Law Web: Whether defendant can file counter claim by amending his written statement?

In the case of Ramesh Chand Ardawatiya Vs. Anil

Panjwani (supra), the Hon'ble Supreme Court has held that

counterclaim

can be filed either with written statement or by way

of amendment of written statement or further by way of

subsequent pleading under Order VIII Rule 9 of CPC. It has been

further observed in the said Judgment that the purpose of the

provision enabling filing of counterclaim

is to avoid multiplicity

of judicial proceedings and to save time of the Court as well as

prevent inconvenience to the parties. The Trial Court in the

present case has referred to the judgment of the Hon'ble Supreme

Court in the case of Bollepanda P. Poonacha and Another Vs.

K.M. Madapa, (2008) 13 Supreme Court Cases 179 wherein it

has been specifically held by the Hon'ble Supreme Court that right

to file a counterclaim

is an additional right.

12. The aforesaid position of law as enunciated by the

Hon'ble Supreme Court in the above mentioned judgment makes

it clear that the defendant cannot be prohibited from filing a

counter claim merely because it failed to raise the same in the

written statement itself. Although, it is clear that the defendant

will not be entitled to file a counter claim if it had not filed written

statement at all. In the facts and circumstances of the present

case, it is evident that the respondent No.1 did file its written

statement on 28/6/2017 well within the time limit specified under

Order VIII Rule 1 as amended and applicable to cover the dispute.

Therefore, the present case is not a situation where respondent

No.1 (defendant) is claiming to raise a counterclaim

in the

absence of written statement on record. The amendments

incorporated in Order VIII Rules 1 & 10 of CPC mandatorily

require written statement to be filed within outer limit of 120 days

and the Court is prohibited from extending the time so specified.

But, it would not lead to the conclusion that the defendant would

be completely prohibited from raising counterclaim

after expiry of

the period of 120 days. As laid down by the Hon'ble Supreme

Court the counter claim is an additional pleading and it can be

raised with leave of the Court subject to the rider that it shall

pertain only to cause of action that accrued to the defendant

either before or after filing of the suit but before the defendant

delivered its defence or time period for delivering its defence had

expired.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

NAGPUR BENCH AT NAGPUR

Writ Petition No. 1688 of 2018

M/s Sri Sai Gopal Turbo Engineering Services, Vs. EM Services Private Limited,

CORAM : MANISH PITALE, J.

PRONOUNCED ON : 04.06.2019

1. The question that arises for consideration in the

present petition is, as to whether the Court of Judge Special

Commercial Court, Nagpur (Trial Court) was justified in

permitting respondent No.1 to raise counter claim, after having

already filed written statement in the suit for recovery filed by the

petitioner.

2. The petitioner filed Special Civil Suit (Commercial) No.

12/2017, against the respondents for recovery of specific amount

towards payment of contract work, damages, loss of tools, etc.

along with future interest @ 18% p.a. The petitioner filed the suit

on 30/03/2017 and respondent No.1 was served with summons

on 05/06/2017. The respondent No.1 filed its written statement

before the Trial Court on 28/06/2017. Thereafter, on

11/12/2017, the respondent No.1 filed an application for

amendment of written statement to incorporate the counter claim.

By the proposed amendment, the respondent No.1 intended to

incorporate the counter claim against the petitioner on the basis

that it was not liable to pay amount claimed by the petitioner and

on the contrary it was entitled to recover a specific amount from

the petitioner, the details of which were given in the proposed

counter claim. The petitioner filed reply to the said application

and sought dismissal of the same by contending that the counter

claim was an after thought, pertaining to transaction of the year

2013 and further that since the suit filed by the petitioner was a

commercial suit, it was to be decided within a stipulated time

frame and that no such counter claim could be permitted to be

incorporated.

3. By the impugned order date 11/01/2018, passed by

the Trial Court, the application for amendment to incorporate the

counter claim filed by respondent No.1 was allowed, subject to the

condition of the respondent No.1 paying costs of Rs.5,000/.

The

petitioner filed the present writ petition challenging the said order

wherein notice was issued for final disposal on 21/03/2018 and in

the meantime the proceedings before the Trial Court were stayed.

