The Supreme Court (“SC”) in the matter of Ashok Kumar Kalra v. Wing Commander Surendra Agnihotri and Others (decided on November 19, 2019) held that a counter claim against the original claim may at the court’s discretion be filed after the written statement has been filed but not after the issues have been framed. However, exceptional circumstances exception has been carved out to permit the filing of the counter claim after the issues have been framed in order to prevent the multiplicity of proceedings and avoid the situation of an effective retrial but any counter claim filed after the recording of evidence has begun would be improper.

FACTS
Dispute arose between Ashok Kumar Kalra (“Petitioner”) (Original Defendant No. 2) and Wing Commander Surendra Agnihotri (“Respondent No. 1”) (Original Plaintiff) concerning a contract for sale pursuant to which Respondent No. 1 filed a suit on May 02, 2008 seeking the relief of specific performance.

Thereafter, the Petitioner in this case filed his written statement on December 02, 2008 and subsequently a counter-claim in the same suit on March 15, 2009. This was objected to by the Respondent No. 1 and the trial court rejected objections against the filing of the counter-claim after filing of the written statement and framing of issues. This order was quashed by the High Court. Hence, reference was made to the SC on this question of law.

ISSUES

i) Whether Order VIII Rule 6A of the Civil Procedure Code (“Rule 6A”) mandates an embargo on filing the counterclaim after filing the written statement.
ii) If not, then what are the restrictions on filing the counterclaim after filing of the written statement?

ARGUMENTS
The Petitioner argued that the intent behind Rule 6A is to provide an enabling provision for the filing of counterclaim so as to avoid multiplicity of proceedings, thereby, saving the time of the courts and avoiding inconvenience to the parties. Therefore, no specific statutory bar or embargo has been imposed upon the court’s jurisdiction to entertain a counterclaim except the limitation under the said provision which provides that the cause of action in the counterclaim must arise either before or after the filing of the suit but before the defendant has delivered his defense. Additionally, the Petitioner submitted that the rules of procedure should not be interpreted in a manner that ultimately results in failure of justice.

Respondent No. 1 argued that the language of the statute, and the scheme of the order, indicates that the counterclaim has to be a part of the written statement also relying on the statutory requirement that the cause of action relating to a counterclaim must arise before the filing of the written statement, and submitted that the counterclaim must therefore form a part of the written statement. Reliance was also placed on the placement of the provision relating to counter claim in Rule 6A.

OBSERVATIONS OF THE SUPREME COURT
The SC began emphasizing on the importance of both procedural and substantive justice, and the need to recognize and harmoniously stitch the two types of justice together to have an effective, accurate and participatory judicial system. It then considered the provisions of Order VIII, Civil Procedure Code, 1908, especially the claim of set-off in a money suit and right to claim under Rule 6A in addition to a set off (which is to have the effect of a cross suit) in respect of a cause of action accruing to the defendant before the delivery of his defense. It then went on to add that the counter-claim shall be treated as a plaint and governed by the rules applicable to plaints. The whole scheme of Order VIII in the opinion of the SC unequivocally points out the legislative intent to advance the cause of justice by placing an embargo on the belated filing of written statement, set-off and counterclaim.

The SC then pointed out the fact that Rule 6A was inserted vide an amendment (Act No. 104 of 1976) to avoid multiplicity of proceedings and that following Salem Advocate Bar Association Tamil Nadu v. Union Of India, [(2005) 6 SCC 344], procedural law should not be construed in a way to leave the court helpless, giving in fact a wide discretion to the civil court regarding procedural elements of a suit. Then following the Mahendra Kumar and Another v. State of Madhya Pradesh and Others, [(1987) 3 SCC 265] case, the SC, while considering the scope of Rule 6A(1) held that it does not bar the filing of a counter-claim by the defendant after he has filed the written statement as the cause of action for the counter-claim has arisen before the filing of the written statement.

The SC briefly discussed cases pertaining to the limitation applicable to filing such counter-claims and other judgments dealing with Rule 6A before concluding that a time limitation is not explicitly provided by the legislature, rather only limitation as to the accrual of the cause of action is provided. However, this does not mean that the counter-claim can be filed at any time after filing of the written statement as it is to be treated as a plaint which needs to be compliant with limitation provided under the Limitation Act, 1963. Time-barred suits cannot be entertained under the guise of counter-claim just because the cause of action arose as per the parameters of Rule 6A. The SC preferred a discretionary approach as opposed to the rigid technical view where the courts taking into the consideration, the reasons stated in support of the counter-claim, adopt a balanced approach keeping in mind the object behind the amendment and to sub-serve the ends of justice while deciding whether the counter-claim can be filed.

Hence, the SC stated that Rule 6A does not put an embargo on filing counter-claim after filing written statement but the restriction is only with respect to accrual of the cause of action. This does not give the right to file the counter-claim after substantial delay even if the limitation period has not passed and pegged the outer time limit till the framing of issues. The factors to be taken into consideration while permitting the filing are, inter alia, period and reason of delay, prescribed limitation period of cause of action, similarity in cause of action between main suit and counter-claim, injustice and abuse of process, and other facts and circumstances.

The dicta of Justice Shantanagoudar further added that in exceptional circumstances, the subsequent filing of the counter-claim may be permitted after the framing of issues until the stage of recording of evidence as there is no significant development in the proceedings during the intervening period of framing of issues and recording of evidence. A new issue can be framed by the court after the counter-claim if needed, without prejudicing the rights of either party. He however, went on to add that the filing of counter-claims after the commencement of recording of evidence is not illegal per se, rather improper and that the discretion has to be exercised wisely and pragmatically.

Vaish Associates Advocates View
One of the foremost activities of the third pillar is to ensure balance is maintained. This task of striking a balance is often a mammoth one, as one wrong precedent may lead to a floodgate of proceedings in the lower judiciary all over the country. The SC in the present judgment has attempted this balance, while trying to carve out principles of allowing a counter-claim to be filed after the written statement, in consonance with Rule 6A of the Civil Procedure Code, 1908. While doing so, the court has enshrined the foundational principle of “procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice”.

The SC has gone on to expound that although a rigid formula cannot be laid down, a counterclaim can be filed after filing of written statement in certain exceptional cases. The SC has delegated the balancing act to the civil judge to decide upon whether or not to allow such belated filing, while at the same time capping the upper limit at the stage of framing of issues. This delegation comes with a checklist of parameters to allow such filings that may successfully limit the number of counter claims filed at a later stage.

The only concern that may arise from this ruling is that such a belated filing may become a matter of routine and customary procedure. In a number of civil courts, the upper limit for filing a written statement has been increased to ninety days as a matter of practice, even though the statutory time limit is thirty days, and the extended time of up to ninety days is to be allowed only in exceptional cases. This ruling if not applied correctly, may lead to delayed counterclaims becoming a matter of practice, and the SC’s upper limit till the stage of framing of issues may only be able to do so much to prevent this practice.

For more information please write to Mr. Bomi Daruwala at [email protected]

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