or corporation and that too after compliance of the order. Moreover, it is also noticed that in a routine manner, several Consumer Commissions remains oblivious to section 305 Cr.P.C which clearly stipulates that a corporation or a company could be represented by a representative appointed by managing Director or CEO. The bottom line is after compliance of the order in a complaint which may be subject matter of penalty proceedings, the continuance of proceedings u/s 27 (1986 Act) or under Section (2019 Act)   are not warranted and the proceedings are required to be terminated.  

                                           -------

Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

ATTACHMENT BEFORE DECREE: ORDER 38 RULE 5 OF CPC

 

Attachment before Decree: Order 38 Rule 5 of CPC

The civil case after conclusion of trial culminates into passing judgment and decree. If a plaintiff succeeds in a suit filed by him and even after the judgment and decree, the decree remains unsatisfied, the plaintiff or successful parties are required to seek enforcement of decree or award by way of an execution petition. The order 21 Rule 10 of Code of Civil Procedure contains the procedure for execution. Though, there are various situations relating to enforcement of decree including requirement of punitive measures and Order 21 Rules 1 to 106 of Code of Civil Procedure relates to execution proceedings and cater to any probable situation, including, but not limiting to attachment of immoveable properties and sale by auction etc. These are norms. A limited exception or departure, however, is carved out in this regard and in exceptional circumstances, the order of attachment of the properties could be passed even during the pendency of a suit. The principles to that effect are contained in Order XXXVII and Rule 5 of Code of Civil Procedure. By way of this article, the aforesaid provisions of Order XXXVIII Rule 5 shall be analysed.

It may be worthwhile in the context to reproduce the provision of Order XXXVIII & Rule 5 of Code of Civil Procedure.    

5. Where defendant may be called upon to furnish security for production of property.

(1)    Where, at any stage of a suit, other than a suit of the nature referred to in section 16, clause (a) to (d)  the Court is satisfied, by affidavit or otherwise,

(a)  that the defendant, with intent to delay the plaintiff, or to avoid any process of the Court or to obstruct or delay the execution of any decree that may be passed against him,-

(i)  has absconded or left the local limits of the jurisdiction of the Court, or

(ii)  is about to abscond or leave the local limits of the jurisdiction of the Court , or

(iii) has disposed of or removed from the local limits of the jurisdiction of the Court, his property or any part thereof , or

(b) That the defendant is about to leave [India] under circumstances affording reasonable probability that the plaintiff will or may thereby be obstructed or delayed in the execution of any decree that may be passed against the defendant in the suit.

The Court may issue a warrant to arrest the defendant and bring him before the Court to show cause, why he should not furnish security, for his appearance

Provided that the defendant shall not be arrested if he pays to the officer entrusted with the execution of the warrant any sum specified in the warrant as specified as sufficient to satisfy the plaintiff’s claim and such sum shall be held in deposit by the Court until the suit is disposed of or until the further order of the Court.

As narrated above, the measures as contained in Order XXXVIII Rule 5 are extra-ordinary in nature and it is a departure from the conventional procedure, therefore, the provisions and its legal implication may need a close look. It is not without reason that guidelines are stipulated through judicial dicta in this regard.

Guidelines before invoking Order XXXVIII Rule 5 of Code of Civil Procedure

The Calcutta High Court in a celebrated judgment reported as Premraj Mundra vs Md. Maneck Gazi And Ors AIR 1951 Cal 156 have laid down guiding principles. The principles may be shown as follows:

(1) That an order under Order 38, Rules 5 & 6, can only be issued, if circumstances exist as are stated therein. Two aspects in the circumstances has to be satisfied: one the factum of removal of properties from the jurisdiction of the Court and second the mental element i.e with the intention to defraud the plaintiff;

(2) Whether such circumstances exist is a question of fact that must be proved to the satisfaction of the Court. The proof may be made either by way of filing affidavits or by adducing proof in the regular hearing of the suit;

(3) That the Court would not be justified in issuing an order for attachment before judgment, or for security, merely because it thinks that no harm would be done thereby or that the defendant would not be prejudiced;

(4) That the affidavits in support of the contentions of the applicant, must not be vague, & must be properly verified. Where it is affirmed true to knowledge or information or belief, it must be stated as to which portion is true to knowledge, the source of information should be disclosed, & the grounds for belief should be stated;

(5) That a mere allegation that the defendant was selling off & his properties is not sufficient. Particulars must be stated;

