LAW ON REPOSSESSION OF LOANED VEHICLE BY BANK

 

 

LAW ON REPOSSESSION OF LOANED VEHICLE BY BANK

 

The offshoot of development is a growing need and a desire of meeting such needs. That propels people to avail money from other sources. Obviously, as there are often gaps between the cost of availing of or meeting needs on immediate basis and available income, therefore, receiving loan is opted for. Even to further the entrepreneur desire also, people crave for loan. The wheel of development is thus based on the lending system of bank or financial institutions. The loan for vehicle, for instance are commonly availed of. However, sometime default occurs in repayment of installments, thereby, necessitating the need of retrieving of vehicle for recovery of sums. As the instances of forcible repossession of vehicles without taking recourse to law are found rampant on the part of financier, therefore, it was felt necessary that rules should be framed in accordance with law for such retrieval of loaned vehicle so that chaos is not caused and norms of a welfare society are not tinkered with. Once, vehicle is possessed by the financier, there are further rules for auction of the vehicles for receiving better value of the vehicles so retrieved.

Periodically, judgments are pronounced by courts and there has been Supreme Court guidelines in this regard. The High Courts have also released guidelines in sync with Supreme Court judgments. For instance, recently, in a matter captioned as M/S ICICI BANK LIMITED  versus NAVEEN KALKAL bearing no. CM (M) 1821/2019, the hon’ble Delhi High court has laid down guidelines based on earlier judicial precedents. To put it in perspective, in the above case, the ICICI bank had sought permission from the court which was under the custody of the bank for sell. The hearing in the trial court was getting adjourned, thus, the bank had to approach Delhi High Court. The application under Order LX Rule 1 of CPC was filed for appointment of Receiver for the purpose of sale. The possession of vehicle was received by the bank thereafter. The application was filed in the backdrop of respondent defaulting on repayment of loan. Pertinently, the bank had filed application under Order XXXIX Rule 6 of Code of Civil Procedure as well for, seeking sale of hypothecated vehicle.

FACTUAL MATRIX

To buttress the entire issue further, there was an agreement between the bank and respondent for financing of the vehicle. The recovery suit was filed by the bank along with an application under Order XL Rule 1 CPC, for appointment of a Receiver for the hypothecated vehicle, with power to sell and Receiver was appointed and the bank official had taken possession of the vehicle. Since the Defendant continued to not appear before the trial Court, hence, application under Order XXXIX Rule 6 CPC came to be filed by the Bank seeking permission to sell the vehicle. The application was not being heard and it was simply being adjourned.

Earlier, in M/s. ICICI Bank Ltd. v. Kamal Kumar Garewal, [FAO 49/2015, decided on 29th May, 2015], a ld. Single Judge of Delhi High Court has already passed directions as to the manner in which such cases are to be dealt with, especially in respect of loan transactions, where there is a default in payment. Despite guidelines, having been laid down, it was alleged that the Trial Courts did not follow the same and hearings were delayed. Considering that the value of vehicles is likely to deteriorate as time passes on and also considering that there is a steep maintenance cost on the Bank, for preservation of the vehicles, a ld. Single Judge of Delhi High Court under similar circumstances had passed the directions in M/s ICICI Bank Ltd.Vs kamal Garewal  (supra) and the same was reinforced in M/S ICICI BANK LIMITED  versus NAVEEN KALKAL which shall be dealt with.  

In view of the above guidelines which shall be delineated little later , it was held in ICICI Bank Vs Naveen (Supra) that the process and procedure for retrieval of vehicle and roles of Receiver has to be in sync with the directions for dealing with the vehicles and vehicle loans. In general, whenever the Court finds that the availing of the loan itself is admitted, either due to the payment of some installments or on the basis of documents, the Court can appoint a Receiver for taking the possession of the vehicle. The vehicle can be taken either from address given in the loan application or from any other location where it may be found. The directions given in above paragraphs can be prescribed as a general procedure to be followed for taking possession of the vehicle, precautions to be taken during the same, preservation of evidence as to the status of the vehicle and maintenance of the safe custody of the vehicle. The Court’s judgment above has also made adequate provisions for the payments by the Defendant, even after the possession is taken. If the payments are not made, a proper course of action would be permission for sale by public auction.

 

The Delhi High Court has thus held that procedure laid down in M/s ICICI Bank Ltd. (supra), thus, ought to be followed generally by the Trial Courts while dealing with the Banks’ suits, which involve vehicle loan. The preservation of the vehicle initially and thereafter permitting the public auction is essential in order to ensure that the value of the vehicle is not eroded and the Bank does not incur the additional expenses, maintenance for parking space etc. Thus, whenever the application for appointment of Receiver or for permission for sale are moved, the Trial Court shall consider the same expeditiously.

