M/S SCG CONTRACTS INDIA PVT. LTD.versusK. S. CHAMANKAR INFRASTRUCTURE PVT. LTD. & ORS.

1050                SUPREME[2019]
                            COURT   REPORTS
                                  3 S.C.R. 1050              [2019] 3 S.C.R.


 A               M/S SCG CONTRACTS INDIA PVT. LTD.
                                      v.
        K. S. CHAMANKAR INFRASTRUCTURE PVT. LTD. & ORS.
                       (Civil Appeal No. 1638 of 2019)
                           FEBRUARY 12, 2019
 B
               [R. F. NARIMAN AND VINEET SARAN, JJ.]
             Code of Civil Procedure, 1908 (As amended in the wake of
       the Commercial Courts, Commercial Division and Commercial
       Appellate Division of High Courts Act, 2015 coming into force on
       23-10-2015):
 C
              Or. VIII, r. 1, proviso and r. 10, proviso, Or. V, r. 1, sub rule
       (1), second proviso – Written statement – Procedure when party
       fails to present written statement called for by court – On facts, in a
       commercial suit, failure of defendant No.1 to file written statement
       within 120 days from the date of service of summons – Meanwhile,
 D     filing of application under Or. VII, r. 11 – Rejected by order dated
       05.12.2017 – Thereafter, defendant no. 1 sought time for filing the
       written statement – Extension of time till 15.12.2017, subject to
       defendant paying cost – Pursuant thereto, written statement filed
       on 15.12.2017 – Thereafter, belated application filed averring that
 E     in view of the amendments in CPC, written statement could not be
       taken on record since 120 days had elapsed from the date of service
       of summons of the suit – High Court allowed the written statement
       to be taken on record even though order dated 05.12.2017 had
       become final and provisions of law were amended – On appeal,
       held: Proviso in Or. VIII r. 10 states that the Court has no further
 F     power to extend the time beyond the period of 120 days – Beyond
       120 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 – All this points to
       the fact that the earlier law on the filing of written statement under
 G     Or. VIII, r. 1 has now been set at naught – Clear, definite and
       mandatory provisions of Or. V r/w Or. VIII, r. 1 and 10 cannot be
       circumvented by recourse to the inherent power u/s. 151 – Thus, the
       05.12.2017 order cannot be sustained – Second order dated
       24.09.2018 is also set aside – Even assuming that the 05.12.2017
       order is final, res judicata cannot stand in the way of an erroneous
 H
                                        1050
  M/S SCG CONTRACTS INDIA PVT. LTD. v. K. S. CHAMANKAR                    1051
              INFRASTRUCTURE PVT. LTD.

interpretation of a statutory prohibition – Thus, the written statement   A
of defendant no. 1 to be taken off the record – Res judicata.
      Allowing the appeal, the Court
       HELD: 1.1 A perusal of the amendments made in the wake
of the Commercial Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015 to Code of Civil              B
Procedure-Or. VIII, r. 1 and 10 proviso, Or. V, r. 1 sub rule (1)
second proviso, would show that ordinarily a written statement
is to be filed within a period of 30 days. However, grace period of
a further 90 days is granted which the Court may employ for
reasons to be recorded in writing and payment of such costs as it         C
deems fit to allow such written statement to come on record.
Beyond 120 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. This is further buttressed by the proviso in Order VIII
Rule 10 also adding that the Court has no further power to extend         D
the time beyond this period of 120 days. Given the consequence
of non-filing of written statement, the amended provisions of the
CPC will have to be held to be mandatory. The consequence of
forfeiting a right to file the written statement; non-extension of
any further time; and the fact that the Court shall not allow the         E
written statement to be taken on record all points to the fact that
the earlier law on Order VIII Rule 1 on the filing of written
statement under Order VIII Rule 1 has now been set at naught.
The clear, definite and mandatory provisions of Order V read
with Order VIII Rule 1 and 10 cannot be circumvented by
recourse to the inherent power under Section 151 to do the                F
opposite of what is stated therein. Therefore, the 05.12.2017 order
which applies in the face of the amendments made to the
CPC cannot be sustained. [Para 8, 10, 11, 16, 17][1056-B-C;
1057-B-C-D; 1058-F-G]
      1.2 An issue of law which arises between the same parties           G
in a subsequent suit or proceeding is not res judicata if, by an
erroneous decision given on a statutory prohibition in the former
suit or proceeding, the statutory prohibition is not given effect
to. This is despite the fact that the matter in issue between the
parties may be the same as that directly and substantially in issue       H
in the previous suit or proceeding. This is for the reason that in
1052               SUPREME COURT REPORTS                   [2019] 3 S.C.R.


