Can the defendant file a counterclaim late after filing the written statement?

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Introduction:

Mahesh Govindji Trivedi (“Appellant”) has appealed[1] before the Honorable Supreme Court of India, Delhi, challenging the order of November 30, 2021 (“Disputed Order”) passed by the Division Bench of the Honorable Bombay High Court, Mumbai (“Division Bench”). Pursuant to the contested order, the division bench set aside the order dated May 2, 2019 passed by the single bench of the Honorable High Court of Bombay, Mumbai (“single judge”) by which a notice of motion[2] filed by the Appellant was upheld in order to grant the counterclaim filed belatedly by the Appellant.

Facts:

  1. Bakul Maganlal Vyas & Ors. (“Original Plaintiffs”) had filed a complaint[3] on June 10, 2004 for requesting the concrete execution of the purported transfer agreement dated May 28, 2001 by the late Ramalaxmi Ravishankar Trivedi, who was the Appellant’s sister. The original plaintiffs had also named other legal heirs of the deceased as defendants. The appellant had filed his written statement on November 16, 2005. Subsequently, in and around April 2017, there was a settlement of the estate of the lawsuit’s assets by which the appellant acquired property rights on the prosecution’s property.
  2. Subsequently, the Appellant filed his counterclaim on September 7, 2018 at the Registry of the Bombay High Court without seeking permission from the court in accordance with Rule 95 of the Rules of the Bombay High Court (original side). Since the counterclaim was filed without seeking proper leave from the court, the Single Judge expunged the record and returned the counterclaim to the appellant. This decision of the Single Judge was challenged by intra-judicial appeal to the Division Bench whereby the Appellant was invited to file a proper application seeking leave from the court.
  3. Accordingly, the appellant filed the notice of motion seeking leave to file the counterclaim. In view of an order dated May 2, 2019, authorization was granted by the single judge in order to avoid the multiplicity of procedures. In the said order, the single judge also specified that all of the defenses of the applicants, including the exception of limitation, were kept open.
  4. Agreed by said order, the original plaintiffs filed an in-court appeal to the Divisional Bench challenging the order dated May 2, 2019. The appeal was granted by an order dated November 30, 2021. Accordingly, the appellant has filed this appeal.
  5. In the meantime, the appellant had also filed a notice of motion seeking permission from the court to transfer right, title and interest in the suit’s property to third parties. The Notice of Petition was dismissed by the Single Judge and Divisional Bench of the Bombay High Court. However, the Honorable Supreme Court of India has issued an order dated 26th February 2021 adopted under a Special Leave Application (“SLP”)[4]authorized the transfer of lawsuit property with conditions to expedite the remaining pending proceedings and the transfer of lawsuit property will be subject to the outcome of the pending lawsuit.

Submissions on behalf of the appellant:

  1. The issue of reactivation of the counterclaim was no longer open when the Honorable Supreme Court of India approved the indictment of the third party purchaser who would adopt the written statement and counterclaim filed by the appellant and the prosecution would continue from the state it was in at the time of the passage of said order of February 26, 2021 to SLP.
  2. Even though the Single Judge, in his order dated 02 May 2019, had listed various reasons for allowing the counterclaim, including, but not limited to, keeping all defenses open to the original plaintiff, the bench of the division did not provide reasons for rescinding said order. of the single judge.

Submissions on behalf of the original plaintiffs (defendants):

  1. As the lawsuit was filed in 2004 and the written statement was filed on November 16, 2005, the counterclaim could not have been allowed almost after 13 years.
  2. The appellant had surreptitiously filed the counterclaim and the single judge had rightly dismissed it as contravening Rule 95 of the Bombay High Court Rules.
  3. In the SLP, the issue of the counterclaim was never raised or discussed. Therefore, said order of February 26, 2021 is not opposable to the exceptions concerning the counterclaim.

Results:

  1. The Court considered the judgment rendered in Ashok Kumar Karla v Wind Cdr. Surendra Agnihotri & Ors.[5] which was relied upon by the original plaintiffs and observed that in said judgment the court considered whether it was mandatory to file the counterclaim with the written statement. Even though there is no time limit for filing the counterclaim, the court observed that the majority opinion was that the counterclaim cannot be allowed to be filed by the defendant once the issues are framed and that the prosecution has made substantial progress. In this case, the counterclaim was filed before the questions were asked.
  2. The Court observed that in application of the fundamental principles, the rules of procedure are intended to serve the cause of justice rather than to punish the parties for their conduct.
  3. In reviewing the arguments relating to the order made in SLP, the Court observed that although the subject matter was not about the admissibility of filing the counterclaim, however, the substance and impact of the February 26 order 2021 left no scope for upsetting existing pleadings. Further, the Bench Division also did not consider the impact of said order as there was no reason to reopen the matter relating to the filing of a counterclaim.
  4. The Court further observed that there was no justified reason for Division Bench to interfere with the order of 02 May 2019, as the single judge granted the request taking into account the proper conduct of the proceedings while avoiding the multiplicity of disputes. In fairness, the Single Judge had also kept all defences, including the statute of limitations, open to argument at the relevant stage.

Conclusion:

In view of the foregoing, the Honorable Court allowed the Appeal by setting aside the Impugned Order and reinstating the order of the Single Judge which had upheld the counterclaim filed by the Appellant. Thus, the Honorable Apex Court clarified that the provisions of Ordinance VIII, Rule 6-A of the Code of Civil Procedure, 1908 and Rule 95 of the Bombay High Court Rules (original side) do not operate as a embargo for late taking the has filed a counterclaim on record that was filed before the questions were asked.

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