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Delhi High Court: Sets Aside Ex-Parte Order in Recovery Suit Due to Procedural Irregularities

Delhi High Court: Sets Aside Ex-Parte Order in Recovery Suit Due to Procedural Irregularities

Case title: M/S Gardenia India LTD & ANR VS DR Rakesh Kumar (HUF)
Case no.: C.M.(M) 137 OF 2020, AND CM APPL. 4642 OF 2020
Dated on: 14TH May 2024
Quorum: Hon’ble Ms. Justice Shalinder Kaur.

FACTS OF THE CASE
The present petition has been preferred invoking the supervisory jurisdiction of this Court under Article 227 of the Constitution of India. The petitioners are aggrieved by the order dated 25.09.2019 passed by the learned District Judge-04, North-West, Rohini Courts, Delhi (hereinafter referred to as “Trial Court”) in Civil Suit bearing no. 662/2017, titled as “Dr. Rakesh Kumar HUF vs. M/s Gardenia India Ltd. & Ors.” wherein the learned Trial Court dismissed the application filed by the petitioners under Order IX Rule 7 of Civil Procedure Code, 1908 (hereinafter referred to as “CPC”) for setting aside the ex-parte order dated 06.12.2018.

CONTENTIONS OF THE APPELLANT
The learned counsel for petitioners submitted that petitioner no.1 is a body corporate and petitioner no.2 is the chairman of petitioner no.1 who have been impleaded as defendant nos.1 and 2 in the suit filed by the respondent seeking recovery of Rs. 40,60,000/- with pendente lite and future interest. Further submitted that from 29.01.2018 till 06.12.2018, fresh summons was not ordered to be served upon petitioner nos.1 and 2 as the respondent and his counsel kept taking adjournments on one pretext or the other. And also, he stated under Section 138 of the Negotiable Instrument Act. The petitioner company received the summons of the aforesaid case and appeared before the Court of the learned Metropolitan Magistrate, where they moved an application for compounding the case.
The learned counsel submitted that the respondent never informed the Court or the petitioners that a civil suit arising out of the same facts and on the basis of same dishonoured cheques has been filed and is pending before the learned Trial Court. The learned counsel submitted that on one occasion, an official of the petitioner company was trying to locate the orders of the complaint case and was shocked to discover on the website the pendency of a civil suit before the learned Trial Court. Thereafter, the petitioners engaged a counsel and upon inspection of the Trial Court record, it came to the knowledge of the petitioners that they had been proceeded ex-parte vide order dated 06.12.2018. The learned counsel also submitted that since the respondent was aware of the truth regarding the service reports, he did not even choose to furnish reply to the application moved on behalf of the petitioners under Order IX Rule 7 CPC. Nonetheless, the learned Trial Court chose to dismiss the application of the petitioners and imposed a cost of Rs. 5,000/-.

CONTENTIONS OF THE RESPONDENTS
The learned counsel for respondent controverted the submissions made on behalf of the petitioners and contended that the petitioners have filed an application seeking to set aside the ex-parte order dated 06.12.2018 passed against them on false and concocted facts. It was also submitted that the learned Trial Court has passed a detailed order regarding the service reports and the steps taken by the respondent to serve the summons on the petitioners. Further, the learned counsel submitted that the petitioners were well aware of the present proceedings and deliberately chose not only to avoid the summons of the present case but also failed to appear after being duly served with the summons, with the purpose of delaying the trial of the suit. This conduct of the petitioners has been aptly recorded by the learned Trial Court in the impugned order. It is submitted that the impugned order is based upon sound reasoning therefore does not require any interference by this Court.

LEGAL PROVISIONS
Order IX Rule 7 of Civil Procedure Code, 1908: It empowers the court to allow the defendant to contest the case.
Article 227 of the Constitution of India: Every High Court shall have superintendence over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction
Section 138 of the Negotiable Instrument Act: Penalizes the dishonour of any cheque which has been issued in the discharge of the whole or part of “any debt or other liability”. And the liability of the guarantor and principal debtor is coextensive. Hence, the guarantor cannot escape liability under section 138, N.I.

