Commercial Courts- Delay in preferring appeal-Whether could be
condoned?
If
the delay in filing written statement also cannot be condoned in all
circumstances
The
Supreme Court has dealt with the aforesaid aspect in a matter captioned ad as M/s. Anvita Auto Tech Works Pvt. Ltd. v
M/s. Aroush Motors 2025 INSC 1202. The Supreme Court has deliberated inter
alia on the failure to file a written statement within the time stipulated
under Rule 1(1) of Order VIII Code of Civil Procedure, 1908 (CPC) and whether
the right to cross examination could be denied to a defendant, in case, the
written statement was not filed within stipulated time, within the terms of
Commercial Courts Act 2015 ( as amended and up to date) and hence, the written statement was struck
off from the record. It is also
discussed if in all cases, the time limit of 120 days in filing written
statement is sacrosanct or any exception could be carved out.
The
Supreme Court at the very outset had reiterated the words of the Hon’ble
Justice V.R. Krishna Iyer:
“Procedural
law is not to be a tyrant but a servant, not an obstruction but an aid to
justice. It is the handmaid of justice and not its mistress”
It
was thus observed, that, the object of the procedural rules is to advance the
cause of justice and not to thwart it, and when the rigid adherence to
technicalities of procedure causes injustice, courts have to come to the rescue
by adopting a liberal approach. It was further observed that the courts cannot
countenance a situation where substantial justice is sacrificed, at the altar
of procedural rigidity. Where substantial justice is at stake, technicalities
must give way to ensure that the litigant is afforded sufficient opportunity to
defend. According to the Supreme Court the controversy of the present matter M/s
Anvita Auto Tech (Supra) must be tested on the said principle.
To
set out the facts the order dated 20.05.2025 in Commercial Appeal No. 19 of
2023 of Karnataka High Court was
challenged by the appellant, which has affirmed the Judgement and decree dated
15.11.2022 passed by the Additional City Civil & Sessions Judge (Exclusive
Commercial Court) in Original Commercial Suit No. 372 of 2021 filed by the
Respondent No. 1-M/s. Aroush Motors for recovery of monies.
CHRONOLOGY
|
S.N |
Stage
of Commercial Suit (Com (OS No. 372/2021) |
Date |
|
1. |
Institution
of suit before the Commercial Court |
18.06.2021 |
|
2. |
Summons
issued to defendant no.1 and 2 |
23.06.2021 |
|
3. |
Summon
served upon defendant no.1 |
17.07.2021 |
|
4. |
Defendant
no.1 entered appearance through counsel |
07.08.2021 |
|
5. |
The
commercial court directed the defendant no.1 to file written statement by 07.09.2021 |
17.08.2021 |
|
6. |
Application
filed by the defendant no.1 for seeking extension of time in filing written
statement |
07.09.2021 |
|
7. |
The
completion of statutory period of 120 days in filing written statement as
mandated under the second proviso to sub-rule 1 of Rule 1 of Order V and
proviso to sub-rule (1) of Rule (1) of
Order VIII as per the special amendment in the Comme4rcail Courts Act 2015 |
14.11.2021 |
|
8. |
Application
was filed by defendant no.1 u/s 148 of CPC for enlargement of time in filing
written statement |
24.11.2021 |
|
9. |
The
plaintiff had preferred application for seeking striking off defence of
defendant no.1 due to failure in filing written statement within statutory
period of 120 time |
06.12.2021 |
|
10. |
Application
filed by the defendant no.1 for seeking to place on record the written
statement |
07.01.2022 |
|
11. |
Rejection
of application filed by the defendant for seeking to place on record the
written statement |
22.03.2022 |
|
12. |
The
commercial appeal preferred by the defendant no.1 against the rejection of
application for placing written statement on record |
21.04.2022 |
|
13. |
Process
of recording of evidence adjourned at the instance of plaintiff |
30.07.22 to 10.08.2022 |
|
14. |
PW-1
was examined in chief and cross examination opportunity as NIL due to failure
in filing written statement within stipulated time |
19.08.2022 |
|
15. |
Suit
was partly decreed |
15.11.2022 |
The
aforesaid chronology may be illustrated further with facts.
