Date of the Judgment: 12 February 2019
Citation: (2019) INSC 107
Judges: R.F. Nariman, J., Vineet Saran, J.
Can a court extend the deadline for filing a written statement in a commercial suit beyond 120 days, as stipulated by amendments to the Code of Civil Procedure (CPC)? The Supreme Court addressed this critical question, emphasizing the mandatory nature of the amended timelines and overruling previous interpretations that allowed for more flexibility. This judgment clarifies the importance of strict adherence to procedural timelines in commercial disputes.
Case Background
The case involves a suit filed on March 10, 2017, by M/S SCG Contracts India Pvt. Ltd. against K.S. Chamankar Infrastructure Pvt. Ltd. and others, seeking recovery of Rs. 6,94,63,114. The primary defendant, K.S. Chamankar Infrastructure Pvt. Ltd., was served summons on July 14, 2017. According to the amended Code of Civil Procedure, the defendant had 30 days to file a written statement, extendable by another 90 days with the court’s permission, for a total of 120 days. However, the defendant failed to file the written statement within this period. Instead, they filed an application under Order VII Rule 11 of the CPC, seeking rejection of the plaint. This application was rejected on December 5, 2017, and the court granted the defendant an extension till December 15, 2017, to file the written statement, subject to payment of costs. The written statement was filed on December 15, 2017. Subsequently, the plaintiff challenged the acceptance of the written statement, arguing that the 120-day limit had expired.
Timeline
| Date | Event |
|---|---|
| 10 March 2017 | Suit filed by M/S SCG Contracts India Pvt. Ltd. |
| 14 July 2017 | Summons served to Defendant No. 1, K.S. Chamankar Infrastructure Pvt. Ltd. |
| 11 November 2017 | 120 days from the date of service of summons expired. |
| 5 December 2017 | Order VII Rule 11 application rejected; court grants extension till 15th December 2017 to file written statement, subject to costs. |
| 15 December 2017 | Defendant No. 1 files written statement. |
| 6 August 2018 | Application filed stating that the written statement could not be taken on record due to the expiry of 120 days. |
| 24 September 2018 | Court orders written statement to be taken on record, stating the order of 05.12.2017 was final. |
| 12 February 2019 | Supreme Court allows the appeal and orders the written statement to be taken off record. |
Course of Proceedings
The Single Judge of the High Court rejected the defendant’s application under Order VII Rule 11 of the CPC on December 5, 2017, and granted an extension for filing the written statement until December 15, 2017, subject to payment of costs. Subsequently, another Single Judge on September 24, 2018, ordered that the written statement filed on December 15, 2017, be taken on record, asserting that the December 5, 2017, order was final. The appellant challenged both these orders in a Special Leave Petition before the Supreme Court.
Legal Framework
The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, amended the Code of Civil Procedure (CPC) significantly. Key amendments include:
- Order V Rule 1(1) CPC: The second proviso was substituted, stating that if a defendant fails to file a written statement within 30 days, they may be allowed to file it within 120 days from the date of service of summons, with reasons recorded in writing and payment of costs. After 120 days, the right to file a written statement is forfeited.
“Provided further 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 days, 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 and 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.” - Order VIII Rule 1 CPC: A new proviso was substituted, mirroring the amendment in Order V Rule 1(1), emphasizing the 120-day limit.
“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 and twenty days from the date of service of summons and on expiry of one hundred and 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.” - Order VIII Rule 10 CPC: A further proviso was added, stating that no court shall extend the time for filing a written statement beyond the 120-day limit specified in Order VIII Rule 1 of the CPC.
“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.”
These amendments were introduced to ensure timely resolution of commercial disputes, making the filing of written statements within the stipulated time mandatory.
Arguments
| Main Submission | Sub-Submissions | Party |
|---|---|---|
| The amendments to the CPC regarding the time limit for filing written statements are mandatory. |
|
Appellant |
| The order dated 05.12.2017 had attained finality and could only be challenged after the decree in the Suit is passed. |
|
Respondent |
| An Order VII Rule 11 application had to be answered before trial of the Suit could commence. |
|
Respondent |
| The inherent power of the court under Section 151 of the CPC can be invoked to prevent injustice. |
|
Respondent |
Appellant’s Arguments: The appellant argued that the recent amendments to the CPC, particularly Order V, Rule 1, and Order VIII, Rules 1 and 10, make it mandatory for a defendant to file a written statement within 120 days of receiving the summons. They emphasized that the consequence of not filing within this period is the forfeiture of the right to file a written statement, and the court cannot extend this time limit. The appellant cited State of Bihar and Others vs. Bihar Rajya Bhumi Vikas Bank Samiti, (2018) 9 SCC 472 and Canara Bank vs. N.G. Subbaraya Setty and Anr., AIR 2018 SC 3395 to support their position that the amended provisions are mandatory.
