Andhra HC (Pre-Telangana)
N. Eshwara Prasad And Ors. vs Margadarshi Chit Fund Limited And Anr. on 6 November, 2003
Equivalent citations: 2004(3)ALD128, 2004(3)ALT159, III(2004)BC227, 2004 A I H C 2134, (2004) 2 CIVILCOURTC 483, (2004) 3 BANKCAS 227, (2004) 3 ANDHLD 128, (2004) 4 RECCIVR 158, (2004) 3 ANDH LT 159, (2004) 2 BANKJ 815
ORDER T. Ch. Surya Rao, J.
1. This revision petition is directed against the order dated 28-7-2003 passed by the learned Principal Senior Civil Judge, Warangal in I.A. No. 90 of 2003 in LA. No. 868 of 2002 in O.S. No. 120 of 1999.
2. The unsuccessful Defendants 2 to 5 are the revision petitioners. The first respondent herein is the plaintiff and the second respondent herein is the first defendant in the suit. The first respondent-plaintiff filed the suit for recovery of amount from the Defendants 2 to 5, the first defendant being the principal debtor and Defendants 2 to 5 are the guarantors.
3. During the pendency of the suit, the Defendants 2 to 5 filed LA. No. 868 of 2002 seeking leave of the Court to permit them to file a counter-claim in the suit. While that application has been pending, the plaintiff in the suit filed LA. No. 90 of 2003 requesting the Court to exclude the counter-claim sought to be filed by defendants by dismissing LA. No. 868 of 2002. Both LA, No. 90 of 2003 and LA. No. 868 of 2002 were considered and a common order was passed by the Court below on 28-7-2003.
4. The facts lie in a narrow compass:
5. The Margadarsi Chit Fund Limited, the plaintiff herein filed the suit for recovery of Rs. 1,35,823/- basing on the chit agreement and Guarantee Bonds etc.
6. The trial in the case was taken up and PW. 1 was examined on the side of the plaintiff. The plaintiff's side evidence was closed after such examination. When the suit had been coming up for defendants' evidence, Defendants 2 to 5 filed LA. No. 868 of 2002 seeking leave of the Court to permit them to file a counter-claim. It appears, the suit was coming up for filing the written statement by the defendants. The plaintiff thereupon filed LA. No. 90 of 2003 mentioning inter alia that the Defendants 2 to 5 had no right to file a counter-claim after filing their written statement and that they had no right to amend the written statement even after the commencement of the trial and that the counter-claim was barred by limitation and therefore, the counter-claim shall have to be excluded by dismissing LA. No. 868 of 2002.
7. The second defendant filed a counter in LA. No. 90 of 2003 resisting that petition. The case of the Defendants 2 to 5 was that the plaintiff Chit Fund Company allowed the first defendant to join in the chit, despite his poor paying capacity. The Defendants 2 to 5, therefore, requested the plaintiff company not to allow the first defendant to participate in the auctions as he was already a member in three other chits worth Rs. 5,00,000/-, Rs. 5,00,000/-and Rs. 2,50,000/- respectively. Despite their request, the plaintiff company allowed the first defendant to participate in the chit auctions and to receive the prize amount on 13-11-1996. When the plaintiff issued notice to the defendants on the default committed by the first defendant, Defendants 2 to 5 gave a reply requesting the plaintiff to proceed against the first defendant insofar as his share in the Rice Mill and Oil Mill was concerned and when the first defendant absconded to an unknown place, Defendants 2 to 5 got issued another notice to the plaintiff requesting it to initiate appropriate proceedings against the first defendant by getting the properties of the first defendant attached. Therefore, the defendants claim that the plaintiff deliberately failed to take action against the first defendant who filed an insolvency petition later without including the debt of the plaintiff and for non-action on the part of the plaintiff the plaintiff was liable to pay damages to the defendants to the tune of Rs. 2,00,000/-. Thus the defendants wanted to make a claim for damages for an amount of Rs. 2,00,000/-against the plaintiff. Under the impugned order as aforesaid, the Court below dismissed LA. No. 868 of 2002.