 A     such cases, the rights of the parties are not the only matter for
       consideration (as is the case of an erroneous interpretation of a
       statute inter parties), as the public policy contained in the
       statutory prohibition cannot be set at naught. The said is applicable
       to the facts of the instant case, as even assuming that the
       05.12.2017 order is final, res judicata cannot stand in the way of
 B
       an erroneous interpretation of a statutory prohibition. Therefore,
       the second order dated 24.09.2018 is set aside. The written
       statement of defendant no. 1 must be taken off the record.
       [Paras 18, 19][1059-B-C; F]
             Canara Bank v. N.G. Subbaraya Setty and Anr. AIR
 C           2018 SC 3395 : [2018] SCR 884 – relied on.
             Oku Tech Private Limited v. Sangeet Agarwal & Ors. dt
             11.08.2016 in CS (OS) No. 3390/2015 – approved.
             State of Bihar and Others v. Bihar Rajya Bhumi Vikas
 D           Bank Samiti (2018) 9 SCC 472 : [2018] 7 SCR 1147 ;
             Bhanu Kumar Jain v. Archana Kumar and Another
             (2005) 1 SCC 787 : [2004] 6 Suppl. SCR 1104 ; Shaikh
             Salim Haji Abdul Khayumsab v. Kumar and Others
             (2006) 1 SCC 46 : [2005] 5 Suppl. SCR 349 ; R.K.
             Roja v. U.S. Rayudu and Another [2016] SCR 221 ;
 E           Kailash v. Nanhku (2005) 4 SCC 480 : [2005] 3
             SCR 289 ; Salem Advocate Bar Association v. Union
             of India (2005) 6 SCC 344 : [2005] 1 Suppl. SCR 929
             ; State v. N.S. Gnaneswaran (2013) 3 SCC 594 ;
             Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth
 F           Hiralal [1962] Suppl 1 SCR 450 ; Maja Cosmetics v.
             Oasis Commercial Pvt. Ltd. 2018 SCC Online Del 6698
             – referred to.
                           Case Law Reference
       [2018] 7 SCR 1147          referred to                 Para 5
 G     [2004] 6 Suppl. SCR 1104   referred to                 Para 6
       [2005] 5 Suppl. SCR 349    referred to                 Para 6
       [2016] SCR 221             referred to                 Para 6
       [2005] 3 SCR 289           referred to                 Para 9
       [2005] 1 Suppl. SCR 929    referred to                 Para 9
       (2013) 3 SCC 594           referred to                 Para 9
 H     [1962] Suppl 1 SCR 450     referred to                 Para 16
       [2018] SCR 884             relied on                   Para 18
  M/S SCG CONTRACTS INDIA PVT. LTD. v. K.S. CHAMANKAR                         1053
              INFRASTRUCTURE PVT. LTD.

      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1638                    A
of 2019
      From the Judgment and Order dated 05.12.2017 of the High
Court of Delhi at New Delhi in Civil Suit (Comm.) No. 199 of 2017 and
order dated 24.9.2018 in I.A. No. 10569 of 2018 in CS (Comm.) No.
199 of 2017.                                                                  B
     Rajesh Mahajan, Dr. S. Ritam Khare, Ms. Urvi Kuthiala,
Ms. Shweta Chaurasia (for M/s. Ace Legal), Advs. for the Appellant.
     L. D. Joshi, Amzad Salim, Nishant R. Katneshwarkar,
M/s Legal Options, Advs. for the Respondents.
                                                                              C
      The Judgment of the Court was delivered by
      R. F. NARIMAN, J. 1. Leave granted.
       2. In the present case, a Suit was filed on 10.03.2017 claiming a
sum of Rs. 6,94,63,114/-. The Defendant No.1 was served with the
summons in the Suit on 14.07.2017. 120 days from this date takes us to        D
11.11.2017, by which date no written statement had been filed.
Meanwhile, however, an Order VII Rule 11 application was filed. This
application was taken up and rejected by the first impugned order dated
05.12.2017. After rejecting the Order VII Rule 11 application, the learned
Single Judge recorded that none appeared for the plaintiff inspite of
                                                                              E
advance copy stated to have been given. He also records that the counsel
for the defendant No.1 now states that seven days time be granted to
file a written statement. Para 14 of the aforesaid order then reads as
follows:
      “14. Subject to the defendant No.1 paying costs of Rs.25,000/- to
                                                                              F
      the counsel for the plaintiff on or before 15th December, 2017, the
      time for filing the written statement is extended till 15th December,
      2017. If either of the conditions is not complied with, the right of
      the defendant No.1 to file written statement shall stand closed
      without any further order.”
       3. In obedience to this order, a written statement was filed on        G
15.12.2017 by the defendant No.1. By a belated application dated
06.08.2018, it was averred that the recent changes that have been made
in the Code of Civil Procedure were not adhered to as a result of which
the written statement which had yet to be taken on record could not so
                                                                              H
1054                SUPREME COURT REPORTS                     [2019] 3 S.C.R.