Respondent’s Arguments: The respondents contended that the order dated December 5, 2017, which granted an extension to file the written statement, had attained finality and could only be challenged after the decree in the suit was passed. They argued that the order of September 24, 2018, which allowed the written statement to be taken on record, was correct. The respondents relied on Bhanu Kumar Jain vs. Archana Kumar and Another, (2005) 1 SCC 787 and Shaikh Salim Haji Abdul Khayumsab vs. Kumar and Others, (2006) 1 SCC 46, to argue that the principle of res judicata applied to different stages of the same proceeding. They also argued that the filing of an Order VII Rule 11 application justified the delay in filing the written statement, citing R.K. Roja vs. U.S. Rayudu and Another, (2016) 14 SCC 275. Additionally, they invoked Section 151 of the CPC, arguing that the court’s inherent powers could be used to prevent injustice.
Innovativeness of the argument: The appellant’s argument was innovative in the sense that it emphasized the mandatory nature of the recent amendments to the CPC, which had not been fully appreciated by the High Court. This argument effectively challenged the earlier precedents that allowed for more flexibility in filing written statements.
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the core issue addressed by the Court was:
- Whether the amended provisions of the Code of Civil Procedure (CPC), specifically Order V Rule 1(1) and Order VIII Rules 1 and 10, regarding the time limit for filing written statements in commercial suits, are mandatory or directory?
- Whether the High Court could have allowed the written statement to be taken on record after the expiry of 120 days from the date of service of summons?
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Decision | Reasoning |
|---|---|---|
| Whether the amended provisions of the CPC regarding the time limit for filing written statements are mandatory or directory? | Mandatory | The amendments clearly state that the defendant forfeits the right to file a written statement after 120 days, and the court cannot extend this limit. The use of “shall” and the explicit consequence of forfeiture indicate a mandatory provision. |
| Whether the High Court could have allowed the written statement to be taken on record after the expiry of 120 days from the date of service of summons? | No | The High Court’s order was in contravention of the mandatory provisions of the CPC. The court cannot use its inherent powers under Section 151 to circumvent mandatory provisions of the CPC. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | Legal Point | How Considered |
|---|---|---|---|
| State of Bihar and Others vs. Bihar Rajya Bhumi Vikas Bank Samiti, (2018) 9 SCC 472 | Supreme Court of India | Mandatory vs. directory nature of statutory provisions | Cited to emphasize that when a statute provides a consequence for non-compliance, it is mandatory. |
| Canara Bank vs. N.G. Subbaraya Setty and Anr., AIR 2018 SC 3395 | Supreme Court of India | Res judicata and erroneous interpretation of statutory provisions | Cited to support the view that res judicata does not apply to erroneous interpretations of statutory prohibitions. |
| Kailash vs. Nanhku, (2005) 4 SCC 480 | Supreme Court of India | Interpretation of Order 8 Rule 1 of CPC (pre-amendment) | Referred to show that pre-amendment, the provision was not considered mandatory. |
| Salem Advocate Bar Association vs. Union of India, (2005) 6 SCC 344 | Supreme Court of India | Interpretation of Order 8 Rule 1 of CPC (pre-amendment) | Referred to show that pre-amendment, the provision was not considered mandatory. |
| State vs. N.S. Gnaneswaran, (2013) 3 SCC 594 | Supreme Court of India | Directory nature of statutory provisions without consequences | Cited to highlight that if no consequences are provided for breach, a provision is directory. |
| Oku Tech Private Limited vs. Sangeet Agarwal & Ors., CS (OS) No. 3390/2015 (Delhi High Court, 11.08.2016) | Delhi High Court | Mandatory nature of amended Order VIII Rule 1 | Followed as a correct interpretation of the amended CPC provisions. |
| Maja Cosmetics vs. Oasis Commercial Pvt. Ltd., 2018 SCC Online Del 6698 | Delhi High Court | Mandatory nature of amended Order VIII Rule 1 | Followed as a correct interpretation of the amended CPC provisions. |
| Bhanu Kumar Jain vs. Archana Kumar and Another, (2005) 1 SCC 787 | Supreme Court of India | Res judicata in different stages of the same proceeding | Distinguished as it dealt with the pre-amendment position and was not applicable to the facts of the present case. |
