Bombay High Court
Reliance General Insurance Co. ... vs Colonial Life Insurance Co ... on 28 January, 2021
Bench: S.C. Gupte, Surendra Pandharinath Tavade
1.Commercial Appeal.543.2019.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL APPEAL NO.543 OF 2019
IN
COMMERCIAL NOTICE OF MOTION NO.561 OF 2018
IN
COMMERCIAL SUIT NO.29 OF 2013
Reliance General Insurance Co. Ltd. ....Appellant/Original Plaintif
Vs.
Colonial Life Insurance Company
(Trinidad) Ltd. & Anr. ....Defendants
Mr. Nitin Thakkar, Senior Advocate a/w. Mr. Anubhav Datta and Ms. Aashna
Jain i/by Tuli & Co. for the Appellant.
Mr. Sharan Jagtiani, Senior Advocate a/w. Mr. Priyank Kapadia, Ms. Sonali
Mathur and Mr. Parth Jain i/by AZB & Partners for Respondent No.1.
Ms. Suchita Uppal i/by Hariani & Co. for Respondent No.2.
CORAM : S.C. GUPTE AND
SURENDRA P. TAVADE, JJ.
DATE : 28 JANUARY 2021
ORAL JUDGMENT (PER : S. C. GUPTE, J.):
1. This commercial appeal challenges an order passed by a learned
Single Judge of this Court on a notice of motion. The question of law
decided by the learned Single Judge in the impugned order was : whether
the mandatory timeline of 120 days for fling a written statement in a
Commercial Suit is applicable to suits which were fled prior to the enactment
of the Commercial Courts Act, 2015 and which came to be transferred as
commercial suits to be heard by the commercial division of this Court in
accordance with the provisions of Section 15 of the Commercial Courts Act.
2. The present suit was fled on 19.03.2013 as an ordinary suit. On
15.04.2013, writ of summons was issued to both defendants, who are
Respondents to the present commercial appeal. The writ of summons was
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duly served on defendant No.2, but not on defendant No.1. In pursuance of
such service, on 19.11.2013, defendant No.2 fled its written statement in the
suit. Before the writ of summons could be served on defendant No.1, the
Commercial Courts, Commercial Division and Commercial Appellate
Division of High Courts Act, 2015 ("Commercial Courts Act") came into force
on 23.10.2015. In pursuance of that Act, particularly Section 15 thereof, the
Prothonotary & Senior Master issued a notifcation transferring all suits of
specifed value and answering the description of "commercial dispute" to the
commercial division of this Court, to be tried as commercial suits. On
13.08.2016, the present suit was accordingly converted into a commercial
suit. At that stage, the advocate of original defendant No.1 entered
appearance and waived service of writ of summons. The Prothonotary &
Senior Master, by his order dated 13.08.2016, directed defendant No.1 to
fle its written statement on or before 2..09.2016, failing which the
commercial suit was directed to be transferred to the list of undefended suits
as against defendant No.1. Defendant No.1 failed to fle its written statement
by that date and instead sought three extensions. Finally, by order dated
21.09.201., defendant No.1 was granted four weeks' time to fle its written
statement. Defendant No.1, however, did not fle its written statement within
this period. On 19.01.2018, period of 120 days from the date of the original
order providing for the last extension of time elapsed without there being any
written statement on record. In the premises, on 2..02.2018, defendant
No.1 fled the present notice of motion seeking condonation of delay in fling
its written statement. The learned Judge, after hearing the parties, passed
an order on that notice of motion on 24.05.2019, holding interalia that the
mandatory timeline of 120 days for fling of a written statement in a
commercial suit was not applicable to suits fled prior to the enactment of the
Commercial Courts Act, which were subsequently transferred as commercial
suits to be tried by the commercial division of this Court. Though the notice
of motion for condonation of delay is still pending before the learned Single
Judge, as a matter of law, the point was decided in favour of the
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applicant/defendant No.1. Being aggrieved, the present commercial appeal
has been fled by the original plaintif.
3. Mr. Thakkar, learned senior counsel appearing for the
appellant/original plaintif, has taken us through the provisions of the
Commercial Courts Act and, in particular, Section 15 thereof and
amendments made by that Act to Order V Rule 1, Order VIII Rule 1 and
Order VIII Rule 10 of the Code of Civil Procedure, 1908 ("Code") in their
application to commercial suits. Learned counsel submits that the
provisions of Commercial Courts Act and in particular, the proviso to Sub-
section (4) of Section 15 thereof, which makes the amended provisions of
sub-rule (1) of Order V of the Code inapplicable to pending suits transferred
to the commercial division, applies only to those suits which were not only
pending as at the date of the Commercial Courts Act, but where writs of
summons had been served on the defendants prior to the enactment of that
Act. Learned counsel submits that as far as transferred pending suits,
where writs of summons have not been served on the defendants, are
concerned, the timeline of 120 days for fling of a written statement and
forfeiture of the right to fle written statement after expiry of that period very
much apply to them. Learned counsel relies on the judgment of the
Supreme Court in the case of SCG Contracts (India) Private Limited Vs.
