Supreme Court Allows Appeal Against Ex-Parte Decree in Property Damage Suit: Aviation Travels Pvt. Ltd. vs. Bhavesha Suresh Goradia (2020)

Date of the Judgment: March 2, 2020

Citation: (2020) INSC 171

Judges: R. Banumathi, J. and A.S. Bopanna, J.

Can a court refuse a party the right to defend a suit, especially when significant damages are claimed? The Supreme Court of India addressed this question in a case involving a property damage claim, where a defendant was initially denied the opportunity to present their case. The Court, in this judgment, examined whether the High Court was right in refusing to set aside an ex-parte decree. The bench comprised Justices R. Banumathi and A.S. Bopanna, with the opinion authored by Justice R. Banumathi.

Case Background

The case revolves around a property dispute that began in 1994. Bhavesha Suresh Goradia, representing a private trust, filed a suit against Aviation Travels Pvt. Ltd. (the appellant) and others, claiming damages for trespass, nuisance, and property damage. The trust alleged that Aviation Travels had caused significant damage during repairs and renovations of a property that the trust owned. The trust sought ₹1 crore in compensation and a permanent injunction against further repairs by the appellant.

Aviation Travels had an agreement with the trust to purchase part of the property in 1978. Further, Aviation Travels had a leave and license agreement with Woodlands Garden Cafe (respondent No. 2) to run a restaurant on the premises. The trust claimed that during renovations in 1992, Aviation Travels caused damage and carried out illegal construction.

The High Court of Bombay, in an ex-parte decree dated October 7, 2003, ordered Aviation Travels and Woodlands Garden Cafe to pay ₹77,02,500 with 6% interest from the date of filing the suit, along with other reliefs. This decree was passed because Aviation Travels did not file a written statement.

Timeline:

Course of Proceedings

Aviation Travels filed a Notice of Motion in 2018 to set aside the 2003 ex-parte decree, arguing that they were not properly served with the suit summons and that the Bombay High Court Rules were not followed. The Single Judge of the High Court dismissed this motion, stating that an advocate had filed a vakalatnama (a document authorizing a lawyer to act) on behalf of Aviation Travels, and therefore personal service was not required. The Single Judge also noted the existence of a Power of Attorney in favour of K. Shrinivas Rao, who was a director of the appellant company and had engaged a lawyer.

The Division Bench of the High Court upheld the Single Judge’s decision, noting that the advocate had represented Aviation Travels on several occasions, including engaging a senior advocate. A review petition filed by Aviation Travels was also dismissed by the High Court, stating that there was no error on the face of the order.

Legal Framework

The case primarily involves the interpretation of procedural rules regarding service of summons and appearance of parties in court. The Bombay High Court Rules were central to the dispute, specifically Rule 79, which addresses the requirement of personal service of a writ of summons. Rule 79 of the Bombay High Court Rules states:

“79. Waiver of service of writ of summons.- The service of a writ of summons on a defendant may be waived by the defendant or his advocate by an endorsement in writing on the writ of summons, or by an undertaking in writing to accept service of that writ of summons and to file a vakalatnama.”

The High Court interpreted this rule to mean that once a vakalatnama is filed, personal service is not required. The appellant contended that even with a vakalatnama, personal service was necessary.

Arguments

Appellant’s Arguments:

• The appellant argued that they were never served with the summons of the original suit at their registered address or any other business address.
• They contended that the vakalatnama filed by M/s. Narayanan & Narayanan, Advocates was not authorized by them.
• The appellant claimed that K. Shrinivas Rao, who signed the vakalatnama, was not authorized to represent them in the suit and that the Power of Attorney dated 29.04.1993 was a general one and did not authorize him to sign vakalatnama on their behalf in the suit.
• They argued that even if a vakalatnama was filed, Rule 79 of the Bombay High Court Rules requires personal service of the writ of summons.
• The appellant also questioned the genuineness of the Power of Attorney, stating that it was notarized in Mumbai by an advocate representing the respondent, while their company was located in Bangalore.

Respondents’ Arguments:

• The respondents argued that M/s. Narayanan & Narayanan, Advocates had entered appearance on behalf of the appellant and filed a vakalatnama signed by the constituted attorney of the appellant.
• They stated that the Power of Attorney dated 29.04.1993 authorized the attorney to accept summons and other processes.
• The respondents argued that the appellant’s constituted attorney, K. Shrinivas Rao, had filed a reply affidavit in 1994, acknowledging the appellant’s interest in the property.
• They contended that the appellant had surrendered its rights in the property to respondent No.2 and the appeal was a proxy litigation.
• The respondents highlighted that the summons was served on the advocates for the appellant by the bailiff of the Sheriff of Mumbai.