Under these circumstances, it was directed that the Bank would be entitled to sell the vehicle through a proper public auction with written notice to the Defendant. The notice would be served by way of speed post at the known address(es) of the Defendant, as also the location from where the possession of the vehicle was taken. The Defendant was also permitted to participate in the auction, in the manner explained in the judgment in M/s ICICI Bank Ltd. (supra). Once the auction has taken place, strictly in terms of the said judgment, a report shall be filed before the Trial Court for further proceedings.

It was also directed by the Delhi High Court the above order along with the judgment in M/s ICICI Bank Ltd. (supra) be circulated to all the District Judges, for proper circulation amongst all the Commercial Courts Judges and Civil Judges, to enable the courts to follow the broad procedure laid down therein. In cases of this nature, since public money is involved, all steps ought to be taken to ensure that recoveries to the extent possible, ought to be enabled in accordance with law.

In Icici Bank Ltd vs Kamal Kumar Garewal (Supra)  the Delhi High Court had dealt with the matter. In that case the learned Trial Court had issued the summons of the suit and notice of the application under Order XL Rule 1 of the Code of Civil Procedure to the respondent. The grievance of appellant before the High Court was that the learned Trial Court has not appointed the receiver to take over the possession of the vehicle at the time of issuing the summons to the respondent. The loan was sanctioned to the respondent who executed the following documents in favour of the appellant :-

(a) Credit facility application form along with the standard terms and conditions;

(b) Deed of hypothecation; and

(c) Irrevocable power of attorney.

 The respondent agreed to repay the loan with interest @ 12.50 % per annum in equal monthly installments. The loan was disbursed and dealer had delivered the vehicle to the respondent. After payment of first EMI, the respondent committed default for repayment of 46 EMIs. Vide a Notice dated 03^rd December, 2014, the appellant recalled the loan and called upon the respondent to the pay total outstanding amount. The respondent did not comply with the aforesaid notice dated 03^rd December, 2015 and on 27th January, 2015, the appellant instituted a suit for recovery of Rs.8,08,491.09 along with an application under Order XL Rule 1 of the Code of Civil Procedure for appointment of a Receiver for the hypothecated vehicle. On 27th January, 2015, the learned Trial court issued summons of the suit and notice of the application to the respondent returnable on 17^th March, 2015. However, the learned Trial Court did not appoint the Receiver ex parte to take over the possession of the vehicle in question.

The outstanding of the respondent is Rs. 8,55,685.09 and the appellant had filed an application under Order XL Rule 1 of the Code of Civil Procedure for appointment of a receiver to take over the possession of the vehicle before the Trial Court and the appellant pressed that application at the time of issuing of summons. The respondent was alleged to be a chronic defaulter, who has defaulted in the payment of the EMIs to the appellant bank and it was p[rayed that if the ex parte order appointing the receiver is not passed, it would be very difficult for the appellant to recover the vehicle from the respondent. It was further prayed that after the receipt of the summons, the respondent was likely to remove the vehicle from his residence/office to make it difficult, if not impossible to trace the vehicle. It is further submitted that the delay in appointment of the receiver would also result in depreciation of the value of the vehicle. It was further contended that the delay in appointing the receiver has caused prejudice to the appellant, who became entitled to take over the vehicle in terms of the agreement at the time of recalling the loan. No reasons whatsoever was given by ld trial court for declining the appellant's prayer for appointment of an ex parte Receiver.

GUIDELINES FOR RETRIEVAL OF VEHICLES

The Delhi High Court on careful consideration of the matter has held that the appellant had made out a case for ex parte appointment of a Receiver. The appeal was accordingly allowed and representative of the appellant bank was appointed as Receiver to take the possession of Ritz Car. The directions to the Receiver by the hon’ble Delhi High Court in a matter captioned as M/S ICICI BANK LIMITED  versus NAVEEN KALKAL (supra) in sync with earlier judicial precedents are as under:-

(i)          The Receiver was directed to take over the possession of the vehicle from the respondent at the address(es) given in the loan application.

(ii)        If the vehicle was not available at the said address(es), the receiver shall be at liberty to recover the vehicle wherever found. However, the receiver shall not stop a running vehicle on the road to forcibly take out the driver to take the possession of the vehicle.

(iii)       The Receiver shall also not make any attempt to block the passage of a car to bring it to a halt to take its possession. The receiver shall avoid taking the possession of the vehicle if the vehicle is occupied by a woman who is not accompanied by a male member or an elderly, infirm or physically/mentally challenged person. In such cases, the receiver shall take the possession of the vehicle from the borrower's residence.

