M/S SCG CONTRACTS INDIA PVT. LTD. versus K. S. CHAMANKAR INFRASTRUCTURE PVT. LTD. & ORS.

M/S SCG CONTRACTS INDIA PVT. LTD.

K. S. CHAMANKAR INFRASTRUCTURE PVT. LTD. & ORS.(Civil Appeal No. 1638 of 2019)

FEBRUARY 12, 2019

[R. F. NARIMAN AND VINEET SARAN, JJ.]

Code of Civil Procedure, 1908 (As amended in the wake ofthe Commercial Courts, Commercial Division and CommercialAppellate Division of High Courts Act, 2015 coming into force on23-10-2015):

Or. VIII, r. 1, proviso and r. 10, proviso, Or. V, r. 1, sub rule(1), second proviso – Written statement – Procedure when partyfails to present written statement called for by court – On facts, in acommercial suit, failure of defendant No.1 to file written statementwithin 120 days from the date of service of summons – Meanwhile,Dfiling of application under Or. VII, r. 11 – Rejected by order dated05.12.2017 – Thereafter, defendant no. 1 sought time for filing thewritten statement – Extension of time till 15.12.2017, subject todefendant paying cost – Pursuant thereto, written statement filedon 15.12.2017 – Thereafter, belated application filed averring thatEin view of the amendments in CPC, written statement could not betaken on record since 120 days had elapsed from the date of serviceof summons of the suit – High Court allowed the written statementto be taken on record even though order dated 05.12.2017 hadbecome final and provisions of law were amended – On appeal,held: Proviso in Or. VIII r. 10 states that the Court has no furtherFpower to extend the time beyond the period of 120 days – Beyond120 days from the date of service of summons, the defendant shallforfeit the right to file the written statement and the Court shall notallow the written statement to be taken on record – All this points tothe fact that the earlier law on the filing of written statement underGOr. VIII, r. 1 has now been set at naught – Clear, definite andmandatory provisions of Or. V r/w Or. VIII, r. 1 and 10 cannot becircumvented by recourse to the inherent power u/s. 151 – Thus, the05.12.2017 order cannot be sustained – Second order dated24.09.2018 is also set aside – Even assuming that the 05.12.2017order is final, res judicata cannot stand in the way of an erroneous

M/S SCG CONTRACTS INDIA PVT. LTD. v. K. S. CHAMANKARINFRASTRUCTURE PVT. LTD.

interpretation of statutory prohibition – Thus, the written statementof defendant no. 1 to be taken off the record – Res judicata.

Allowing the appeal, the Court

HELD: 1.1 perusal of the amendments made in the wakeof the Commercial Courts, Commercial Division and CommercialAppellate Division of High Courts Act, 2015 to Code of CivilProcedure-Or. VIII, r. 1 and 10 proviso, Or. V, r. 1 sub rule (1)second proviso, would show that ordinarily written statementis to be filed within period of 30 days. However, grace period ofa further 90 days is granted which the Court may employ forreasons to be recorded in writing and payment of such costs as itdeems fit to allow such written statement to come on record.Beyond 120 days from the date of service of summons, thedefendant shall forfeit the right to file the written statement andthe Court shall not allow the written statement to be taken onrecord. This is further buttressed by the proviso in Order VIIIRule 10 also adding that the Court has no further power to extendthe time beyond this period of 120 days. Given the consequenceof non-filing of written statement, the amended provisions of theCPC will have to be held to be mandatory. The consequence offorfeiting right to file the written statement; non-extension ofany further time; and the fact that the Court shall not allow thewritten statement to be taken on record all points to the fact thatthe earlier law on Order VIII Rule 1 on the filing of writtenstatement under Order VIII Rule 1 has now been set at naught.The clear, definite and mandatory provisions of Order V readwith Order VIII Rule 1 and 10 cannot be circumvented byrecourse to the inherent power under Section 151 to do theopposite of what is stated therein. Therefore, the 05.12.2017 orderwhich applies in the face of the amendments made to theCPC cannot be sustained. [Para 8, 10, 11, 16, 17][1056-B-C;1057-B-C-D; 1058-F-G]

