DELHI HIGH COURT HOLDS COMMERCIAL COURT FAILED TO CONSIDER THE SUFFICIENT CAUSE OF DELAY IN FILING OF WRITTEN STATEMENT

A Single-Judge Bench of the High Court of Delhi (High Court) comprising of Justice Shalinder Kaur, passed an Order dated 27-03-2024 in the matter of Raj Kumar Nair vs. UCO Bank, Civil Misc (Main) 1885/2023 and observed that the Commercial Court failed to consider the Proviso to Order VIII Rule 1 of the Code of Civil Procedure (CPC) 1908[i] (Written Statement), which allows the defendant to file a Written Statement beyond the initial 30-day period, subject to the court’s discretion and payment of costs. Further, the Bench reiterated that the litigants must receive a fair opportunity to present their cases and defend their rights.

FACTS:

1) That the Writ Petition above-mentioned was filed under Article 227 of the Constitution of India before the Hon’ble High Court by one Raj Kumar Nair (Petitioner) against the UCO Bank (Respondent), against the Impugned Orders dated 11.04.2023 and 17.10.2023 passed by the Learned District Judge (Commercial), North West, Rohini, Delhi (hereinafter “Commercial Court”) in the matter of UCO Bank vs Triveni Fashion CS(COMM) No. 134/2020. The Commercial Court refused to accept the Petitioner’s Written Statement due to the absence of an Application for the Condonation of Delay. Subsequently, after filing of Application by the Petitioner and requesting a review of the Order dated 11.04.2023, the Court dismissed the Application and imposed a Cost of Rs. 5000/- upon the Respondent, vide Order dated 17.10.2023.

2) The Petitioner who was the Proprietor of M/s Triveni Fashion, engaged in garment manufacturing, established and managed by the Petitioner’s father but registered in the Petitioner’s name.

3) In 2017, the Petitioner’s father approached the Respondent Bank for a Term Loan/Demand Cash Credit of Rs. 5 Lakhs only under the Pradhan Mantri Mudra Yojana. The Loan Application, dated 25.12.2017, however, specified that the repayment would be done by the Petitioner. Consequently, the Respondent Bank sanctioned Rs. 5 Lakhs as cash credit, and secured a Demand Cash Credit dated 01.01.2018 through the hypothecation of goods. The Bank also endorsed a Demand Promissory Note (DP Note) of Rs. 5 Lakhs, with an interest rate of 8.60% per annum.

4) Following the demise of the Petitioner’s father and mother on 17.10.2019 and 25.12.2019, respectively, the Petitioner’s father’s Firm ceased operations. Despite the Petitioner’s requests, the Respondent Bank didn’t take steps to redeem dues from the stock and machinery of the closed business.

5) Under Section 12A of the Commercial Courts Act 2015 (Pre-Institution Mediation and Settlement), pre-mediation was instituted, resulting a Non-Starter Report dated 07.03.2020. Subsequently, on 06.08.2020, the Respondent Bank filed a Commercial Suit for recovery of Rs. 9.81 Lakhs against the Petitioner. The Petitioner, however, could not respond as the summons was not received due to the Petitioner’s ill health and the COVID-19 Pandemic.

6) As a result, on 29.09.2021, since no representation was made on behalf of the Petitioner, the case proceeded ex-parte. The Petitioner only became aware of the Suit’s Summons in February 2022. Subsequently, on 09.02.2022, the Petitioner filed an Application under Order IX Rule 7 of CPC (Procedure where defendant appears on day of adjourned hearing and assigns good cause for previous non-appearance) to set aside the ex-parte Order by the Commercial Court.

7) Despite facing difficulties in accessing clear documents, the Petitioner submitted a Written Statement on 18.07.2022. However, the Respondent did not respond to the Application under Order IX Rule 7 CPC. Consequently, the ex-parte Order was set aside on 05.12.2022 by the Commercial Court.