K.S. Chamankar Infrastructure Private Limited & Ors.1 and decisions of
Delhi High Court in the cases of AIS Glass Solutions Limited vs. Moser
Baer Solar Limited & Ors.2, and Oku Tech Private Limited vs. Sangeet
Agarwal & Ors.3 and the judgment of a learned Single Judge of our High
Court at its Aurangabad Bench in Raj Process Equipments and Systems
Pvt. Ltd. & Ors. vs. Honest Derivatives Pvt. Ltd. 4, in support of his
submissions.
1 (2019) 12 SCC 210
2 2017 SCC Online Del 11467
3 2016 SCC Online Del 6601
4 2019 SCC Online Bom 12063
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4. The Commercial Courts Act provides for adjudication of what are
called commercial disputes inter alia by establishment of Commercial
Courts, Commercial Appellate Courts, Commercial Divisions and
Commercial Appellate Divisions to deal with such suits. It makes various
procedural provisions for dealing with such suits and appeals from such
suits. It inter alia makes amendments to the provisions of the Code in their
application to such commercial suits. We are concerned here with three
such provisions of the Code, which have been amended as a result. These
provisions are (i) Order V Rule 1, (ii) Order VIII Rule 1 and (iii) Order VIII
Rule 10 of the Code. In Order V Rule 1, for the existing second proviso
(which applies to all ordinary suits), the following proviso has been
substituted for commercial suits :
"Provided further that where the defendant falls to fle the written
statement within the said period of thirty days, he shall be allowed
to fle the written statement on such other days, as may be
specifed by the Court, for reasons to be recorded in writing and
on payment of such costs as the Court deem ft, 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 fle the written statement and the Court shall not allow
the written statement to be taken on record."
On the other hand, in Order VIII Rule 1, the following proviso has been
substituted in place of the original proviso :
"Provided that where the defendant fails to fle the written
statement within the said period of thirty days, he shall be allowed
to fle the written statement on such other day, as may be
specifed by the Court, for reasons to be recorded in writing and
on payment of such costs as the Court deems ft, 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 fle the written statement and the Court shall not allow
the written statement to be taken on record."
So also, in Order VIII Rule 10, the following proviso has been inserted;
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"Provided that no Court shall make an order to extend the time
provided under Rule 1 of this Order for fling of the written
statement."
5. The Commercial Courts Act provides for transfer of pending suits in
Chapter V of the Commercial Courts Act. Section 15, which is the only
section forming part of Chapter V, is quoted below :
"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 a Specifed
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 Specifed 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 fnal 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 (2).
(3) Where any suit or application, including an application under
the Arbitration and Conciliation Act, 1996 (26 of 1996), relating to
a commercial dispute of Specifed Value shall stand transferred to
the Commercial Division or Commercial Court under sub-section
(1) or sub-section (2), the provisions of this Act shall apply to
those procedures that were not complete at the time of transfer.
(4) The Commercial Division or Commercial Court, as the
case may be, may hold case management hearings in respect of
such transferred suit or application in order to prescribe new
timelines or issued such further directions as may be necessary
for a speedy and efcacious disposal of such suit or application in
accordance [with Order XV-A] of the Code of Civil Procedure,
1908 (5 of 1908);
Provided that the proviso to sub-rule (1) of rule 1 of Order V of the
Code of Civil Procedure, 1908 (5 of 1908) shall not apply to such
transferred suit or application and the Court may, in its discretion,
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prescribe a new time period within which the written statement
shall be fled.
(5) In the event that such suit or application is not transferred
in the manner specifed in sub-section (1), sub-section (2) or sub-
section (3), the Commercial Appellate Division of the High Court
may, on the application of any of the parties to the suit, withdraw
such suit or application from the Court before which it is pending
and transfer the same for trial or disposal to the Commercial
Division or Commercial Court, as the case may be, having
territorial jurisdiction over such suit, and such order of transfer
shall be fnal and binding."
6. As is apparent on the very face of it, Sub-section (4) of Section 15
makes a special provision for timeline of a transferred suit or application.
The Commercial Courts Act contains strict timelines for various stages of a
commercial suit. Though these timelines are applicable even to transferred
commercial suits, atleast to the extent of those proceedings which were not
complete at the time of transfer of such suits, just as all provisions of the
Commercial Courts Act are meant to apply to those proceedings (Sub-
section (3) of Section 15), Sub-section (4) of Section 15 gives power or
authority to the Commercial Division or Court, as the case may be, to
prescribe new timelines or issue further directions in such transferred suits.
