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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1638  OF 2019 (Arising out of Special Leave Petition (C) No. 103/2019)

M/S SCG CONTRACTS INDIA PVT. LTD.                 Appellant(s)

VERSUS

K.S. CHAMANKAR INFRASTRUCTURE PVT. LTD. & ORS. Respondent(s)

J U D G M E N T

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  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 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

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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 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 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 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  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 and argued, laying great emphasis on State of

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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

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 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 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 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

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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 unjust consequences

would otherwise ensue.

7) Having  heard  learned  counsel  for  both  parties,  it  is

important to 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 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 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.”

Equally, in Order VIII Rule 1, a new proviso was substituted

as follows:

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“Provided 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 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 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:-

“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 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.”

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

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statement to come on record.  What is of great 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.

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

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. 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:

“23. It will be seen from this provision that,

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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

application  under  Section  34  has  elapsed,  no

consequence  is  provided.  This  is  one  more

indicator that the same Amendment 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  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.

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

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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.

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

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 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”.  

15) Learned counsel appearing for the respondents then argued

that it cannot be assumed that the learned Single Judge did

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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 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  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 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  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

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under s.151 is not justified...”

     (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.

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

24.09.2019, the only reason for this order is that 05.12.2017

has attained finality.

18) Factually  speaking,  this  is  not  correct  as  a  Special

Leave  Petition  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 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), as the public policy contained in the

statutory prohibition cannot be set at naught.

This is for the same reason as that contained in

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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 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 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  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.  

  .......................... J.    (ROHINTON FALI NARIMAN)

  .......................... J.              (VINEET SARAN)

New Delhi; February 12, 2019.