Sunday 19 April 2015

Supreme Court on Basic concept of counter claim


In Jag Mohan Chawla and Anr. v. Dera Radha Swami Satsang and Ors. MANU/SC/0565/1996 : (1996) 4 SCC 699 dealing with the concept of counter-claim, the Court has opined thus:
... is treated as a cross-suit with all the indicia of pleadings as a plaint including the duty to aver his cause of action and also payment of the requisite court fee thereon. Instead of relegating the Defendant to an independent suit, to avert multiplicity of the proceeding and needless protection (sic protraction), the legislature intended to try both the suit and the counter-claim in the same suit as suit and cross-suit and have them disposed of in the same trial. In other words, a Defendant can claim any right by way of a counter-claim in respect of any cause of action that has accrued to him even though it is independent of the cause of action averred by the Plaintiff and have the same cause of action adjudicated without relegating the Defendant to file a separate suit.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6862 OF 2014

Rajni Rani Vs Khairati Lal & Ors.

Citation;(2015) 2 SCC682,2014(6)ALLMR(SC)895,

The centrirorial issue that has stemmed in this appeal by
grant of special leave is whether an order of dismissal of the
counter-claim being barred by principles of Order 2, Rule 2 of
the Code of Civil Procedure (C.P.C.) can be set aside in exercise
of revisional jurisdiction under Section 115 of the C.P.C. or in
exercise of power of superintendence under Article 227 of the
Constitution of India or is it required to be assailed by
preferring an appeal.