| Shaikh Salim Haji Abdul Khayumsab vs. Kumar and Others, (2006) 1 SCC 46 | Supreme Court of India | Res judicata in different stages of the same proceeding | Distinguished as it dealt with the pre-amendment position and was not applicable to the facts of the present case. |
| R.K. Roja vs. U.S. Rayudu and Another, (2016) 14 SCC 275 | Supreme Court of India | Filing of Order VII Rule 11 application before written statement | Explained that while a defendant can file an Order VII Rule 11 application, it cannot be used as a ruse to retrieve the lost opportunity to file a written statement. |
| Manohar Lal Chopra vs. Rai Bahadur Rao Raja Seth Hiralal, [1962] Suppl 1 SCR 450 | Supreme Court of India | Inherent powers of the court under Section 151 of CPC | Cited to emphasize that the inherent powers of the court cannot be used to circumvent mandatory provisions of the CPC. |
Judgment
The Supreme Court allowed the appeal, setting aside the orders of the High Court that had allowed the written statement to be taken on record. The Court held that the amended provisions of the CPC regarding the time limit for filing written statements are mandatory. The Court emphasized that the consequence of not filing within 120 days is the forfeiture of the right to file a written statement, and the court cannot extend this time limit. The Court also held that the principle of res judicata does not apply to erroneous interpretations of statutory prohibitions.
| Submission | Court’s Treatment |
|---|---|
| The amendments to the CPC regarding the time limit for filing written statements are mandatory. | Accepted. The Court held that the amended provisions are indeed mandatory, and the 120-day limit cannot be extended. |
| The order dated 05.12.2017 had attained finality. | Rejected. The Court held that the order was not final as a Special Leave Petition had been filed, and even if it were, res judicata cannot apply to erroneous interpretations of statutory prohibitions. |
| An Order VII Rule 11 application had to be answered before trial of the Suit could commence. | Rejected. The Court clarified that while an Order VII Rule 11 application can be filed, it cannot be used to circumvent the mandatory time limit for filing a written statement. |
| The inherent power of the court under Section 151 of the CPC can be invoked to prevent injustice. | Rejected. The Court held that the inherent power of the court cannot be used to circumvent mandatory provisions of the CPC. |
How each authority was viewed by the Court?
- State of Bihar and Others vs. Bihar Rajya Bhumi Vikas Bank Samiti, (2018) 9 SCC 472*: The court used this case to support its view that when a statute provides a consequence for non-compliance, it is mandatory.
- Canara Bank vs. N.G. Subbaraya Setty and Anr., AIR 2018 SC 3395*: This case was used to establish that res judicata does not apply to erroneous interpretations of statutory prohibitions.
- Kailash vs. Nanhku, (2005) 4 SCC 480* and Salem Advocate Bar Association vs. Union of India, (2005) 6 SCC 344*: These cases were distinguished as they dealt with the pre-amendment position of Order 8 Rule 1 and were not applicable to the facts of the present case.
- State vs. N.S. Gnaneswaran, (2013) 3 SCC 594*: This case was used to highlight that if no consequences are provided for breach, a provision is directory, which was not the case in the present matter.
- Oku Tech Private Limited vs. Sangeet Agarwal & Ors., CS (OS) No. 3390/2015 (Delhi High Court, 11.08.2016)* and Maja Cosmetics vs. Oasis Commercial Pvt. Ltd., 2018 SCC Online Del 6698*: These cases were followed as they correctly interpreted the amended CPC provisions.
- Bhanu Kumar Jain vs. Archana Kumar and Another, (2005) 1 SCC 787* and Shaikh Salim Haji Abdul Khayumsab vs. Kumar and Others, (2006) 1 SCC 46*: These cases were distinguished as they dealt with the pre-amendment position and were not applicable to the present case.
- R.K. Roja vs. U.S. Rayudu and Another, (2016) 14 SCC 275*: This case was explained to clarify that while an Order VII Rule 11 application can be filed, it cannot be used to circumvent the mandatory time limit for filing a written statement.
- Manohar Lal Chopra vs. Rai Bahadur Rao Raja Seth Hiralal, [1962] Suppl 1 SCR 450*: This case was used to emphasize that the inherent powers of the court cannot be used to circumvent mandatory provisions of the CPC.
What weighed in the mind of the Court?
