SUPREME COURT SETS ASIDE EX PARTE DECREE AND CLARIFIES APPLICATION OF CPC RULES

INTRODUCTION

A Division Bench of the Supreme Court, comprising of Justice Vikram Nath and Justice Ahsanuddin Amanullah passed an Judgment dated 16.08.2023 in Y.P Lele Vs. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. & Ors. in Civil Appeal No. 5155 of 2023, Arising out of SLP (C) No. 3543 of 2019 and held that the High Court had committed an error applying the explanation to Order XVII Rule 2 of the Code of Civil Procedure 1908 (CPC).

FACTS

1) Maharashtra State Electricity Board (“MSEB”) had filed a Special Civil Suit No. 125 of 1988 in the Court of Civil Judge, Senior Division at Sangli against Miraj Electricity Supply Co. Ltd. (“MESC”) and its five Directors wherein Y. P. Lele (“Appellant”) was Defendant No. 5, for recovery of 1,42,85,177.47 (Rupees One Crore Forty-Two Lakhs Eighty-Five Thousand One Hundred and Seventy-Seven Only).

2) Subsequently, the Defendants to the suit appeared and filed their written statements. Thereafter, at the stage of Submission of Evidence by the Plaintiff, the Counsel for the Defendants, Mr. M. B. Karmarkar, Adv., withdrew his Vakalatnama vide Exhibit 112. The said Counsel for the Defendants had also not cross-examined the witnesses at the time.

3) The Trial Court, on 04.12.2004 directed the suit to proceed under Order XVII Rule 2[i] (Procedure if parties fail to appear on day fixed) of the Civil Procedural Code (“CPC”) against the Defendants. Subsequently, the Court proceeded to record the Evidence of the Plaintiff and vide Judgment and Order dated 29.01.2005, decreed the suit ex-parte with Costs and directed the Defendants to jointly and severally pay Rs. 1,42,85,177.47 to MSEB and also an interest of 18% from the date of the suit till the realization on the same.

4) The Defendants, after coming to know of the ex parte decree, filed an Application under Order IX Rule 13[ii] (Setting aside decree ex parte against defendant) of CPC accompanied by an Application of Condonation of Delay under Section 5 of the Limitation Act, 1963 on 21.09.2006.

5) The Trial Court then, vide order dated 20.09.2010, allowed the Application under Section 5 (Extension of prescribed period in certain cases) of the Limitation Act, 1963 as they found the explanation to be satisfactory for the delay caused by the Defendants with Costs of Rs. 3,000/- to be paid within ten days.

6) Further, the Trial Court vide Order dated 30.9.2014, allowed the Application under Order IX Rule 13 of the CPC and set aside the ex parte Decree dated 29.01.2005 and imposed a fine of Rs. 1000/- on the Defendants and restored the Special Civil Suit No. 125 of 1988 to its original number.

7) Thereafter, MSEB filed a Writ Petition before the High Court of Maharashtra, under Articles 226 and 227 of the Constitution. Subsequently, the High Court by the impugned Order dated 12.01.2015, allowed the Writ Petition and set aside the Order dated 30.09.2014. The said Petition was allowed on the ground that the Application under Order IX Rule 13 of CPC was not maintainable in as the High Court had applied the explanation under Order XVII Rule 2 of CPC. Due to the same, the suit of MSEB stood decreed ex parte.

8) Aggrieved by the same, the Appellant preferred an Appeal against MSEB and also impleaded the other Defendants in the Trial Court, i.e., MESC and the other four Directors of MESC.

SUPREME COURT ANALYSIS

i) The Apex Court, by an Order dated 21.10.2019, directed to remove Respondents No. 2 to 6 from the array of the parties. Though, by an Order dated 15.09.2021, the parties were again restored as Respondents.

ii) Thereafter, the Apex Court heard the Counsels of both sides, wherein the Counsel for the Appellant pleaded that the High Court committed a grave error in applying the explanation to Order XVII Rule 2 of CPC. Further, according to the Counsel, the Order passed by the Trial Court decreeing the ex parte and the earlier Order dated 04.12.2004 was only an Order XVII Rule 2 of CPC and not under the explanation as the explanation would not be applicable.

iii) The Counsel for MSEB submitted that out of the five Directors, only one of them approached the Supreme Court, whereas Respondent No. 2 to 6 did not challenge the said Order of the High Court.