 A     to be taken on record in view of the fact that 120 days had elapsed from
       the date of service of summons of this Suit.
              4. On 24.09.2018, another learned Single Judge took up this
       application and held that the 05.12.2017 order being final, even though
       the provisions of law may provide otherwise, the defendant No.1’s written
 B     statement which was filed on 15.12.2017 should be taken on record.
       The petitioner has filed a Special Leave Petition against the aforesaid
       two orders.
              5. Learned counsel appearing on behalf of the petitioner has taken
       us through the recent amendments made in the Code of Civil Procedure
 C     and argued, laying great emphasis on State of Bihar and Others vs.
       Bihar Rajya Bhumi Vikas Bank Samiti, (2018) 9 SCC 472 as well as
       Canara Bank vs. N.G. Subbaraya Setty and Anr. AIR 2018 SC 3395
       for the proposition that the amendments so made now provide for the
       consequence of non-filing of written statement, and as this is so, the
       provisions of Order VIII Rules 1 and 10 can no longer be said to be
 D     directory but can only be said to be mandatory. In this view of the
       matter, since a statutory prohibition now exists, the doctrine of res
       judicata cannot be availed.
              6. As against this, learned counsel appearing on behalf of the
       respondents has argued, basing himself on the decisions in Bhanu Kumar
 E     Jain vs. Archana Kumar and Another, (2005) 1 SCC 787 and Shaikh
       Salim Haji Abdul Khayumsab vs. Kumar and Others, (2006) 1 SCC
       46 that the vital difference between res judicata in a subsequent suit
       and res judicata in two different stages of the same proceeding must
       be kept in view. He stated that as the 05.12.2017 order had attained
 F     finality and could only now be challenged after the decree in the Suit is
       passed, clearly, the order of 24.09.2018 is correct. He also stated that
       by now the order dated 05.12.2017 had been acted upon and a wrongful
       act of the Court therefore, cannot prejudice him. He also argued citing
       the judgment of R.K. Roja vs. U.S. Rayudu and Another, (2016) 14
       SCC 275 that as an Order VII Rule 11 application had been filed and
 G     that had to be answered before trial of the Suit could commence, it was
       clear that a written statement could not be filed. He then relied upon
       Section 151 of the Code of Civil Procedure which preserves the inherent
       power of the court, more particularly, that of a Court of record - the
       High Court, and can be invoked in cases like the present where grossly
 H     unjust consequences would otherwise ensue.
  M/S SCG CONTRACTS INDIA PVT. LTD. v. K.S. CHAMANKAR                           1055
       INFRASTRUCTURE PVT. LTD. [R. F. NARIMAN, J.]

        7. Having heard learned counsel for both parties, it is important to    A
first set out the statutory provisions.
       8. The Commercial Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015 came into force on 23.10.2015
bringing in their wake certain amendments to the Code of Civil Procedure.
In Order V, Rule 1, sub-rule (1), for the second proviso, the following         B
proviso was substituted:
      “Provided further 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 days, as may be
      specified by the Court, for reasons to be recorded in writing and         C
      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 and 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.”                                 D

      Equally, in Order VIII Rule 1, a new proviso was substituted as
follows:
      “Provided that where the defendant fails to file the written
      statement within the said period of thirty days, he shall be allowed      E
      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 and twenty days from the date of service of
      summons and on expiry of one hundred and twenty days from the
      date of service of summons, the defendant shall forfeit the right         F
      to file the written statement and the court shall not allow the written
      statement to be taken on record.”
      This was re-emphasized by re-inserting yet another proviso in
Order VIII Rule 10 CPC, which reads as under:-
                                                                                G
      “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 make such order
                                                                                H
1056                 SUPREME COURT REPORTS                      [2019] 3 S.C.R.


