WHETHER DEFENDANT CAN START RECORDING OF EVIDENCE

 

WhethEr defendaNt can START recording of evidence

The Code of Civil Procedure is a comprehensive code in itself with regard to procedure laid down in cases related to civil proceedings. The filing of suit, filing of written statement, impleadment, addition or deletion of parties, amendments in pleadings, framing of issues and other modalities are detailed in the code and judicial precedents emerges from time to time in case any grey area existed. The process of evidence commences after framing of issues. By the Rule of convention as embodied in Order 18, Rule1 of Code of Civil Procedure the plaintiff or petitioner is required to initiate recording of evidence and after conclusion of plaintiff evidence, the process of recording of evidence on behalf of defendant shall commence. However, the said rule also include a situation, when the departure to the rule is prescribed and the defendant may be permitted to record evidence first and plaintiff may record their evidence thereafter. As stated, this is a departure from ordinary rule and is an exception. It is fraught with ramifications. Ordinarily, the defendant may file application under Order 18 Rule 1 of Code of Civil Procedure for seeking to record their evidence first. There may also be instance, though, rare, when the plaintiff may also seek the defendant to initiate recording of evidence and application could be filed by plaintiff to that effect. After hearing of parties, thereafter, the order could be passed by courts. However, what is pertinent in the context is that whether court shall have power to suo motu direct the defendant to record evidence by defendants first? What are the circumstances of that? Whether satisfaction of court is sufficient or there are some guidelines laid down in this regard that needed deliberation. What the courts as a precedents have laid down over the years, has to be analysed as well.

                          ORDER 18 RULE 1

Before digging deep it may be apt to reproduce the provisions of Order 18 Rule 1 of Code of Civil Procedure:

Rule 1. "Right to begin"

The plaintiff has the right to begin unless the defendant admits the facts alleged by the plaintiff and contends that either in point of law or on some additional facts alleged by the defendant the plaintiff is not entitled to any part of the relief which he seeks, in which case the defendant has the right to begin.

                          DELHI HIGH COURT

The Delhi High Court in CM (M) 282/2019 in Om Prakash Vs Amit Chaudhary & Ors was dealing with the impugned order dated 19.11.2018, wherein the Trial Court held that the plaintiff was not entitled to the direction sought, and that a direction under Order XVIII Rule 1 of the CPC can be passed only on an application made by the defendants. It was further observed that as a general rule, the plaintiff has to prove his claim by positive proof.

In Om Prakash (Supra) the plaintiff had filed the suit against the defendants for recovery of sum alongwith interest thereupon on the premise that as per Collaboration Agreement between them for development and construction of a building on the suit property the plaintiff claimed to have paid Rs 10,00,000/- out of the agreed consideration. It was alleged by the plaintiff that the defendants did not deliver possession of the suit property which was, in fact, sealed by municipal authorities. Thus, refund of sum of Rs 10,00,000/- was claimed alongwith interest and  damages in the sum of Rs 15,00,000/-.

In the written statement filed by the defendants the execution of collaboration agreement was not disputed, but according to defendant it was not to be acted upon and that the suit property had already been fully developed. The loan was advanced by the plaintiff and defendant attempted to repay that but it was not being accepted by the plaintiff. The claim of damages was thus disputed.

At this stage, the plaintiff filed the application under Order XVIII Rule 1 of the CPC. It is contended therein that in view of the defendants' admission regarding the execution of the Collaboration Agreement, the defendants ought to be directed to lead evidence first. The application was contested by the defendants, reiterating the contents of the written statement.