iv) Further, the Apex Court said that a plain reading of Order IX Rule 13 makes it apparent that where in a case, a Decree is passed ex parte against Defendant, a party may apply to the Court for setting aside the same for reasons satisfying the Court regarding non-appearance.

v) Subsequently, the Supreme Court said that, in the present case, the Defendants did not appear before the Trial Court on 4.12.2004, nor their Counsel appeared as the same had withdrawn his Vakalatnama by a written request. And due to this, the Trial Court directed for the suit to proceed under Order XVII Rule 2 CPC against the Defendants.

vi) Thereafter, MSEB recorded their Evidence and the Trial Court, as the Defendant didn’t appear on several occasions, decreed the suit ex parte.

vii) The Apex Court held that the explanation under Order XVII Rule 2 of CPC would have been invoked only if MSEB, after adducing the evidence or substantial evidence, failed to appear before the Court, the Court could have recorded his presence while disposing of the suit. But here, the Defendants were not present, and moreover the Defendants’ Counsel had not led any evidence at all. Therefore, the explanation could not be invoked as against the Defendant/ Appellant.

viii) The Supreme Court was of the opinion that the High Court committed an error applying the Explanation to Order XVII Rule 2 of CPC and based on the same the High Court held that an Application made under Order IX Rule 13 of CPC was not maintainable as the presence of the Defendant was deemed to be recorded at the time of the disposal of the suit.

ix) Further, the Apex Court also held that, once the Counsel for the Defendant had withdrawn his Vakalatnama, in the normal course, the Trial Court ought to have issued notice to the Defendants to engage another Counsel, which was not the case here and that the Court proceeded ex parte. The Trial Court was wrong in doing so.

x) Further, the Trial Court, in its wisdom and discretion had allowed the Application under Order IX Rule 13 CPC, the High Court had to refrain from interfering with an order which advanced the cause of justice by affording opportunities to both the parties so that the suit could have been decided on merits.

xi) Upon considering all the facts and circumstances of the Appeal, the Division Bench held that the Impugned Order of the High Court was set aside. The Apex Court directed the Trial Court to proceed and decide the Special Civil Suit on its own merits, after giving due opportunities to the parties and strictly proceed in accordance with the law.

CONCLUSION

Thus, after considering all the facts and circumstances of the case, the Supreme Court allowed the Appeal filed by the Appellant. Further, as the ex parte decree was being set aside, the Court, according to Order IX Rule 13, can impose such terms and conditions as it deems fit and can require the Appellant to deposit some amount to the Court. The Bench decided that 20% of the suit claim, along with the interest accrued thereon, may be retained by the Trial Court and may deposit the same in the Fixed Deposit initially for six months, renewable on an automatic basis, till the further orders were passed in the Court. Further, 30% along with the accrued interest thereon, be returned to the Appellant in four weeks of the date of filing of this Order before the Trial Court along with an application for return of amount as directed.

 

Kartik G. Khandekar

Associate

The Indian Lawyer

 

[i] Order XVII Rule 2 CPC– Procedure if parties fail to appear on day fixed. –

Where, on any day to which the hearing of the suit is adjourned, the parties or any of them fail to appear, the Court may proceed to dispose of the suit in one of the modes directed in that behalf by Order IX or make such other order as it thinks fit.

Explanation-Where the evidence or a substantial portion of the evidence of any party has already been recorded and such party fails to appear on any day to which the hearing of the suit is adjourned, the Court may, in its discretion, proceed with the case as if such party were present.

 

[ii] Order IX Rule 13 CPC– Setting aside decree ex parte against defendant-

In any case in which a decree is passed ex-parte against a defendant, he may apply to the Court by which the decree was passed for an order to set it aside; and if he satisfies the Court that the summons was not duly served, or that he was prevented by any sufficient cause from appearing when the suit was called on for hearing, the Court shall make an order setting aside the decree as against him upon such terms as to costs, payment into Court or otherwise as it thinks fit, and shall appoint a day for proceeding with the suit: Provided that where the decree is of such a nature that it cannot be set aside as against such defendant only it may be set aside as against all or any of the other defendants also: Provided further that no Court shall set aside a decree passed ex parte merely on the ground that there has been an irregularity in the service of summons, if it is satisfied that the defendant had notice of the date of hearing and had sufficient time to appear and answer the plaintiffs claim.

Explanation– Where there has been an appeal against a decree passed ex parte under this rule, and the appeal has been disposal of on any ground other than the ground that the appellant has withdrawn the appeal, no application shall lie under this rule of setting aside the ex parte decree.