Commercial Suits - Time Limit Of 120 Days For Filing Written Statements Not Mandatory For Written Statements To Counter Claims: Madras High Court

In a significant decision, the Madras High Court recently held that the mandatory time limit of 120 days to file a written statement in a commercial suit is not applicable to written statement to a counter-claim.

"... this Court holds that the Proviso to Order VIII Rule 1 of Code of Civil Procedure, which fixes the maximum period for filing the written statement as 120 days and which was held to be mandatory by the Hon'ble Supreme Court in SCG Contracts India Pvt. Ltd. Vs. K. S. Chamankar Infrasturcture Pvt. Ltd. and Ors., reported in 2019 (2) CTC 294, beyond which the right to file the written statement will stand forfeited, will not apply to a written statement filed by the plaintiffs for the counter claim made by the defendants and such cases will be governed only by the time period fixed by the Court under Order VIII Rule 6 A(3) of CPC".

Justice N. Anand Venkatesh was considering if it would be prudent according to the provisions of Civil Procedure Code and Madras High Court Original Side Rules to condone the delay of 563 days in filing the Written Statement of the Plaintiffs for a Counter Claim filed by Defendant.

While holding that the right to file a written statement to a counterclaim won't be forfeited unless there is explicit time limit fixed by the court under Order VIII Rule 6 A(3) of CPC, the High Court concluded that the applicants, CSCO LLC and Base IX Company LLC, have shown a reasonable cause for the delay in filing the said written statement for the counterclaim.

Though the apex court has clarified in SCG Contracts India Pvt. Ltd. v. K. S. Chamankar Infrastructure Pvt. Ltd. & Ors that the Proviso to Order VIIIRule 1 of Code of Civil Procedure r/w Order VIII Rule 10 of CPC fixes the maximum period for filing the written statement in commercial suits as 120 days from the date of service of summons of the Suit, Madras High Court has observed that it's solely applicable to written statement filed by defendants under Order VIII Rule 1 CPC.

Referring to the duty cast upon the court to fix the time limit for filing the written statement by the plaintiff under Order VIII Rule 6 A (3), the court observed as below:

"...While fixing such time limits, the Court is guided by Order VIII Rule 9 of CPC., wherein the Court can fix a time limit of not more than 30 days for presenting the written statement for a counterclaim. Even though leave is not required for filing a written statement for the counterclaim, since it is a matter of right for the plaintiffs, the Court can always fix a time limit for filing such a written statement. Hence, when a counter claim is filed by the defendants, the Court has to specifically pass an order while taking the counterclaim on file, directing summons to be served on the plaintiffs or if the plaintiff is represented by a counsel, directing the counsel to accept service of summons on behalf of the plaintiff. The time limit for filing the written statement for the counterclaim will commence only thereafter."

In the case before the court, the respondent company, Lakshmi Saraswathi Spintex Limited, had filed a written statement in the applicant's suit for relief of permanent injunction and damages, among other reliefs, with a delay of 113 days. The said delay was condoned by the High Court. It is pertinent to note here that the respondent company filed the written statement along with a counterclaim. The appeal filed by the plaintiff/ applicant against condonation of delay in Original Second Appeal was dismissed by the court. Aggrieved by the dismissal of appeal, the plaintiff/ applicant approached Supreme Court through a special leave petition where the matter is currently pending adjudication.

Therefore, the court noted in the order that there was no time limit against the plaintiff since the court did not pass any order, directing the applicants to file a written statement to the counterclaim within a specified period under Order VIII Rule 6 A(3) of CPC, while condoning the delay in filing the written statement by respondents.

