Allahabad High Court
M/S Awasthi Motors vs Managing Director M/S Energy ... on 22 March, 2021
Equivalent citations: AIR 2021 ALLAHABAD 143, AIRONLINE 2021 ALL 400
Author: Saumitra Dayal Singh
Bench: Saumitra Dayal Singh
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Court No. 38 Case :- FIRST APPEAL FROM ORDER DEFECTIVE No. - 144 of 2021 Appellant :- M/S Awasthi Motors Respondent :- Managing Director M/S Energy Electricals Vehicle And Another Counsel for Appellant :- Shashank Tripathi Hon'ble Saumitra Dayal Singh, J.
1. Certified copy of the formal order filed today. Taken on record.
2. Defect reported stands cured. Office to allot regular number to the appeal.
3. Heard Shri Shashank Tripathi, learned counsel for the appellant.
4. The appeal has been heard on the following question of law:-
"Whether deposit of court fee on the valuation of the plaint is a pre-condition to maintain an application under Section 12A of The Commercial Courts Act, 2015 read with Rule 3 of The Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018?"
5. Present appeal has been filed under Section 13(1)A of The Commercial Courts Act, 2015 (hereinafter referred to as the Act) against the order of the Presiding Officer, Commercial Court, Jhansi (hereinafter also referred to as the 'learned court below'), dated 4.1.2021. By that order, the learned court below has rejected the appellant's application - paper no.14C/2, praying for issuance of notice to the respondent for pre-institution mediation and settlement. Also, order has been passed rejecting the other application paper no. 15C/2 filed by the appellant praying for extension of time, to deposit the deficient court fee on the valuation of the plaint, pending pre-institution mediation.
6. Briefly, the appellant is a dealer in electronic vehicles (E-rickshaws and E-carts) manufactured by the company - respondent no.1, of which respondent no.2 is the Managing Director. Bereft of unrelated details, it may be noticed, disputes have arisen between the parties arising from the appointment of the appellant as a dealer by the respondent company. The appellant claims to have transferred Rs. 4,36,000/- to the respondent through banking channel but corresponding supply of goods has not been made to the appellant. In such circumstances, the appellant presented a plaint before the learned court below, proposing to institute a suit against the respondents, seeking delivery of the goods (in lieu of the money paid by the appellant) and for compensation. Owing to deficiency of Court fees, it was registered as Misc. Case No. 17 of 2020.
7. At the same time, besides the plaint document, the appellant had moved an application under Section 12A of the Act before the learned Presiding Officer, Commercial Court, Jhansi, seeking pre-institution mediation. That application was numbered as paper no. 14C/2. It had also applied for extension of time to deposit the deficient court fees, as reported on the plaint in the Misc. Case No. 17 of 2020. It was numbered as paper no. 15C/2. By the impugned order, the learned court below has rejected those applications on the reasoning that the plaint presented by the appellant is deficient in court fee. Relying on General Rule Civil, Section 149 Civil Procedure Code, 1908 (hereinafter referred to as the 'Code') and the decision of the Supreme Court in A. Nawab John & Ors. Vs. V. N. Subramaniyam, (2012) 7 SCC 738, it has been held by the learned court below that - "The Court proceedings are conducted by General Rule Civil. Admittedly the applicant appears is more keen to get the relief, without filing the basis of suit or filing the Court fee."
8. Relying on Section 12A of the Act read with The Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 (hereinafter referred to as the 'Rules') it has been submitted, that law provides for a complete Code for initiation and conduct of pre-institution mediation-by way of a mandatory pre-condition to institute a suit proceeding under the Act. Inasmuch as the Act read with the Rules only requires payment of prescribed fees for conduct of pre-institution mediation, the learned court below could not have imposed any further condition on the petitioner to deposit the entire court fee payable on the plaint. The court fee may become due only on the failure of pre-institution mediation. He would further submit; the language of the aforesaid provisions is clear. If payment of court fee is enforced at this stage, the entire purpose of seeking pre-institution mediation would fail, resulting in failure of justice.
