Applicability of the CPC provisions in consonance with the Commercial Courts Act 2015

I. Introduction

The Indian Judiciary is burdened with lakhs and lakhs of pending cases and the Government, both Central & State governments are bringing various amendments and enactments so as to reduce the burden on courts and to facilitate speedy settlement of disputes and claims. The Amendments to the Code of Civil Procedure, 1908, (“CPC”) and the enactment of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (“Act”) are some steps taken by the government so as to adhere to strict timelines for procedures for speedy settlement of claims.

II. Commercial Courts

The Commercial courts have been established under this act to try suits over a value of 1cr and above and arising from various commercial disputes. Commercial Disputes under Section 2(c) of the Act is defined as and brings within its ambit disputes arising out of transactions of merchants, bankers including those relating to mercantile documents, disputes arising out of export or import of merchandise or services, issues relating to admiralty and maritime law, carriage of goods, the transaction relating to aircraft, franchising agreement, distributions in-licensing agreement, shareholders agreements, partnership agreements, joint venture agreements etc. The definition is clearly exhaustive in nature and tends to cover a wide variety of plausible business transactions.

The amendments in CPC also apply to the procedural timelines of the commercial courts and is clearly stated in section 16 of the act which read as —

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, as amended by this Act, the provisions of the Code of Civil Procedure as amended by this Act shall prevail.

This has been interpreted by the Hon’ble Delhi High Court in the cases of Oku Tech Private Limited v. Sangeet Agarwal and Ors[1] and Gulf DTH FZ LLC v. Dish TV India Limited & Ors[2] where the Court observed that the provisions of the Act should be strictly complied with and any delay over and above than that prescribed under the Act cannot be condoned by the Court.

With respect to strict timelines in procedures, 3 aspects have been taken which are-:

1. Filing of Written Statement
2. Replication
3. Admission Denial of Documents

1. Written Statement

Written Statement is a reply to the plaint where every material fact alleged by the plaintiff along with any new facts is dealt with. The rules pertaining to procedural aspects of written statements are given in Order VIII, Rules 1-10 of CPC. Where Rule 1 specifically states out that the written statement must be filed within 30 days after the service of summons under Order V. This filing must not exceed more than 120 days where 90 grace days are given after the amendment[3] of CPC.

In Order VIII, in Rule 1, for the proviso, the following proviso has been substituted after the commencement of the Act-

“Provided that where the defendant fails to file the 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 Rule 10, the following proviso has been added after the commencement of the Act-

“Provided further that no Court shall make an order to extend the time provided under Rule 1 of this Order for filing of the written statement.”

This means that even courts do not have the power to entertain the filing of any written statement beyond the statutory period of 120 days and this has been interpreted in the judgement by the Hon’ble Supreme Court and 3 principle aspects in relation to the filing of the written statement have been interpreted by the Supreme Court

1.1 Filing of the written statement within 120 days is mandatory

This principle has been laid down in the case of M/s SCG Contracts India Pvt. Ltd. V/s. K.S. Chamankar Infrastructure Pvt. Ltd. & Ors[4] where the court held that 120-day deadline to file the written statement in Commercial Suits is mandatory, thereby, leaving no room for courts to exercise their discretion to relax the same.

1.2 Courts not to use their inherent powers to twist any procedural provision

Principle determined in the case of Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal[5] where court interpreted that and in view of the same held that when there is a special provision in the C.P.C which deals with a specific procedure, the same cannot be circumvented by taking recourse to the inherent powers of the court.

1.3 An application filed under Order VII Rule 11 of the C.P.C cannot be used as a defence for non-filing of the written statement within the statutory period

Principle determined in the case of R.K Roja Vs. U.S Rayudu and Anr.[6]

From the above, we can conclude that commercial courts do not have discretionary powers to extend statutory timelines.