COURT’S ANALYSIS AND JUDGEMENT
The respondent instituted the present civil suit, which came to be listed before the learned Trial Court on 04.08.2017. However, on that date, the learned Presiding Officer was on leave and the matter was posted for consideration on 11.08.2017. On the said date of hearing, the summons of the suit and notice of the interim application were ordered to be served on the petitioners on filing of PF/RC, returnable on 29.09.2017. After learning of this ex-parte order, the petitioners moved an application under Order IX Rule 7 CPC wherein the petitioners put forth the facts and circumstances of the case including the fraud played upon by the respondent in manipulating the service report and filing false affidavits contrary to the judicial record. However, the learned Trial Court did not consider the above submissions and summarily dismissed the application moved on behalf of the petitioners. The learned Trial Court passed directions for defendant no. 2 to file written statement within three weeks with copy to the opposite side and in the meanwhile, ordered for issuance of fresh summons of the suit and notice of the interim application against the petitioner nos. 1 and 2 returnable on 29.01.2018, the learned Presiding Officer was on leave and the respondent had moved an application under Order VIII Rule 1 and 10 CPC. For service of the petitioner nos. 1 & 2, steps were not taken by the respondent. On the subsequent date of hearing, no one had appeared on behalf of the petitioners and the matter was listed for 07.06.2018. On the said date of hearing, again there was no appearance on behalf of the petitioners. The counsel for the respondent requested an adjournment to furnish the service report on affidavit with respect to petitioner nos.1 and 2. Therefore, the matter was posted for adjourned for further proceedings to 12.07.2018. The learned Trial Court observed that the counsel for the respondent had filed two original postal receipts, both dated 26.12.2017, in the name of petitioner nos.1 and 2 along with a copy of the tracking report which was already on record. Further, the learned Trial Court observed that the service of petitioner nos.1 and 2 was complete as per the tracking record and deemed it to be a due service. Since the petitioners did not put an appearance on 06.12.2018 till 02:12 P.M., consequently, they were proceeded ex-parte with the learned Trial Court holding that they were not interested in defending the case. The matter came to be listed for ex-parte evidence by way of affidavit on 11.01.2019. Thereafter, the application was moved on behalf of the petitioners to set aside the said ex-parte order, which came to be dismissed vide the impugned order.
The copy of the notice issued to the petitioners in the complaint case filed under Section 138 Negotiable Instrument Act has also been placed on record. From the said notice, it transpires that the same address of petitioners has been mentioned, which has been disclosed in the present suit. However, before the learned Metropolitan Magistrate, the notices were served on the petitioners and they appeared before the Court. Having considered the above, the facts & circumstances as discerned, the impugned order dated 25.09.2019 is set aside and the ex parte order dated 06.12.2018 passed by the learned Trial Court is recalled, subject to cost of Rs. 30,000/- (Rupees Thirty Thousand only) to be paid to the respondent by the petitioners on the next date of hearing before the learned Trial Court. Consequently, the petition along with pending application is allowed.

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Judgement Reviewed by – HARIRAGHAVA JP

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The Supreme Court scrutinized Order 22 Rule 5 of the CPC, highlighting its mandate for the court to determine the rightful legal representative upon the death of a party.

Case title: Swami Vedvyasanand Ji Maharaj (D) v. Shyam Lal Chauhan & Ors.

Case no.: Civil Appeal Nos. 5569-5570 of 2024 (@ Special Leave Petition (C) Nos.1717-1718 of 2020)

Dated on: 30th April 2024

Quorum: Justice A.S. Bopanna and Justice Sudhanshu Dhulia

FACTS OF THE CASE

A recent case, outlined in the judgment, underscores the importance of adhering to procedural rules, particularly concerning the substitution of legal representatives in pending cases.

The case revolves around a civil suit concerning a property dispute in Bihar. Swami Shivdharmanand was one of the defendants in the suit. After his demise, the question arose regarding the substitution of his legal representative in the ongoing second appeal before the Patna High Court.

Two individuals, Swami Triyoganand and Swami Satyanand, claimed to be the rightful successors to Swami Shivdharmanand’s position. Initially, the High Court allowed both parties to be substituted as legal representatives. However, this decision was challenged, leading to a remand by the Supreme Court for the High Court to reconsider the matter.

Upon reconsideration, the High Court upheld Swami Satyanand as the legal representative, dismissing the claim of Swami Triyoganand. Dissatisfied with this decision, Swami Vedvyasanand, who claimed through Swami Triyoganand, appealed to the Supreme Court.

The Supreme Court’s judgment emphasized the procedural nuances involved in determining legal representation. While the substitution of legal representatives is crucial for the continuity of legal proceedings, it does not confer any substantive rights. Instead, it merely allows representation of the deceased’s estate in ongoing litigation.

The Court referred to Order 22 Rule 5 of the Civil Procedure Code (CPC), which mandates the court to determine the legal representative of a deceased party. Moreover, the proviso to Rule 5 empowers the appellate court to refer the matter to a subordinate court for factual inquiry, whose findings are then considered by the appellate court.

