Monday, 25 December 2017

Highlights of landmark Judgment- Salem Advocate Bar Association, Tamil Nadu Vs. Union of India (UOI)

(1) Code of Civil Procedure, 1908 - Amendments by Amendment Acts of 1999 and 2002--Constitutional validity of amendments upheld earlier by Supreme Court in Salem Advocates Bar Association, T. N. v. Union of India, (2003) 1 SCC 49--Committee headed by former Judge of Supreme Court appointed by Apex Court to suggest modalities for operation of amendments--Committee submitting its report having three parts--Report 1 dealing with various grievances on amendments and recommendations of Committee--Report 2 dealing with various points on draft rules for Alternate Disputes Resolution (A.D.R.) and mediation envisaged by Section 89 of Code read with Order X, Rules 1A, 1B and 1C--Report 3 containing conceptual appraisal of case management and model rules therefor--Legal position on amendments clarified--High Courts to take appropriate steps for making rules on A.D.R.--High Courts can examine model case flow management draft rules and consider question of adopting such rules or making rules with or without modification--Registrar Generals of High Courts, Central Government and State/Union Territories to file progress report on action taken within four months.

(2) Code of Civil Procedure, 1908--Amendments by Amendment Acts of 1999 and 2002--Report 1 of Committee on suggestions regarding various grievances relating to amendments considered -- Legal position clarified -- Important clarifications noted as under :

(a) Sub-section (2) of Section 26 and sub-rule (4) of Rule 15 of Order VI--Sub-section (2) of Section 26 requires plaint to be accompanied by affidavit--And person verifying pleadings to furnish affidavit in support thereof as provided under Rule 15 (4) of Order VI--Whether requirement of filing affidavit is illegal and unnecessary in view of existing requirement of verification of pleadings?--Held, "no".

(b) Order XVIII, Rule 4--Amendment providing that in every case, examination-in-chief of witness shall be on affidavit--Right of cross-examination and re-examination not disturbed by insertion of Rule 4--In appropriate cases, Court can permit examination-in-chief to be recorded in Court--Proviso to sub-rule (2) of Rule 4 clearly suggests that Court has to apply its mind to facts of case, etc.--Whether witness to be examined in Court or by Commissioner appointed by it--In complex cases, Court may prefer to itself record cross-examination of material witnesses--Will of Legislature cannot be defeated on ground that Court would be deprived of watching demeanour of witness--Discretion to declare witness hostile not conferred on Commissioner.

No exception can be taken in regard to the power of the Legislature to amend the Code and provide for the examination-in-chief to be on affidavit or cross-examination before a Commissioner. In appropriate cases, trial court can permit the examination-in-chief to be recorded in the Court. Proviso to sub-rule (2) of Rule 4 of Order XVIII clearly suggests that the Court has to apply its mind to the facts of the case, nature of allegations, nature of evidence and importance of the particular witness for determining whether the witness shall be examined in Court or by the Commissioner appointed by it. The power under Order XVIII, Rule 4 (2) is required to be exercised with great circumspection having regard to the facts and circumstances of the case. It is not necessary to lay down hard and fast rules controlling the discretion of the Court to appoint Commissioner to record cross-examination and re-examination of witnesses. The purpose would be served by noticing some illustrative cases which would serve as broad and general guidelines for the exercise of discretion. For instance, a case may involve complex question of title, complex question in partition or suits relating to partnership business or suits involving serious allegations of fraud, forgery, serious disputes as to the execution of the Will, etc. In such cases, as far as possible, the Court may prefer to itself record the cross-examination of the material witnesses and the prayer for recording evidence by the Commissioner may be declined by the Court.

Generally, the expenses incurred towards the fee payable to the Commissioner is likely to be less than expenditure incurred for attending the Courts on various dates for recording evidence besides the harassment and inconvenience to attend the Court again and again for the same purpose and, therefore, in reality, in most of the cases, there could be no additional burden.