(iv)       The Receiver shall be at liberty to take the assistance of the local police, if required, for taking over possession of the vehicle. The concerned SHO shall provide assistance to the receiver as and when requested.

(v)         The receiver shall also ensure that the repossession of the vehicle does not result any breach of the peace. In the event of any breach of peace by the person occupying the vehicle, the receiver shall not proceed without assistance of police.

(vi)        At the time of taking the custody of the vehicle, the receiver shall take the photographs of the vehicle from different angles along with the person(s) occupying the vehicle as well as the place of taking over the possession.

(vii)      The Receiver shall prepare an inventory of the articles/accessories found in the vehicle and shall furnish the copy of the inventory to the person from whom the possession is taken.

(viii)    After taking the vehicle in possession, the receiver shall keep the vehicle in safe custody.

(ix)        If the respondent makes payment of the outstanding installments as on date of possession, the Receiver shall release the vehicle in question to the respondent on superdari subject to an undertaking by the respondent to the Receiver for regular repayment of future monthly installments till the expiry of the tenure and a declaration not to part with the vehicle or create third party interest in the vehicle until the entire amount is paid.

(x)         If the respondent is not in a position to clear the entire outstanding installments, the Receiver shall give him another opportunity to pay the outstanding installments within 30 days of taking over the possession of the vehicle and in case the respondent makes the payment the outstanding installments within the said period, the Receiver shall release the vehicle to the respondent subject to an undertaking as aforementioned.

(xi)       If the respondent does not make the payment of the outstanding amount to the appellant bank within 60 days, the Receiver, with the prior permission of the Trial Court, would be authorised to sell the vehicle in question in a public auction with prior written notice (to be sent by Speed Post AD) of the date of auction to the respondent at the address(es) mentioned in the loan agreement or the address from where the vehicle is taken into possession so that the respondent may also be able to participate in the auction to enable the appellant to fetch maximum amount from the sale of the vehicle.

(xii)   Whenever such an application for permission to auction the vehicle is made, the Trial Court shall adjudicate the same within 30 days of filing of the application. The Receiver shall carry out video recording of the auction proceedings and shall submit the same before the Trial Court along with his final report.

(xiii)  The receiver shall submit his first report before the Trial Court within 10 days of taking the custody of the vehicle along with the photographs and inventory mentioned above. The final report shall be submitted before the Trial Court within 10 days of the public auction along with the proceedings for public auction and video recording of the public auction.

CONCLUSION

The directions and guidelines in respect of retrieving the hypothecated vehicle in the event of loan default are now categorical and it will be unlawful for Police or a receiver so appointed to act contrary to the guidelines laid down by the courts. The guidelines are aimed at to enforce rule of law and to dissuade the Financial Institutions/Banker from adopting extra-legal manner and mandates the authorities to act as per law and strictly in sync with the guidelines. A bank or financial institutions approaches courts of law for loan default in order to retrieve the vehicle and sell that in open public auction, but the rights of the bank shall not be unqualified and the recourse to law shall have to be taken in sync with the guidelines as narrated above and rights of the defaulter shall also have to be accorded due consideration, so that undue harm is not caused to defaulter. In case the loan agreement contains arbitration clause, then, the Bank or Financial Institutions shall have to approach civil courts u/s 9 of Arbitration & Conciliation Act 1996 and interim measures can be passed by the courts and the further order, being arbitrable can be passed by Arbitrator so appointed in terms of the provision of the agreement between the parties. However, whether arbitration agreement existed or not or whether courts of law alone shall have the jurisdiction in absence of arbitration agreement, the fact remains that guidelines shall have to be followed for retrieval and disposal of hypothecated vehicles.

                                               -----------

                                       Anil K Khaware

                                                      Founder & Senior Associate

Societylawandjustice.com

COMMERCIAL COURTS ACT 2015: APPLICABILITY OF ORDER 7 RULE 14 OF CPC

 

COMMERCIAL COURTS ACT 2015: APPLICABILITY OF ORDER 7 RULE 14 OF CPC

 

The Law Commission of India, in its 253^rd Report had recommended for the establishment of Commercial courts, Commercial Division and Commercials Appellate Divisions in the High Court for disposal of commercial disputes of specified value. The Act has also amended the provisions of Code of Civil Procedure 1908.