1.2 An issue of law which arises between the same partiesin subsequent suit or proceeding is not res judicata if, by anerroneous decision given on statutory prohibition in the formersuit or proceeding, the statutory prohibition is not given effectto. This is despite the fact that the matter in issue between theparties may be the same as that directly and substantially in issuein the previous suit or proceeding. This is for the reason that in

Asuch cases, the rights of the parties are not the only matter forconsideration (as is the case of an erroneous interpretation of astatute inter parties), as the public policy contained in thestatutory prohibition cannot be set at naught. The said is applicableto the facts of the instant case, as even assuming that the05.12.2017 order is final, res judicata cannot stand in the way ofBan erroneous interpretation of statutory prohibition. Therefore,the second order dated 24.09.2018 is set aside. The writtenstatement of defendant no. 1 must be taken off the record.[Paras 18, 19][1059-B-C; F]

Canara Bank v. N.G. Subbaraya Setty and Anr. AIRC2018 SC 3395 : [2018] SCR 884 – relied on.

Oku Tech Private Limited v. Sangeet Agarwal & Ors. dt11.08.2016 in CS (OS) No. 3390/2015 – approved.

State of Bihar and Others v. Bihar Rajya Bhumi VikasDBank Samiti (2018) 9 SCC 472 : [2018] 7 SCR 1147 ;Bhanu Kumar Jain v. Archana Kumar and Another(2005) 1 SCC 787 : [2004] 6 Suppl. SCR 1104 ; ShaikhSalim Haji Abdul Khayumsab v. Kumar and Others(2006) 1 SCC 46 : [2005] 5 Suppl. SCR 349 ; R.K.Roja v. U.S. Rayudu and Another [2016] SCR 221 ;EKailash v. Nanhku (2005) 4 SCC 480 : [2005] 3SCR 289 ; Salem Advocate Bar Association v. Unionof India (2005) 6 SCC 344 : [2005] 1 Suppl. SCR 929; State v. N.S. Gnaneswaran (2013) 3 SCC 594 ;Manohar Lal Chopra v. Rai Bahadur Rao Raja SethFHiralal [1962] Suppl 1 SCR 450 ; Maja Cosmetics v.Oasis Commercial Pvt. Ltd. 2018 SCC Online Del 6698– referred to.M/S SCG CONTRACTS INDIA PVT. LTD. v. K.S. CHAMANKARINFRASTRUCTURE PVT. LTD.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1638

of 2019

From the Judgment and Order dated 05.12.2017 of the HighCourt of Delhi at New Delhi in Civil Suit (Comm.) No. 199 of 2017 andorder dated 24.9.2018 in I.A. No. 10569 of 2018 in CS (Comm.) No.199 of 2017.

Rajesh Mahajan, Dr. S. Ritam Khare, Ms. Urvi Kuthiala,Ms. Shweta Chaurasia (for M/s. Ace Legal), Advs. for the Appellant.

L. D. Joshi, Amzad Salim, Nishant R. Katneshwarkar,M/s Legal Options, Advs. for the Respondents.

The Judgment of the Court was delivered by

R. F. NARIMAN, J. 1. Leave granted.

2. In the present case, Suit was filed on 10.03.2017 claiming asum of Rs. 6,94,63,114/-. The Defendant No.1 was served with thesummons in the Suit on 14.07.2017. 120 days from this date takes us to11.11.2017, by which date no written statement had been filed.Meanwhile, however, an Order VII Rule 11 application was filed. Thisapplication was taken up and rejected by the first impugned order dated05.12.2017. After rejecting the Order VII Rule 11 application, the learnedSingle Judge recorded that none appeared for the plaintiff inspite ofadvance copy stated to have been given. He also records that the counselfor the defendant No.1 now states that seven days time be granted tofile written statement. Para 14 of the aforesaid order then reads asfollows:

“14. Subject to the defendant No.1 paying costs of Rs.25,000/- tothe counsel for the plaintiff on or before 15[th] December, 2017, thetime for filing the written statement is extended till 15[th] December,2017. If either of the conditions is not complied with, the right ofthe defendant No.1 to file written statement shall stand closedwithout any further order.”