8) But, on 11.04.2023, the Commercial Court didn’t accept the Petitioner’s Written Statement due to the absence of a separate application for condonation of delay.

9) To address this issue, on 24.04.2023, the Petitioner filed an Application for Condonation of Delay along with a Review Application against the Order dated 11.04.2023. Nevertheless, on 17.10.2023, the Commercial Court dismissed these Applications and imposed a cost of Rs. 5,000 on the Petitioner.

COMMERCIAL COURT:

i) The Commercial Court scrutinized the Petitioner’s Written Statement presented on 11.04.2023. However, the Court noted a critical procedural flaw: i.e. the absence of a separate application seeking condonation of delay specifically regarding the filing of the Written Statement. This procedural requirement, crucial for addressing delays in submitting legal documents, was not fulfilled by the Petitioner.

ii) Furthermore, the Commercial Court’s observation underscores the importance of ensuring that all necessary procedural steps are meticulously followed to avoid complications and delays in the adjudication process. In this instance, the absence of a proper Application for Condonation of Delay hindered the Court from accepting the Petitioner’s Written Statement, thereby necessitating further action to rectify the procedural lapse.

HIGH COURT:

Aggrieved by the Orders dated 11.04.2023 and 17.10.2023 of the Commercial Court, the Petitioner filed a Writ Petition before the High Court.

ISSUES:

I) Whether the Commercial Court’s decision to refuse to accept the Written Statement solely based on the absence of a separate application for condonation of delay was in accordance with the provisions of the law, particularly Proviso to Order VIII Rule 1 of the Code of Civil Procedure (CPC).

II) Whether the Petitioner’s explanations for the delay in filing the Written Statement, including the unavailability of their counsel during vacation and difficulties in accessing and verifying documents provided by the Respondent, warranted Condonation of Delay.

OBSERVATIONS:

a) The High Court highlighted the legal principle that the period for filing a Written Statement is 30 days from the date of service of summons, with an outer limit of 120 days. Failure to adhere to this timeframe may result in the forfeiture of the right to file a written statement.

b) It was noted that the Commercial Court failed to consider the Proviso to Order VIII Rule 1 of the CPC, which allows for the filing of a Written Statement beyond the initial 30-day period, subject to the Court’s discretion and payment of costs.

c) The Commercial Court’s outright dismissal of the Application for Condonation of Delay without considering the reasons provided by the Petitioner, was deemed erroneous by the High Court.

d) The High Court emphasized that the Commercial Court should have taken into account the Petitioner’s explanations for the delay, including counsel’s unavailability during vacation and difficulties in accessing and verifying documents provided by the Respondent.

e) Referring to relevant legal precedents, the High Court concluded that the delay in filing the Written Statement warranted condonation, particularly considering the peculiar circumstances of the case, such as the Petitioner’s lack of knowledge regarding their deceased father’s business operations.

f) To rectify the procedural irregularities and ensure fairness in adjudication, the High Court set aside the Impugned Orders of the Commercial Court and allowed the Written Statement to be taken on record, subject to the Petitioner paying costs to the Respondent.

g) The High Court’s observations underscored the importance of procedural fairness and equitable treatment in judicial proceedings, ensuring that litigants are afforded a fair opportunity to present their case and defend their rights.

CONCLUSION:

Based on the aforementioned observations, the High Court allowed the Petition and set aside the Impugned Orders dated 11.04.2023 and 17.10.2023 of the Commercial Court. However, the Court found merit in condoning the delay and thereby allowed the Written Statement to be taken on record on the basis that the Petitioner lacked knowledge of their deceased father’s business operations, which led to a delay in submitting a Written Statement. As compensation for the delay and negligence, the Court ordered the Petitioner to pay a cost of Rs. 20,000 to the Respondent Bank.

 

 

Sakshi Raghuvanshi

Legal Associate

The Indian Lawyer

 

[i] Order VIII Rule 1 CPC

 

[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.]

*[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 twenty days from the date of service of summons and on expiry of one hundred 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.]