Original Side Rules On Accepting Counterclaim & Reply Need Amending Due To Rigidity Of S.18 Of Commercial Courts Act: Calcutta HC Frames Guidelines

The Calcutta High Court has held that the court's original side rules on accepting of plaint and counterclaim need to be amended due to the rigidity of Section 18 of the Commercial Courts act. In doing so, the bench of Justices Soumen Sen and Biswaroop Chowdhury also framed guidelines for the same till the amended rules were implemented. 

The Court held: In view of the stringent provisions in the Commercial Court Act, with regard to filing of pleadings and more particularly written statement it is imperative that the Original Side Rules so far as acceptance of counterclaim and reply thereto requires amendment. In view of the fact that writ of summons along with the plaint is served upon the defendant after scrutiny and after removal of all defects and only upon service of such authenticated plaint the obligation of the defendant to file written statement arises, similarly for a reply to the counter claim which in effect partakes the character of a written statement only upon service of an authenticated copy thereof, the time to file reply to the counter statement shall arise and the period of 120 days is required to be calculated from the date of service of such authenticated copy of the written statement along with counter claim. Having regard to the fact that no rule in exercise of power conferred under Section 18 on the issue has been framed and the existing Original Side Rules on this issue is silent on scrutiny we issue the following practice directions in line with Mr. M. Maria Albert Stanly (supra) till appropriate rules are framed:

(i) The Commercial Division of this court with effect from 1st March, 2025 shall scrutinize every counter claim filed and shall follow the same procedure as applicable to scrutiny of a plaint before service of summons.

(ii) After scrutiny of the counter claim filed by the defendant the registry of the commercial division shall within seven working days serve notice of such counter claim along with a copy thereof on the plaintiff or his advocate on record in the same manner as provided for suits in commercial disputes.

(iii) All curable defects shall be removed by the defendant/s within a fortnight from the date of intimation of such defects, in default, the matter shall be placed before the Commercial Division.

(iv) The period for filing the Written Statement by a plaintiff in response to a Counter-Claim filed by Defendant shall be reckoned from the date on which the notice along with copy of the Counter-Claim is served by the Registry of the Court on the plaintiff or his advocate, as the case may be.

(v) While serving the notice with copy of the Counter-claim on the plaintiff, it shall be ensured that the copies of all documents relied by the Defendant in support of the counter-claim are simultaneously delivered to the plaintiff

The appeal involved the question of whether the timeline specified in Order VIII Rule 1 as amended by the Commercial Courts Act, 2015 would apply to the timeline within which the reply to the counterclaim in the written statement, sometimes also referred to as an additional written statement, is to be filed by the plaintiff. The Single Judge declined to extend the time to file an additional written statement beyond 120 days and had rejected the application filed by the plaintiff for an extension of time to file an additional written statement beyond that time.

Senior counsel appearing on behalf of the respondent raised the question of the maintainability of the appeal. He relied upon the proviso to Section 13 (1-A) of the Commercial Courts Act, 2015, to argue that an appeal can only be made from such orders as are specifically enumerated under Order XLIII of the Code of Civil Procedure. The senior counsel has also referred to Section 13(2) of the said Act to show that no appeal can lie from any order or decree otherwise than in accordance with the provisions of the said Act and the said sub-section has specifically excluded application of Letters Patent of a High Court. 

Senior counsel appearing on behalf of the appellant submitted that the Commercial Courts Act has not specifically dealt with the right of the plaintiff to file additional pleadings, there have been no amendments to the Code of Civil Procedure as far as the time limit prescribed for filing additional written statement under the Commercial Courts Act, 2015. It was submitted that the practice directions for the Commercial Division and Commercial Appellate Division of the High Court at Calcutta in exercise of Section 18 of the Commercial Courts Act 2015, have not dealt with the delay in filing reply to the counter statement. No amendment has been carried out in its Original Side Rules after the Commercial Courts Act, 2015 was enacted. The provision for subsequent pleadings under Order VIII Rule 9 CPC applies only to pleadings subsequent to the filing of written statement. However, it does not apply to an additional written statement.

It is thus submitted that when the learned Single Judge has not fixed any time period for filing the reply to the counter claim on acceptance and in absence of any amendment in the CPC with regard to the time limit prescribed for filing reply to the counter statement under the Commercial Court Acts, 2015, the reply to the counter claim would not have been rejected on a plea that by reason of amendment to Order VIII Rule 1 of the Code of Civil Procedure, the time to file additional written statement should be considered from the date of filing of the written statement with counter claim.

It was submitted that in such circumstances the Court shall either fix the time for acceptance of the written statement with counter claim when no time was fixed. It is further submitted that in any event and in any view of the matter the time to file reply to the counter claim would only arise after the counter claim is scrutinized by the department concerned in accordance with the Original Side Rules. 

The question, which thus arose, was whether reply to a counter statement is required to be filed within 120 days from the service of the written statement with counterclaim upon the plaintiff.

Court noted that the counter claim in a written statement is treated as a plaint, and the plaintiff may file an additional written statement in answer to the said counter claim in view of the fact that the suit was filed in the original side of the High Court. The procedures insofar as filing, scrutiny and other related matters are concerned in the absence of any practice directions shall be governed by the Original Side Rules unless these rules are not in conflict with the procedure prescribed under the Commercial Courts Act.

In reading the proviso under Section 13(1) of the Commerical courts act, the court noted that the proviso goes on to state that an appeal shall lie from such orders passed by the Commercial Division of the High Court that are specifically enumerated under Order 43 of the Code of Civil Procedure Code, 1908, and Section 37 of the Arbitration Act. It will at once be noticed that orders that are not specifically enumerated under Order 43 CPC would, therefore, not be appealable, and appeals that are mentioned in Section 37 of the Arbitration Act alone are appeals that can be made to the Commercial Appellate Division of a High Court.

In relying on several landmark cases on the subject, the court held: An appeal is a creature of a statute. The Commercial Courts Act, 2015 is self contained code dealing with specified kind of commercial dispute. It is a special statute. The Parliament in its wisdom has provided for an appellate forum against some orders. The right of appeal when it is provided is a substantive right. The right of appeal of a litigant being aggrieved by the order passed by the Court under the Arbitration Act vis-a-vis right of appeal under Clause 15 of the Letters Patent came up for consideration in. Union of India vs. K. Satyanarayan in which the Division Bench after referring to Section 39 of the Arbitration Act 1940 observed: 28. In the case of (10) R. Wright & Partner Ltd. v. Governor General in Council reported in ILR 1948(2) Cal. 265 : 52 CWN 224, it has been observed that the right of appeal under Clause 15 of the Letters Patent is by Clause 44 subject to the legislative powers of the Governor General in Council and Section 39 of the Arbitration Act, 1940, has explicitly taken away the right. B.K. Mukherjea, J. (as His Lordship then was) in the aforementioned case made the following observation:- "Our conclusion, therefore, is that Section 39 of the Arbitration Act is sufficiently explicit to include an appeal under Clause 15 of the Letters Patent as well as the provisions of Clause 15 of the Letters Patent have to be taken subject to the Legislative Powers of the Governor General in Legislative Council. We must hold that to this extent the right of appeals has been curtained and modified."

It thus framed the aforesaid guidelines and dismissed the appeal.

Case: A K GHOSH AND COMPANY AND ORS. VERSUS BIMAN BOSE AND ORS.

Case No: CS-COM/440/2024

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