CONTENTIONS OF THE APPELLANT

Swami Vedvyasanand Ji Maharaj, the appellant, contested the order of the High Court, which substituted Swami Satyanand as the appellant in the pending Second Appeal. The appellant, through detailed contentions, argued that the High Court’s decision to reject his substitution application and uphold Swami Satyanand’s representation was procedurally flawed.

The Supreme Court meticulously analyzed the legal provisions governing the substitution of parties upon the death of a litigant. Emphasizing the importance of adhering to due process, the Court highlighted the limited purpose of substitution, which is to ensure the continuity of proceedings, rather than conferring any substantive rights.

Citing the precedent set in Jaladi Suguna v. Satya Sai Central Trust, the Court reiterated that the determination of legal representation is crucial for the proper adjudication of the case. However, this determination does not grant any proprietary rights to the substituted party.

The Court noted the erroneous interpretation of Order 22 Rule 5 by the High Court and criticized its failure to consider the objections raised against the Trial Court’s report. Additionally, the Court clarified that the proviso to Rule 5 empowers the Appellate Court to consider the findings of the subordinate court while making an independent decision on substitution.

CONTENTIONS OF THE RESPONDENTS

The respondents, claiming to be successors to the deceased Swami Shivdharmanand, sought substitution in the pending appeal. Initially, the High Court allowed both parties to be substituted as legal representatives, leading to subsequent legal challenges. The Supreme Court’s intervention was sought to clarify the correct procedure for determining legal representation.

LEGAL PROVISIONS

Order 22 Rule 5 of CPC reads as follows: Determination of question as to legal representative. — Where a question arises as to whether any person is or is not the legal representative of a deceased plaintiff or a deceased defendant, such question shall be determined by the Court.

Provided that where such question arises before an Appellate Court, that Court may, before determining the question, direct any subordinate Court to try the question and to return the records together with evidence, if any, recorded at such trial, its findings and reasons therefor, and the Appellate Court may take the same into consideration in determining the question.

ISSUE

  • The primary issue revolved around the correct procedure for substituting legal representatives in a pending appeal, particularly concerning conflicting claims.
  • Whether the High Court adhered to the procedural requirements stipulated under Order 22 Rule 5 of the Civil Procedure Code (CPC) while determining legal representation.

COURT’S ANALYSIS AND JUDGEMENT

The Supreme Court meticulously analyzed the procedural lapses in the High Court’s decision-making process. It emphasized the importance of adhering to statutory provisions and ensuring a fair opportunity for all parties to present their claims.

The Court scrutinized Order 22 Rule 5 of the CPC, highlighting its mandate for the court to determine the rightful legal representative upon the death of a party. It underscored the discretionary power of the Appellate Court to consider evidence and objections before making a conclusive decision on substitution.

The Supreme Court set aside the High Court’s orders and remitted the matter for fresh consideration. It reiterated the procedural lapses observed and emphasized the need for adherence to statutory provisions. The Court clarified that its decision pertained solely to procedural irregularities and refrained from opining on the substantive merits of the claims.

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Judgement Reviewed by – Chiraag K A

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“Decision of Arbitral Tribunal to not Implead a Party to Arbitration is not an Interim Award”: Delhi High Court

Case title: National Highway Authority of India v. Ms IRB Ahmedabad Vadodra Super Express Tollways Pvt. Ltd

Case no.: O.M.P. (COMM) 455/2022 & I.A. 18565/2022

Order on: 2nd April 2024

Quorum: Justice Prateek Jalan

FACTS OF THE CASE

The petitioner, National Highway Authority of India (NHAI), challenged a decision of a three-member Arbitral Tribunal dated 01.08.2022. This decision rejected NHAI’s application under Order I Rule 10 of the Code of Civil Procedure, 1908 (CPC) for impleadment of the State of Gujarat as a party to the arbitral proceedings. The arbitral proceedings stemmed from a Concession Agreement dated 25.07.2011 between NHAI and the respondent, MS IRB Ahmedabad Vadodra Super Express Tollways Pvt. Ltd.

CONTENTIONS OF THE APPELLANT

Advocates Mr. Ankur Mittal, Mr. Abhay Gupta, and Mr. Ankur Saboo represented NHAI. They argued that the State of Gujarat should be impleaded based on the obligations it undertook in a State Support Agreement dated 11.02.2016, which was related to the Concession Agreement.

CONTENTIONS OF THE RESPONDENTS

Represented by Mr. Atul Nanda, Senior Advocate, the respondent contested NHAI’s application for impleadment, arguing that the Arbitral Tribunal lacked jurisdiction to decide on the impleadment of the State of Gujarat.