2. The factual score need not be exposited in detail. Suffice it
to state that one Phoolan Rani, wife of Om Prakash, and
another instituted Civil Suit No. 107B of 2003 seeking
a
declaration that they are the owners in possession of the land
admeasuring 1/9th share in the suit land and further praying
for permanent injunction against the defendants. After issue of
notice, the defendants entered contest and the defendant
Nos.12 to 14 filed a counter-claim putting forth that they had
the right, title and interest as the original owner, Jeth Ram, had
executed a Will dated 18.5.1995 in their favour.
3. After the counter-claim was filed, defendant Nos. 1 and 2
filed an application for dismissal of the counter-claim on the
foundation that the same did not merit consideration as it was
barred by Order 2, Rule 2 of C.P.C.
It was set forth in the
application that a suit for declaration was earlier filed by the
present appellants along with others against the defendants
and a decree was passed in their favour on 21.9.2002 whereby
it was held that the present appellants and some of the
respondents were entitled to 1/4th share each. The judgment
and decree passed in the said suit was assailed in appeal and
the appellate court modified the judgment and decree dated
Page 2
3
21.9.2002 vide judgment dated 15.2.2003 holding that each
one of them was entitled to 1/9th share and the said
modification was done on the ground that the property was
ancestral in nature and the sisters had their shares.
After
disposal of the appeal, one of the sisters filed a declaratory suit
to the effect that she is the owner in possession of land in
respect of 1/9th share in the suit land and in the said suit a
counter-claim was filed by defendant Nos. 12 to 14 stating that
they had become owners in possession of the suit property on
the basis of a properly registered Will dated 18.5.1995 executed
by Jeth Ram. In the application it was set forth that the
counter-claim had been filed in collusion with the plaintiff as
the plea of claiming any status under the Will dated 18.5.1995
was never raised in the earlier suit. It was urged that the plea
having not been raised in the earlier suit, it could not have been
raised by way of a counter-claim in the second suit being
barred by the principles of Order 2, Rule 2 of C.P.C.
4. The learned trial Judge adverted to the lis in the first suit,
the factum of not raising the plea with regard to Will in the
earlier suit and came to hold that the counter-claim could not
be advanced solely on the ground that the existence of the Will
Page 3
4
had come to the knowledge of the defendants only in the year
2003. Being of this view, the learned trial Judge allowed the
application filed by the defendant Nos. 1 and 2 and resultantly
dismissed the counter-claim filed by the defendant Nos. 12 to
14 vide order dated 13.10.2010.
5. The legal substantiality of the aforesaid order was called in
question in Civil Revision No. 900 of 2011 preferred under
Article 227 of the Constitution of India wherein the High Court
taking note of the previous factual background came to hold
that the learned trial Judge had failed to appreciate that the
Will dated 18.5.1995 executed by Jeth Ram, the father of
defendant Nos. 12 to 14, was alive at the time of adjudication
of the earlier suit and hence, the said Will could not have taken
aid of during his lifetime. The aforesaid analysis persuaded the
learned Single Judge to set aside the order passed by the
learned trial Judge. However, the Single Judge observed that it
would be open to the plaintiff to raise all pleas against the
counter-claim.
6. We have heard Mr. Arvinder Arora, learned counsel for the
appellants and Mr. S.S. Nara, learned counsel for the
respondents.
Page 4
5
7.
At the very outset, we must make it clear that we are not
inclined to advert to the defensibility or justifiability of the order
of rejection of the counter-claim by the learned trial Judge or
the annulment or invalidation of the said order by the High
Court. We shall only dwell upon the issue whether the revision
petition could have been entertained or was it obligatory on the
part of respondents herein to assail the order by way of appeal.
8.
The submission of Mr. Arora, learned counsel appearing
for the appellants is that the counter-claim is in the nature of a
plaint and when it is dismissed it has to be assailed by way of
appeal before the competent forum by paying the requisite
court fee on the basis of the claim and such an order cannot be
set at naught in exercise of supervisory jurisdiction of the High
Court. Learned counsel for the respondents, per contra, would
contend that such an order is revisable and, in any case, when
cause of justice has been subserved this Court should not
interfere in exercise of its jurisdiction under Article 136 of the
Constitution of India.
9.
To appreciate the controversy in proper perspective it is
imperative to appreciate the scheme relating to the counter-
claim that has been introduced by CPC (amendment) Act 104 of
Page 5
6
1976 with effect from 1.2.1977.
Order 8, Rule 6A deals with
counter-claim by the defendant. Rule 6A(2) stipulates thus:-
“(2) Such counter-claim shall have the same effect
as a cross-suit so as to enable the Court to
pronounce a final judgment in the same suit, both
on the original claim and on the counter-claim.”
10.
Rule 6A(3) enables the
plaintiff
to
file a written
statement. The said provision reads as follows:-
“(3) The plaintiff shall be at liberty to file a written
statement in answer to the counter-claim of the