3. In obedience to this order, written statement was filed on15.12.2017 by the defendant No.1. By belated application dated06.08.2018, it was averred that the recent changes that have been madein the Code of Civil Procedure were not adhered to as result of whichthe written statement which had yet to be taken on record could not so

Ato be taken on record in view of the fact that 120 days had elapsed fromthe date of service of summons of this Suit.

4. On 24.09.2018, another learned Single Judge took up thisapplication and held that the 05.12.2017 order being final, even thoughthe provisions of law may provide otherwise, the defendant No.1’s writtenBstatement which was filed on 15.12.2017 should be taken on record.The petitioner has filed Special Leave Petition against the aforesaidtwo orders.

5. Learned counsel appearing on behalf of the petitioner has takenus through the recent amendments made in the Code of Civil ProcedureCand argued, laying great emphasis on State of Bihar and Othersvs.Bihar Rajya Bhumi Vikas Bank Samiti, (2018) 9 SCC 472 as well asCanara Bankvs. N.G. Subbaraya Setty and Anr.AIR 2018 SC 3395for the proposition that the amendments so made now provide for theconsequence of non-filing of written statement, and as this is so, theprovisions of Order VIII Rules 1 and 10 can no longer be said to beDdirectory but can only be said to be mandatory. In this view of thematter, since statutory prohibition now exists, the doctrine of resjudicata cannot be availed.6. As against this, learned counsel appearing on behalf of therespondents has argued, basing himself on the decisions inBhanu KumarEJainvs. Archana Kumar and Another, (2005) 1 SCC 787 and ShaikhSalim Haji Abdul Khayumsabvs. Kumar and Others, (2006) 1 SCC46 that the vital difference between res judicata in subsequent suitand res judicata in two different stages of the same proceeding mustbe kept in view. He stated that as the 05.12.2017 order had attainedFfinality and could only now be challenged after the decree in the Suit ispassed, clearly, the order of 24.09.2018 is correct. He also stated thatby now the order dated 05.12.2017 had been acted upon and wrongfulact of the Court therefore, cannot prejudice him. He also argued citingthe judgment of R.K. Rojavs. U.S. Rayudu and Another, (2016) 14SCC 275 that as an Order VII Rule 11 application had been filed andGthat had to be answered before trial of the Suit could commence, it wasclear that written statement could not be filed. He then relied uponSection 151 of the Code of Civil Procedure which preserves the inherentpower of the court, more particularly, that of Court of record - theHigh Court, and can be invoked in cases like the present where grosslyHunjust consequences would otherwise ensue.

7. Having heard learned counsel for both parties, it is important tofirst set out the statutory provisions.

8. The Commercial Courts, Commercial Division and CommercialAppellate Division of High Courts Act, 2015 came into force on 23.10.2015bringing in their wake certain amendments to the Code of Civil Procedure.In Order V, Rule 1, sub-rule (1), for the second proviso, the followingproviso was substituted:

“Provided further that where the defendant fails to file the writtenstatement within the said period of thirty days, he shall be allowedto file the written statement on such other days, as may bespecified by the Court, for reasons to be recorded in writing andon payment of such costs as the court deems fit, but which shallnot be later than one hundred twenty days from the date of serviceof summons and on expiry of one hundred and twenty days fromthe date of service of summons, the defendant shall forfeit theright to file the written statement and the court shall not allow thewritten statement to be taken on record.”

Equally, in Order VIII Rule 1, new proviso was substituted asfollows:

“Provided that where the defendant fails to file the writtenstatement within the said period of thirty days, he shall be allowedto file the written statement on such other day, as may be specifiedby the court, for reasons to be recorded in writing and on paymentof such costs as the Court deems fit, but which shall not be laterthan one hundred and twenty days from the date of service ofsummons and on expiry of one hundred and twenty days from thedate of service of summons, the defendant shall forfeit the rightto file the written statement and the court shall not allow the writtenstatement to be taken on record.”