The proviso to Sub-section (4) makes the timeline provided in sub-rule (1) of
Rule 1 of Order V of the Code for fling of a written statement inapplicable to
a transferred commercial suit. As we have noted above, the amended
proviso to sub-rule (1) of Rule 1 of Order V provides for initial period of 30
days after service of writ of summons for fling of a written statement, leaving
discretion to the Court to extend that time, for reasons to be recorded in
writing and on payment of such costs as it deems ft, upto a maximum period
of 120 days from the date of service of writ of summons. The proviso goes
on to add that on expiry of 120 days, the defendant shall forfeit the right to
fle a written statement. It further affrms the position in law by providing that
no court shall thereafter allow the written statement to be taken on record.
As is obvious, this entire proviso has been done away with by virtue of the
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proviso to Sub-section (4) of Section 15 of the Commercial Courts Act,
which makes it clear that this particular proviso to Sub-rule (1) of Rule 1 of
Order V does not apply to any suit or application which is transferred under
Section 15 of the Commercial Courts Act to the Commercial Division of this
Court.
.. The argument of Mr. Thakkar is twofold. Firstly, learned counsel
submits that even if the proviso of Sub-rule (1) of Rule 1 of Order V has been
done away with in its application to transferred commercial suits, the other
amended provisions, namely, provisos to Order VIII Rule 1 and Order VIII
Rule 10 of the Code, are left intact. Learned counsel submits that exclusion
of these two provisos from the text of Section 15(4) must be treated as a
deliberate act of the legislature and given a meaning accordingly; it is
imperative not to treat this exclusion as a lacuna and then cure it by reading
these two provisos in Sub-section (4) of Section 15. Learned counsel,
secondly, submits that the amended provisions can only be reconciled by
interpreting Sub-sections (3) and (4) of Section 15 of the Commercial
Courts, Act in the manner suggested by him, that is to say, by holding the
proviso to Sub-section (4) of Section 15 to be applicable only to those
transferred suits or applications, where writs of summons have already been
served prior to the transfer and not to those suits where writs of summons
are still to be served as at the date of such transfer.
8. In our opinion, neither of the two submissions has any merit. It is
beyond the pail of controversy that Sub-rule (1) of Rule 1 of Order V of the
Code, which has been amended in its application to commercial suits, whilst
providing for a special timeline for fling of a written statement in commercial
suits, makes four important provisions in that behalf. Firstly, it stipulates an
initial timeline of 30 days for fling of a written statement. Secondly, it gives
power to the Court to extend this timeline upto a period of maximum 120
days from the date of service of summons. Thirdly, it provides for the
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defendant's forfeiture of his right to fle a written statement at the expiry of
this period of 120 days. And fourthly, it prohibits the Court from allowing any
written statement to be taken on record thereafter. No doubt, as a result of
these pivotal provisions, the Commercial Courts Act introduces amendments
even in Order VIII Rule 1 and Order VIII Rule 1 and makes supplementary
provisions to the same efect in these latter rules. The proviso introduced in
Rule 1 of Order VIII reiterates practically the whole of the proviso to Sub-rule
(1) of Rule 1 of Order V. In fact, it is in exactly identical terms, whereas the
amended proviso to Rule 10 of Order VIII reiterates the proscription against
the Court extending the maximum time provided for fling of a written
statement. It is, however, impermissible to hold that though the entire
proviso of Sub-rule (1) of Rule 1 of Order V has been made inapplicable to
transferred commercial suits, identical provisions contained in Order VIII
Rule 1 and the restriction on the Court's power contained in the proviso to
Order VIII Rule 10 nevertheless apply to such transferred commercial suits.
In the very least, if we were to hold this to be the correct position, Sub-
section (4) of section 15 of the Commercial Courts Act would be rendered
wholly nugatory, loosing all its content and meaning. That, we are afraid, is
impermissible whilst construing any statutory enactment.