Whether in terms of Commercial Courts Act 2015, the application under Order VII Rule 14 of Code of Civil Procedure could be filed for seeking to file additional documents and whether such an application for seeking filing of additional documents could be permitted within the meaning of Commercial Courts Act 2015 is a topic of present deliberation. It is worthwhile to mention that Commercials Courts Act 2015 is enacted with a view to provide fillip to the commercial disputes resolution and to avoid procrastination and therefore, to avoid any such unnecessary delay the said Act is in place. There are specific provisions prescribed under the Commercials Courts Act 2015 and certain provisions of Code of Civil Procedure are specifically excluded as per the Commercial Courts Act 2015, with the avowed object of seeking expedition of disputes resolution. The Commercial Courts Act 2015 was further amended in the name and style of The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act 2018 (Act 28 of 2018).

  

Whether the additional documents could be produced and placed on record subsequent to filing of written statement in a commercial suit by the defendant or any party under the Commercial Courts Act 2015,and after filing statement of truth under, and if so what shall be the mode and manner of that? In the said context the hon’ble Delhi High Court has recently dealt with the issue in a matter captioned as BELA CREATION PVT LTD versus ANUJ TEXTILES and bearing no. CM(M) 405/2022. The petitioner had filed a written statement and a counter claim in response to the suit of the respondents, accompanied by a statement of truth. This was followed by two affidavits of witnesses whose evidence, the petitioner desired to lead, in support of the written statement as well as the counter claim. Additionally, as stated, the petitioner also filed an application under Order VII Rule 14(3) of the CPC to take on record certain additional documents.

 

Rule 14 (3) reads as under:

 

 14. Production of document on which plaintiff sues or relies. –

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(3) A document which ought to be produced in Court by the plaintiff when the plaint is presented, or to be entered in the list to be added or annexed to the plaint but is not produced or entered accordingly, shall not, without the leave of the Court, be received in evidence on his behalf at the hearing of the suit.

 

The petitioner had prayed for permission to take on record the invoices sought to be introduced under the application under Order VII Rule 14. No invoices, though,  was reflected in the list of documents filed with the written statement and counter claim and that, though there was a reference to the aforesaid invoices, the invoices themselves were not annexed thereto. The invoices which thus being sought to be placed on record, it was contended, were reflected in the GST returns which were already filed by the petitioner as well as in the ledger account of the respondent.

 

It was contended that additional documents could not be placed on record in view of the fact that the law firm which was prosecuting the case on behalf of the petitioner (defendant) had left the law firm during COVID and that the main Counsel of the law firm was not aware of the fact that the original invoices had not been filed. It was only during the cross examination of PW1 on 2^nd  December, 2021, the fact of non-filing of the invoices came to light. In as much as the invoices found reference in the GST returns already filed by the petitioner, it was sought to be contended that the prayer for permission to file the invoices was required to be allowed.

 

The learned District Commercial Court, while rejecting the aforesaid application under Order VII Rule 14(3) of the CPC, noted the fact that, in para 6 of the statement of truth accompanying the written statement the director of the petitioner had solemnly affirmed to having filed all documents in his possession, power and control and that he had no other documents in his power or possession. That being so, in the absence of any averment that the invoices which were being sought to be introduced under cover of the application under Order VII Rule 14(3) were not in the power or possession of the petitioner at the time of filing the statement of truth, the learned Commercial Court held that the petitioner could not, at a belated stage, seek to introduce the said documents.

 

The hon’ble Delhi High Court has relied upon a Supreme Court judgment on an identical situation in Sudhir Kumar @ S. Baliyan v. Vinay Kumar G.B 2021 SCC OnLine SC 734, that in a commercial suit filed by the appellant Sudhir Kumar before the learned Commercial Court, Sudhir Kumar had moved an application under Order VII Rule 14(3) of the CPC, to place certain additional documents on record. The learned Commercial Court dismissed the application, and the petitioned under Article 227 of the Constitution of India was also dismissed by the high court, and, the petitioner having failed in the petition, moved the Supreme Court under Article 136 of the Constitution of India.

 

Before going further it may be apt to reproduce provisions of Order XI and Rules thereunder. The Order XI is reproduced as under:

 

DISCLOSURE, DISCOVERY AND INSPECTION OF DOCUMENTS IN SUITS BEFORE THE COMMERCIAL DIVISION OF A HIGH COURT OR COMMERCIAL COURT

 

Order 11 Rule 1 of CPC is as under:

 

1. Disclosure and discovery of documents. –

(1) Plaintiff shall file a list of all documents and photocopies of all documents, in its power, possession, control or custody, pertaining to the suit, along with the plaint, including:

(a) Documents referred to and relied on by the plaintiff in the plaint;

(b) Documents relating to any matter in question in the proceedings, in the power, possession, control or custody of the plaintiff, as on the date of filing the plaint, irrespective of whether the same is in support of or adverse to the plaintiffs case;

(c) nothing in this rule shall apply to documents produced by plaintiffs and relevant only –

(i) for the cross-examination of the defendant's witnesses, or

(ii) in answer to any case setup by the defendant subsequent to the filing of the plaint, or

(iii) handed over to a witness merely to refresh his memory.