The Trial Court has held that the plaintiff was not entitled to the direction sought, and that a direction under Order XVIII Rule 1 of the CPC can be passed only on an application made by the defendants. It was further observed that as a general rule, the plaintiff has to prove his claim by positive proof. In para 8 of the Om Prakash (Supra) the High Court has held:

“ Order XVIII Rule 1 of the CPC recognizes the general rule that the plaintiff in a suit must prove his case. This is in consonances with Section 101 and 114 of the Indian Evidence Act, 1872. The defendant is given "the right to begin" only in a situation where the facts alleged by the plaintiff are admitted but the plaintiff's entitlement to relief is contested in law or on the basis of additional facts asserted by the defendant. The condition that the facts pleaded by the plaintiff must be admitted by the defendant is of great significance. It implies that the facts necessary for proving the plaintiff's case must be entirely, or atleast very substantially, admitted by the defendant. It is by reason of the defendant's admission that the plaintiff is absolved from its duty to prove its case before the defendant is called upon to give evidence. On a proper interpretation, the second part of Order XVIII Rule 1 therefore is applicable in a situation where, but for the additional facts pleaded or legal defences raised by the defendant, the plaintiff would have been entitled to a decree upon admission”.

In Sabina Sultana & Ors Vs Ahmad Aziz & Anr CS (OS) 2958/2011, decided on 31.08.2017, the Delhi High Court has held by relying upon several authorities that in the absence of admission of facts pleaded by the plaintiff, asking the defendant to lead evidence first could well be disadvantageous to the defendant. Paragraph 8 of the judgment, to that effect, is reproduced below:-

"8. In terms of the procedure stipulated in CPC and the aforesaid precedents, it is clear that as a general rule the party which set up a claim must prove the burden cast upon it. The plaintiff has a right to begin and so he must because the burden of proof rests upon one who pleads. It is for the plaintiff to lead evidence first. It is only when the defendant admits to the facts pleaded by the plaintiff that the latter would be relieved of this burden, but in the absence of any such admission, asking the defendant to lead evidence first could well be disadvantageous to the defendant. Order 18 Rule 1 of CPC prescribes "right to begin" the recording of evidence wherein the plaintiff would lead evidence first but the defendant may be permitted to lead evidence if after having admitted to the facts pleaded by the plaintiff, he so seeks to do. In the absence of these two qualifying circumstances, the Court would not direct the defendant to lead evidence first."

In the judgment of Orissa High Court in Mirza Niamat Baig vs. Sk. Abdul Sayeed, 2008(II) OLR 566, also indicates that the facts admitted by the defendant must include all the material facts. Paragraphs 4 of the said judgment are reproduced below:-

"4. The law is well settled that a person who sets the law in motion and seeks a relief before the Court, must necessarily be in a position to prove his case and get the relief moulded by the law. The right to begin is to be determined by the rules of evidence. As a general rule, the party on whom the burden of proof rests should begin. In no case, the plaintiff can be allowed to take any undue advantage over the defendant, whatever may be the position or stand the defendant takes, for the very reason that the defendant is expected to answer the claim made by the plaintiff in the suit. In the wording "unless the defendant admits the facts alleged" occurring in Order 18, Rule 1, C.P.C., the word "facts" means all the materials facts. Thus, where a defendant admits only some of the facts alleged by the plaintiff, there the plaintiff should begin”.

The authorities cited in Sabiha Sultana (supra) that the provision is an enabling one - the defendant can choose whether to exercise the right to begin or not. Reference in this connection may be made to the judgments of the Bombay High Court in Dattatray Namdeo Patil  Vs Ram Namdeo Patil  (2010) 3 Mah LJ 801, and Haran Bedi Suppliers Vs V.M & Co. (2001) 4 Mah LJ 112, and the Patna High Court in Mohammad Jahangir vs. Sajda Khatoon (2007) 4 PLJR 100. In the judgment of the Bombay High Court in Zainabee vs. Shivkumar (2018) 2 Mah LJ 634, the earlier judgments of the Courts were considered and it was held that the Court does not have the power to issue a direction to a defendant to lead evidence first, which is reproduced below:-

"20.  In Bhagirath Shankar Somani Vs Ramesh Chandra Daulal Soni    2007 (5) Mh.L.J. 508 : 2007 (4) ALL MR 514, this Court concluded that if the defendant decides to lead evidence first and is so permitted by the Court, the plaintiff can always lead evidence in rebuttal. The trial Court does not have the power to issue a direction to the defendant compelling him to lead his evidence before the plaintiff adduces his evidence under Order 18, Rule 1. Only when the defendant claims a right to begin under Rule 1 and the plaintiff disputes existence of such right, the Court will have to decide the question whether, the defendant has acquired a right to begin”.