9. The application filed by the petitioner has been rejected by the learned court below by an ex-parte order, without issuance of any notice to the respondents. Further, the reason given by the learned court is - the non-payment of the court fee on the valuation of the plaint document. Thus, the dispute and the question arising from the order passed by the learned court below is strictly a matter between the court and the appellant. The opposite party has no right to be heard at this preliminary stage of the proceeding. Therefore, no notice is required to be issued to the respondents in the present appeal.
10. Having heard learned counsel for the appellant and having perused the record, in the first place, the controversy revolves around the provisions of Section 12A of the Act and the Rules, in the context of pre-existing provisions of the Code and the General Rule Civil, as made applicable to the proceedings under the Act. In that regard, it is seen, the provisions of Section 12A of the Act were introduced upon amendment made by Act no. 28 of 2018. Thereby, Chapter IIIA was added to the Act, with retrospective effect from 3.5.2018. Section 12A of the Act reads as below:
"12A. Pre-Institution Mediation and Settlement.-(1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government.
(2) The Central Government may, by notification, authorise the Authorities constituted under the Legal Services Authorities Act, 1987 (39 of 1987), for the purposes of pre-institution mediation.
(3) Notwithstanding anything contained in the Legal Services Authorities Act, 1987 (39 of 1987), the Authority authorised by the Central Government under sub-section (2) shall complete the process of mediation within a period of three months from the date of application made by the plaintiff under sub-section (1):
Provided that the period of mediation may be extended for a further period of two months with the consent of the parties:
Provided further that, the period during which the parties remained occupied with the pre-institution mediation, such period shall not be computed for the purpose of limitation under the Limitation Act, 1963 (36 of 1963).
(4) If the parties to the commercial dispute arrive at a settlement, the same shall be reduced into writing and shall be signed by the parties to the dispute and the mediator.
(5) The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996(26 of 1996)]".
11. Pursuant to enactment of Section 12A and in exercise of powers conferred under Section 21A of the Act, the Central Government has published and enforced the Rules. Relevant to the issue before this Court, Rule 3 of the Rules reads as below:-
"3. Initiation of mediation process.- (1) A party to a commercial dispute may make an application to the Authority as per Form-1 specified in Schedule-I, either online or by post or by hand, for initiation of mediation process under the Act along with a fee of one thousand rupees payable to the Authority either by way of demand draft or through online;
(2) The Authority shall, having regard to the territorial and pecuniary jurisdiction and the nature of commercial dispute, issue a notice, as per Form-2 specified in Schedule-I through a registered or speed post and electronic means including e-mail and the like to the opposite party to appear and give consent to participate in the mediation process on such date not beyond a period of ten days from the date of issue of the said notice.
(3) Where no response is received from the opposite party either by post or by e-mail, the Authority shall issue a final notice to it in the manner as specified in sub-rule (2).
(4) Where the notice issued under sub-rule (3) remains unacknowledged or where the opposite party refuses to participate in the mediation process, the Authority shall treat the mediation process to be a non-starter and make a report as per Form 3 specified in the Schedule-I and endorse the same to the applicant and the opposite party.
(5) Where the opposite party, after receiving the notice under sub-rule (2) or (3) seeks further time for his appearance, the Authority may, if it thinks fit, fix an alternate date not later than ten days from the date of receipt of such request from the opposite party.
(6) Where the opposite party fails to appear on the date fixed under sub-rule (5), the Authority shall treat the mediation process to be a non-starter and make a report in this behalf as per Form 3 specified in Schedule-I and endorse the same to the applicant and the opposite party.
(7) Where both the parties to the commercial dispute appear before the Authority and give consent to participate in the mediation process, the Authority shall assign the commercial dispute to a Mediator and fix a date for their appearance before the said Mediator.
(8) The Authority shall ensure that the mediation process is completed within a period of three months from the date of receipt of application for pre-institution mediation unless the period is extended for further two months with the consent of the applicant and the opposite party."
