Supreme Court clarifies the timing of filing a counterclaim under Order VIII Rule 6A of the Civil Procedure Code: Ashok Kumar Kalra vs. Wing Cdr. Surendra Agnihotri & Ors. (19 November 2019)

Introduction

Date of the Judgment: 19 November 2019

Citation: 2019 INSC 1207

Judges: N.V. Ramana, J., Mohan M. Shantanagoudar, J., Ajay Rastogi, J. (Majority opinion by N.V. Ramana, J. and concurring opinion by Mohan M. Shantanagoudar, J.)

Can a defendant file a counterclaim after submitting their written statement in a civil suit? The Supreme Court of India recently addressed this crucial question regarding the interpretation of Order VIII Rule 6A of the Civil Procedure Code, 1908 (CPC). This judgment clarifies the procedural aspects of filing counterclaims, balancing the need for speedy trials with the defendant’s right to present their case fully. The Court, in this case, had to decide whether the language of Order VIII Rule 6A of the CPC is mandatory in nature, specifically regarding the timing of filing a counterclaim.

Case Background

The dispute arose from a disagreement between Ashok Kumar Kalra (the Petitioner, defendant no. 2) and Wing Cdr. Surendra Agnihotri (Respondent No. 1, the plaintiff) concerning the performance of an agreement to sell dated 20 November 1987 and 4 October 1989. The plaintiff, Wing Cdr. Surendra Agnihotri, filed a suit for specific performance against the defendant, Ashok Kumar Kalra, on 2 May 2008. The defendant submitted a written statement on 2 December 2008, and subsequently filed a counterclaim on 15 March 2009 in the same suit.

The trial court initially rejected objections to the filing of the counterclaim, which was made after the written statement and framing of issues, on 12 May 2009. However, the High Court, in Civil Revision No. 253 of 2009, allowed the revision and quashed the counterclaim. Aggrieved by the High Court’s order, the defendant approached the Supreme Court, leading to a reference to a three-judge bench to clarify the interpretation of Order VIII Rule 6A of the CPC.

Timeline

Arguments

The petitioner’s counsel argued that Order VIII Rule 6A of the CPC is an enabling provision designed to avoid multiple proceedings and save court time. They contended that there is no statutory bar on the court’s jurisdiction to entertain a counterclaim, except that the cause of action must arise before the defendant delivers their defense. The counsel also submitted that courts have the discretion to reject a counterclaim if it would delay the trial. They relied on Salem Advocate Bar Association, Tamil Nadu v. Union Of India, AIR 2005 SC 3353 and Jai Jai Ram Manohar Lal v. National Building Material Supply, Gurgaon, (1969) 1 SCC 869, asserting that procedural rules should not be interpreted to cause injustice.

The respondent’s senior counsel argued that the language and scheme of the statute indicate that a counterclaim must be part of the written statement. They emphasized that the cause of action for a counterclaim must arise before the filing of the written statement, suggesting that the counterclaim must be included in the written statement itself. They also referred to Order VIII Rule 6 of the CPC, which requires a defendant’s set-off claim to be part of the written statement, arguing that the same rule should apply to counterclaims.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether Order VIII Rule 6A of the CPC mandates an embargo on filing the counterclaim after filing the written statement?
2. If the answer to the aforesaid question is in the negative, then what are the restrictions on filing the counterclaim after filing of the Written Statement?

Treatment of the Issue by the Court

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

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court addressed the issues by analyzing the provisions of the CPC and relevant case laws. The Court held that Order VIII Rule 6A of the CPC does not impose a strict embargo on filing a counterclaim after submitting the written statement. The restriction is related to the accrual of the cause of action.

However, the Court clarified that a defendant cannot file a counterclaim with substantial delay, even if the limitation period has not expired. The outer limit for filing a counterclaim is generally until the issues are framed. The court has the discretion to entertain a counterclaim after considering factors like the period of delay, reasons for the delay, and prejudice to the opposite party.

The Court also clarified that the discretion to allow a belated counterclaim should ordinarily be exercised till the framing of issues for trial. However, in exceptional circumstances, to prevent multiplicity of proceedings and a situation of effective re-trial, the Court may entertain a counterclaim even after the framing of issues, so long as the Court has not started recording the evidence.

How each authority was viewed by the Court?

• Salem Advocate Bar Association, Tamil Nadu v. Union Of India, AIR 2005 SC 3353*: The Court relied on this case to emphasize that procedural law should not be construed in a way that leaves the Court helpless, and that a wide discretion is given to civil courts regarding procedural elements of a suit.
• Jai Jai Ram Manohar Lal v. National Building Material Supply, Gurgaon, (1969) 1 SCC 869*: The Court used this case to support the view that rules of procedure must not be interpreted in a manner that ultimately results in a failure of justice.
• Mahendra Kumar and Anr. v. State Of Madhya Pradesh and Ors., (1987) 3 SCC 265*: The Court clarified that this case needs to be understood and restricted to its specific facts, and that while it held that a counterclaim can be filed after the written statement, it should not be interpreted to allow unlimited delay.
• Jag Mohan Chawla And Another v. Dera Radha Swami Satsang & Ors., (1996) 4 SCC 699* and Shanti Rani Das Dewanjee (Smt.) v. Dinesh Chandra Day (Dead) by LRs., (1997) 8 SCC 174*: The Court referred to these cases in the context of the applicability of the limitation period for filing a counterclaim.
• Vijay Prakash Jarath v. Tej Prakash Jarath, (2016) 11 SCC 800*: The Court cited this case to show that a counterclaim was allowed even 2.5 years after the framing of issues, as evidence was pending and no prejudice was caused to the plaintiff.
• Bollepanda P. Poonacha & Anr. v. K.M. Madapa, (2008) 13 SCC 179*: The Court referred to this case to highlight that belated filing of counterclaims is discouraged, and to emphasize the serious harm caused by allowing such delayed filings.
• Ramesh Chand Ardawatiya v. Anil Panjwani, (2003) 7 SCC 350*: The Court referred to this case to discuss the three modes of pleading a counterclaim: in the written statement, by amendment, or by subsequent pleading. It also highlighted that belated counterclaims are discouraged.
• Rohit Singh v. State of Bihar, (2006) 12 SCC 734*: The Court clarified that the observation in this case that a counterclaim cannot be raised after issues are framed and evidence is closed is not a correct statement of law.
• Gayathri Women’s Welfare Association v. Gowramma, (2011) 2 SCC 330*: The Court referred to this case to highlight that a counterclaim cannot be filed after the framing of issues.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to balance procedural fairness with the efficient administration of justice. The Court emphasized that while the right to file a counterclaim is important, it should not be used to unduly delay proceedings or cause prejudice to the opposing party. The Court also recognized the practical difficulties faced by litigants and the need for a flexible approach to procedural rules.

