Supreme Court Sets Aside Bombay HC Order on Delay in Filing Written Statement: ATCOM Technologies Ltd. vs. Y.A. Chunawala & Co. (2018)

Date of the Judgment: May 7, 2018

Citation: 2018 INSC 403

Judges: A.K. Sikri, J. and Ashok Bhushan, J.

Can a court condone a 15-year delay in filing a written statement simply because the summons was served late? The Supreme Court of India recently addressed this question in a case involving a dispute over property and financial dues. The Court overturned a High Court decision that had allowed a significant delay in filing a written statement, emphasizing the importance of timely legal procedures. The judgment was delivered by a two-judge bench of Justices A.K. Sikri and Ashok Bhushan.

Case Background

The dispute arose from a series of agreements between ATCOM Technologies Limited (the appellant) and Y.A. Chunawala & Co. and others (the respondents). The core issue was the non-payment of dues amounting to approximately Rs. 11.9 crores, along with interest, by the respondents to the appellant. The appellant had advanced funds to the respondents for development and marketing rights of certain properties, but the respondents failed to either refund the money or hand over possession of the agreed-upon flats in a building named ‘Emerald Court’ in Mumbai.

The appellant’s case was that the respondents, who owned a plot of land in Andheri, Mumbai, entered into an agreement with M/s. Shree Siddhivinayak Developers Ltd. to develop the land. The appellant’s sister concern, ATCO Securities and Finance Ltd., was granted development and marketing rights for a consideration of Rs. 44 crores. Pursuant to a Memorandum of Understanding (MOU) dated December 20, 1995, the appellant’s sister concern advanced Rs. 14,23,50,000 to M/s. Shree Siddhivinayak Developers Ltd. A Tripartite Agreement dated April 1, 1996, was then executed between the appellant, its sister concern, and M/s. Shree Siddhivinayak Developers Ltd., where the development rights were to be shared equally. However, this agreement was later cancelled in December 1996.

Subsequently, it was agreed that Rs. 3,77,30,000 out of the advanced amount would be adjusted towards the purchase of 11 flats in ‘Emerald Court’. The balance amount of Rs. 3,34,45,000 was to be refunded. Despite some additional payments, the respondents failed to deliver the flats. The appellant claimed that the respondents also failed to deliver 12 more flats for which separate agreements were made. When the respondents failed to deliver the flats, the appellant demanded a refund, which was not provided, leading to the filing of multiple suits.

Timeline:

Course of Proceedings

Initially, the appellant filed Suit No. 3813 of 2000 in the High Court of Judicature at Bombay, seeking recovery of Rs. 7,88,90,000 along with interest. The respondents failed to file a written statement within the stipulated time. When the case was listed for hearing on January 29, 2015, the court noted that no written statement had been filed. The case was adjourned for an ex-parte decree. The respondents then filed a Notice of Motion seeking condonation of a 15-year delay in filing their written statement.

The learned Single Judge initially dismissed a similar application by the respondents in a related suit (Suit No. 4870 of 1999), citing the respondents’ complete neglect of the proceedings. However, in the present case, the Single Judge condoned the delay, imposing a cost of Rs. 5 lakhs on the respondents. The High Court Division Bench upheld this order, stating that the appellant had also taken a long time to serve the summons. The appellant then appealed to the Supreme Court.

Legal Framework

The primary legal provision at the heart of this case is Order VIII Rule 1 of the Code of Civil Procedure, 1908. This provision mandates that a defendant must file a written statement within 30 days from the date of service of summons. However, the court has the discretion to extend this period up to 90 days from the date of service of summons, provided there are sufficient reasons. The relevant provision is:

“1. Written statement.- The defendant shall, within thirty days from the date of service of summons on him, present a written statement of his defence:
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 same on such other day, as may be specified by the Court, for reasons to be recorded in writing, but which shall not be later than ninety days from the date of service of summons.”

While the provision allows for an extension of time, it is not meant to be used routinely. The Supreme Court has clarified that time extensions should only be granted in exceptionally hard cases, keeping in mind the 90-day upper limit set by the legislature.

Arguments

Appellant’s Submissions:

• The appellant argued that the High Court erred in condoning the delay, as the Writ of Summons was served immediately after filing the suit, not in 2009 as claimed by the High Court.
• Even if the summons were served in 2009, the respondents failed to provide a satisfactory explanation for the delay, which was more than 5 years and 54 days.
• The High Court failed to consider that a similar application for condonation of delay in a related suit (Suit No. 4870 of 1999) was dismissed by the learned Single Judge and affirmed by the Division Bench and the Supreme Court.
• The appellant emphasized that the respondents had been aware of the proceedings since 2002, when they were granted unconditional leave to defend in Suit No. 4870 of 1999, and all suits were directed to be tried together.

Respondents’ Submissions:

The respondents did not appear before the Supreme Court despite being served notice, and therefore, no arguments were presented on their behalf.

Issues Framed by the Supreme Court:

The primary issue before the Supreme Court was:

1. Whether the High Court was justified in condoning the delay of 15 years and 54 days in filing the written statement by the respondents.

Treatment of the Issue by the Court:

Authorities

The Supreme Court considered the following authority:

• Salem Advocate Bar Association, Tamil Nadu v. Union of India, (2005) 6 SCC 344 – The Supreme Court referred to this case to interpret Order VIII Rule 1 of the Code of Civil Procedure, 1908, emphasizing that while the provision is procedural, the time for filing a written statement can be extended only in exceptionally hard cases. The court reiterated that the discretion to extend time should not be exercised routinely to nullify the time limit fixed by the provision.