 

In Metafield Coli Pvt Ltd Vs Nikivik Tube Industries Pvt Ltd, 2012 (1) Mh.L.J. 289, while considering such an issue under Order 18, Rule 1, it was concluded that:

“A consistent view taken by the Courts is that a direction against the defendant to lead evidence before the plaintiff leads his evidence, cannot be issued under Order 18, Rule 1. The scheme of law appears to be that of a normal rule and it would be a privilege of the plaintiff to lead his evidence first. However, it enables the defendant to exercise the right in the contingency mentioned in the rule. After the plaintiff exercises his option to lead evidence first, it is for the defendant to decide whether, he would like to lead evidence and make such a formal request to the Court. If the Court permits the defendant to lead evidence first, the plaintiff can always lead evidence in rebuttal. The Court does not have the power to issue a direction to the defendant so as to compel him to step into the witness box first and lead evidence."

Thus what emerges is that Order 18 of the Code of Civil Procedure would entitle the defendant, who admits the fact, to begin the recording of his evidence first. It is an enabling provision. If the defendant applies and makes a request or claims such a right, the Court may pass an order permitting the defendant to step into the witness box first.

Even the Division Bench of Orissa High Court in Balkrishna kar Vs H.K Mahatab, AIR 1954 Ori 191, had overturned the order of the Trial Court placing the burden upon the defendant to lead evidence first in a defamation suit. The Division Bench held that the admission of publication of the allegedly defamatory articles was insufficient for this purpose as the defendant had not admitted that the articles constituted libel on the character of the plaintiff. It was held that in such circumstances, the onus lies on the plaintiff to establish his case.

After perusing the precedents, the Delhi High Court in Om Prakash (Supra) has held that:

“Order XVIII Rule 1 was not applicable. The defendants had not sought to exercise the right to begin which, in view of the authorities above, is a choice for him to make and not for the plaintiff to force upon him. In any event, the substantive condition that the facts alleged by the plaintiff must be admitted by the defendants is also not satisfied. Merely because the execution of the Collaboration Agreement is admitted, does not imply that the defendants have admitted the facts alleged by the plaintiff. In contractual disputes, it is often the case - perhaps in a majority of cases - that the execution of the contract is admitted by the defendant, but other facts establishing the plaintiff's claims are not. In the present case, for example, the quantum of damages assessed by the plaintiff has been expressly and unequivocally disputed in the written statement. It is settled law that pleadings are to be read as a whole, and admissions cannot be considered in isolation. Reference may be made to the judgment of the Supreme Court in Udhav Singh Vs Madhav Rao Scindia, (1977) 1 SCC 511, wherein it has been held as follows:-

"33. We are afraid, this ingenious method of construction after compartmentalisation, dissection, segregation and inversion of the language of the paragraph, suggested by Counsel, runs counter to the cardinal canon of interpretation, according to which, a pleading has to be read as a whole to ascertain its true import. It is not permissible to cull out a sentence or a passage and to read it out of the context, in isolation”.

It is further held that “the pleading has to be construed as it stands without addition or subtraction of words, or change of its apparent grammatical sense. The intention of the party concerned is to be gathered, primarily, from the tenor and terms of his pleading taken as a whole."

The later judgments of the Supreme Court in Sopan Sukhdeo Sable vs. Asstt. Charity Commr. (2004) 3 SCC 137 [Paragraph 15] and  Des Raj Vs Bhagat Ram (2007) 9 SCC 641 [Paragraph 17] also lay down the above principle. On a holistic reading of the written statement filed by the defendants in the present case, it is not possible to conclude that the defence rests on additional facts or points of law, the facts pleaded by the plaintiff being admitted.