2. Replication

The term “Replication” has not been defined in CPC but has been interpreted by the court in various ways and has been related to Subsequent Pleadings under Order VIII, Rule 9 of CPC which reads as-

“No pleading subsequent to the written statement of a defendant other than by way of defence to set-off or counterclaim be presented except by the leave of the Court and upon such terms, as the Court thinks fit, but the Court may at any time require a written statement or additional written statement or additional written statement from any of the parties and fix a time of not more than thirty days (30) for presenting the same.”

So where the plaintiff, in certain cases, by the leave of the court has been permitted to file a rejoinder to the written statement filed by the defendant such a situation is interpreted as Replication and shall be done within 30 days from the date fixed by the court.

Interpretation for the same has been given in the case of M.L. Gupta Vs Kripal Singh[7] wherein it was observed “It is clear from this rule that the replication cannot be filed by the Plaintiff, except by way of defence to a set-off, as a matter of right, But with the leave of the Court it can be presented. Once the Court required a party to file the replication or allowed the plaintiff to present it then the replication will become part of the pleading. Headnote ‘subsequent pleadings’ and the opening words ‘No Pleading’ used in this provision clearly bring the replication filed after the written statement within the purview of the word ‘pleading’……”

It has been held by Court that if the defendant introduces a new case, it is fair to allow the plaintiff to file his subsequent pleading[8]

The only difference between the provisions before and after the amendment is that a specific timeline of 30 days has been provided after the 2002 amendment and that power can only be used in exceptional circumstances and reasons recorded in writing and cannot be used by the defendant as a matter of right.

3. Statement of Admission / Denial of Documents

As given in Order XI (4)(1) of CPC the admission or denial of all disclosed documents must be submitted within Fifteen days (15) of the completion of inspection of Documents where Parties have to complete inspection of documents within 30 days from the date of filing the Written Statement or Written Statement to the Counter Claim whichever is later.

The Court may extend the time limit upon application at its discretion, but not beyond 30 days in any event. (Therefore a maximum of 60 days)[9]

According to the recent Delhi High Court notifications in Delhi High Court (Original Sides) Rules, 2018[10], it is mandatory to file an affidavit of admission or denial with a written statement. Rule 3[11] reads as “along with the written statement, the defendant shall also file an affidavit of admission/denial of documents filed by the plaintiff, without which the written statement shall not be taken on record.”

Whereas, Rule 4 states, “If the Court is satisfied that the defendant was prevented by sufficient cause for exceptional and unavoidable reasons in filing the written statement within 30 days, it may extend the time for filing the same by a further period not exceeding 90 days, but not thereafter. For such extension of time, the party in delay shall be burdened with costs as deemed appropriate.

The written statement shall not be taken on record unless such costs have been paid/deposited. In case the defendant fails to file the affidavit of admission/denial of documents filed by the plaintiff, the documents filed by the plaintiff shall be deemed to be admitted. In case, no written statement is filed within the extended time also, the Registrar may pass orders for closing the right to file the written statement.

The same principle was held by the Delhi High Court in the case of Unilin Beheer B.V. v. Balaji Action Buildwell[12] has held that it is mandatory to file an affidavit of admission or denial with a written statement. In case of failure, the Court will not take the statement on record and the contested documents filed by the plaintiff would be admitted by the Court.

Hence we can conclude that for a streamlined settlement of claims the deadlines strictly need to adhere.

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Reference

[1] CS (OS) 3390/2015

[2] CS (OS) 3355/2015

[3] Code of Civil Procedure (Amendment) Act, 2002

[4] AIR 2019 SC 2691

[5] [(1962) Suppl 1 SCR 450]

[6] [(2016) 14 SCC 275].

[7] [98(2002) DLT683

[8] Shakoor v. Jaipur Development Authority, AIR 1987 Raj 19

[9] Code of Civil Procedure (Amendment) Act, 2002

[10] NOTIFICATION No. 722/Rules/DHC Dated: 16.10.2018

[11] Delhi High Court (Original Sides) Rules, 2018

[12] 2019VIIIAD(Delhi)206

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