Submissions Table:

Issues Framed by the Supreme Court

The Supreme Court did not frame specific issues for determination. However, the core issue before the court was whether the High Court was correct in refusing to set aside the ex-parte decree, thereby denying the appellant an opportunity to contest the suit on merits. The primary sub-issue was whether the appellant had been properly served with summons and whether the filing of a vakalatnama by an advocate on behalf of the appellant was sufficient to waive the requirement of personal service.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court did not cite any specific cases or legal provisions in its judgment. The primary focus of the Court was on the procedural fairness and the need to provide an opportunity to the appellant to defend the suit on merits. The Court did refer to Rule 79 of the Bombay High Court Rules, but did not provide any interpretation of the same.

Authorities Table

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Rule 79 of the Bombay High Court Rules: The Court acknowledged the existence of the rule and the arguments surrounding it, but did not provide a specific interpretation. The Court focused on the broader principle of providing a fair opportunity to contest the suit.

What weighed in the mind of the Court?

The Supreme Court was primarily concerned with ensuring that the appellant had a fair opportunity to defend itself, given the substantial amount of damages claimed in the suit. The Court noted that the suit was for recovery of damages of ₹1 crore, with a claim for 24% interest per annum. The ex-parte decree had directed the appellant to pay ₹77,02,500, which along with interest, amounted to ₹1,20,03,282.96. The Court emphasized that damages could only be ascertained after the parties presented evidence. The Court also considered that the appellant had deposited ₹60,00,000/- and was directed to deposit a further sum of ₹35,00,000/-, demonstrating their bona fide intent to contest the suit.

The sentiment analysis of the Supreme Court’s reasoning is as follows:

Fact:Law Ratio:

The Court’s decision was influenced more by the factual aspects of the case and the need to ensure a fair hearing, rather than a strict interpretation of the law. The ratio of fact:law is 60:40.

The Court’s reasoning was based on a step-by-step approach, starting from the filing of the suit to the final decision to set aside the ex-parte decree.

The Supreme Court did not discuss any alternative interpretations of the law. The Court’s primary concern was to ensure that the appellant was given an opportunity to present their case, given the substantial amount of damages claimed. The Court observed that “the suit claim was for damages. The damages to the property if any, can be ascertained only after the parties adduce the oral and documentary evidence.” The Court also noted that “we have no reason to believe that the appellant would have benefited by deliberately not contesting the suit as they would in any event be saddled with interest if their conduct was to drag and prolong the suit.” The Court also stated that “Considering the nature of the claim and other facts and circumstances and in the interest of justice, we are of a view that an opportunity has to be given to the appellant to contest the suit subject to terms.”

Key Takeaways

• An ex-parte decree can be set aside if the court finds that the defendant was not given a fair opportunity to contest the suit, especially in cases involving substantial damages.
• The court will consider the nature of the claim, the amount of damages, and the conduct of the parties when deciding whether to set aside an ex-parte decree.
• Depositing a substantial amount of money as directed by the court can demonstrate a party’s bona fide intent to contest the suit.
• The Supreme Court prioritizes the principle of natural justice, ensuring that all parties have a fair opportunity to present their case.

Directions

The Supreme Court set aside the High Court’s judgment and restored the suit. The appellant and respondent No. 2 were directed to file their written statements within four weeks. The High Court was directed to provide sufficient opportunity to both parties to present evidence and dispose of the suit in accordance with the law. The appellant was given two months to deposit the remaining ₹35,00,000, which would be invested in a nationalized bank and subject to the outcome of the suit.

Development of Law

The ratio decidendi of the case is that an ex-parte decree should be set aside to ensure that the defendant has a fair opportunity to contest the suit on merits, especially in cases involving substantial damages. This judgment emphasizes the principle of natural justice and the importance of allowing all parties to present their case before a final decision is made. There is no change in the previous position of law.

Conclusion

The Supreme Court’s decision in Aviation Travels Pvt. Ltd. vs. Bhavesha Suresh Goradia emphasizes the importance of ensuring that all parties have a fair opportunity to present their case, especially when significant damages are claimed. The Court set aside the ex-parte decree and allowed the appellant to contest the suit, highlighting the principle of natural justice and the need for a fair hearing. This case serves as a reminder that procedural rules should not be interpreted in a way that denies a party the right to defend themselves.