12. Then, by virtue of Section 3 of the Act, at present thirteen 'Commercial Courts' have been created in the State of Uttar Pradesh for the purpose of ensuring speedy disposal of 'commercial disputes' of a 'specified value', not less than three lakh Rupees. Under Section 2(1)(c) of the Act, 'commercial dispute' has been defined as - disputes arising out of ordinary transaction of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents. Then, by virtue of Section 2(1)(i) of the Act, 'specified value', in relation to valuation of a suit involving a commercial dispute, has been defined to mean - the value of the subject matter in respect of a suit, not less than three lakh rupees or higher value as may be notified.
13. As to the applicability of the Code - to a suit in respect of a 'commercial dispute' of a 'specified value', Section 16 of the Act provides that the Code as amended by the Schedule to the Act, shall apply and the 'Commercial Court' shall follow the provisions of the Code as amended by the Act. By virtue of the Schedule to the Act, a proviso has been appended to Section 26 of the Code regarding institution of a suit proceeding. Thus, the affidavit required under section 26(2) of the Code must conform to the prescription of Order VI, Rule 15-A, as introduced by the Schedule to the Act. Yet, in absence of any other manner being prescribed and by virtue of section 26(1) read with Order IV, Rule 1(1) of the Code (as applicable in Uttar Pradesh) read with section 16 of the Act, a suit involving a 'commercial dispute' of 'specified value' shall be instituted by the presentation of a plaint along with true copy/copies (for service of notice), to the Court or the appointed officer. Similarly, under Order IV, Rule 1(2) of the Code (as applicable in Uttar Pradesh), court fee chargeable for such service must be paid at the time of filing the plaint. Then, following the above, by virtue of Order IV, Rule (1)3 of the Code read with section 16 of the Act, no suit involving a 'commercial dispute' of a 'specified value' shall be deemed to be instituted unless it complies with the requirements specified in sub-rules (1) & (2).
14. As to the meaning to be given to the word 'instituted' used in sub-section (1) of Section 12A, in Goswami Krishna Murari Lal Vs. Shiam Sunder, 1984 All LJ 1034, in the context of a suit proceeding, it was held as under:
"...A suit is deemed to be instituted only when it is registered under the orders of the Court to which it is presented..."
15. What follows from the above is - a suit involving a 'commercial dispute' of a 'specified value' may be treated to have been instituted upon presentation of a plaint supported by affidavit on prescribed form, to the Court or the appointed officer. It must comply with sub-rules (1) & (2) of the Rule 1 of Order IV and also the General Rule Civil. However, even these mandatory steps of institution of a suit taken either individually or collectively and also their consequence have been specifically suspended, by law, by introduction of section 12-A to the Act.
16. Then under Section 12A(1) of the Act, the legislature has chosen to use the words 'shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation'. Therefore, a question arises whether the said phrase is mandatory or directory insofar as it provides for a pre-condition for institution of a suit involving a 'commercial dispute' of a 'specified value'. One may first look at the meaning and intent of the legislature gathered from the attending circumstances. By using prohibitive or negative word, i.e. 'not' in conjunction with the word 'shall' and by further qualifying the phrase with the word 'unless' before the words 'the plaintiff exhausts the remedy of pre-institution mediation', a clear and unambiguous intent has been expressed to make the provision of Section 12A (1) mandatory. The use of prohibitive or negative words leave no doubt as to the legislative intent. This principle had been applied by the Supreme Court in Union of India Vs. A.K. Pandey, (2009) 10 SCC 552 while reading Rule 34 of the Army Rules, 1954 to be mandatory. There, it was observed as under:
"15. The principle seems to be fairly well settled that prohibitive or negative words are ordinarily indicative of mandatory nature of the provision; although not conclusive. The Court has to examine carefully the purpose of such provision and the consequences that may follow from non-observance thereof. If the context does not show nor demands otherwise, the text of a statutory provision couched in a negative form ordinarily has to be read in the form of command. When the word "shall" is followed by prohibitive or negative words, the legislative intention of making the provision absolute, peremptory and imperative becomes loud and clear and ordinarily has to be inferred as such...."