4. Mr. R.S. Sundaram, learned counsel appearing for the

petitioner submitted that the impugned order passed by the Trial

Court was unsustainable in view of specific amendments

incorporated in Order VIII Rules 1 & 10 of the Code of Civil

Procedure, 1908 (CPC). It was submitted that the amendments

specifically incorporated in the aforesaid Rules pertaining to

commercial disputes made it very clear that no written statement

could be permitted to be filed after expiry of 120 days from the

date of service of summons and that the defendant forfeited the

right to amend the written statement to incorporate counter claim

beyond the said period. It was further submitted that the

amendment prohibited the Court from extending the aforesaid

time period for filing written statement and that, therefore, in the

present case, the Trial Court could not have permitted the

respondent No.1 to amend the written statement to incorporate

the counter claim after said period of 120 days from service of

summons had expired. It was submitted that since the present

suit concerned a commercial dispute, the position of law

pertaining to general suits could not be applied to the present case

and that the Trial Court ought not to have allowed application

filed by respondent No.1. It was further submitted that Order VIII

Rule 6A

of CPC read with amended Order VIII Rules 1 & 10 of

CPC demonstrated obvious error committed by the Trial Court in

referring to Order VIII Rule 9 of CPC while passing the impugned

order. The learned counsel placed reliance on the Judgment of

the Delhi High Court in the case of System Air India Private

Limited Vs. ETA Engineering Private Limited (Order dated

29/11/2016) in CS (COMM) 56/2016, to contend that the

amendment of the aforesaid provisions of CPC for commercial

disputes clearly demonstrate that the impugned order of the Trial

Court was unsustainable.

5. On the other hand, Mr. A.A. Choube, learned counsel

appearing for respondent No.1 submitted that the impugned order

passed by the Trial Court was in terms of the position of law laid

down by the Hon'ble Supreme Court and that the petitioner was

misreading the amended provisions of Order VIII Rules 1 & 10 of

CPC, while interpreting Order VIII Rule 6A

of CPC in the context

of right of defendant to raise counter claim by way of additional

pleadings. It was submitted that there was no quarrel with the

mandatory nature of amended Rules 1 & 10 of Order 8 of CPC in

the context of commercial disputes, as the Hon'ble Supreme Court

in the case of SCG Contracts India Pvt. Ltd. Vs. K. S. Chamankar

Infrastructure Pvt. Ltd. and Others, 2019 SCC OnLine SC 226

had upheld the view of the Delhi High Court relied upon by the

learned counsel for the petitioner. It was not submitted that

despite the said mandatory nature of the amended Rules, a proper

reading of Order VIII Rules 6A

of CPC read with position of law

laid down by the Hon'ble Supreme Court in that context would

show that no error had been committed by the Trial Court in

passing the impugned order. The learned counsel placed reliance

on the Judgments of the Hon'ble Supreme Court in the cases of

Mahendra kumar and Another Vs. State of Madhya Pradesh

and Others (1987) 3 Supreme Court Cases 265 and Ramesh

Chand Ardawatiya Vs. Anil Panjwani (2003) 7 Supreme Court

Cases 350.

6. In order to appreciate the contentions raised by rival

parties, it would be appropriate to refer the relevant provisions of

the CPC, as applicable to commercial disputes, which read as

follows.

“Order VIII Rule 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 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.

Order VIII Rule 6A.

Counterclaim

by defendant :(

1) A defendant in a suit may, in addition to his right of

pleading a setoff

under rule 6, set up, by way of

counterclaim

against the claim of the plaintiff, any

right or claim in respect of a cause of action accruing to

the defendant against the plaintiff either before or after

the filing of the suit but before the defendant has

delivered his defence or before the time limit for

delivering his defence has expired, whether such

counterclaim

is in the nature of a claim for damages or

not :

Provided that such counterclaim

shall not exceed the

pecuniary limits of the jurisdiction of the Court.

(2) Such counterclaim

shall have the same

effect as a crosssuit

so as to enable the Court to

pronounce a final judgment in the same suit, both on

the original claim and on the counterclaim.

(3) The plaintiff shall be at liberty to file a

written statement in answer to the counterclaim

of the

defendant within such period as may be fixed by the

Court.

(4) The counterclaim

shall be treated as a

plaint and governed by the rules applicable to plaints.

Order VIII Rule 9 :Subsequent

pleadings :No

pleading subsequent to the written statement of a

defendant other than by way of defence to setoff

counterclaim

shall be presented except by the leave of

the Court and upon such terms as the Court thinks fit;

but the Court may at any time require a written

statement or additional written statement from any of

the parties and fix a time of not more than thirty days

for presenting the same.