This was re-emphasized by re-inserting yet another proviso inOrder VIII Rule 10 CPC, which reads as under:-

“Procedure when party fails to present written statement calledfor by Court.- Where any party from whom written statementis required under Rule 1 or Rule 9 fails to present the same withinthe time permitted or fixed by the Court, as the case may be, theCourt shall pronounce judgment against him, or make such order

Ain relation to the suit as it thinks fit and on pronouncement of suchjudgment decree shall be drawn up.

Provided further that no Court shall make an order to extendthe time provided under Rule 1 of this Order for filing of the writtenstatement.”

perusal of these provisions would show that ordinarily writtenstatement is to be filed within period of 30 days. However, graceperiod of further 90 days is granted which the Court may employ forreasons to be recorded in writing and payment of such costs as it deemsfit to allow such written statement to come on record. What is of greatCimportance is the fact that beyond 120 days from the date of service ofsummons, the defendant shall forfeit the right to file the written statementand the Court shall not allow the written statement to be taken on record.This is further buttressed by the proviso in Order VIII Rule 10 alsoadding that the Court has no further power to extend the time beyondthis period of 120 days.D

9. In Bihar Rajya Bhumi Vikas Bank Samiti(supra), questionwas raised as to whether Section 34(5) of the Arbitration and ConciliationAct, 1996, inserted by Amending Act 3 of 2016 is mandatory or directory.In para 11 of the said judgment, this Court referred to Kailashvs.Nanhku, (2005) 4 SCC 480 referring to the text of Order 8 Rule 1 as itEstood pre the amendment made by the Commercial Courts Act. It alsoreferred to the Salem Advocate Bar Associationvs. Union of India,(2005) 6 SCC 344, which, like the Kailash judgment, held that the mereexpression “shall” in Order 8 Rule 1 would not make the provisionmandatory. This Court then went on to discuss in para 17Statevs.N.S.FGnaneswaran, (2013) 3 SCC 594 in which Section 154(2) of the Codeof Criminal Procedure was held to be directory inasmuch as noconsequence was provided if the Section was breached. In para 22 byway of contrast to Section 34, Section 29-A of the Arbitration Act wasset out. This Court then noted in para 23 as under:

G“23. It will be seen from this provision that, unlike Sections 34(5)and (6), if an award is made beyond the stipulated or extendedperiod contained in the section, the consequence of the mandateof the arbitrator being terminated is expressly provided. Thisprovision is in stark contrast to Sections 34(5) and (6) where, ashas been stated hereinabove, if the period for deciding theHapplication under Section 34 has elapsed, no consequence is

provided. This is one more indicator that the same AmendmentAct, when it provided time periods in different situations, did sointending different consequences.”

10. Several High Court judgments on the amended Order VIIIRule 1 have now held that given the consequence of non-filing of writtenstatement, the amended provisions of the CPC will have to be held to bemandatory. [See Oku Tech Private Limitedvs. Sangeet Agarwal &Ors.by learned Single Judge of the Delhi High Court dated 11.08.2016in CS (OS) No. 3390/2015 as followed by several other judgmentsincluding judgment of the Delhi High Court in Maja Cosmeticsvs.Oasis Commercial Pvt. Ltd.2018 SCC Online Del 6698.

11. We are of the view that the view taken by the Delhi HighCourt in these judgments is correct in view of the fact that theconsequence of forfeiting right to file the written statement; non-extension of any further time; and the fact that the Court shall not allowthe written statement to be taken on record all points to the fact that theearlier law on Order VIII Rule 1 on the filing of written statement underOrder VIII Rule 1 has now been set at naught.

12. However, learned counsel appearing for the respondents reliedstrongly upon the judgment in Bhanu Kumar Jain (supra) and ShaikhSalim Haji Abdul Khayumsab (supra) and, in particular, paras 22 and27 of the first judgment and paras 4 & 19 of the second judgment.

13. We are of the view that since both these judgments dealt withthe pre-amendment position, they would not be of any direct relianceinsofar as the facts of the present case is concerned.