Conclusion

The plaintiff has the inherent right as per the laid down procedure and as contained in Order 18 Rule 1 of Code of Civil Procedure to initiate recording of evidence. The plaintiff has to prove their case by standing on their leg. The rebuttal evidence thereafter shall follow and defendants shall lead evidence to rebut. This is a normal rule of procedure. The Order 18 Rule 1 of CPC carve out an exception, when the defendants may be permitted to initiate the evidence, but that shall be contingent upon the fact that defendant has admitted substantive part of the plaint and the defendant also seeks to examine their witness first by filing an application for seeking such permission. Even if the opposition is raised by the plaintiff, the court may decide, if the defendant shall be entitled to lead the evidence first or not. Therefore, what clearly emerges is that unless the admission are pervasive by defendants and the disputes virtually does not exists and on law point only decision shall hinge, then, defendant could be permitted to lead evidence first, not otherwise. In a routine course and in a mechanical manner there cannot be departure from normal rule of procedure and the plaintiff only shall have to initiate evidence and examine witnesses on their behalf.

                                  -----------

                                  Anil k Khaware

                                  Founder & Senior Associate

                                  Societylawandjustice.com

PERSPECTIVE OF COMMERCIAL SUITS AS PER COMMERCIAL COURTS ACT 2015

 

PERSPECTIVE OF COMMERCIAL SUITS AS PER COMMERCIAL COURTS ACT 2015

Ever since Commercial Courts Act 2015 is enacted, there are diverse pleas raised after filing of the suit, if the suit so filed shall fall within the meaning of The Commercial Courts Act 2015 or not? For instance, if a suit is filed as an ordinary suit, the objection may come if the filing of the suit as non commercial suit is in order or not? Conversely, if the suit is filed as Commercial suit, it is also required to be shown if the suit is in conformity with the provisions of The Commercial Courts Act 2015 so as to conform to those provisions. The aforesaid vista with detailed perspective shall be explained hereunder.

In the aforesaid context it may be apt to pin point the very genesis of the enactment of The Commercial Courts Act 2015.

HISTORICAL PERSPECTIVE

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Act No.4 of 2016) is published in the Gazette of India on 01.01.2016. The Act is deemed to have come into force w.e.f. 23.10.2015. The Act No.4 of 2016 was amended by Central Act 28 of 2018 – The Commercial Courts Act. The Law Commission in its 253^rd  Report, inter alia has made various recommendations. Para (4.2) of Chapter IV-“Conclusions and Summary of Recommendations” of Law Commission’s 253^rd  Report.

 

The preamble of the Commercial Courts Act, 2015 reads as under:-

 

“An Act to provide for the constitution of Commercial Courts, Commercial Appellate Courts, Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of specified value and matters connected therewith or incidental thereto.”

The Statement of Objects and Reasons of the Commercial Courts Act reads as under:-

“Statement of Objects and Reasons:

The proposal to provide for speedy disposal of high value commercial disputes has been under consideration of the Government for quite some time. The high value commercial disputes involve complex facts and question of law. Therefore, there is a need to provide for an independent mechanism for their early resolution. Early resolution of commercial disputes shall create a positive image to the investor world about the independent and responsive Indian legal system.

……….

It is proposed to introduce the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015 to replace the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordinance, 2015 which inter alia, provides for the following namely:-

(i) constitution of the Commercial Courts at District level except for the territory over which any High Court is having ordinary original civil jurisdiction;

(ii) constitution of the Commercial Divisions in those High Courts which are already exercising ordinary civil jurisdiction and they shall have territorial jurisdiction over such areas on which it has original jurisdiction;

(iii) constitution of the Commercial Appellate Division in all the High Courts to hear the appeals against the Orders of the Commercial Courts and the Orders of the Commercial Division of the High Court;

(iv) the minimum pecuniary jurisdiction of such Commercial Courts and Commercial Division is proposed as one crore rupees; and

(v) to amend the Code of Civil Procedure, 1908 as applicable to the Commercial Courts and Commercial Divisions which shall prevail over the existing High Courts Rules and other provisions of the Code of Civil Procedure, 1908 so as to improve the efficiency and reduce delays in disposal of commercial cases.