8. Certain dates which are material shall have to be mentioned at the threshold for effective adjudication of the matter. The suit in this case was filed on 30-4-1999 for recovery of the chit amount. On 6-12-1999 the first defendant filed his written statement. On 4-2-2000 Defendants 2 to 4 filed their written statement and on 27-1-2000, the fifth defendant filed his written statement. Thereafter issues were framed in the suit and when the suit had been coming up for evidence, in the month of July, 2002 one witness was examined on the side of the plaintiff. On closure of the evidence on the side of the plaintiff, the suit had been coming for the evidence on the side of the defendants and on 6-8-2002 Defendants 2 to 5 filed a petition whereunder they sought to file the counter-claim and the said petition was numbered as LA. No. 868 of 2002 for the purpose of convenience and identity. It is obvious therefore, that Defendants 2 to 5 sought to file their counter-claim long after the filing of the written statement by them resisting the suit claim of the plaintiff and after the evidence on the side of the plaintiff had already been closed. The request of the Defendants 2 to 5 was sought to be resisted by the plaintiff on the ground that, that was not the stage at which the defendants would be permitted to file the counter and that the counterclaim at any rate would not be permitted as it was barred by limitation. It is therefore, appropriate at this stage to examine the nature of the claim sought to be made by the defendants by means of a counter-claim. The main basis for filing the counter claim was the inaction on the part of the plaintiff and the consequence thereof would invariably be the discharge of the guarantors in accordance with the provisions contained in Section 134 of the Indian Contract Act. Further, inasmuch as the plaintiff was sought to collude with the first defendant and did not respond to the request of Defendants 2 to 5 and dragged the sureties to the Court knowing pretty well that the sureties stood discharged for the omission on the part of the plaintiff-creditor, the plaintiff was liable to be sued for damages of Rs. 2,00,000/- by means of a counter-claim. As can be seen from the counter-claim, the cause of action arose on 20-11-1996 when they came to know that the first defendant was also a member in the other chits of the plaintiff company and when the Defendants 2 to 5 requested the plaintiff company not to allow the first defendant to participate in the auctions to be conducted in the other chits and that on 23-11-1997, 12-24998 and 18-2-1998 when the plaintiff company allowed the first defendant to participate in the auctions despite the protest of the Defendants 2 to 5 and on 25-11-1998 when the plaintiff got issued a legal notice to Defendants 1 to 5 claiming the chit amount and on 1-12-1998 when the second defendant gave a reply requesting the plaintiff to proceed against the first defendant alone and on 7-4-1999 when the second defendant got issued the additional reply notice by requesting the plaintiff to initiate appropriate proceedings against the first defendant by attaching his properties and on 5-8-1999 when the first defendant filed insolvency petition without impleading the plaintiff company on account of the secret agreement arrived in between them. The cause of action is a bundle of facts, which gives right to the plaintiff to lay a claim against the defendants. All these facts were available to the Defendants 2 to 5 when they filed the written statement resisting the claim of the plaintiff. The suit in this case was filed on 30-4-1999. In all probability, the Defendants 2 to 5 could have filed the counter-claim along with the written statement filed by them in the suit, but they did not chose to file the same and ultimately they filed I.A. No. 868 of 2002 on 6-8-2002. Among various dates of the cause of action, the last date is 5-8-1999 when the first defendant is said to have filed insolvency petition. It is therefore, the contention of the plaintiff that the claim sought to be made by Defendants 2 to 5 against the plaintiff for damages is barred by limitation, In this scenario, it has to be seen as to whether the Defendants 2 to 5 could lay a counter-claim in the circumstances. The provision germane in the context for consideration is Order 8 Rule 6-A C.P.C. which reads thus:
6-A.(1) A defendant in a suit may, in addition to his right of pleading a set-off under Rule 6, set up, by way of counterclaim against the claim of the plaintiff, any right or claim in respect of a cause of action accruing to the defendant against the plaintiff either before or after the filing of the suit but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of a claim for damages or not:
Provided that such counter-claim shall not exceed the pecuniary limits of the jurisdiction of the Court.
(2) Such counter-claim shall have the same effect as a cross-suit so as to enable the Court to pronounce a final judgment in the same suit, both on the original claim and on the counter-claim;
(3) The plaintiff shall be at liberty to file a written statement in answer to the counterclaim of the defendant within such period as may be fixed by the Court;
(4) The counter-claim shall be treated as a plaint and governed by rules applicable to plaints.
9. Rule 6-B mandates that the ground set forth in support of the counterclaim shall have to be specifically stated in the written statement. Rule 6-C enables the plaintiff to approach the Court at any time before the issues are settled in relation to the counter-claim to exclude such a counter-claim on the ground that the counter-claim ought to be disposed of by way of an independent suit. Rule 6-D mandates that the counter-claim shall be proceeded with notwithstanding the fact that the suit of the plaintiff is discontinued or withdrawn. This is because of the fact the counter-claim shall be in the nature of a suit by the defendant against the plaintiff and the rules relating to written statement would apply to the plaintiff also in such counter-claim and the consequences of default by the plaintiff will follow and enable the Court to make an order in relation to the counter-claim as is available in the case of a plaint, as is obvious from Rules 6-E, 6-F and 6-G.