Order VIII Rule 10 :Procedure

when party fails to

present written statement called for by Court :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, as the

case may be, the Court shall pronounce judgment

against him, or makes such order in relation to the suit

as it thinks fit and on the pronouncement of such

judgment a decree shall be drawn up.

Provided further that no Court shall make an order to

extend the time provided under rule 1 of this Order for

filing of the written statement”.

7. The above quoted provisions specifically pertain to

commercial dispute, pursuant to amendment, as it is undisputed

that the suit for recovery filed by the petitioner herein pertains to

commercial dispute between the parties.

8. There can be no doubt about the fact that post

amendment, as per the aforesaid Rules in commercial disputes the

outer limit for filing of written statement is 120 days. This is

clearly laid down by the Hon'ble Supreme Court in the aforesaid

judgment in the case of SCG Contracts India Pvt. Ltd. Vs. K. S.

Chamankar Infrastructure Pvt. Ltd. and Others (supra).

Therefore, the only question that arises in this petition is, as to

whether upon expiry of the said period of 120 days and

respondent No.1 having filed its written statement well within the

specified time limit, it could raise a counterclaim

against the

petitioner. It has been vehemently submitted on behalf of the

petitioner that when summons were served on respondent No.1

on 05/06/2017 and written statement was filed on 28/6/2017,

the counterclaim

ought to have been filed with the written

statement itself and upon expiry of the aforesaid period of 120

days as per the amended rules, the application for raising counterclaim

or for incorporating the same in the written statement could

not have been entertained by the Trial Court. It was submitted

that a proper reading of the amended rules along with Order VIII

Rule 6A

of CPC would show that the Trial Court erred in not only

entertaining the application of respondent No.1, but allowing the

same and holding that the counterclaim

could be said to be

within limitation. It was emphasized on behalf of the petitioner

that the counterclaim

could have been filed only within the

aforesaid specified time limit of 120 days as per the amended Rule

1 of Order VIII of CPC. As opposed to this, the emphasis on behalf

of respondent No.1 was on the fact that filing of counterclaim

was not completely barred even after incorporation of aforesaid

amendments pertaining to commercial dispute. It was

emphasized that counter claim was an additional pleading, which

could be permitted when written statement was already filed on

record by the respondent No.1 within stipulated period of time.

9. In this context, a perusal of the above quoted Order

VIII Rule 6A

of CPC shows that the defendant can certainly raise

a counter claim in respect of cause of action accruing to it either

before or after filing of the suit but before it has delivered its

defence or before the time limit for delivering its defence has

expired. Thus, the said provision is concerned with only period

upto which the cause of action accruing to a defendant can be

raised by way of counterclaim.

10. It has been considered down by the Hon'ble Supreme

Court in the case of Mahendra Kumar and Another Vs. State of

Madhya Pradesh and Others (supra), as to whether Order VIII

Rule 6A

of CPC would bar filing of counterclaim

after filing of

written statement. It has been emphatically laid down that there

can be no such bar in filing counterclaim

and that the defendant

can certainly file a counterclaim

after having filed written

statement, but only pertaining to cause of action as specifically

laid down in Order VIII Rule 6A(

1) of CPC. Therefore, the

contentions raised on behalf of the petitioner in the present case

that the respondent No.1 was prohibited from filing counterclaim

as it had failed to raise the counterclaim

while filing written

statement, cannot be accepted.

11. In the case of Ramesh Chand Ardawatiya Vs. Anil

Panjwani (supra), the Hon'ble Supreme Court has held that

counterclaim

can be filed either with written statement or by way

of amendment of written statement or further by way of

subsequent pleading under Order VIII Rule 9 of CPC. It has been

further observed in the said Judgment that the purpose of the

provision enabling filing of counterclaim

is to avoid multiplicity

of judicial proceedings and to save time of the Court as well as

prevent inconvenience to the parties. The Trial Court in the

present case has referred to the judgment of the Hon'ble Supreme

Court in the case of Bollepanda P. Poonacha and Another Vs.

K.M. Madapa, (2008) 13 Supreme Court Cases 179 wherein it

has been specifically held by the Hon'ble Supreme Court that right

to file a counterclaim

is an additional right. In the case of Vijay

Prakash Jarath Vs. Tej Prakash Jarath (2016) 11 Supreme

Court Cases 800, the Hon'ble Supreme Court has held that the

defendant can certainly file a counter claim limited to cause of

action as specified under Order VIII Rule 6A

of CPC.