defendant within such period as may be fixed by the
Court.”
11.
Rule 6A(4) of the said Rule postulates that the counter-
claim shall be treated as a plaint and governed by rules
applicable to a plaint. Rule 6B provides how the counter-claim
is to be stated and Rule 6C deals with exclusion of counter-
claim.
Rules 6D deals with the situation when the suit is
discontinued. It is as follows:-
“R. 6D. Effect of discontinuance of suit. – If in
any case in which the defendant sets up a counter-
claim, the suit of the plaintiff is stayed, discontinued
or dismissed, the counter-claim may nevertheless be
proceeded with.”
Page 6
7
12.
On a plain reading of the aforesaid provisions it is quite
limpid that a counter-claim preferred by the defendant in a suit
is in the nature of a cross-suit and by a statutory command
even if the suit is dismissed, counter-claim shall remain alive
for adjudication. For making a counter-claim entertainable by
the court, the defendant is required to pay the requisite court
fee on the valuation of the counter-claim.
The plaintiff is
obliged to file a written statement and in case there is default
the court can pronounce the Judgment against the plaintiff in
relation to the counter-claim put forth by the defendant as it
has an independent status. The purpose of the scheme relating
to counter-claim is to avoid multiplicity of the proceedings.
When a counter-claim is dismissed on being adjudicated on
merits it forecloses the rights of the defendant.
As per Rule
6A(2) the court is required to pronounce a final judgment in the
same suit both on the original claim and also on the counter-
claim. The seminal purpose is to avoid piece-meal adjudication.
The plaintiff can file an application for exclusion of a counter-
claim and can do so at any time before issues are settled in
relation to the counter-claim. We are not concerned with such
a situation.
Page 7
8
13.
In
the
instant
case,
the
counter-claim
has
been
dismissed finally by expressing an opinion that it is barred by
principles of Order 2, Rule 2 of the CPC. The question is what
status is to be given to such an expression of opinion. In this
context we may refer with profit the definition of the term
decree as contained in section 2(2) of CPC:-
“(2) “decree” means the formal expression of an
adjudication which, so far as regards the Court
expressing it, conclusively determines the rights of
the parties with regard to all or any of the matters in
controversy in the suit and may be either
preliminary or final. It shall be deemed to include
the rejection of a plaint and the determination of
any question within 1[ * * *] Section 144, but shall
not include –
(a) any adjudication from which an appeal
lies as an appeal from an order, or
(b) any order of dismissal for default.
Explanation- A decree is preliminary when further
proceedings have to be taken before the suit can be
completely disposed of.
It is final when such
adjudication completely disposes of the suit. It may
be partly preliminary and partly final;”
14.
In
R.
Rathinavel
Chettiar
and
Another
v.
V.
Sivaraman and Others2 dealing with the basic components of
a decree, it has been held thus:-
“10. Thus a “decree” has to have the following
essential elements, namely:
1
2
The words and figures “section 47 or” omitted by CPC (Amendment) Act 104 of 1976, S 3 (w.e.f. 1-2.1077)
(1999) 4 SCC 89
Page 8
9
(i) There must have been an adjudication in a
   suit.
(ii) The adjudication must have determined the
    rights of the parties in respect of, or any of
   the matters in controversy.
(iii)
Such determination must be a conclusive
determination resulting in a formal
expression of the adjudication.
11. Once the matter in controversy has received
judicial determination, the suit results in a
decree either in favour of the plaintiff or in favour
of the defendant.”
15.
From the aforesaid enunciation of law, it is manifest that
when there is a conclusive determination of rights of parties
upon adjudication, the said decision in certain circumstances
can have the status of a decree. In the instant case, as has
been narrated earlier, the counter-claim has been adjudicated
and decided on merits holding that it is barred by principle of
Order 2, Rule 2 of C.P.C.
The claim of the defendants has
been negatived. In Jag Mohan Chawla and Another v. Dera
Radha Swami Satsang and Others3 dealing with the concept
of counter-claim, the Court has opined thus:-
“... is treated as a cross-suit with all the indicia
of pleadings as a plaint including the duty to
aver his cause of action and also payment of
3
(1996) 4 SCC 699
Page 9
1
the requisite court fee thereon.
Instead of
relegating the defendant to an independent
suit, to avert multiplicity of the proceeding and
needless
protection
(sic
protraction),
the
legislature intended to try both the suit and the
counter-claim in the same suit as suit and
cross-suit and have them disposed of in the
same trial.
In other words, a defendant can
claim any right by way of a counter-claim in
respect of any cause of action that has accrued
to him even though it is independent of the
cause of action averred by the plaintiff and
have the same cause of action adjudicated
without relegating the defendant to file a
separate suit.”
16.
Keeping in mind the conceptual meaning given to the
counter-claim and the definitive character assigned to it, there
can be no shadow of doubt that when the counter-claim filed by
the defendants is adjudicated and dismissed, finality is
attached to it as far as the controversy in respect of the claim