14. Learned counsel appearing for the respondents also relieduponR.K. Rojavs.U.S. Rayudu and Another(supra) for the propositionthat the defendant is entitled to file an application for rejection of plaintunder Order VII Rule 11 before filing his written statement. We are ofthe view that this judgment cannot be read in the manner sought for bythe learned counsel appearing on behalf of the respondents.

Order VII Rule 11 proceedings are independent of the filing of writtenstatement once suit has been filed. In fact, para 6 of that judgmentrecords “However, we may hasten to add that the liberty to file anapplication for rejection under Order 7 Rule 11 CPC cannot bemade as ruse for retrieving the lost opportunity to file the writtenstatement”.

A15. Learned counsel appearing for the respondents then arguedthat it cannot be assumed that the learned Single Judge did not knowabout these amendments when he passed the first impugned order dated05.12.2017. We do not wish to enter upon this speculative arena. Hethen argued that since this judgment permitted him to file the writtenstatement beyond 120 days, it was an act of the Court which shouldBprejudice no man. This doctrine cannot be used when the res is not yetjudicata. The 05.12.2017 order is res sub judice inasmuch as itscorrectness has been challenged before us.

16..Learned counsel for the respondents then strongly relied uponthe inherent powers of the Court to state that, in any case, proceduralCprovision such as contained in the amendment, which may lead to unjustconsequences can always, in the facts of given case, be ignored wheresuch unjust consequences follow, as in the facts of the present case.We are again of the view that this argument has also no legs to stand on,given the judgment of this Court in Manohar Lal Chopravs. RaiDBahadur Rao Raja Seth Hiralal, [1962] Suppl 1 SCR 450. In thisjudgment, the Court held:

“The suit at Indore which had been instituted later, could be stayedin view of s.10 of the Code. The provisions of that section areclear, definite and mandatory. Court in which subsequentEsuit has been filed is prohibited from proceeding with the trial ofthat suit in certain specified circumstances. When there is aspecial provision in the Code of Civil Procedure for dealing withthe contingencies of two such suits being instituted, recourse tothe inherent powers under s.151 is not justified...”

(at page 470)

Clearly, the clear, definite and mandatory provisions of Order Vread with Order VIII Rule 1 and 10 cannot be circumvented by recourseto the inherent power under Section 151 to do the opposite of what isstated therein.

17. Clearly, therefore, the 05.12.2017 order which applies in theface of the amendments made to the Civil Procedure Code cannot besustained. When we come to the second order dated 24.09.2018, theonly reason for this order is that 05.12.2017 has attained finality.

18. Factually speaking, this is not correct as Special Leave Petitionfrom the said order has been filed. Even otherwise, this Court inCanaraBankvs. N.G. Subbaraya Setty and Anr.(supra) has held (page 3414):

“(ii) An issue of law which arises between the same parties in asubsequent suit or proceeding is not res judicata if, by an erroneousdecision given on statutory prohibition in the former suit orproceeding, the statutory prohibition is not given effect to. This isdespite the fact that the matter in issue between the parties maybe the same as that directly and substantially in issue in the previoussuit or proceeding. This is for the reason that in such cases, therights of the parties are not the only matter for consideration (asis the case of an erroneous interpretation of statute inter parties),as the public policy contained in the statutory prohibition cannotbe set at naught. This is for the same reason as that contained inmatters which pertain to issues of law that raise jurisdictionalquestions. We have seen how, in Natraj Studios (AIR 1981 SC537) (supra), it is the public policy of the statutory prohibitioncontained in Section 28 of the Bombay Rent Act that has to begiven effect to. Likewise, the public policy contained in otherstatutory prohibitions, which need not necessarily go to jurisdictionof Court, must equally be given effect to, as otherwise specialprinciples of law are fastened upon parties when specialconsiderations relating to public policy mandate that this cannotbe done.”

The aforesaid para applies on all fours to the facts of the presentcase, as even assuming that the 05.12.2017 order is final, res judicatacannot stand in the way of an erroneous interpretation of statutoryprohibition. The present is one such case. Therefore, the second ordermust also be set aside.

19..The appeal is allowed, with the consequence that the writtenstatement of Defendant No.1 must be taken off the record.

Nidhi Jain

Appeal allowed.G