……...”

 

The object and purpose of Commercial Courts Act is to ensure that the Commercial Courts, Commercial Appellate Courts, Commercial Division and Commercial Appellate Division of the High Courts and also to ensure that the commercial cases are disposed of expeditiously, fairly and at reasonable cost to the litigant.

 

After the Law Commission’s 253^rd Report, the Act No.4 of 2016 was amended by Central Act 28 of 2018. The section 3 of the Act deals with Constitution of Commercial Courts. As per Section 3 of the Act, the State Government shall, after consultation with the High Court, by notification, constitute Commercial Courts at District level if deemed necessary for the purpose of exercising jurisdiction under the Act. As per Section 3(1A) of the Act, Commercial Courts shall have jurisdiction to try the commercial disputes of a “Specified Value” which shall not be less than Three Lakh Rupees or such higher value, for whole or part of the State, as it may consider necessary. After amendment in 2018, proviso to Section 3 provides that Commercial Courts may be constituted with respect to area over which the High Courts have ordinary original civil jurisdiction. Section 5(1) of the Act provides for the constitution of Commercial Appellate Division having one or more Division Benches for the purpose of exercising jurisdiction and powers conferred on it by the Act.

Section 5 of the Act deals with the Constitution of Commercial Appellate Division. Section 5(1) of the Act reads as under:-

“5. Constitution of Commercial Appellate Division. – (1) After issuing notification under sub-section (1) of section 3 or order under sub-section (1) of section 4, the Chief Justice of the concerned High Court shall, by order, constitute Commercial Appellate Division having one or more Division Benches for the purpose of exercising the jurisdiction and powers conferred on it by the Act”.

 

In terms of Section 5(2) of the Act, the Chief Justice of the High Court shall nominate such Judges of the High Court who have experience in dealing with commercial disputes to be Judges of the Commercial Appellate Division.

 

Section 6 of the Act reads as under:-

 

“6. Jurisdiction of Commercial Court –

The Commercial Court shall have jurisdiction to try all suits and applications relating to a commercial dispute of a Specified Value arising out of the entire territory of the State over which it has been vested territorial jurisdiction.

Explanation. – For the purposes of this section, a commercial dispute shall be considered to arise out of the entire territory of the State over which a Commercial Court has been vested jurisdiction, if the suit or application relating to such commercial dispute has been instituted as per the provisions of sections 16 to 20 of the Code of Civil Procedure, 1908 (5 of 1908)”.

 

Section 7 deals with the jurisdiction of Commercial Divisions of High Courts. Section 7 of the Act reads as under:-

“7. Jurisdiction of Commercial Divisions of High Courts –

 

All suits and applications relating to commercial disputes of a Specified Value filed in a High Court having ordinary original civil jurisdiction shall be heard and disposed of by the Commercial Division of that High Court:

 

Provided that all suits and applications relating to commercial disputes, stipulated by an Act to lie in a court not inferior to a District Court, and filed or pending on the original side of the High Court, shall be heard and disposed of by the Commercial Division of the High Court:

 

Provided further that all suits and applications transferred to the High Court by virtue of sub-section (4) of section 22 of the Designs Act, 2000 (16 of 2000) or section 104 of the Patents Act, 1970 (39 of 1970) shall be heard and disposed of by the Commercial Division of the High Court in all the areas over which the High Court exercises ordinary original civil jurisdiction”.

 

The Commercial Divisions are to be set up in High Courts that are already having ordinary original civil jurisdiction having one or more Benches consisting of a Single Judge having experience in dealing with commercial disputes for exercising powers under the Act. As per Section 7(1) and the proviso thereto, Commercial Division will hear and dispose of all suits and applications relating to commercial disputes of a specified value, that lie in a court not inferior to district court and filed in a High Court having ordinary original civil jurisdiction and also those cases transferred to High Court under Section 22(4) of the Designs Act, 2000 or under Section 104 of the Patents Act, 1970.