Order XVIII, Rule 4 (4) requires that any objection raised during the recording of evidence before the Commissioner shall be recorded by him and decided by the Court at the stage of arguments. Order XVIII, Rule 4 (8) stipulates that the provisions of Rules 16, 16A, 17 and 18 of Order XXVI, in so far as they are applicable, shall apply to the issue, execution and return of such commission thereunder. The discretion to declare a witness hostile has not been conferred on the Commissioner. Under Section 154 of the Evidence Act, it is the Court which has to grant permission, in its discretion, to a person who calls a witness, to put any question to that witness which might be put in cross-examination by the adverse party. The powers delegated to the Commissioner under Order XXVI, Rules 16, 16A, 17 and 18 do not include the discretion that is vested in Court under Section 154 of the Evidence Act to declare a witness hostile.

(c) Order XVIII, Rule 17A--Deletion of Rule 17A of said order on additional evidence--Rule 17A did not create any new right but only clarified position--Deletion of Rule 17A does not disentitle production of evidence at later stage--Court may permit leading of additional evidence at later stage on such terms as may appear to be just.

(d) Order VIII, Rule 1--Amendment by Act 46 of 1999 providing that defendant shall within 30 days from date of service of summons on him, present written statement of his defence--Court can extend time for filing written statement upto 90 days--Whether Court has power or jurisdiction to extend period beyond 90 days?--Held, "yes"--Provision providing for maximum period of 90 days is not mandatory but only directory.

The use of the word 'shall' in Order VIII, Rule 1 by itself is not conclusive to determine whether the provision is mandatory or directory. We have to ascertain the object which is required to be served by this provision and its design and context in which it is enacted. The use of the word 'shall' is ordinarily indicative of mandatory nature of the provision but having regard to the context in which it is used or having regard to the intention of the legislation, the same can be construed as directory. The rule in question has to advance the cause of justice and not to defeat it. The rules of procedure are made to advance the cause of justice and not to defeat it. Construction of the rule or procedure which promotes justice and prevents miscarriage has to be preferred. The rules or procedure are hand-maid of justice and not its mistress. In the present context, the strict interpretation would defeat justice.

The maximum period of 90 days to file written statement has been provided but the consequences on failure to file written statement within the said period have not been provided for in Order VIII, Rule 1.

In construing this provision, support can also be had from Order VIII, Rule 10 which provides that where any party from whom a written statement is required under Rule 1 or Rule 9, fails to present the same within the time permitted or fixed by the Court, the Court shall pronounce judgment against him, or make such other order in relation to the suit as it thinks fit. On failure to file written statement under this provision, the Court has been given the discretion either to pronounce judgment against the defendant or make such other order in relation to suit as it thinks fit. In the context of the provision, despite use of the word 'shall', the Court has been given the discretion to pronounce or not to pronounce the judgment against the defendant even if written statement is not filed and instead pass such order as it may think fit in relation to the suit. In construing the provision of Order VIII, Rule 1 and Rule 10, the doctrine of harmonious construction is required to be applied. The effect would be that under Rule 10 of Order VIII, the Court in its discretion would have power to allow the defendant to file written statement even after expiry of period of 90 days provided in Order VIII, Rule 1. There is no restriction in Order VIII, Rule 10 that after expiry of ninety days, further time cannot be granted. The Court has wide power to 'make such order in relation to the suit as it thinks fit'. Clearly, therefore, the provision of Order VIII, Rule 1 providing for upper limit of 90 days to file written statement is directory.

However, the order extending time to file written statement cannot be made in routine. The time can be extended only in exceptionally hard cases. While extending time, it has to be borne in mind that the Legislature has fixed the upper time limit of 90 days. The discretion of the Court to extend the time shall not be so frequently and routinely exercised so as to nullify the period fixed by Order VIII, Rule 1.

(e) Section 39 (4)--This section not authorising Court to execute decree outside its jurisdiction--But does not dilute other provisions giving such power on compliance with conditions stipulated in those provisions--Thus, Order XXI, Rule 3 or Rule 48 providing differently--Not affected by Section 39 (4).

(f) Section 64 (2)--No ambiguity therein.