9. Section 15 of the Commercial Courts Act, which is the lone provision
made specially for taking care of transfer of ordinary suits pending before the
High Courts to Commercial Divisions and their trial as commercial suits by
those Divisions, not only makes the timeline provided under the proviso to
Sub-rule (1) of Rule 1 of Order V inapplicable to such transferred suits, it
empowers the Court, in its discretion, to prescribe a new timeline within
which the written statement can be fled. In its plain meaning, what this
proviso does is that it bestows discretion on the Court to provide for
extension of time beyond the maximum permissible time limit of 120 days
from the date of service of writ of summons. If that is so, there is no way to
apply the forfeiture clause to a defendant, who does not fle his written
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statement within the period of 120 days and who may be given further time
by the Court. It would make scarce sense of the Court's power to grant
further time, if one were to hold that the Court nevertheless does not have
power to grant time by virtue of the provisions of Order VIII Rule 1 or Rule
10. No act of legislature can be read in this fashion.
10. The Supreme Court's judgment in the case of SCG Contracts
(India) Private Limited (supra) deals with a commercial suit fled after the
Commercial Courts Act came into operation. It considers whether the
timeline of maximum period of 120 days for fling of a written statement in the
suit before it could be extended by the Court. On a combined reading of the
three provisions introduced by the Commercial Courts Act, namely, the
substituted second proviso in Sub-rule (1) of Rule 1 of Order V, the
substituted proviso to Rule 1 of Order VIII and the newly introduced proviso
in Rule 10 of Order VIII, it holds that the provision of maximum period of 120
days from the date of service of writ of summons for fling a written statement
in a commercial suit is mandatory and not directory. This law has nothing to
do with the facts of our case. In our case, what we are concerned with is,
whether forfeiture by a defendant of his right to fle written statement after
this timeline and inability of the Court to extend the timeline, are meant to
apply to those suits, which were originally fled as ordinary suits and later on
transferred to the commercial division by virtue of Section 15 of the
Commercial Courts Act. In so far as such suits are concerned, the strict
timeline provided for fling of a written statement, the forfeiture of the
defendant's right to fle a written statement after such timeline and inability of
the Court to extend that timeline, are expressly stated to be not applicable.
11. The judgment of Delhi High Court in Oku Tech Private Limited
(Supra) also deals with the combined efect of the three amended provisions
of the code in their application to commercial suits fled after the commercial
Courts Act came into force. It rules on the legislative intent to take away the
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discretion of the Court to extend the time for fling of a written statement
beyond the maximum period of 120 days. The other judgment of that Court,
namely, the case of AIS Glass Solutions Limited (Supra), reiterates the
law stated in Oku Tech Private Limited (supra).
12. The facts of the case before Aurangabad Bench in Raj Process
Equipments and Systems Pvt. Ltd. (supra) were, as per the Court's own
observations, wholly diferent from the facts of the impugned judgment of the
learned Single Judge in our case. The Court in that case did not question
the law stated by the learned Single Judge in the impugned judgment, but
held that it would not apply to the case in hand, since the suit, which was
before the Aurangabad Bench, was transferred to the commercial Court
after a "no written statement" order was passed. Besides, as observed by
that Court, unlike in the case of the impugned judgment, the Petitioners in
Raj Process Equipments and System Pvt. Ltd. had not even fled any
application for setting aside the "no written statement" order. The statement
of the Court in Raj Process Equipments and Systems Pvt. Ltd. that the
provisions of Order VIII Rule 1 and Rule 10 were not noticed in the
impugned judgment or other observations made in connection with the
provisions of Order VIII Rule 1 or 10, cannot be read to mean a doubt being
cast about the correctness of the observations in the judgment impugned in
the present commercial appeal. Anyway, the judgment in Raj Process
Equipments and Systems Pvt. Ltd. does not state the law otherwise.
13. The distinction drawn by Mr. Thakkar between those commercial
suits which were fled before the commencement of the Commercial Courts
Act and where writs of summons were served prior to such commencement
and those suits which were fled before the introduction of the Commercial
Courts Act, but where writs of summons were not served till the date of
commencement of the Commercial Courts Act, has no merit. Chapter V of
the Commercial Courts Act, dealing with the subject, is entitled "Transfer of
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pending suits". Sub-section (1) of Section 15 provides for compulsory
transfer of all suits and applications including applications under Arbitration
and Conciliation Act, 1996, relating to commercial disputes of specifed
value pending in a High Court where a Commercial Division has been
constituted, to such commercial division. The condition for application of this
provision is "pendency" of a suit or application. The provisions which follow
[Sub-sections (2) to (5)] deal with such pending suits transferred to the
commercial division. There is no scope for distinguishing between these
suits on the basis of service or want of service of writ of summons. Sub-
sections (2) to (5) of Section 15 apply to all commercial suits irrespective of
the date of service of writ of summons.
14. The learned Single Judge has accordingly correctly interpreted the
law and come to a correct conclusion that the mandatory timeline of 120
days for fling of a written statement in a commercial suit is not applicable to
suits originally fled as ordinary suits, and which have been transferred as
commercial suits to be heard by the commercial division of this Court, under
Section 15(1) of the Commercial Courts Act.
15. There is, thus, no merit in the appeal. The Commercial Appeal is
dismissed. Costs to be costs in the cause.
(SURENDRA P. TAVADE, J) (S.C. GUPTE, J.)
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