17. Then, in Govindlal Chhaganlal Patel Vs. Agricultural Produce Market Committee, (1975) 2 SCC 482, the Supreme Court again had the occasion to consider when a provision may be read as mandatory or directory in the context of the words 'shall' and 'may'. It was observed as under:
"13. Crawford on Statutory Construction (Edn. 1940, Article 261, p. 516) sets out the following passage from an American case approvingly:
"The question as to whether a statute is mandatory or directory depends upon the intent of the Legislature and not upon the language in which the intent is clothed. The meaning and intention of the Legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from construing it the one way or the other."
Thus, the governing factor is the meaning and intent of the Legislature, which should be gathered not merely from the words used by the Legislature but from a variety of other circumstances and considerations. In other words, the use of the word "shall" or "may" is not conclusive on the question whether the particular requirement of law is mandatory or directory. But the circumstance that the Legislature has used a language of compulsive force is always of great relevance and in the absence of anything contrary in the context indicating that a permissive interpretation is permissible, the statute ought to be construed as peremptory. One of the fundamental rules of interpretation is that if the words of a statute are themselves precise and unambiguous, no more is necessary than to expound those words in their natural and ordinary sense, the words themselves in such case best declaring the intention of the legislature. [Shriram v. State of Bombay, AIR 1961 SC 674 : (1961) 2 SCR 890, 898 : (1961) 1 Cri LJ 760] Section 6(1) of the Act provides in terms, plain and precise, that a notification issued under the section "shall also" be published in Gujarati in a newspaper. The word ''also' provides an important clue to the intention of the legislature because having provided that the notification shall be published in the Official Gazette, Section 6(1) goes on to say that the notification shall also be published in Gujarati in a newspaper. The additional mode of publication prescribed by law must, in the absence of anything to the contrary appearing from the context of the provision or its object, be assumed to have a meaning and a purpose. In Khub Chand v. State of Rajasthan [AIR 1967 SC 1074 : (1967) 1 SCR 120, 124-25] it was observed that:
"The term ''shall' in its ordinary significance is mandatory and the court shall ordinarily give that interpretation to that term unless such an interpretation leads to some absurd or inconvenient consequence or be at variance with the intent of the Legislature, to be collected from other parts of the Act. The construction of the said expression depends on the provisions of a particular Act, the setting in which the expression appears, the object for which the direction is given, the consequences that would flow from the infringement of the direction and such other considerations."
18. In the present case, not only there are negative or prohibitive words used in sub-section (1) of Section 12A of the Act to clearly indicate that pre-institution mediation is mandatory or stands by way of a pre-condition to the institution of a suit proceedings involving a 'commercial dispute' of a 'specified value' but further, the second proviso to sub-section (3) of Section 12A further makes it plain that the time consumed in seeking pre-institution mediation is to be excluded for the purposes of institution of the suit. The legislative intent is thus unambiguous that the suit proceeding may be instituted only after the pre-institution mediation has failed. Thus, the pre-institution mediation must be carried out prior and even independent to the institution of the suit proceeding that may eventually to be instituted only in the case of a failed mediation.
19. Unless the pre-institution mediation were to be undertaken independent of the institution of the suit itself, the second proviso to sub-Section (3) of Section 12A of the Act would become a dead letter of law and would remain completely redundant. If a plaintiff would have to first institute a suit proceeding and thereafter seek mediation, there would arise no occasion when, for the purpose of computation of the period of limitation, any time consumed in conducting such mediation may ever be required to be excluded. In all such cases, the suit proceedings would always necessarily stand instituted, prior in time.
20. In the present case, there appears to be a clear purpose on part of the legislature to provide for pre-institution mediation, to ensure amicable final settlement between the parties without litigation - that often involves long delays. The whole purpose of enacting the Act and the amendment introduced by Act No. 28 of 2018 has been to ensure expeditious disposal. In that regard, the Objects and Reasons may be noted below:
"Statements of Objects and Reasons- The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 was enacted for the constitution of Commercial Courts, Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of specified value and for matters connected therewith or incidental thereto.