(6) There is no rule that transactions before suit cannot be taken into consideration, but the object of attachment before judgment must be to prevent future transfer or alienation. In order to prove the intention part of the defendant, the normal rule of evidence is applicable;

(7) Where only a small portion of the property belonging to the defendant is being disposed of, no inference can be drawn in the absence of other circumstances that the alienation is necessarily to defraud or delay the plaintiff's claim;

(8) That the mere fact of transfer is not enough, since nobody can be prevented from dealing with his properties simply because a suit has been filed: There must be additional circumstances to show that the transfer is with an intention to delay or defeat the plaintiff's claim. It is open to the Court to look to the conduct of the parties immediately before suit, & to examine the surrounding circumstances, & to draw an inference as to whether the defendant is about to dispose of the property, & if so, with what intention. The Court is entitled to consider the nature of the claim & the defence put forward;

(9) The fact that the defendant is in insolvent circumstances or in acute financial embarrassment, is a relevant circumstance, but not by itself sufficient;

(10) That in the case of running businesses, the strictest caution is necessary & the mere fact that a business has been closed, or that its turnover has diminished, is not enough;

(11) Where however the defendant starts disposing of his properties one by one, immediately upon getting a notice of the plaintiff's claim, &/or where he had transferred the major portion of his properties shortly prior to the institution of the suit & was in an embarrassed financial condition, these were grounds from which an inference could be legitimately drawn that the object of the defendant was to delay and defeat the plaintiffs' claim;

(12) Mere removal of properties outside jurisdiction, is not enough, but where the defendant with notice of the plaintiffs' claim, suddenly begins removal of his properties outside the jurisdiction of the appropriate Court, & without any other satisfactory reason, an adverse inference may be drawn against the defendant. Where the removal is to a foreign country, the inference is greatly strengthened;

(13) The defendant in a suit is under no liability to take any special care in administering his affairs, simply because there is a claim pending against him. Mere neglect, or suffering execution by other creditors, is not a sufficient reason for an order under Order 38 of the Code;

(14) The sale of properties at a gross undervalue, or benami transfers, are always good indications of an intention to defeat the plaintiff's claim. The Court must however be very cautious about the evidence on these points & not rely on vague allegations.

These principles have oftenly been applied by civil courts in the aid of justice.

The Madras High Court in a matter reported as Renox Commercials Ltd Vs Inventa Technologies Pvt Ltd A.I.R, 2000 Mad. 213, has laid down seven guiding principles. Those guiding principles are mentioned in para 26 and said para 26 is as under :

(1)        That an order under Order 38, Rule 5 can be issued only if circumstances exist as are stated therein to the satisfaction of the Court.

(2)        That the Court would not be justified in issuing an order for attachment before judgment, or for security merely because it thinks that no harm would be done thereby or that the defendants would not be prejudiced.

(3)        That the affidavit in support of the contentions of the applicant should not be vague and it must be properly verified. Where it is affirmed true to knowledge or information, it must be stated as to which portion is true to knowledge and the source of information should be disclosed and the grounds for belief should be stated.

(4)        That a mere allegation that the defendant is selling off his properties is not sufficient. Particulars must be stated.

(5)        An order of attachment before judgment is a drastic remedy and the power has to be exercised with utmost care and caution, as it may be likely to ruin the reputation of the party against whom the power is exercised. As the Court must act with the utmost circumspection before issuing an order of attachment, the affidavit filed by the applicant should clearly establish that the defendant, with intent to obstruct or delay the execution of the decree that may be passed against him is about to dispose of the whole or any part of his property,

(6)        A mere mechanical repetition of the provisions in the Code or the language therein without any basic strata of truth underlying the allegation or vague and general allegations that the defendant is about to dispose of the property or to remove it beyond the jurisdiction of the Court, totally unsupported by particulars, would not be sufficient compliance with Order 38, Rule 5 of C.P.C.

(7)        An attachment before judgment is not a process to be adopted as a matter of course. The suit is yet to be tried and the defence of the defendant is yet to be tested. At the nebulous juncture, the relief which is extraordinary could be granted only if the conditions for its grant, as per the provisions of the Code, stand satisfied. This process is never meant as a lever for the plaintiff to coerce the defendant to come to terms. Hence utmost caution and circumspection should guide the Court."

What are borne out from the guidelines and approach of the courts in this regard is the fact that Order 38 Rule 5 is a provision purely discretionary and equitable. The court must take into consideration the attendant fact/ situation and form an opinion that the balance of convenience lies in favour of issuing the attachment.  An order of attachment before judgment has the most deleterious effect on the activities of the defendant. In the matter of issuing the attachment order, the court must be very much circumspect and only for asking the order should not be issued.

