Monday, February 13, 2023

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 253rd 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 2nd  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 13th 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 7th December, 2020, allowed the appeal and took on record, all documents filed by the defendant in that case. The order dated 13th 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 6th  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

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