BRIEF FACTS
(1) The original Defendant No. 1-M/s. Anvita
Auto Tech Works Pvt. Ltd. (Appellant-herein), had launched a flagship
motorcycle by the name of CFMOTO in India in 2019 and invited applications for
its dealership across the country including Bengaluru City. Plaintiff-M/s.
Aroush Motors (Respondent No. 1-herein) applied and was provisionally appointed
dealer under a Letter of Intent dated 03.09.2019. In consideration of the
dealership, the plaintiff remitted a sum of Rs. 20,00,000/- (Rupees Twenty
Lakhs Only) towards security deposit to Defendant No. 1, incurred expenditure
of rent and interiors for setting up a showroom. Further, the plaintiff paid
sum amount to Rs. 70,00,000/- (Rupees Seventy Lakhs Only) towards spare parts,
software, equipment and initial stock of motorcycles. Moreover, additional sum
of Rs. 5,00,000/- (Rupees Five Lakhs Only) was remitted to Defendant No. 1 and
on the advice of Defendant No. 1, the plaintiff also remitted Rs. 7,06,900/-
(Rupees Seven Lakhs Six Thousand Nine Hundred Only) to Defendant No. 2-Conair
Equipment Pvt. Ltd (Respondent No. 2-herein) for service centre equipment being
its authorised service provider.
(2) The Defendant No. 1 supplied Nineteen (19)
motorbikes of BS-IV Category to Plaintiff out of which the Eight (8) were sold.
On 01.04.2020, the Government imposed ban on the sale of BS-IV Category
vehicles, as such, Defendant No. 1 imposed prohibition upon sale of the such
motorcycles but promised to supply Kits and Equipment to upgrade the
motorcycles to BS-VI Category. Nevertheless, due to the inability of Defendant
No. 1 to supply the same, the plaintiff’s business was stalled and is said to
have sustained substantial loss, following which, the plaintiff terminated the
dealership of Defendant No. 1 on 14.09.2020 alleging breach of obligations and
sought recovery of monies invested by way of filing the present Commercial
Original Suit (Com. O.S.) No. 372 of 2021 claiming a sum of Rs. 1,78,03,090/-
(Rupees One Crore Seventy-Eight Lakhs Three Thousand Ninety Only) from
Defendant No. 1 with an Interest of 18% (Eighteen Percent) and Rs. 7,06,900/-
(Rupees Seven Lakhs Six Thousand Nine Hundred Only) from Defendant No. 2 with
an Interest of 18% (Eighteen Percent) till the realization of payments along
with 3 (Three) Interim Applications (IAs) No. I to III.
(3) The defendant no/1 was duly served and hence
appeared on 07.08.2021, but, still, did not file the Written Statement on the
said date. Later on, the defendant no. 1 had moved an I.A. No. IV seeking
extension of time to file Written Statement on 07.09.2021. However, in the meanwhile,
the 3 (three) I.As which were filed with Com. OS No. 372 of 2021, were decided vide
order dated 30.10.2021 wherein, IA No. 1 which sought direction to defendant
no. 1 to take back the remaining motorcycles from possession of plaintiff was
allowed, but the other two IAs which had sought for mandatory injunction
against Defendant No. 1 & 2, respectively, to refund the monies were
directed to be kept in abeyance for consideration along with main suit since
the nature of relief was that of final in nature.
(4) That on 14.11.2021, the time period of 120
days as prescribed under the law for filing Written Statement in a commercial
suit had expired. The defendant No. 1 again preferred I.A. No. 5 under section
148 of the Code of Civil Procedure, 1908 seeking extension of time to file
Written Statement. The plaintiff filed its objection to the application with
another application under section 151 of CPC, thereby seeking to strike out the defence. However,
while the said applications were pending in objections, the defendant no. 1 on
07.01.2022 preferred yet another application along with Written Statement,
seeking permission to file the same by seeking condonation of delay on the
premise that the delay was due to non-residing of the defendant no. 1, in
Bengaluru and COVID-19. The said IA came to be Rejected by order dated
22.03.2022 by the Trial Court and consequently, the Written Statement also came
to be rejected. The Defendant No. 1 challenged the order of dismissal of IA by
way of Commercial Appeal bearing No. 189 of 2021.