 A           in relation to the suit as it thinks fit and on 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.”
 B             A perusal of these provisions would show that ordinarily a written
       statement is to be filed within a period of 30 days. However, grace
       period of a further 90 days is granted which the Court may employ for
       reasons to be recorded in writing and payment of such costs as it deems
       fit to allow such written statement to come on record. What is of great
 C     importance is the fact that beyond 120 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.
       This is further buttressed by the proviso in Order VIII Rule 10 also
       adding that the Court has no further power to extend the time beyond
       this period of 120 days.
 D
              9. In Bihar Rajya Bhumi Vikas Bank Samiti (supra), a question
       was raised as to whether Section 34(5) of the Arbitration and Conciliation
       Act, 1996, inserted by Amending Act 3 of 2016 is mandatory or directory.
       In para 11 of the said judgment, this Court referred to Kailash vs.
       Nanhku, (2005) 4 SCC 480 referring to the text of Order 8 Rule 1 as it
 E     stood pre the amendment made by the Commercial Courts Act. It also
       referred to the Salem Advocate Bar Association vs. Union of India,
       (2005) 6 SCC 344, which, like the Kailash judgment, held that the mere
       expression “shall” in Order 8 Rule 1 would not make the provision
       mandatory. This Court then went on to discuss in para 17 State vs. N.S.
 F     Gnaneswaran, (2013) 3 SCC 594 in which Section 154(2) of the Code
       of Criminal Procedure was held to be directory inasmuch as no
       consequence was provided if the Section was breached. In para 22 by
       way of contrast to Section 34, Section 29-A of the Arbitration Act was
       set out. This Court then noted in para 23 as under:

 G           “23. It will be seen from this provision that, unlike Sections 34(5)
             and (6), if an award is made beyond the stipulated or extended
             period contained in the section, the consequence of the mandate
             of the arbitrator being terminated is expressly provided. This
             provision is in stark contrast to Sections 34(5) and (6) where, as
             has been stated hereinabove, if the period for deciding the
 H           application under Section 34 has elapsed, no consequence is
  M/S SCG CONTRACTS INDIA PVT. LTD. v. K.S. CHAMANKAR                           1057
       INFRASTRUCTURE PVT. LTD. [R. F. NARIMAN, J.]

      provided. This is one more indicator that the same Amendment              A
      Act, when it provided time periods in different situations, did so
      intending different consequences.”
      10. Several High Court judgments on the amended Order VIII
Rule 1 have now held that given the consequence of non-filing of written
statement, the amended provisions of the CPC will have to be held to be         B
mandatory. [See Oku Tech Private Limited vs. Sangeet Agarwal &
Ors. by a learned Single Judge of the Delhi High Court dated 11.08.2016
in CS (OS) No. 3390/2015 as followed by several other judgments
including a judgment of the Delhi High Court in Maja Cosmetics vs.
Oasis Commercial Pvt. Ltd. 2018 SCC Online Del 6698.
                                                                                C
       11. We are of the view that the view taken by the Delhi High
Court in these judgments is correct in view of the fact that the
consequence of forfeiting a right to file the written statement; non-
extension of any further time; and the fact that the Court shall not allow
the written statement to be taken on record all points to the fact that the
earlier law on Order VIII Rule 1 on the filing of written statement under       D
Order VIII Rule 1 has now been set at naught.
       12. However, learned counsel appearing for the respondents relied
strongly upon the judgment in Bhanu Kumar Jain (supra) and Shaikh
Salim Haji Abdul Khayumsab (supra) and, in particular, paras 22 and
27 of the first judgment and paras 4 & 19 of the second judgment.               E

      13. We are of the view that since both these judgments dealt with
the pre-amendment position, they would not be of any direct reliance
insofar as the facts of the present case is concerned.
       14. Learned counsel appearing for the respondents also relied            F
upon R.K. Roja vs. U.S. Rayudu and Another (supra) for the proposition
that the defendant is entitled to file an application for rejection of plaint
under Order VII Rule 11 before filing his written statement. We are of
the view that this judgment cannot be read in the manner sought for by
the learned counsel appearing on behalf of the respondents.
Order VII Rule 11 proceedings are independent of the filing of a written        G
statement once a suit has been filed. In fact, para 6 of that judgment
records “However, we may hasten to add that the liberty to file an
application for rejection under Order 7 Rule 11 CPC cannot be
made as a ruse for retrieving the lost opportunity to file the written
statement”.
                                                                                H
1058                SUPREME COURT REPORTS                     [2019] 3 S.C.R.