"The plaintiffs were awaiting for the orders of the Apex Court and hence did not proceed to file the written statement for the counter claim made by the defendants. This Court made it very clear while passing an order on 01.12.2021 that in the absence of an order of stay passed by the Apex Court, the proceedings cannot be kept in abeyance and that this Court will proceed further with the suit. It is only thereafter, the present application came to be filed to condone the delay in filing the written statement for the counterclaim. Hence, the applicants/plaintiffs have shown a reasonable cause for the delay in filing the written statement for the counterclaim. That apart, when the application was allowed in Application No. 6464 of 2018 by an order dated 20.09.2018, this Court did not direct the counsel for plaintiffs to accept summons in the counterclaim and this Court also did not pass any order fixing the period for filing the written statement for the counter claim under Order VIII Rule 6 (3) of CPC", the court observed.

Other Court Observations

The bench noted that Order VIII Rule 6-A CPC underscores that a counterclaim will have the same effect as that of a cross suit while Order VIII Rule 6-G CPC clarifies that the rules applicable to written statements filed by defendants are applicable to the written statement filed in response to a counterclaim. Order VIII Rule 6-E CPC further provides that the court can proceed in a counterclaim even if the plaintiff fails to file a written statement to the claim. 

Moreover, the court also notes that,

"The counterclaim is in the nature of a plaint and it is considered like an independent suit, in the eye of law and that is the reason why Rule 6-D specifically provides that even if the main suit is stayed, discontinued or dismissed, counter claim can be proceeded with independently. Any order passed in the counter claim will have the effect of a decree under Section 2 (2) of CPC."

Referring to the judgments in Dattaram Krishnanath Pednekar & Ors.v. Pandurang K. Pednekar & Ors. (2010),  Nirottam Sharma .v Ramkishore & Anr. (2019), Indcon Boiler Ltd. .v Maeda Corporation India & Ors. (2019), the single judge bench opined that is a settle position of law that the time limit for filing a written statement for a counter claim is governed by Order VIII Rule 6-A (3) and not under Order VIII Rule 1 CPC. Consequently, it was held that written statement in such cases should be filed within such time fixed by the Court. If the plaintiff fails to file the written statement by abiding with these rules, the consequence under Order VIII Rule 6-E CPC will ensue.

The court added that the time limit fixed under Order VIII Rule 9 of CPC can be extended by the court, In the proviso to Rule 10, it is seen that there is an express bar on extending the time limit under Rule 1 for filing a written statement. However, there is an omission of Order VIII Rule 9 CPC in the proviso to Rule 10.

The court also made a reference to the Madras High Court Original Side Rules while deciding the issue. The court said that even Order V Rules 2 to 5 of the Original Side Rules does not mandate a rigid time limit for filing a written statement for a counter claim; extension of time period is left to the discretion of High Court.

"These rules must also be kept in mind since there is nothing available under the amended provisions of CPC., governing the Commercial Division running contrary to these rules and which specifically deals with the time limit for filing the written statement for a counter claim. Some clarity is required to be given for a written statement filed by the plaintiffs for the counter claim made by the defendants since Order VIII Rule 1 of CPC., does not apply and it is only Order VIII Rule 6-A (3) which specifically provides for the Court to fix such period for filing the written statement...It will always be open to the Court acting under the Commercial Courts Act, to forfeit the right of the plaintiffs if the written statement for the counter claim is filed beyond the time limit fixed by the Court, without showing sufficient cause", the court noted while concluding its observations

Therefore, the court, while allowing the application, condoned the 563 days' delay in filing the written statement to the counter claim. However, considering the case and the delay in filing written statement, the court directed the applicants/ plaintiffs to pay costs of a sum of Rs.10,000/- to the Tamil Nadu State Legal Services Authority on or before 11th February.

The applicants/ plaintiffs were represented by Argus Partners comprising Abeezar Faizullabhoy, Senior Partner, Murtaza Kachwalla, Partner, Aashdin Chivalwala, Principal Associate (Designate), Bhavika Deora (Associate).

Case Title: M/s.CSCO LLC & Anr. v. M/s.Lakshmi Saraswathi Spintex Limited, Rep.by its Managing Director & Ors.

Case No: Application No.4791 of 2021 in C.S.No.697 of 2017

Citation: 2022 LiveLaw (Mad) 35

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