(5) In the meanwhile, the Written Statement on
behalf of Defendant No. 2 was also taken as NIL. The suit progressed
subsequently to the stage of recording plaintiff’s evidence and on 30.07.2022,
10.08.2022 and on 19.08.2022 the examination-in-chief of PW1 was recorded and
cross-examination of the defendant was taken as NIL by the Trial Court on the
ground that defendant had failed to file their Written Statement within
Stipulated time and the matter was posted for defendant’s evidence.
(6) That eventually, the suit came to be partly
decreed on 15.11.2022 wherein Defendant No.1 was directed to pay sum of Rs.
1,78,03,090/- (Rupees One Crore Seventy-Eight Lakhs Three Thousand Ninety Only)
and Defendant No. 2 was directed to pay Rs. Rs. 7,06,900/- (Rupees Seven Lakhs
Six Thousand Nine Hundred Only) with future interest of 9% (Nine Percent) per
annum each from the date of suit till realization.
In the backdrop of the judgement
and decree, the Commercial Appeal No. 189 of 2022 came to be dismissed as
withdrawn.
The defendant No.1, being
aggrieved by the judgement and decree of the Trial Court preferred Commercial
Appeal No. 19 of 2023 before the Karnataka High Court and that came to be dismissed
by the Impugned Order dated 20.05.2025.
Hence, the present appeal was
preferred.
SUBMISSIONS of appellant (defendant no.1)
(i) The error in the impugned
judgment loom large as the court below erred in rejecting the written statement
dated 07.01.2022 which is in contravention of the orders passed by the Supreme Court in Suo Moto Writ Petition (C) No. 3 of
2020 extending the limitation due to COVID-19 wherein the limitation period
between 15.03.2020 to 28.02.2022 was waived off in all cases, including
commercial disputes. The reliance was also placed on Babasaheb Raosaheb
Kobarne & Anr. v. Pyrotek India Private Limited and Ors. 2022 SCC SC
1315 and Prakash Corporates v. Dee Vee Projects Limited (2022)
5 SCC 112.16.
(ii) The failure on the part of
the defendant to file the Written Statement within the time permitted by the
court would not tantamount to pronouncement of judgment against the defendant. In
this context reliance was placed on Asma Lateef v. Shabbir Ahmad (2024)
4 SCC 696.17. The reliance was also placed on the decision of Supreme Court in Ranjit Singh v. State of
Uttarakhand, 2024 INSC 724 that even without filing of written statement,
the right to cross-examine survives and not permitting the same has resulted in
petitioner’s substantial rights being defeated without adjudication on merits.
(iii) The Order VIII Rule 10 CPC
does not empower the court to automatically pass a decree, merely, because a
written statement is not filed. The court must still assess whether a prima
facie case is made out and in the present case, the decree was passed summarily
without such satisfaction being recorded.
(iv) If the impugned decree is
executed, it would cause severe and irreparable loss to the petitioner despite
him not having had a fair opportunity to contest the claim and it is settled
principle that procedural rules must not be used to defeat substantial justice.
SUBMISSION ON
BEHALF OF THE RESPONDENT NO. 1- PLAINTIFF
(i) That the right of
cross-examination on the part of defendant No. 1 stood forfeited on account of
non-filing of written statement. It was rightly held by the high court that despite
repeated and adequate opportunities afforded to the defendant No. 1, he
wilfully chose not to exercise his right of cross-examination.
(ii) At no stage, during the
proceedings before the trial court, did the defendant no. 1 Company opted to
file an application for recall of the order closing the stage for cross-
examination of PW1 nor did it file any appeal or writ petition challenging such
order of closing the stage. The defendant No.1 had therefore acquiesced and is
now estopped from raising such plea at this belated stage especially when
defendant no. 1 did not take such a ground even in the memo of appeal.
(iii) The conduct of the
defendant before the courts below revealed a syndrome of dilatory tactics,
false pleadings, and abuse of process. The defendant no.1 failed to file the
written statement within the statutory period and did not avail the opportunity
of cross-examination and never challenged the orders closing its right to
cross-examination at the first instance.