(2) The list of documents filed with the plaint shall specify whether the documents in the power, possession, control or custody of the plaintiff are originals, office copies or photocopies and the list shall also set out in brief, details of parties to each document, mode of execution, issuance or receipt and line of custody of each document.

(3) The plaint shall contain a declaration on oath from the plaintiff that all documents in the power, possession, control or custody of the plaintiff, pertaining to the facts and circumstances of the proceedings initiated by him have been disclosed and copies thereof annexed with the plaint, and that the plaintiff does not have any other documents in its power, possession, control or custody.

Explanation.—A declaration on oath under this sub-rule shall be contained in the Statement of Truth as set out in the Appendix.

(4) In case of urgent filings, the plaintiff may seek leave to rely on additional documents, as part of the above declaration on oath and subject to grant of such leave by court, the plaintiff shall file such additional documents in court, within thirty days of filing the suit, along with a declaration on oath that the plaintiff has produced all documents in its power, possession, control or custody, pertaining to the facts and circumstances of the proceedings initiated by the plaintiff and that the plaintiff does not have any other documents, in its power, possession, control or custody.

(5) The plaintiff shall not be allowed to rely on documents, which were in the plaintiff's power, possession, control or custody and not disclosed along with plaint or within the extended period set out above, save and except by leave of court and such leave shall be granted only upon the plaintiff establishing reasonable cause for non-disclosure along with the plaint.

(6) The plaint shall set out details of documents, which the plaintiff believes to be in the power, possession, control or custody of the defendant and which the plaintiff wishes to rely upon and seek leave for production thereof by the said defendant.

(7) The defendant shall file a list of all documents and photocopies of all documents, in its power, possession, control or custody, pertaining to the suit, along with the written statement or with its counter-claim if any, including -

(a) the documents referred to and relied on by the defendant in the written statement;

(b) the documents relating to any matter in question in the proceeding in the power, possession, control or custody of the defendant, irrespective of whether the same is in support of or adverse to the defendant's defence;

(c) nothing in this rule shall apply to documents produced by the defendants and relevant only –

(i) for the cross-examination of the plaintiff's witnesses,

(ii) in answer to any case setup by the plaintiff subsequent to the filing of the plaint, or

(iii) handed over to a witness merely to refresh his memory.

(8) The list of documents filed with the written statement or counter-claim shall specify whether the documents, in the power, possession, control or custody of the defendant, are originals, office copies or photocopies and the list shall also set out in brief, details of parties to each document being produced by the defendant, mode of execution, issuance or receipt and line of custody of each document;

(9) The written statement or counter-claim shall contain a declaration on oath made by the deponent that all documents in the power, possession, control or custody of the defendant, save and except for those set out in sub-rule (7)(c)(iii) pertaining to the facts and circumstances of the proceedings initiated by the plaintiff or in the counter-claim, have been disclosed and copies thereof annexed with the written statement or counter-claim and that the defendant does not have in its power, possession, control or custody, any other documents;

(10) Save and except for sub-rule (7)(c)(iii), defendant shall not be allowed to rely on documents, which were in the defendant's power, possession, control or custody and not disclosed along with the written statement or counter-claim, save and except by leave of court and such leave shall be granted only upon the defendant establishing reasonable cause for non-disclosure along with the written statement or counter-claim;

(11) The written statement or counter-claim shall set out details of documents in the power, possession, control or custody of the plaintiff, which the defendant wishes to rely upon and which have not been disclosed with the plaint, and call upon the plaintiff to produce the same;

(12) Duty to disclose documents, which have come to the notice of a party, shall continue till disposal of the suit.