Mr. Nanda submits that the question of maintainability of a petition under Section 34 of the Act against an order of an arbitral tribunal declining impleadment of a third party is no longer res integra. He relies upon the decision in National Highway Authority of India vs. Lucknow Sitapur Expressway Ltd. (Lucknow Sitapur Expressway), The Court was, in that case, also concerned with a decision of an arbitral tribunal adjudicating disputes under a Concession Agreement. The Tribunal had rejected an application by NHAI for impleadment of a State Government on the ground that it was a party to a State Support Agreement.

LEGAL PROVISIONS

Section 34 of the Arbitration and Conciliation Act, 1996 – Application for setting aside arbitral award.

It allows parties to challenge an arbitral award before the appropriate court on certain grounds, including that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties. In this case, the petitioner NHAI, invoked Section 34 to challenge the decision of the Arbitral Tribunal rejecting its application for impleadment of the State of Gujarat.

ISSUE

The main issue was whether the decision of the Arbitral Tribunal rejecting NHAI’s application for impleadment of the State of Gujarat constituted an arbitral award, thus making it amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996.

COURT’S ANALYSIS AND JUDGEMENT

The court examined precedents, including the case of Lucknow Sitapur Expressway Ltd., which involved similar circumstances. In Lucknow Sitapur Expressway, it was ruled that a decision rejecting an application for impleadment did not constitute an arbitral award under Section 2(1)(c) of the Act. The court emphasized that for a decision to be considered an award, it must decide a substantive dispute or conclusively settle an issue pertaining to the heart of the dispute.

The court further clarified that the distinction between a decision on jurisdiction and one on merits did not affect the characterization of the decision as an award. Even if the tribunal ruled on the jurisdiction to decide on impleadment, it did not change the nature of the decision. The court referenced various legal principles and previous judgments to support its conclusion.

In light of the precedent set by Lucknow Sitapur Expressway and other relevant judgments, the court held that NHAI’s petition under Section 34 of the Act was not maintainable. Consequently, the petition was dismissed, and all pending applications were disposed of.

The court’s decision in the case of O.M.P. (COMM) 455/2022 reaffirmed the legal position established by precedent, particularly the Lucknow Sitapur Expressway case. It clarified the criteria for a decision to be considered an arbitral award and emphasized that decisions on procedural matters like impleadment did not fall under this category.

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Judgement Reviewed by – Chiraag K A

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“Merits of Case not necessary for Granting Delay in Condonation,” Principles For Condonation Of Delay Under Limitation Act laid down by Supreme Court.

Case title: Pathapati Subba Reddy (Died) By L.Rs. & Ors. v. The Special Deputy Collector (LA)

Case no.: Special Leave Petition (Civil) No. 31248 Of 2018

Order on: 8th April 2024

Quorum: Justice Pankaj Mithal and Justice Bela M. Trivedi

FACTS OF THE CASE

In the village of Gandluru, District Guntur, Andhra Pradesh, certain lands were acquired for the Telugu Ganga Project in 1989. Dissatisfied with the compensation offered, 16 claimants filed a reference under Section 18 of the Land Acquisition Act. During the pendency of the reference, three of the claimants passed away, but their heirs were not substituted. Eventually, the reference was dismissed along with others, upholding the collector’s award.

Several years later, some heirs and legal representatives of one of the deceased claimants, Pathapati Subba Reddy, sought to file an appeal challenging the dismissal. However, they did so after an inordinate delay of 5659 days. They cited reasons such as lack of awareness of the reference due to living away from the ancestral home.

CONTENTIONS OF THE APPELLANT

The appellants, heirs of the deceased claimant No. 11, sought to explain the delay by citing lack of awareness of the reference due to living in a different household. They argued that they promptly filed the appeal upon discovering the reference.

CONTENTIONS OF THE RESPONDENTS

The respondent argued against condoning the delay, highlighting the lack of due diligence by the claimants in pursuing the reference earlier. They also emphasized that most claimants had accepted the reference court’s decision, implying acquiescence to the dismissal. Few Judgements which were relied on:

  • Bhag Mal alias Ram Bux and Ors. vs. Munshi (Dead) by LRs. and Ors. [1]:

it has been observed that different provisions of Limitation Act may require different construction, as for example, the court exercises its power in a given case liberally in condoning the delay in filing the appeal under Section 5 of the Limitation Act, however, the same may not be true while construing Section 3 of the Limitation Act. It, therefore, follows that though liberal interpretation has to be given in construing Section 5 of the Limitation Act but not in applying Section 3 of the Limitation Act, which has to be construed strictly.