(iv) The present appeal is only a
last-ditch attempt to obstruct & delay the lawful execution of the decree.
ISSUE FOR
CONSIDERATION
The Supreme Court had issued
notice, only the following issue:
“Whether the High Court was
correct in observing that on account of non-filing of written statement by the
defendant, his right to cross-examination is taken away?”
It was noted by the
Supreme Court as per the chronology, that, though, the summons was served upon
the defendant no. 1 company on 17.07.2021, they could not file the Written
Statement up till 07.01.2022 which was long after the statutory period of 120
days had already expired on 14.11.2021. The law regarding the mandatory filing
of Written Statement in a commercial dispute within the statutory period is
clearly envisaged under Proviso to sub-rule (1) of Rule 1 of Order VIII Code of
Civil Procedure, 1908 (CPC) and Second Proviso to Sub-rule (1) of Rule 1 of
Order V CPC as amended by the Special Amendment under the Commercial Courts
Act, 2015 is well settled. The said provisions impose an absolute embargo upon
the courts to accept the written statement after the expiry of one hundred
twenty (120) days. The said provisions may be perused as under:
“1. Written Statement —The
defendant shall, within thirty days from the date of service of summons on him,
present a Written Statement of his defence:
Provided that where the defendant
fails to file written statement within the said period of thirty days, he shall
be allowed to file the written statement on such other day, as may be specified
by the court, for reasons to be recorded in writing and on payment of such
costs as the court deems fit, but which shall not be later than one hundred
twenty days from the date of service of summons and on expiry of one hundred
twenty days from the date of service of summons, the defendant shall forfeit
the right to file the written statement and the court shall not allow the
written statement to be taken on record.”
In SCG
Contracts (India) Pvt. Ltd. v. K.S. Chamankar Infrastructure Private Limited
and Ors. (2019) 12 SCC 210 27 the Supreme Court has already fortified
the mandatory nature of statutory period in filing WS in a commercial dispute and
it was held that that timeline of 120 days’ fixed by the statute is not
directory but rather mandatory, therefore, commercial courts cannot condone the
delay beyond 120 days in filing the WS. However, the Supreme Court has
proceeded further to hear the appeal in view of some other vital aspect and
that could not have been brushed aside . The meticulous scrutiny of the
chronological chart as mentioned supra shows that the limitation period for
filing the WS commenced on 17.07.2021 and ended on 14.11.2021. It was held that
both these dates fell at a time when our nation was in garb of global pandemic
of COVID-19 which affected the lives of millions of people around the world as
well our judicial systems. This court was conscious of the fact as to the
difficulty faced by the litigants in approaching the courts physically and was
of the view that the said pandemic should not become the reason to vandalise
the rights of the litigants due to expiry of period of limitation who could
have approached the court well within the time had it not been for the
pandemic. Hence , the Supreme Court, In Re: Cognizance for Extension of
Limitation (2022) 3 SCC 117 in Suo Moto Writ Petition (C) No. 3 of 2020
by exercise of its powers under Article 142 of the Constitution of India passed
series of orders to exclude the period commencing from 15.03.2020 till
28.02.2022 for the purpose of computing the limitation period under any general
or special laws in respect of all judicial or quasi-judicial proceedings. For
the purpose of reference, the relevant portion of the order is extracted below:
“ I. The order dated 23.03.2020
is restored and in continuation of the subsequent orders dated 08.03.2021,
27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till
28.02.2022 shall stand excluded for the purposes of limitation as may be
prescribed under any general or special laws in respect of all judicial or
quasi judicial proceedings.