Section 9 of Code of Civil Procedure shall be applicable to Commercials Courts Act 2015.

 

It is clearly stipulated in Section 11 of the Act, notwithstanding anything contained in the Act, a Commercial Court or a Commercial Division shall not entertain or decide any suit relating to any commercial dispute in respect of which the jurisdiction of the civil court is either expressly or impliedly barred under any other law for the time being in force.

 

TRANSFER OF PENDING CASES

Section 15 of the Act deals with transfer of pending cases. It reads as under : -

“15. Transfer of pending cases. – (1) All suits and applications, including applications under the Arbitration and Conciliation Act, 1996 (26 of 1996), relating to a commercial dispute of Specified Value pending in a High Court where a Commercial Division has been constituted, shall be transferred to the Commercial Division.

(2) All suits and applications, including applications under the Arbitration and Conciliation Act, 1996 (26 of 1996), relating to a commercial dispute of a Specified Value pending in any civil court in any district or area in respect of which a Commercial Court has been constituted, shall be transferred to such Commercial Court:

Provided that no suit or application where the final judgment has been reserved by the Court prior to the constitution of the Commercial Division or the Commercial Court shall be transferred either under sub-section (1) or sub-section.

 

Insofar as transferred cases, as per Section 15(4) of the Act, the Commercial Division or Commercial Court shall prescribe new timelines or issue further directions for speedy and efficacious disposal of such suit or application in accordance with Order XVA of the Code of Civil Procedure. New time period for filing written statement shall be prescribed and the proviso to sub-rule (1) of rule 1 of Order V of the Code of Civil Procedure shall not apply to the transferred cases and the Court may, in its discretion, prescribe a new time period within which the written statement shall be filed.

Section 2(1)(c) defines “commercial dispute” as under:-

“2. Definitions. - (1) In this Act, useless the context otherwise requires,-

……….

(c) “Commercial dispute” means a dispute arising out of-

 

(i) ordinary transaction of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents;

(ii) export or import of merchandise or services;

(iii) issues relating to admiralty and maritime law;

(iv)transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same;

(v) carriage of goods;

(vi)construction and infrastructure contracts, including tenders;

(vii) agreements relating to immovable property used exclusively in trade or commerce;

(viii) franchising agreements;

(ix) distribution and licensing agreements;

(x) management and consultancy agreements;

(xi) joint venture agreements;

(xii) shareholders agreements;

(xiii) subscription and investment agreements pertaining to the services industry including outsourcing services and financial services;

(xiv) mercantile agency and mercantile usage;

(xv) partnership agreements;

(xvi) technology development agreement;

(xvii)intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits;

(xviii) agreements for sale of goods or provision of services;

(xix) exploitation of oil and gas reserves or other natural resource including electromagnetic spectrum;

(xx) insurance and re-insurance;

(xxi) contract of agency relating to any of the above; and

(xxii) such other commercial disputes as may be notified by the Central Government.

Explanation.- A commercial dispute shall not cease to be commercial dispute merely because-

(a) it also involves action for recovery of immovable property or for realising of monies out of immovable property given as security or involves any other relief pertaining to immovable property;

(b) one of the contracting parties is the State or any of its agencies or instrumentalities, or a private body carrying out public functions;

(d) “Commercial Division” means the Commercial Division in a High Court constituted under sub-section (1) of section 4;

(e) “District Judge” shall have the same meaning as assigned to it in clause (a) of Article 236 of the Constitution of India:

(f) “Document” means any mater expressed or described upon any substance by means of letters, figures or marks, or electronic means, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matters;

(g) “Notification” means a notification published in the Official Gazette and the expression “notify” with its cognate meanings and grammatical variations shall be construed accordingly;

(h) “schedule” means the Schedule appended to the Act; and

(i) “Specified Value”, in relation to a commercial dispute, shall mean the value of the subject matter in respect of a suit as determined in accordance with section 12 [which shall not be less than three lakh rupees] or such higher value, as may be notified by the Central Government.”