The Supreme Court also considered the following provision:

• Order VIII Rule 1 of the Code of Civil Procedure, 1908 – This provision mandates that a defendant must file a written statement within 30 days from the date of service of summons, with a possible extension up to 90 days for sufficient reasons.

Judgment

How each authority was viewed by the Court?

• The Supreme Court relied on Salem Advocate Bar Association, Tamil Nadu v. Union of India, (2005) 6 SCC 344* to emphasize that while Order VIII Rule 1 of the Code of Civil Procedure, 1908 is procedural, the time for filing written statement can be extended only in exceptionally hard cases.

What weighed in the mind of the Court?

The Supreme Court was primarily influenced by the following factors:

• The lack of a satisfactory explanation from the respondents for the inordinate delay in filing the written statement.
• The High Court’s erroneous finding that the summons were served only in 2009, when evidence suggested they were served earlier.
• The need to uphold the procedural requirements of Order VIII Rule 1 of the Code of Civil Procedure, 1908.
• The inconsistency in the High Court’s approach, as a similar application for condonation of delay in a related suit was dismissed.

The Supreme Court observed that the High Court’s decision to condone the delay was based on a misinterpretation of facts and a disregard for the procedural rules. The Court emphasized that while procedural rules are handmaids of justice, they cannot be ignored to the extent of allowing a party to take as much time as they want in filing a written statement without providing convincing reasons. The Court stated:

“This reason of the High Court that delay was condoned ‘by balancing the rights and equities’ is far-fetched and, in the process, abnormal delay in filing the written statement is condoned without addressing the relevant factor, viz. whether the respondents had furnished proper and satisfactory explanation for such a delay.”

The Court also noted that the High Court had failed to consider that a similar application for condonation of delay was rejected in a related suit, and that the respondents had been aware of the proceedings since 2002. The Court further stated:

“No doubt, the provisions of Order VIII Rule 1 of the Code of Civil Procedure, 1908 are procedural in nature and, therefore, hand maid of justice. However, that would not mean that the defendant has right to take as much time as he wants in filing the written statement, without giving convincing and cogent reasons for delay and the High Court has to condone it mechanically.”

The Court concluded that the High Court’s approach was erroneous and could not be sustained.

The Supreme Court also noted:

“We fail to persuade ourselves with this kind of reasoning given by the High Court in condoning the delay, thereby disregarding the provisions of Order VIII Rule 1 of the Code of Civil Procedure, 1908 and the spirit behind it.”

Key Takeaways

• Timely Filing of Written Statements: Defendants must file their written statements within the timelines prescribed by law (30 days from the date of service of summons, extendable to 90 days for valid reasons).
• Justification for Delay: Courts will not condone delays without a satisfactory explanation. A mere claim of late service of summons is not sufficient.
• Importance of Procedural Rules: Procedural rules, such as Order VIII Rule 1 of the Code of Civil Procedure, 1908, are essential for the efficient administration of justice and cannot be disregarded.
• Consistency in Judicial Approach: Courts are expected to maintain consistency in their approach, especially when dealing with similar matters.

Directions

The Supreme Court set aside the impugned order of the High Court and dismissed Notice of Motion No. 1212 of 2015, effectively denying the respondents’ request for condonation of delay in filing their written statement.

Development of Law

The Supreme Court reaffirmed the principle that while Order VIII Rule 1 of the Code of Civil Procedure, 1908 is procedural, the time for filing a written statement can be extended only in exceptionally hard cases. The Court clarified that the discretion to extend time should not be exercised routinely to nullify the time limit fixed by the provision. This judgment reinforces the need for parties to be diligent in adhering to procedural timelines and to provide valid and cogent reasons for any delays.

Conclusion

The Supreme Court allowed the appeals, setting aside the High Court’s order that had condoned a 15-year delay in filing a written statement. The Court emphasized the importance of adhering to procedural timelines and providing valid reasons for delays. The decision underscores the need for parties to be diligent in pursuing their legal matters and for courts to ensure that procedural rules are not disregarded.

Category

Parent Category: Code of Civil Procedure, 1908

Child Category: Order VIII Rule 1, Code of Civil Procedure, 1908

Parent Category: Civil Procedure

Child Category: Delay Condonation

Parent Category: Court Procedure

Child Category: Written Statement

FAQ

Q: What is a written statement in a court case?

A: A written statement is a formal document filed by the defendant in a civil suit, responding to the claims made by the plaintiff. It outlines the defendant’s defense and their version of the facts.

Q: What is the time limit for filing a written statement?

A: As per Order VIII Rule 1 of the Code of Civil Procedure, 1908, the defendant must file a written statement within 30 days from the date of service of summons. The court may extend this period up to 90 days for sufficient reasons.

Q: Can a court condone a delay in filing a written statement?

A: Yes, a court can condone a delay, but only if the defendant provides a satisfactory explanation for the delay. The court’s discretion to extend time is not meant to be used routinely and is reserved for exceptionally hard cases.

Q: What happens if a written statement is not filed within the stipulated time?

A: If a written statement is not filed within the stipulated time and the delay is not condoned by the court, the court may proceed with the case ex-parte, meaning it may make a decision based on the plaintiff’s claims alone.

Q: What was the main issue in the ATCOM Technologies case?

A: The main issue was whether the High Court was justified in condoning a 15-year delay in filing a written statement by the respondents. The Supreme Court held that the High Court’s decision was erroneous.

Q: What did the Supreme Court decide in the ATCOM Technologies case?

A: The Supreme Court set aside the High Court’s order and dismissed the respondents’ request for condonation of delay. The Court emphasized the importance of adhering to procedural timelines and providing valid reasons for delays.