2. The global economic environment has since become increasingly competitive and to attract business at international level, India needs to further improve its ranking in the World Bank 'Doing Business Report' which, inter alia, considers the dispute resolution environment in the country as one of the parameters for doing business. Further, the tremendous economic development has ushered in enormous commercial activities in the country including foreign direct investments, public private partnership, etc., which has prompted initiating legislative measures for speedy settlement of commercial disputes, widen the scope of the courts to deal with commercial disputes and facilitate ease of doing business. Needless to say that early resolution of commercial disputes of even lesser value creates a positive image amongst the investors about the strong and responsive Indian legal system. It is, therefore, proposed to amend the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015.
3. As Parliament was not in session and immediate action was required to be taken to make necessary amendments in the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, to further improve India's ranking in the 'Doing Business Report', the President promulgated the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018 on 3rd May, 2018.
4. It is proposed to introduce the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill, 2018 to replace the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018, which inter alia, provides for the following namely:--
(i) to reduce the specified value of commercial disputes from the existing one crore rupees to three lakh rupees, and to enable the parties to approach the lowest level of subordinate courts for speedy resolution of commercial disputes;
(ii) to enable the State Governments, with respect to the High Courts having ordinary original civil jurisdiction, to constitute commercial courts at District Judge level and to specify such pecuniary value of commercial disputes which shall not be less than three lakh rupees and not more than the pecuniary jurisdiction of the district courts;
(iii) to enable the State Governments, except the territories over which the High Courts have ordinary original civil jurisdiction, to designate such number of Commercial Appellate Courts at district judge level to exercise the appellate jurisdiction over the commercial courts below the district judge level;
(iv) to enable the State Governments to specify such pecuniary value of a commercial dispute which shall not be less than three lakh rupees or such higher value, for the whole or part of the State; and
(v) to provide for compulsory mediation before institution of a suit, where no urgent interim relief is contemplated and for this purpose, to introduce the Pre-Institution Mediation and Settlement Mechanism and to enable the Central Government to authorise the authorities constituted under the Legal Services Authorities Act, 1987 for this purpose.
5. The Bill seeks to achieve the above objectives."
21. Thus, after 03.05.2018, no fresh suit involving a 'commercial dispute' of a 'specified value' shall be instituted, unless the (proposed) plaintiff first exhausts the remedy of pre-institution mediation. That is the exact prescription made by Section 12A (1) of the Act. The only exception may arise if such a suit carries an urgent interim relief application. In that case the suit proceeding may be instituted even without seeking pre-institution mediation.
22. As as result, once it is disclosed that the proposed plaintiff proposes to institute a suit proceeding involving a 'commercial dispute' of a 'specified value' not involving any urgent interim relief, the Commercial Court, before whom such suit proceedings is proposed to be instituted must enforce on such proposed plaintiff the mandatory pre-condition of pre-institution mediation, prescribed by the Act. The legislature has left no discretion with the Courts, in that regard, by using words - "shall not" in sub-section (1) of Section 12A of the Act before the words - "be instituted" and the word "unless" thereafter.
23. Once the institution of the suit proceeding itself has been put in abeyance by the legislature, unless a pre-institution mediation is first carried out (except where urgent interim relief is sought), it cannot be contemplated how a condition inextricably linked to the institution of the suit, namely payment of court fee on the valuation of the plaint, can be enforced at the stage of pre-institution mediation. For that reason as well, the reasoning adopted by the learned court below cannot be accepted as correct.
24. The application for pre-institution mediation is mandatory in nature. That application must be entertained and dealt with independent to the institution of the suit proceedings. In fact, the institution of a suit would depend directly on the fate of the pre-institution mediation and not vice-versa. It cannot be said that an application for pre-institution mediation may be entertained only after the suit proceeding had been first instituted.