put forth by the defendants is concerned.
Nothing in that
regard survives as far as the said defendants are concerned. If
the definition of a decree is appropriately understood it conveys
that there has to be a formal expression of an adjudication as
Page 10
1
far as that Court is concerned.
The determination should
conclusively put to rest the rights of the parties in that sphere.
When an opinion is expressed holding that the counter-claim is
barred by principles of Order 2, Rule 2 C.P.C., it indubitably
adjudicates the controversy as regards the substantive right of
the defendants who had lodged the counter-claim. It cannot be
regarded as an ancillary or incidental finding recorded in the
suit. In this context, we may fruitfully refer to a three-Judge
Bench decision in M/s. Ram Chand Spg. & Wvg. Mills v. M/s.
Bijli Cotton Mills (P) Ltd., Hathras and Others 4 wherein
their Lordships was dealing with what constituted a final order
to be a decree. The thrust of the controversy therein was that
whether an order passed by the executing court setting aside an
auction sale as a nullity is an appealable order or not.
Court referred to the decisions in
The
Jethanand and Sons v.
State of Uttar Pradesh5 and Abdul Rahman v. D.K. Kassim
and Sons6 and proceeded to state as follows:-
“In deciding the question whether the order is a
final order determining the rights of parties and,
therefore, falling within the definition of a decree
4
AIR 1967 SC 1344
AIR 1961 SC 794
6
AIR 1933 PC 58
5
Page 11
1
in Section 2(2), it would often become necessary
to view it from the point of view of both the
parties in the present case — the judgment-
debtor and the auction-purchaser. So far as the
judgment-debtor
is
concerned
the
order
obviously does not finally decide his rights since
a fresh sale is ordered. The position however, of
the auction-purchaser is different. When an
auction-purchaser is declared to be the highest
bidder and the auction is declared to have been
concluded certain rights accrue to him and he
becomes entitled to conveyance of the property
through the court on his paying the balance
unless the sale is not confirmed by the court.
Where an application is made to set aside the
auction sale as a nullity, if the court sets it aside
either by an order on such an application or suo
motu the only question arising in such a case as
between him and the judgment-debtor is whether
the auction was a nullity by reason of any
violation of Order 21, Rule 84 or other similar
mandatory provisions. If the court sets aside the
auction sale there is an end of the matter and no
further question remains to be decided so far as
he and the judgment-debtor are concerned. Even
though a resale in such a case is ordered such
an order cannot be said to be an interlocutory
order as the entire matter is finally disposed of. It
Page 12
1
is thus manifest that the order setting aside the
auction sale amounts to a final decision relating
to the rights of the parties in dispute in that
particular civil proceeding, such a proceeding
being one in which the rights and liabilities of the
parties arising from the auction sale are in
dispute and wherein they are finally determined
by the court passing the order setting it aside.
The parties in such a case are only the
judgment-debtor and the auction-purchaser, the
only issue between them for determination being
whether the auction sale is liable to be set aside.
There is an end of that matter when the court
passes the order and that order is final as it
finally, determines the rights and liabilities of the
parties,
viz.,
the
judgment-debtor
and
the
auction-purchaser in regard to that sale, as after
that order nothing remains to be determined as
between them.”
After so stating, the Court ruled that the order in
question was a final order determining the rights of the
parties and, therefore, fell within the definition of a decree
under Section 2(2) read with Section 47 and was an
appealable order.
17.
We have referred to the aforesaid decisions to
highlight that there may be situations where an order can get
Page 13
1
the status of a decree. A Court may draw up a formal decree
or may not, but if by virtue of the order of the Court, the
rights have finally been adjudicated, irrefutably it would
assume the status of a decree. As is evincible, in the case at
hand, the counter-claim which is in the nature of a cross-suit
has been dismissed. Nothing else survives for the defendants
who had filed the counter-claim.
Therefore, we have no
hesitation in holding that the order passed by the learned
trial Judge has the status of a decree and the challenge to the
same has to be made before the appropriate forum where
appeal could lay by paying the requisite fee. It could not have
been unsettled by the High Court in exercise of the power
under Article 227 of the Constitution of India. Ergo, the order
passed by the High Court is indefensible.
18.
Consequently, the appeal is allowed and the order
passed by the High Court is set aside.
However, as we are
annulling the order on the ground that revision was not
maintainable, liberty is granted to the respondents to prefer an
appeal before the appropriate forum as required under law.
We may hasten to add that we have not expressed any opinion
on the merits of the case. There shall be no order as to costs.
Page 14
1
.............................J.
[Dipak Misra]
.............................J.
[V. Gopala Gowda]
New Delhi;
October 14, 2014
Page 15

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