[Subs. by Act 28 of 2018, sec. 4(II), for “which shall not be less than one crore rupees” (w.r.e.f. 3-5-2018)].

 

It may be noted that clause (i) of Section 2 of the Act defines “Specified Value”, in relation to a commercial dispute, shall mean the value of the subject matter in respect of a suit as determined in accordance with section 12 [which shall not be less than Three Lakh Rupees] or such higher value, as may be notified by the Central Government”. Section 12 provides for criteria for valuation of the suit, application or appeal for the purpose of the Act. What will attract jurisdiction of the Commercial Court or the Commercial Division of the High Court shall depend on the following factors:-

(i) it shall be a commercial dispute within the meaning of Section 2(1)(c) of the Act; and

(ii) such commercial disputes are of a specified value as per Section 2(i) of the Act.

 

Section 13 deals with appeals from decrees of Commercial Courts and Commercial Divisions. As per Section 14 of the Act, the Commercial Appellate Court and the Commercial Appellate Division shall endeavour to dispose of appeals filed before it within a period of six months from the date of filing of such appeal.

THE SUPREME COURT OF INDIA In CIVIL APPEAL NO. 7843 OF 2019

(Arising out of SLP (Civil) No.9391 of 2019) in a matter captioned as Ambalal Sarabhai Enterprises Ltd. Versus K.S. Infra space LLP & Anr has dealt with the ambit of Commercial Courts act 2015.

Fast Track Procedure for deciding the Commercial Disputes

 

Section 16 of the Act, stipulates that the provisions of the Code of Civil Procedure as amended under the Act, shall apply in the trial of suit in respect of a commercial dispute of a specified value. For ready reference section 16 of the Act reads as under:

“16. Amendments to the Code of Civil Procedure, 1908 in its application to commercial disputes. –

 

(1) The provisions of the Code of Civil Procedure, 1908 (5 of 1908) shall, in their application to any suit in respect of a commercial dispute of a Specified Value, stand amended in the manner as specified in the Schedule.

(2) The Commercial Division and Commercial Court shall follow the provisions of the Code of Civil Procedure, 1908 (5 of 1908), as amended by this Act, in the trial of a suit in respect of a commercial dispute of a Specified Value.

(3) Where any provision of any rule of the jurisdictional High Court or any amendment to the Code of Civil Procedure, 1908 (5 of 1908), by the State Government is in conflict with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), as amended by this Act, the provisions of the Code of Civil Procedure as amended by this Act shall prevail”.

 

AMENDMENT IN CODE OF CIVIL PROCEDURE NECESSITATED DUE TO COMMERCIAL COURTS ACT 2015

 

Order XIIIA -  “Summary Judgment” has been inserted. Order XIII contains the scope and classes of suits to which Order XIIIA applies, grounds for summary judgment, procedure to be followed, evidence for hearing of summary judgment, orders that may be made by Court in such proceedings for summary judgment, etc.

Order XV A– “ Case Management Hearing” has been inserted. Order XVA provides for first Case Management Hearing-

 

(Rule 1); recording of oral evidence on a day-to-day basis

(Rule 4); powers of the Court in a Case Management Hearing

         (Rule 6); adjournment of Case Management Hearing

(Rule 7); consequences of non-compliance with orders

(Rule 8). By way of amendment, several rules have been incorporated to make the matters of commercial disputes on fast track.

In Order XX of the Code – “Judgment”, Rule 1 has been substituted that within ninety days of the conclusion of arguments, the Commercial Court/Commercial Division/Commercial Appellate Division to pronounce the judgment and copies thereof shall be issued to all the parties to the dispute through electronic mail or otherwise.

 

Various provisions of the Act namely Case Management Hearing and other provisions makes the court to adopt a pro-active approach in resolving the commercial dispute. A new approach for carrying out case management and strict guidelines for completion of the process has been introduced so that the adjudicatory process is not delayed.