On a plain reading of Rule 5, it is very much clear that in any application under that Rule, the Plaintiff has to show:

a) that he has a prima facie case and he is likely to get a favourable decree against the defendant;

b) the defendant is either disposing of or about to dispose of his entire property or part of the same outside the jurisdiction of the court;

c)that disposal of his properties or removal of properties is done with an intent to defraud the execution of any decree which may be issued against him.

d) the points may be proved either by way of affidavit or by any other means.

                                                                        LAW:

(i)           In the case of Muruzakham Vs Ballarpur Industries Ltd  reported at 2002(4) 2002(3) Mh.L.J. 399, as the application filed by the plaintiff under Order 38, Rule 5 did not mention anything which would have shown that the defendant was about to dispose of the property owned by him nor shown that the defendant was about to remove the property from local limits of jurisdiction of Court, hence, the application was dismissed.

(ii)         The Supreme Court judgment in Raman Tech. & Process Engg. Co. & Anr. Vs. Solanki Traders, (2008) 2 SCC 302, as below:-

“5. The power under Order 38 Rule 5 CPC is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt. Any attempt by a plaintiff to utilise the provisions of Order 38 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged. Instances are not wanting where bloated and doubtful claims are realised by unscrupulous plaintiffs by obtaining orders of attachment before judgment and forcing the defendants for out-of-court settlements under threat of attachment.

6. A defendant is not debarred from dealing with his property merely because a suit is filed or about to be filed against him. Shifting of business from one premises to another premises or removal of machinery to another premises by itself is not a ground for granting attachment before judgment. A plaintiff should show, prima facie, that his claim is bona fide and valid and also satisfy the court that the defendant is about to remove or dispose of the whole or part of his property, with the intention of obstructing or delaying the execution of any decree that may be passed against him, before power is exercised under Order 38 Rule 5 CPC. Courts should also keep in view the principles relating to grant of attachment before judgment.

What is also significant that judicial dicta veers round to the view that the allegation of fraud is a subject matter of trial and no case under Order XXXVIII Rule 5 of Code of Civil Procedure was made out.

(iii)       In M/s. K. C. V. Airways Ltd. & Anr. Vs. Wg. Cor. R. K. Blaggana, AIR 1998 Delhi 70, a Division Bench of Delhi High Court has held that the power of the Court under Order XXXVIII Rule 5 of the CPC is an extraordinary remedy. Reference in this regard may be made to paragraph 8 of the judgment:

“8. Needless to say, that R. 5 of O. XXXVIII, CPC is an extra ordinary remedy and if the ingredients for invoking it are lacking in the application and the affidavit filed in support thereto attachment before judgment order cannot be ordered claim for attachment before judgment on the averments has been mainly set out in paras 7 and 8 reproduced above of the application in question and a bare reading thereof reveals, that it was not pleaded therein that the appellants with intent to obstruct or delay the execution of the decree that may be passed against them (a) are about to dispose of the whole or any part of the property, or (b) are about to remove the whole or any part of the property from the local limits of the jurisdiction of this Court. Affidavit filed along with the application contains no statement except an assertion that the respondent has gone through the application and the facts stated therein are correct to the best of his knowledge and information received. That be so, on the basis of the averments as they stand made in the application and the affidavit in question the appellant could not have been legally asked to furnish security.

CONCLUSION

The Order XXXVIII Rule 5 of Code of Civil procedure is a clear departure from conventional procedure as included in Civil Procedure Code and only when extra-ordinary and overwhelming circumstances existed and only if cogent and established reasons established that pursuant to the notice of the suit, the defendants are trying to remove the suit property from the jurisdiction of the court and the decree in such a circumstances, even if eventually passed may remain as a paper decree that the court may indulge in the process and even before the final judgment and during pendency of suit itself, necessary order of attachment of suit property could be passed. There are guidelines stipulated so that the provisions could be invoked in very apt case, but only in rare and exceptional circumstances. The Supreme Court has consistently observed that the provisions of Order XXXVIII Rule 5 of the CPC have to be used sparingly and that the plaintiff has to satisfy the Court that the defendant is seeking to remove or dispose of whole or part of his property with the intention of obstructing or delaying the execution of the decree that may be passed against him. Thus, what comes out is that in apt case or cases courts are not powerless in securing the interest of justice by order of attachment even before passing of judgment and decree, though, the adequate safeguards are prescribed by way of judicial pronouncements.    

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Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com