  • Lanka Venkateswarlu vs. State of Andhra Pradesh & Ors.[2]:

where the High Court, despite unsatisfactory explanation for the delay of 3703 days, had allowed the applications for condonation of delay, this Court held that the High Court failed to exercise its discretion in a reasonable and objective manner. High Court should have exercised the discretion in a systematic and an informed manner. The liberal approach in considering sufficiency of cause for delay should not be allowed to override substantial law of limitation. The Court observed that the concepts such as ‘liberal approach’, ‘justice-oriented approach’ and ‘substantial justice’ cannot be employed to jettison the substantial law of limitation.

  • Imrat Lal & Ors. vs. Land Acquisition Collector & Ors.[3]:

In this case also the matter was regarding determination of compensation for the acquired land and there was a delay of 1110 days in filing the appeal for enhancement of compensation. Despite findings that no sufficient cause was shown in the application for condoning the delay, this Court condoned the delay in filing the appeal as a large number of similarly situate persons have been granted relief by this Court.

LEGAL PROVISIONS

Section 3 of the Limitation Act, in no uncertain terms lays down that no suit, appeal or application instituted, preferred or made after the period prescribed shall be entertained rather dismissed even though limitation has not been set up as a defence subject to the exceptions contained in Sections 4 to 24 (inclusive) of the Limitation Act.

Section 5 of the Limitation Act, Extension of prescribed period in certain cases. – Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.

ISSUE – The key issue was whether the High Court was justified in refusing to condone the inordinate delay in filing the appeal.

COURT’S ANALYSIS AND JUDGEMENT

The Court analysed the principles underlying the law of limitation, emphasizing the need for finality in litigation and the mandatory nature of Section 3. It discussed the discretionary power of courts to condone delay under Section 5, contingent upon the demonstration of “sufficient cause” by the appellant.

The Court cited precedents to underscore the necessity of exercising caution in condoning delays, particularly when negligence or lack of due diligence is apparent. It emphasized that while the court may adopt a liberal approach, it should not disregard the statutory provisions or the need for substantial cause for delay.

Ultimately, the Court upheld the decision of the High Court, reasoning that the claimants had failed to demonstrate sufficient cause for the delay. It highlighted their lack of diligence in pursuing the reference earlier and noted that most claimants had accepted the reference court’s decision. Consequently, the Special Leave Petition was dismissed.

The case underscores the importance of diligence and awareness in pursuing legal remedies and the stringent application of limitation laws. It reaffirms that while courts may exercise discretion in condoning delays, such discretion is not absolute and must be exercised judiciously.

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Judgement Reviewed by – Chiraag K A

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[1] (2007) 11 SCC 285

[2] (2011) 4 SCC 363

[3] (2014) 14 SCC 133

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Directing a legislative amendment is beyond the scope of judicial review, Supreme Court on amending delimitation notification of 2006.

Case title: Public Interest Committee for Scheduling Specific Areas and Anr Vs Union of India & Ors

Case no.: Writ Petition (Civil) No 443 of 2017

Decided on: 23.11.2023

Quorum: Hon’ble Chief Justice Dhananjaya Y Chandrachud, Hon’ble Justice Manoj Misra, Hon’ble Justice J B Pardiwala.

 

Hon’ble Justices stated that “it is for the Union Government to take recourse to the powers under the Delimitation Act 2002 for the purpose of ensuring that the provisions of Articles 330 and 332 are duly implemented. The Central Government should take a decision with all reasonable dispatch, in accordance with law.”

 

BRIEF FACTS:

The present petition seeks a direction to uphold the Limboo-Tamang Scheduled Tribe’s constitutional rights to seat reservation in the Sikkim Legislative Assembly. It requests that the Delimitation Commission’s Notification of 4 September 2006 and the Delimitation of Parliamentary and Assembly Constituencies Order 20081 be amended or repealed to the extent that they do not include reservations for Limboo-Tamang Scheduled Tribe members. It also seeks directions stating that Section 7(1A) of the Representation of the People Act violates the Constitution for the same reason. The petitioner requests that the Delimitation Commission and the Election Commission implement the mandate of Article 332 of the Constitution in respect of the Limboo Tamang Scheduled Tribe by making the necessary changes to the 2006 Notification and the 2008 Order.

 

COURT ANALYSIS AND JUDGEMENT:

After carefully considering the parties’ arguments, the court concluded that delimitation must be determined in accordance with the Delimitation Act of 2002. However, legislative amendments would be required, particularly in light of the provisions of the RP Act’s First and Second Schedules. It determined that directing a legislative amendment is outside the scope of judicial review. And it directed the central government to use its powers under the Delimitation Act 2002 to ensure that the provisions of Articles 330 and 332 are properly implemented. The Central Government should make a decision promptly  in accordance with the law.

 

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Written by – Surya Venkata Sujith

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