 

As required by Order XI Rule 1 of the CPC, as amended by the Commercial Courts Act, 2015 the suit should be accompanied by a list of all documents and photocopies of all documents in the power, possession, control and custody of petitioner Sudhir, pertaining to the suit. Thereafter, the petitioner sought to introduce certain additional documents, principally invoices, as part of his evidence, for which purpose he moved an application under Order VII Rule 14(3) of the CPC, seeking leave of the Court to do so. This application was rejected by the learned Commercial Court on 13^th November, 2019. Thereafter, his written statement in response to the suit was filed He did not, however, file, with the written statement, the list of documents, accompanied by the documents, on which he sought to place reliance and which were in his power, possession, control or custody, as required by Order XI Rule 1(7). He, however, subsequently moved an application under Order XI Rule 1(10), to place the documents on record. The application was rejected, in part, by the learned Commercial Court, against which appeal was preferred before high Court and High court vide order dated 7^th December, 2020, allowed the appeal and took on record, all documents filed by the defendant in that case. The order dated 13^th November, 2019, whereby the learned Commercial Court had rejected the application filed by him under Order VII Rule 14 to place additional documents on record. The said petition was dismissed by the high court on 6^th  April, 2021, against which petition was preferred before  the Supreme Court under Article 136 of the Constitution of India.

 

Order VII Rule 14 of CPC has no applicability in Commercial suits

  

The Supreme Court observed, at the outset, that, by operation of Order XI Rule 7 of the CPC, as amended by the Commercial Courts Act, Order VII Rule 14 of the CPC had no application to commercial suits. Any application, for introduction of additional documents in a commercial suit, it was observed, was required to be filed under Order XI Rule 1(5) of the CPC (where the application was moved by the plaintiff) or under Order XI Rule 1(10) of the CPC (where the application was moved by the defendant), and not under Order VII Rule 14 of CPC.

It is no res integra, though that if the wrong provision was invoked in his application for placing additional documents on record the same cannot be entertained. As such an application could have been treated as moved under Order XI Rule 1(5) and the Supreme Court treated the application as one having been filed under the said provision. The order XI Rule 7 of CPC are reproduced as follows:

 

7. Certain provisions of the Code of Civil Procedure, 1908 not to apply. – For avoidance of doubt, it is hereby clarified that Order XIII, Rule 1, Order VII, Rule 14 and Order VIII, Rule 1-A the Code of Civil Procedure, 1908 (5 of 1908) shall not apply to suits or applications before the Commercial Divisions of High Court or commercial courts.

 

ANALYSIS

It was thus held in BELA CREATION PVT LTD (Supra) that the aforesaid dicta of Sudhir (Supra) applies equally in this case. The present petitioner could not have filed the application for additional documents under Order VII Rule 14 of the CPC. Such an application could, however, have been maintained under Order XI Rule 1.

Following the example set by the Supreme Court, therefore the hon’ble High Court in Bela Creations (Supra) treated the application as having been filed under Order XI Rule 1(10) of the CPC, as amended by the Commercial Courts Act. Even otherwise, the high court has held that it is a trite position, in law, that the mere citing of a wrong provision, in the application, would not be fatal, so long as the application would lie under another provision, just as exercise of power under a wrong provision would not imperil such exercise, where the power exists, albeit elsewhere. Reference in this regard may be have to Vijaya Bank v. Shyamal Kumar Lodh (2010) 7SCC 635 , N. Mani v. Sangeetha Theatre (2004) 12 SCC 78  and Pruthviraj Sinh v. Jayesh Kumar(2019) 9 DCC 533. What matters, jurisprudentially, is whether the power exists, not whether the power is said to exist.

Applying the above principles to the facts before it, the Supreme Court has held thus:

“30. Order XI Rule 1(5) further provides that the plaintiff shall not be allowed to rely on documents, which were in the plaintiff's power, possession, control or custody and not disclosed along with plaint or within the extended period set out above, save and except by leave of Court and such leave shall be granted only upon the plaintiff establishing reasonable cause for non disclosure along with the plaint. Therefore on combined reading of Order XI Rule 1(4) read with Order XI Rule 1(5), it emerges that (i) in case of urgent filings the plaintiff may seek leave to rely on additional documents; (ii) within thirty days of filing of the suit; (iii) making out a reasonable cause for non disclosure along with plaint.

Therefore, a further thirty days time is provided to the plaintiff to place on record or file such additional documents in court and a declaration on oath is required to be filed by the plaintiff as was required as per Order XI Rule 1(3) if for any reasonable cause for non disclosure along with the plaint, the documents, which were in the plaintiff's power, possession, control or custody and not disclosed along with plaint. Therefore plaintiff has to satisfy and establish a reasonable cause for non disclosure along with plaint. However, at the same time, the requirement of establishing the reasonable cause for non disclosure of the documents along with the plaint shall not be applicable if it is averred and it is the case of the plaintiff that those documents have been found subsequently and in fact were not in the plaintiff's power, possession, control or custody at the time when the plaint was filed. Therefore, Order XI Rule 1(4) and Order XI Rule 1(5) applicable to the commercial suit shall be applicable only with respect to the documents which were in plaintiff's power, possession, control or custody and not disclosed along with plaint. Therefore, the rigour of establishing the reasonable cause in non disclosure along with plaint may not arise in the case where the additional documents sought to be produced/relied upon are discovered subsequent to the filing of the plaint.