The Court considered the legislative intent behind the introduction of Order VIII Rule 6A, which was to avoid multiplicity of proceedings and ensure that all disputes between the parties are resolved in the same suit. However, it also recognized that a rigid interpretation of procedural rules could lead to injustice and that courts must have the discretion to allow belated counterclaims in appropriate cases.

The Court also emphasized that the discretion to allow a belated counterclaim should be exercised judiciously, considering factors such as the period of delay, the reasons for the delay, and the potential prejudice to the opposite party. The Court also clarified that the outer limit for filing a counterclaim is generally until the issues are framed, but in exceptional circumstances, a counterclaim may be allowed even after the framing of issues, so long as the Court has not started recording the evidence.

The Court’s reasoning was also influenced by the need to ensure that procedural rules do not become a tool for delaying justice, and that courts must strive to achieve a balance between procedural fairness and efficient administration of justice.

Fact:Law Ratio: The Supreme Court’s decision was more influenced by legal considerations (70%) than factual aspects of the case (30%).

Logical Reasoning

Issue 1: Whether Order VIII Rule 6A of the CPC mandates an embargo on filing the counterclaim after filing the written statement?

Issue 2: If the answer to the aforesaid question is in the negative, then what are the restrictions on filing the counterclaim after filing of the Written Statement?

Key Takeaways

• Flexibility in Filing Counterclaims: The Supreme Court has clarified that a defendant can file a counterclaim after submitting their written statement, provided that the cause of action for the counterclaim arose before the defendant has delivered his defense or before the time limited for delivering his defense has expired.
• Discretion of the Court: The Court has the discretion to allow or reject a belated counterclaim, based on factors such as the period of delay, reasons for the delay, and prejudice to the opposite party.
• Outer Limit for Filing: The outer limit for filing a counterclaim is generally until the issues are framed. However, in exceptional circumstances, a counterclaim may be allowed until the commencement of recording of evidence.
• Balancing Act: The Court emphasized the need to balance procedural fairness with the efficient administration of justice, ensuring that the right to file a counterclaim is not used to delay proceedings.
• No Strict Embargo: Order VIII Rule 6A of the CPC does not impose a strict embargo on filing a counterclaim after submitting the written statement.
• Importance of Legislative Intent: The Court recognized the legislative intent behind the introduction of Order VIII Rule 6A, which was to avoid multiplicity of proceedings and ensure that all disputes between the parties are resolved in the same suit.

Directions

The Supreme Court directed that the instant Special Leave Petition may be placed before an appropriate Bench after obtaining orders from the Hon’ble Chief Justice of India, for considering the case on merits.

Specific Amendments Analysis

The judgment discusses the amendments made to the Civil Procedure Code, 1908, specifically the introduction of Rule 6A in Order VIII by the Code of Civil Procedure (Amendment) Act of 1976 (Act No.104 of 1976). This amendment was introduced to provide an explicit right to file a counterclaim and to avoid multiplicity of proceedings. The judgment also highlights the amendments made by the Code of Civil Procedure (Amendment) Act, 2002 (Act No. 22 of 2002), which introduced changes with respect to subsequent pleadings.

Development of Law

The ratio decidendi of this case is that Order VIII Rule 6A of the Civil Procedure Code, 1908, does not impose a strict embargo on filing a counterclaim after submitting the written statement. The restriction is related to the accrual of the cause of action, and the court has the discretion to allow a belated counterclaim till the framing of issues and in exceptional circumstances till the commencement of recording of evidence.

This judgment clarifies the previous position of law by stating that the observation in Rohit Singh v. State of Bihar, (2006) 12 SCC 734 that a counterclaim cannot be raised after issues are framed and evidence is closed is not a correct statement of law. The Supreme Court held that filing of counterclaims after the commencement of recording of evidence is not illegal per se, but that permitting such a counterclaim would be improper, as the Court’s discretion has to be exercised wisely and pragmatically.

Conclusion

The Supreme Court’s judgment in Ashok Kumar Kalra vs. Wing Cdr. Surendra Agnihotri & Ors. provides a comprehensive analysis of Order VIII Rule 6A of the Civil Procedure Code, 1908, clarifying the rules regarding the filing of counterclaims. The Court has established that while there is no strict embargo on filing a counterclaim after submitting the written statement, the courts have the discretion to allow or reject a belated counterclaim based on various factors. This decision balances the need for procedural fairness with the efficient administration of justice, ensuring that the right to file a counterclaim is not used to delay proceedings.