(g) Order VI, Rule 17--Amendment of pleadings--Proviso to Rule 17 preventing application for amendment being allowed after trial has commenced unless Court comes to conclusion, that despite due diligence, party could not have raised matter before commencement of trial--Proviso curtailing absolute discretion to allow amendment at any stage--Object is to prevent frivolous applications filed to delay trial--No illegality in provision.

(h) Order V, Rule 9 (3) and Rule 9A--Service of summons through courier--No valid objection can be raised to this mode of service--However, there is danger of false reports of service--Hence, High Courts to issue guidelines to trial courts by framing appropriate rules, order, regulations or practice directions in that behalf.

(i) Order XVII, Rule 1, proviso--Adjournment--Restriction of three adjournments--Awarding cost of adjournment mandatory--Whether further adjournment beyond three can be granted in circumstances beyond control of party?--Held, "yes".

The proviso to Order XVII, Rule 1 and Order XVII, Rule 2 have to be read together. So read, Order XVII does not forbid grant of adjournment where the circumstances are beyond the control of the party. In such a case, there is no restriction on number of adjournments to be granted. It cannot be said that even if the circumstances are beyond the control of a party, after having obtained third adjournment, no further adjournment would be granted. There may be cases beyond the control of a party despite the party having obtained three adjournments. For instance, a party may be suddenly hospitalized on account of some serious ailment or there may be serious accident or some act of God leading to devastation. It cannot be said that though circumstances may be beyond the control of a party, further adjournment cannot be granted because of restriction of three adjournments as provided in proviso to Order XVII, Rule 1.

In some extreme cases, it may become necessary to grant adjournment despite the fact that three adjournments have already been granted (Take the example of Bhopal Gas Tragedy, Gujarat earthquake and riots, devastation on account of Tsunami). Ultimately, it would depend upon the facts and circumstances of each case, on the basis whereof the Court would decide to grant or refuse adjournment. The provision for costs and higher costs has been made because of practice having been developed to award only a nominal cost even when adjournment on payment of costs is granted. Ordinarily, where the costs or higher costs are awarded, the same should be realistic and as far as possible actual cost that had to be incurred by the other party shall be awarded where the adjournment is found to be avoidable but is being granted on account of either negligence or casual approach of a party or is being sought to delay the progress of the case or on any such reason. Further, to save proviso to Order XVII, Rule 1 from the vice of Article 14 of the Constitution of India, it is necessary to read it down so as not to take away the discretion of the Court in the extreme hard cases. The limitation of three adjournments would not apply where adjournment is to be granted on account of circumstances which are beyond the control of a party. Even in cases which may not strictly come within the category of circumstances beyond the control of a party, the Court by resorting to the provision of higher cost which can also include punitive cost in the discretion of the Court, adjournment beyond three can be granted having regard to the injustice that may result on refusal thereof, with reference to peculiar facts of a case.

(j) Order XVIII, Rule 2 (4)--Whether omission of Rule 2 (4) by 1999 amendment takes away Court's inherent power to call for any witness at any stage either suo motu or on prayer of party invoking inherent powers of Court for examination of witness?--Held, "no".

(k) Order VII, Rule 14--In Rule 14 (4)--By mistake words "plaintiff's witnesses" mentioned instead of 'defendant's witnesses'--Hence, till Legislature corrects mistake, words 'plaintiff's witnesses' would be read as 'defendant's witnesses'.

(l) Sections 35, 35A, 35B and 95--Costs--Costs have to be actual reasonable costs including cost of time spent by successful party--High Courts to make appropriate rules to provide guidelines to subordinate courts.

Unfortunately, it has become a practice to direct parties to bear their own costs. In large number of cases, such an order is passed despite Section 35 (2) of the Code. Such a practice also encourages filing of frivolous suits. It also leads to taking up of frivolous defences. Further, wherever costs are awarded, ordinarily the same are not realistic and are nominal. When Section 35 (2), C.P.C. provides for cost to follow the event, it is implicit that the costs have to be those which are reasonably incurred by a successful party except in those cases where the Court in its discretion may direct otherwise by recording reasons thereof. The costs have to be actual reasonable costs including the cost of the time spent by the successful party, the transportation and lodging, if any, or any other incidental cost besides the payment of the court fee, lawyer's fee, typing and other cost in relation to the litigation. It is for the High Courts to examine these aspects and wherever necessary, make requisite rules, regulations or practice direction so as to provide appropriate guidelines for the subordinate courts to follow.