 A             15. Learned counsel appearing for the respondents then argued
       that it cannot be assumed that the learned Single Judge did not know
       about these amendments when he passed the first impugned order dated
       05.12.2017. We do not wish to enter upon this speculative arena. He
       then argued that since this judgment permitted him to file the written
       statement beyond 120 days, it was an act of the Court which should
 B
       prejudice no man. This doctrine cannot be used when the res is not yet
       judicata. The 05.12.2017 order is res sub judice inasmuch as its
       correctness has been challenged before us.
              16..Learned counsel for the respondents then strongly relied upon
       the inherent powers of the Court to state that, in any case, a procedural
 C     provision such as contained in the amendment, which may lead to unjust
       consequences can always, in the facts of a given case, be ignored where
       such unjust consequences follow, as in the facts of the present case.
       We are again of the view that this argument has also no legs to stand on,
       given the judgment of this Court in Manohar Lal Chopra vs. Rai
 D     Bahadur Rao Raja Seth Hiralal, [1962] Suppl 1 SCR 450. In this
       judgment, the Court held:
             “The suit at Indore which had been instituted later, could be stayed
             in view of s.10 of the Code. The provisions of that section are
             clear, definite and mandatory. A Court in which a subsequent
 E           suit has been filed is prohibited from proceeding with the trial of
             that suit in certain specified circumstances. When there is a
             special provision in the Code of Civil Procedure for dealing with
             the contingencies of two such suits being instituted, recourse to
             the inherent powers under s.151 is not justified...”

 F                                                            (at page 470)
              Clearly, the clear, definite and mandatory provisions of Order V
       read with Order VIII Rule 1 and 10 cannot be circumvented by recourse
       to the inherent power under Section 151 to do the opposite of what is
       stated therein.
 G            17. Clearly, therefore, the 05.12.2017 order which applies in the
       face of the amendments made to the Civil Procedure Code cannot be
       sustained. When we come to the second order dated 24.09.2018, the
       only reason for this order is that 05.12.2017 has attained finality.

 H
   M/S SCG CONTRACTS INDIA PVT. LTD. v. K.S. CHAMANKAR                             1059
        INFRASTRUCTURE PVT. LTD. [R. F. NARIMAN, J.]

      18. Factually speaking, this is not correct as a Special Leave Petition      A
from the said order has been filed. Even otherwise, this Court in Canara
Bank vs. N.G. Subbaraya Setty and Anr. (supra) has held (page 3414):
        “(ii) An issue of law which arises between the same parties in a
        subsequent suit or proceeding is not res judicata if, by an erroneous
        decision given on a statutory prohibition in the former suit or            B
        proceeding, the statutory prohibition is not given effect to. This is
        despite the fact that the matter in issue between the parties may
        be the same as that directly and substantially in issue in the previous
        suit or proceeding. This is for the reason that in such cases, the
        rights of the parties are not the only matter for consideration (as
        is the case of an erroneous interpretation of a statute inter parties),    C
        as the public policy contained in the statutory prohibition cannot
        be set at naught. This is for the same reason as that contained in
        matters which pertain to issues of law that raise jurisdictional
        questions. We have seen how, in Natraj Studios (AIR 1981 SC
        537) (supra), it is the public policy of the statutory prohibition         D
        contained in Section 28 of the Bombay Rent Act that has to be
        given effect to. Likewise, the public policy contained in other
        statutory prohibitions, which need not necessarily go to jurisdiction
        of a Court, must equally be given effect to, as otherwise special
        principles of law are fastened upon parties when special
        considerations relating to public policy mandate that this cannot          E
        be done.”
       The aforesaid para applies on all fours to the facts of the present
case, as even assuming that the 05.12.2017 order is final, res judicata
cannot stand in the way of an erroneous interpretation of a statutory
prohibition. The present is one such case. Therefore, the second order             F
must also be set aside.
      19..The appeal is allowed, with the consequence that the written
statement of Defendant No.1 must be taken off the record.

Nidhi Jain                                                       Appeal allowed.   G




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