 

In the application, it was specifically mentioned that so far as the invoices are concerned, the same were not in its possession at the time of the filing of the plaint and so far as the other documents are concerned they were not filed due to they being voluminous. Therefore, so far as the invoices sought to be relied on/produced as additional documents ought to have been permitted to be relied on/produced as it was specifically asserted that they were not in his possession at the time of filing of the plaint/suit.

 

Even the reason given by the learned Commercial Court that the invoices being suspicious and therefore not granting leave to produce the said invoices cannot be accepted. At the stage of granting leave to place on record additional documents the court is not required to consider the genuineness of the documents/additional documents, the stage at which genuineness of the documents to be considered during the trial and/or even at the stage of deciding the application under Order XXXIX Rule 1 that too while considering prima facie case. Therefore, the learned Commercial Court ought to have granted leave to the plaintiff to rely on/produce the invoices as mentioned in the application as additional documents.

So far as the other documents sought to be relied on/produced as additional documents other than the invoices are concerned the same stands on different footing. It is not disputed and in fact it was specifically admitted and so stated in the application that those additional documents other than the invoices were in their possession but not produced being voluminous and that the suit was filed urgently. However, it is to be noted that when the second suit was filed, it cannot be said to be urgent filing of the suit for injunction, as the first suit was filed in the month of October, 2018 and there was an ex parte ad interim injunction vide order dated 29.10.2018 and thereafter plaintiff withdrew the said first suit on 27.07.2019 with liberty to file a fresh suit as per the Commercial Courts Act and the second suit came to be filed on 31.08.2019 after period of one month of the withdrawal of first suit. Therefore the case on behalf of the plaintiff that when the second suit was filed, it was urgently filed therefore, the additional documents sought to be relied upon other than the invoices were not filed as the same were voluminous cannot be accepted. And therefore as such Order XI Rule 1(4) shall not be applicable, though the application was filed within thirty days of filing of the second suit. While seeking leave of the court to rely on documents, which were in his power, possession, control or custody and not disclosed along with plaint or within the extended period set out in Order XI Rule 1(4), the plaintiff has to establish the reasonable cause for non disclosure along with plaint.”

Thus, the Supreme Court divided the additional documents, that Sudhir (Supra) desired to bring on record, into two categories. The first related to invoices regarding which there was a specific assertion, in the plaint filed by Sudhir, that they were not in his possession at the time of filing of the plaint. The learned Commercial Court, it was noticed, had rejected the application to bring the said documents on record on the ground that the invoices were suspicious. The Supreme Court held that, at the stage of deciding of an application under Order XI Rule 1, to bring additional documents on record, the Court could not concern itself with the genuineness or the veracity of the documents. In as much as there was a specific assertion, in the plaint, that the invoices were not in the power, possession, control or custody of Sudhir at the time of filing of the plaint, the Supreme Court held that the learned Commercial Court ought to have allowed the documents to be brought on record.

The second category of documents, however, constituted invoices which were admitted, by Sudhir, in his application, to have been in his possession at the time of filing of the plaint. The justification cited for producing the documents at a later stage was that they were voluminous, and that there was urgency in filing the plaint. On facts, the Supreme Court found that the ground of urgency was not borne out. As the invoices were within the possession of Sudhir at the time of filing of the plaint, and the ground of urgency in filing the plaint, cited as the justification for not filing the said invoices along with the plaint, was found to be bereft of merit, the Supreme Court upheld the decision not to allow the said invoices to be taken on record.

So far as in Bela Creations (Supra) is concerned the application under Order VII Rule 14 of the CPC, filed by the petitioner contained the following averments to justify the prayer for taking on record the invoices sought to be introduced under the application:

(i). That the counter claimant submitted that copy of invoices, which was not filed at the time of written statement as well as counter claimant but the counter claimant had filed the GST Return along with Ledger account in which all invoices has already entered.

(ii) That earlier the aforesaid cases had been handled by the associate member of law firm but during the Covid time, the said associate had left out the firm and so he cannot filed the aforesaid documents.

(iv) That in the most of the proceedings conducted through Video conferencing he was not aware that the original invoices, which is not in the record because the invoices is already filed in the record of the law firm file,  but at the time of cross-examination of plaintiff it came to light that part court fee on their claim amount was filed and then he came to know that the aforesaid invoices were not filled in judicial record.