The Supreme Court’s decision was heavily influenced by the mandatory nature of the amended provisions of the CPC, which were designed to expedite commercial disputes. The Court emphasized that the amendments were clear and unambiguous, leaving no room for interpretation that would allow the court to extend the time for filing a written statement beyond 120 days. The Court also noted that the High Court’s orders were in direct contravention of these mandatory provisions.
| Sentiment | Percentage |
|---|---|
| Mandatory nature of amended CPC provisions | 40% |
| Need for strict adherence to timelines | 30% |
| Res judicata does not apply to erroneous interpretations of statutory prohibitions | 20% |
| Inherent powers of the court cannot circumvent mandatory provisions | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
The Court’s reasoning can be summarized as follows:
The Court rejected the argument that the order of December 5, 2017, had attained finality, stating that a Special Leave Petition had been filed against it. The Court also emphasized that the principle of res judicata does not apply to erroneous interpretations of statutory prohibitions.
“A perusal of these provisions would show that ordinarily a written statement is to be filed within a period of 30 days. However, a grace period of a further 90 days is granted which the Court may employ for reasons to be recorded in writing and payment of such costs as it deems fit to allow such written statement to come on record. What is of great importance is the fact that beyond 120 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.”
“Clearly, the clear, definite and mandatory provisions of Order V read with Order VIII Rule 1 and 10 cannot be circumvented by recourse to the inherent power under Section 151 to do the opposite of what is stated therein.”
“The aforesaid para applies on all fours to the facts of the present case, as even assuming that the 05.12.2017 order is final, res judicata cannot stand in the way of an erroneous interpretation of a statutory prohibition. The present is one such case. Therefore, the second order must also be set aside.”
Key Takeaways
- Mandatory Time Limits: The Supreme Court has made it clear that the amended provisions of the CPC regarding the time limit for filing written statements in commercial suits are mandatory.
- 120-Day Limit: Defendants in commercial suits must file their written statements within 120 days from the date of service of summons. Failure to do so will result in forfeiture of the right to file a written statement.
- No Extension Beyond 120 Days: Courts do not have the power to extend the time for filing a written statement beyond the 120-day limit.
- Res Judicata: The principle of res judicata does not apply to erroneous interpretations of statutory prohibitions.
- Inherent Powers: Courts cannot use their inherent powers under Section 151 of the CPC to circumvent mandatory provisions of the CPC.
- Impact on Commercial Disputes: This judgment will ensure faster resolution of commercial disputes by enforcing strict adherence to timelines.
Directions
The Supreme Court directed that the written statement of Defendant No. 1 be taken off the record.
Development of Law
The ratio decidendi of this case is that the amended provisions of the Code of Civil Procedure (CPC), particularly Order V Rule 1(1) and Order VIII Rules 1 and 10, regarding the time limit for filing written statements in commercial suits, are mandatory. This decision overrules the previous interpretations that allowed for more flexibility in filing written statements, and it establishes a strict timeline for the same. There is a change in the previous position of law where the courts were allowed to extend the time limit for filing written statements beyond 120 days.
Conclusion
The Supreme Court’s judgment in M/S SCG Contracts India Pvt. Ltd. vs. K.S. Chamankar Infrastructure Pvt. Ltd. & Ors. underscores the mandatory nature of the amended provisions of the CPC regarding the time limit for filing written statements in commercial suits. The Court’s decision ensures strict adherence to timelines, promoting faster resolution of commercial disputes. This judgment clarifies that the 120-day limit is absolute, and courts do not have the power to extend it. This ruling will have a significant impact on commercial litigation in India, emphasizing the need for defendants to be diligent in filing their written statements within the stipulated time.
Category
Parent Category: Code of Civil Procedure, 1908
Child Category: Order V Rule 1, Code of Civil Procedure, 1908
Child Category: Order VIII Rule 1, Code of Civil Procedure, 1908
Child Category: Order VIII Rule 10, Code of Civil Procedure, 1908
Child Category: Commercial Suits
FAQ
Q: What is the time limit for filing a written statement in a commercial suit?
A: The time limit is 120 days from the date of service of summons.
Q: Can the court extend the time limit for filing a written statement beyond 120 days?
A: No, the court cannot extend the time limit beyond 120 days.
Q: What happens if a written statement is not filed within 120 days?
A: The defendant forfeits the right to file a written statement, and the court will not allow it to be taken on record.
Q: Does the principle of res judicata apply to erroneous interpretations of statutory prohibitions?
A: No, the principle of res judicata does not apply to erroneous interpretations of statutory prohibitions.
Q: Can the court use its inherent powers to circumvent mandatory provisions of the CPC?
A: No, the court cannot use its inherent powers to circumvent mandatory provisions of the CPC.