The underlying object of the act is therefore to bring out amendment in Code of Civil Procedure to deal with the commercial disputes, only to highlight that the trial of the commercial dispute suits is put on fast track for disposal of the suits expeditiously. Various provisions of the Act referred to above and the amendments inserted to Civil Procedure Code by the Schedule is to ensure speedy resolution of the commercial disputes in a time bound manner. The intent of the legislature seems to be to have a procedure which expedites the disposal of commercial disputes and thus creates a positive environment for investment and development and make India an attractive place to do business.

It has been enacted for the purpose of the Act is to provide an early disposal of high value commercial disputes. A bare perusal of the provisions of the act shall reveal that the Objects and Reasons and various amendments to Civil Procedure Code is to ensure expeditious disposal of cases and the provisions are required to be strictly construed. 

 

CASES RELATED TO IMMOVEABLE PROPERTIES

All the dispute relating to immovable property may not be treated as a commercial dispute, unless the trap of Commercial Courts Act 2015 as amended are attracted in such cases. It becomes a commercial dispute, if it falls under sub-clause (vii) of Section 2(1)(c) of the Act viz. “the agreements relating to immovable property used exclusively in trade or commerce”. The words “used exclusively in trade or commerce” are to be interpreted purposefully. The word “used” denotes “actually used” and it cannot be either “ready for use” or “likely to be used” or “to be used”. It should be “actually used”.

 

The object and purpose of the establishment of Commercial Courts, Commercial Divisions and Commercial Appellate Divisions of the High Court is to ensure that the cases involved in commercial disputes are disposed of expeditiously, fairly and at reasonable cost  to the litigants. Keeping in view the object and purpose of the establishment of the Commercial Courts and fast tracking procedure provided under the Act, the statutory provisions of the Act and the words incorporated thereon are to be meaningfully interpreted for quick disposal of commercial litigations so as to benefit the litigants especially those who are engaged in trade and commerce which in turn will further economic growth of the country.

It follows that with a view to ascertain if the disputes relates to “Commercial Disputes” the quintessential part is that the nature of the dispute and the jurisdiction to try the same is to be reflected in the suit itself. In a civil suit, the pleadings, namely averments in the plaint would at the outset be relevant to confer jurisdiction. Hence before adverting to the other aspects it would be necessary to carefully examine the plaint. In the case of Jagmohan Behl vs. State Bank of Indore, 2017 SCC OnLine Del 10706 it is held that the dispute involved therein would constitute a commercial dispute and the expression “arising out of” and “in relation to immovable property” should not be given the narrow and restricted meaning and the expression would include all matters relating agreements in connection with the immovable properties. The said conclusion reached was in a circumstance where the immovable property in question was undoubtedly being used for a trade or commerce and it was held so when the claim in the suit is for recovery of rent or mesne profit, security deposit etc. for the use of such immovable property.

In  Vasu Healthcare Private Limited vs. Gujarat Akruti TCG Biotech Limited, AIR 2017 Gujarat 153 wherein a detailed consideration has been made and the conclusion reached therein by taking note of an earlier decision is that on a plain reading of Clause 2(1)(c) of CC Act, 2015 the expression “used” must mean “actually used” or “being used”. It is further explained that if the intention of the legislature was to expand the scope, in that case the phraseology “likely to be used” or “to be used” would have been employed.

                                                  REMARK

It is thus crystal clear that all such suits may be treated as Commercial Suit if the same falls within the definition clause of Section 2 as illustrated above. It is necessary to carefully examine and entertain only disputes which actually answers the definition “commercial disputes” as provided under the definition clause 2 (1) (c) of the Act, with a view to arrive at a conclusion if the suit falls within the definition of commercial suit or not. If neither the agreement between the parties refers to the nature of the immoveable property being exclusively used for trade or commerce as on the date of the agreement nor is there any pleading to that effect in the plaint and still further, if the very relief sought in the suit is for execution of the Mortgage Deed which is in the nature of specific performance or of the terms of a Memorandum of Understanding without reference to nature of the use of the immovable property in trade or commerce as on the date of the suit ipso facto cannot be treated as commercial suit.  

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Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com