(v) That the  brother of main counsel during covid 19 had to attend to his brother and associate member as he suffered from acute problem (covid 19).

It was submitted that the above invoices is already recorded in the GST return/document as well as Ledger statement had filed therefore it is not a new document and view of the pandemic it has been not filed by the Counter claimant. The counter claimant therefore wanted to file aforesaid document (27 invoices)

 

What constitutes “Reasonable cause”

It s held that where Counsel represent parties, Counsel have a bounden duty to ensure that pleadings, filed before a Court, are intelligible. Even while acknowledging that the invoices, the non-filing with the Written Statement of which the application of the petitioner seeks to justify, the ground urged is that that, though the invoices were on the record of the file with the law firm which had been retained by the petitioner, the earlier Counsel who was handling the case had not filed the invoices in Court. By no stretch of imagination can such a ground be treated as sufficient to justify non-filing of the invoices along with the written statement.

The learned Commercial Court correctly held, the written statement and counter-plaint were accompanied by a Statement of Truth, in which it was specifically stated thus:

“6. I say that all documents and the power, possession, control or custody, pertaining to the facts and circumstances of the proceedings initiated by the defendant company has been disclosed and copies thereof next with the list of documents filed with the written statement/counter claim, and that the defendant does not have any other documents in its power, possession and control or custody.”

In the absence of any averment to the effect that the aforesaid declaration, contained in the Statement of Truth accompanying the written statement and counter-plaint filed by the petitioner, was incorrect, the learned Commercial Court was justified in holding that additional documents, which were in the custody of the petitioner at the time of filing the written statement, could not be permitted to be introduced at a later stage. It is further held that “Reasonable cause”, within the meaning of Order XI Rule 1(10) of the CPC, as amended by the Commercial Courts Act, cannot extend to negligence in filing of documents before the Court. “Reasonable cause”, necessarily, must refer to a cause which was outside the control of the petitioner, and which prevented the petitioner from filing the concerned documents along with the written statement.

          A perspective of Article 227 of Constitution of India

 

Thus, the order of learned Commercial Court in Bela Creations (Supra) not to allow the placing of additional documents by the petitioner, on record, cannot be faulted and hence the high court did not interfere therewith. It is held that the peripheries of the jurisdiction vested in the High Court under Article 227 of the Constitution of India are well defined and the high court does not sit in appeal or revision over the decision of the court commercial courts below. The high court cannot in legitimate exercise of its power under Article 227 of Constitution of India and deal with the litigation pending before the court below in a manner different from the manner in which the court below has chosen to deal with it, unless, the manner in which the court below has dealt with the situation calls for supervisory correction.

As per the Article 227 court supervises; it does not monitor. One may refer, in this context, with advantage, to the judgments in Estralla Rubber v. Dass Estate (P) Ltd. (2001) 8 SCC 97, Garment Craft v. Prakash Chand Goel 2022 SCC OnLine SC 29 and Puri Investments v. Young Friends & Co. 2022 SCC OnLine SC 283, and Lucina Land Development Ltd. v. Union of India 2022 SCC OnLine Del 1274 

 

                                        CONCLUSION

The high court has thus held in Bela Creations (Supra) that the impugned decision of the learned Commercial Court is entirely in sync with Order XI Rule 1(10) of the CPC as introduced by the Commercial Courts Act 2015 and the recitals contained in the statement of truth filed by the petitioner with the written statement/counter claim. No error of jurisdiction or other error warranting supervisory correction, in exercise of Article 227 jurisdiction of the High Court, can be said to exist.  The petition was accordingly rejected in limine. It thus follows that filing of additional set of documents even before framing of issue shall not entail as a matter of right and the same set of documents can only be placed on record in a suit under the Commercial Courts Act 2015, if the said document/s was not in power and possession of a party to the lis and subsequently, the same was discovered or said to exist. At that stage the genuineness of such documents sought to be placed on record and its veracity is not to be ascertained as all such matter or documents shall have to be proved during trial in accordance with law. The provision as contained in Order VII Rule 14 of Code of Civil Procedure shall not apply in a commercial suit filed under the Commercial Courts Act 2015. The rigour and prescription of filing documents in the commercials suits shall have to be on the basis of amended provisions of Order XI Rules 1,5,7,10 of CPC as made applicable in the commercial suits. Thus, in a conventional and ritualistic way and /or as per provisions of Order VII Rule 14 of CPC or as per Order 13 of CPC no documents can be placed on record at later stage in Commercial suits filed under the provisions of Commercial Courts Act 2015. 

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                                                  Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com