(m) Section 80--Section 80 (1) requiring prior notice of two months to be served on Government as condition for filing suit except where there is urgency for interim order--Two months period provided so that Government shall examine claim put up in notice and has sufficient time to send suitable reply--Underlying object is to curtail litigation--But in large number of cases, either notice is not replied or reply is generally vague and evasive--Directions issued.

Wherever the statutory provision requires service of notice as a condition precedent for filing of suit and prescribed period therefor, it is not only necessary for the Governments or departments or other statutory bodies to send a reply to such a notice but it is further necessary to properly deal with all material points and issues raised in the notice. The Governments, Government departments or statutory authorities are defendants in large number of suits pending in various Courts in the country. Judicial notice can be taken of the fact that in large number of cases, either the notice is not replied or in few cases where reply in sent, it is generally vague and evasive. The result is that the object underlying Section 80 of the Code and similar provisions gets defeated. It not only gives rise to avoidable litigation but also results in heavy expense and cost to the exchequer as well. Proper reply can result in reduction of litigation between State and the citizens. In case proper reply is sent, either the claim in the notice may be admitted or area of controversy curtailed or the citizen may be satisfied on knowing the stand of the State. There is no accountability in the Government, Central or State or the statutory authorities in violating the spirit and object of Section 80, C.P.C.

Having regard to the existing state of affairs, we direct all concerned Governments, Central or State or other authorities, whenever any statute requires service of notice as a condition precedent for filing of suit or other proceedings against it, to nominate, within a period of three months, an officer who shall be made responsible to ensure that replies to notices under Section 80 or similar provisions are sent within the period stipulated in a particular legislation. The replies shall be sent after due application of mind. Despite such nomination, if the Court finds that either the notice has not been replied or reply is evasive and vague and has been sent without proper application of mind, the Court shall ordinarily award heavy cost against the Government and direct it to take appropriate action against the concerned officer including recovery of costs from him.

(n) Section 115--Substitution of proviso to Section 115 (1)--Earlier clause (b) omitted -- Whether curtailment of revisional jurisdiction of High Court under Section 115 (1) takes away constitutional jurisdiction of High Court under Article 227 of Constitution?--Held, "no".

Surya Dev Rai v. Ram Chander Rai, (2003) 6 SCC 675, applied.

(o) Section 148--Enlargement of time for doing any act prescribed or allowed by C.P.C.--Amendment providing period not to exceed 30 days in total--Before amendment, no restriction of time--Whether Court has inherent power to extend time beyond 30 days?--Held, "yes"--Rigid operation of Section 148 to lead to absurdity--Hence, Section 151 to be allowed to fully operate--And extension beyond 30 days can be permitted.

(p) Order XI, Rule 15--Stipulation in Rule 15 confining inspection of documents 'at or before settlement of issues' instead of 'at any time'--Nothing but directory--Inspection can be allowed after settlement of issues.

(q) Section 89 and Order X, Rules 1A, 1B and 1C--No conflict in use of words 'shall' and 'may' in Section 89 and use of word 'shall' in Rule 1A of Order X--Arbitration and Conciliation Act, 1996 (1996 Act) when to apply?--Whether suit can be tried afterwards if no settlement arrived at between parties?--Held, "yes"--Expenses of mediation/ conciliation--Direction to Central Government--Refund of court fee.

Section 89, C.P.C. uses both the words 'shall' and 'may' whereas Order X, Rule 1A uses the word 'shall' but on harmonious reading of these provisions, it becomes clear that the use of the word 'may' in Section 89 governs only the aspect of reformulation of the terms of a possible settlement and its reference to one of ADR methods. There is no conflict. It is evident that what is referred to one of the ADR modes is the dispute which is summarized in the terms of settlement formulated or reformulated in terms of Section 89.