II. Consequently, the balance
period of limitation remaining as on 03.10.2021, if any, shall become available
with effect from 01.03.2022.III. In cases where the limitation would have
expired during the period between 15.03.2020 till 28.02.2022, notwithstanding
the actual balance period of limitation remaining, all persons shall have a
limitation period of 90 days from 01.03.2022. In the event the actual balance
period of limitation remaining, with effect from 01.03.2022 is greater than 90
days, that longer period shall apply
The Supreme Court has
also held in Aditya Khaitan & Ors. v. IL & FS Financial Services
Limited 2023 INSC 867 in a similar situation, wherein, the High Court had
disallowed the appellant to file the Written Statement in a commercial dispute
on the premise that the same was beyond the mandatory statutory period of 120
days. This Court while relying upon the orders passed In Re: Cognizance
for Extension of Limitation (Supra) allowed the appeal and directed
the Written statement to be taken on record. Further, again in Babasaheb
Raosaheb Kobarne & Anr. v. Pyrotek India Private Limited & Ors. 2022
SCC OnLine SC 1315 and Prakash Corporates v. Dee VeeProjects
Limited (2022) 5 SCC 112 had allowed the appellant to file its
written statement notwithstanding the fact that it was filed beyond the period
of 120 days in the light of the COVID-19 pandemic, wherein the period of
limitation was extended.
The
SUO MOTO exemption shall be applicable in all cases
It was thus held by the Supreme
Court in Anvita Auto Tech Works Pvt. Ltd. (Supra), that the
statutory period of 120 days commenced from date of service of summons on
17.07.2021 and as per section 9 of the General Clauses Act, 1897, the date of
service had to be excluded therefore, from 18.07.2021, the 120 days’ period
commenced and it ended on 14.11.2021. In the light of aforesaid discussion, it
can be very well said that both the dates fell within the sweep of period
between 15.02.2020 to 28.02.2022. In fact, during this period itself, to be
precise on 24.11.2021 itself defendant No.1 had filed I.A. No.5 seeking
enlargement of time to file written submission and subsequently on 07.01.2022
had filed IA No.VI/ 6A seeking permission to file written submission enclosing
the written submission also. It was thus held that the High Court ought to have
excluded the aforesaid period for the purpose of filing the written statement
and ought to have permitted the defendant No.1 to file written statement on
record and contest the suit on merits rather than dismissing the appeal.
RIGHT
TO CROSS EXAMINATION shall continue
Moreover, the perusal
of the records particularly, the order sheet of the trial court dated
19.08.2022 clearly reveal that after the examination-in-chief of PW1 was
closed, the cross-examination of Defendant no. 1 was taken as “NIL” on the
ground that defendant had failed to file their written statement within
stipulated time. It was held that that the said reason is absolutely perverse
and is contrary to the right of defence available to the defendant. The purpose
of cross-examination is to elicit the truth from the witness and impeach its
credibility. When the WS was not allowed to be taken on record, the denial of
the right to cross- examine cannot be taken away by leaving the defendant in
lurch and this has acted as final nail in the coffin to defendant’s right of defence.
It was also held in Ranjit Singh v. State of Uttarakhand, 2024
INSC 724 that even when the defendant has not filed the Written statement,
his right to cross-examine the plaintiff witnesses is not foreclosed. The
relevant portion of the decision for easy reference is extracted herewith:
“5…….At this stage, we must
clarify the legal position. Even if a defendant does not file a written
statement and the suit is ordered to proceed ex-parte against him, the limited
defence available to the defendant is not foreclosed. A defendant can always
cross-examine the witnesses examined by the plaintiff to prove the falsity of
the plaintiff’s case. A defendant can always urge, based on the plaint and the
evidence of the plaintiff, that the suit was barred by a statute such as the
law of limitation…..”
Thus,
in the light of the aforesaid discussion, the Supreme Court was pleased to
allow the appeal and consequently, the impugned judgment dated 20.05.2025 in
Commercial Appeal No. 19 of 2023 and consequently the judgment and decree
passed in commercial suit No.372/2021 by the Addl. City Civil and Sessions
Judge (Exclusive Commercial Court) dated 15.11.2022 quo defendant No.1
(Appellant herein) was set aside and the matter was remanded back to the trial
court to dispose of the same after allowing the appellant herein to file the
Written Statement subject to payment of cost to the tune of Rs. 1,00,000/-
(Rupees One Lakh Only) and to permit the appellant to exercise his right of
cross-examination of plaintiff’s witnesses. The trial court was directed to
dispose of the present commercial suit expeditiously and preferably within a
period of Six (6) months.
------
Anil K
Khaware
Founder
& Senior Associate
Societylawandjustice.com
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