25. Also, with respect to any suit involving 'commercial disputes' of a 'specified value', not involving an urgent interim relief application, such an application must necessarily be filed on Form 1 appended to Schedule 1 to the Rules. It shall be entertained subject to it being complete in all respects. Filing of plaint with or without defects is not required or prescribed by the Act read with the Rules as a pre-condition of maintaining that application.
26. If the pre-institution mediation is a non-starter, then a report on Form 3 in Schedule 1 to the Rules would be submitted. It would allow for the exclusion of time - starting from the date an application for pre-institution mediation is filed, to the date of receipt of the non-starter report (by the proposed plaintiff), towards the computation of limitation to institute the suit. It is the plain effect of the second proviso to section 12A (3) of the Act read with Rule 3(4) of the Rules.
27. In all cases, for the purpose of pre-institution mediation the proposed plaintiff must disclose the nature of the dispute as a commercial dispute of a specified value and; the territorial and pecuniary jurisdiction of the Court to whom the application for pre-institution mediation is presented on Form 1, besides the proforma requirements already prescribed under the Rules.
28. Since, in my opinion, the institution of the suit proceeding is not a pre-condition to maintain an application under Section 12A of the Act read with the Rules, the reasoning adopted by the learned court below cannot be accepted as correct. The application seeking pre-institution mediation must be dealt with independent of the filing/presentation of the plaint and it's status as regular or defective is irrelevant or extraneous to the maintainability of the application for initiation of pre-institution mediation.
29. Since the filing of the plaint is itself found to be, not a pre-condition to seek pre-institution mediation under Section 12A of the Act, the ratio of the decision of the Supreme Court in A. Nawab John Vs. B.M. Subramaniam (supra) is wholly distinguishable. That decision was based on the pre-existing law under the Code i.e. in the absence of any requirement for pre-institution mediation. Though, by way of a general principle of law, the suit proceeding may never be instituted unless the issue of court fees has been satisfactorily dealt with, yet, in the context of section 12A of the Act, that principle would stand excluded and it would never apply to a pre-institution mediation. The two concepts stand in mutual exclusion to each other. There is no conflict between the same, either.
30. Resultantly, though the application filed by the appellant seeking pre-institution mediation was wholly maintainable, by virtue of Rule 3 of the Rules, the appellant is required to pay pre-institution mediation fee. The appellant here is willing to deposit that fee, but the learned court below has erred and not allowed him to deposit the same.
31. Besides the reasons noted above, unless such course is adopted, the whole purpose of seeking pre-institution mediation in the commercial dispute would stand risk of failure as besides depositing the mediation fee at the stage provided under the Rules, the appellant would be further burdened to deposit the entire court fee. Yet, despite depositing the entire court fee and the mediation fee, the plaintiff would still have to await failure of the mediation before his suit proceeding would commence. This course, if adopted, would be self-contradicted and unreasonable besides being clearly not permitted by law and more time consuming.
32. Consequently, the order dated 4.1.2021 passed by the Presiding Officer, Commercial Court, Jhansi, is set aside and the matter remitted to that Court to pass an appropriate order, as expeditiously as possible. In doing so, it may remain open to the learned court below to also examine if there exists a 'commercial dispute' of a 'specified value' over which it has territorial and pecuniary jurisdiction. Then, it would be for the learned court below to pass appropriate order or issue appropriate direction requiring the appellant to deposit the pre-institution mediation fee, in accordance with law.
33. Once the pre-institution mediation fee would have been deposited by the appellant in terms of the direction issued by the learned court below, the pre-institution mediation would be carried out, strictly in terms of the Rules and the suit, if any, may be instituted, in accordance with law, if and when required, thereafter. It is only at that stage that the second proviso to sub-section (3) of Section 3 of the Act would come into play. Also, it is at that stage that the court fees on the valuation of the plaint may be charged and paid, in accordance with law. However, that stage has yet not arrived and the observations made in this order are only for the purposes of offering clarity as a natural consequence of the reasoning given above.
34. The question of law (as framed above) is answered in the negative i.e. in favour of the appellant.
35. Accordingly, the present appeal is allowed.
Order Date :- 22.3.2021 Prakhar