One of the modes to which the dispute can be referred is 'Arbitration'. Section 89 (2) provides that where a dispute has been referred for Arbitration or Conciliation, the provisions of the Arbitration and Conciliation Act, 1996 (for short '1966 Act') shall apply as if the proceedings for Arbitration or Conciliation were referred for settlement under the provisions of 1996 Act.

But the procedure for option to Arbitration among four ADRs is not contemplated by the 1996 Act and, therefore, Section 82 or 84 has no applicability where parties agree to go for arbitration under Section 89 of the Code. As already noticed, for the purposes of Section 89 and Order X, Rules 1A, 1B and 1C, the relevant sections in Part X of the Code enable the High Court to frame rules. If reference is made to Arbitration under Section 89 of the Code, 1996 Act would apply only from the stage after reference and not before the stage of reference when options under Section 89 are given by the Court and chosen by the parties. On the same analogy, 1996 Act in relation to Conciliation would apply only after the stage of reference to Conciliation. The 1996 Act does not deal with a situation where after suit is filed, the Court requires a party to choose one or other ADRs including Conciliation. Thus, for Conciliation also rules can be made under Part X of the Code for purposes of procedure for opting for 'Conciliation' and upto the stage of reference to Conciliation. Thus, there is no impediment in the ADR rules being framed in relation to civil court as contemplated in Section 89 upto the stage of reference to ADR. The 1996 Act comes into play only after the stage of reference upto the award. Applying the same analogy, the Legal Services Authority Act, 1987 (for short '1987 Act') or the rules framed thereunder by the State Governments cannot act as impediment in the High Court making rules under Part X of the Code covering the manner in which option to Lok Adalat can be made being one of the modes provided in Section 89. The 1987 Act also does not deal with the aspect of exercising option to one of four ADR methods mentioned in Section 89. Section 89 makes applicable 1996 Act and 1987 Act from the stage after exercise of options and making of reference.

Clause (d) of Section 89 (2) only means that when mediation succeeds and parties agree to the terms of settlement, the mediator will report to the Court and the Court, after giving notice and hearing the parties, 'effect' the compromise and pass a decree in accordance with the terms of settlement accepted by the parties. Further, in this view, there is no question of the Court which refers the matter to mediation/conciliation being debarred from hearing the matter where settlement is not arrived at. The Judge who makes the reference, only considers the limited question as to whether there are reasonable grounds to expect that there will be settlement and on that ground he cannot be treated to be disqualified to try the suit afterwards if no settlement is arrived at between the parties.

Considering large number of responses received by the Committee to the draft rules, it has suggested that in the event of such compulsory reference to conciliation/mediation procedures if expenditure on conciliation/mediation is borne by the Government, it may encourage parties to come forward and make attempts at conciliation/mediation. On the other hand, if the parties feel that they have to incur extra expenditure for resorting to such A.D.R. modes, it is likely to act as a deterrent for adopting these methods. The suggestion is laudable. The Central Government is directed to examine it and if agreed, it shall request the Planning Commission and Finance Commission to make specific financial allocation for the judiciary for including the expenses involved for mediation/conciliation under Section 89 of the Code. In case, Central Government has any reservations, the same shall be placed before the Court within four months. In such event, the Government shall consider provisionally releasing adequate funds for these purposes also having regard to what we have earlier noticed about many statutes that are being administered and litigation's pending in the Courts in various States are central legislations concerning the subjects in List I and List III of Schedule VII to the Constitution of India.

Regarding refund of the court fee where the matter is settled by reference to one of the modes provided in Section 89 of the Act, it is for the State Governments to amend the laws on the lines of amendment made in Central Court Fee Act by 1999 Amendment to the Code. The State Governments can consider making similar amendments in the State Court Fee legislations.


Writ Petition (Civil) Nos. 496 and 570 of 2002

Decided On: 02.08.2005

Salem Advocate Bar Association, Tamil Nadu

Union of India (UOI)

Hon'ble Judges/Coram:

Y.K. Sabharwal, D.M. Dharmadhikari and Tarun Chatterjee, JJ.
Citation: AIR 2005 SC 3353.
Read full judgment here: Click here

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