10. Thus, from a perusal of Rules 6-A to 6-G, it is evident that the defendant can also make a claim against the plaintiff which should be in the nature of a counterclaim while resisting the suit, The counterclaim can be filed even when the cause of action accrued to the defendant is either before or after filing of the suit. The counterclaim may be in the nature of damages. However, the defendant shall make such a claim before he delivers his defence or before the time given for delivering his defence is expired. Invariably, the counterclaim shall be within the pecuniary jurisdiction of the Court before which the suit has been filed. Such a counter-claim will be in the nature of a plaint. The provisions which are applicable to the defendant for filing the written statement would equally apply to the plaintiff in filing his written statement to the counterclaim and the provisions of Order 9 of the Code pertaining to the default and consequences thereof would equally apply to the default of the plaintiff in the counter-claim. Ultimately, the suit as well as counter-claim will be disposed of by the Court adjudicating the rights of the plaintiff and the defendant and the decree shall follow in consequence thereof. That decree may be either in favour of the plaintiff while dismissing the counterclaim of the defendant; or may be in favour of the defendant by allowing the counterclaim and dismissing the suit; or may be partly in favour of the plaintiff and partly in favour of the defendant.
11. Turning to the law on the point, the learned Counsel for the plaintiff seeks to place reliance upon the judgment of the Apex Court in Mahender Kumar v. State of M.P., . The Apex Court in Para 15 held thus:
"Rule 6A(1) does not, on the face of it, bar the filing of a counter-claim by the defendant after he had filed the written statement. What is laid down under Rule 6A(1) is that a counter-claim can be filed, provided the cause of action had accrued to the defendant before the defendant had delivered his defence, or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of acclaim for damages or not".
12. In the circumstances of the case, ultimately inasmuch as the claim sought to be made by the defendants was within the period of limitation, the Apex Court held that the counter-claim could be made,
13. The learned Counsel for the plaintiff sought to place reliance upon the judgment of this Court in Madanapalle Municipality v. Syed Ahamad, 2003 (1) ALD 729, wherein this Court reiterated the principle laid down by the Apex Court in the judgment referred supra by holding that the counter-claim could be made even after the filing of the written statement, provided the cause of action arose prior to the filing of the written statement or prior to the date fixed for filing of the writ petition, subject however, to the condition that it should be filed within the limitation prescribed. Very recently in Ramesh Chand Ardawaitya v. Anil Panjwani, , reviewing the provisions of Order 8, the Apex Court in Para-26 of its judgment held thus:
"These words go to show that a pleading by way of counter-claim runs with the right of filing a written statement and that such right to set up a counter-claim is in addition to the right of pleading a set-off conferred by Rule 6-A set-off claim has to be pleaded in the written statement. The counter-claim must necessarily and find its place in the written statement. Once the right of the defendant to file written statement has been lost or the time limited for delivery of the defence has expired then neither can the written statement be filed as of a right nor a counter-claim can be allowed to be raised, for the counter-claim under Rule 6-A must find its place in the written statement.
14. After having considered the provisions of Order 8 and Rules 6-A, 6-B, and 6-C and Rules 6,8 and 9 and Order 6 Rule 17, the Apex Court laid down the law stating the various modes to file the counterclaim and when to be filed. In Para-28 of the judgment, the Apex Court laid down the law thus:
"Looking to the scheme of Order 8 as mentioned by Act 104 of 1976, we are of the opinion, that there are three modes of pleading or setting up a counter-claim in a civil suit. Firstly, the written statement filed under Rule 1 may itself contain a counter claim which in the light of Rule 1 read with Rule 6-A would be a counter-claim against the claim of the plaintiff preferred in exercise of legal right conferred by Rule 6-A. Secondly, a counter-claim may be preferred by way of amendment incorporated subject to the leave of the Court in a written statement already filed. Thirdly, a counterclaim may be filed by way of a subsequent pleading under Rule 9. In the latter two cases the counter-claim though referable to Rule 6-A cannot be brought on record as of right but shall be governed by the discretion vesting in the Court, either under Order 6 Rule 17 CPC if sought to be introduced by way of amendment, or, subject to exercise of discretion conferred on the Court under Order 8 Rule 9 CPC if sought to be placed on record by way of subsequent pleading. The purpose of the provision enabling filing of a counter-claim is to avoid multiplicity of judicial proceedings and save upon the Court's time as also to exclude the inconvenience to the parties by enabling claims and counter-claims, that is, all disputes between the same parties being decided in the course of the same proceedings. If the consequences of permitting a counterclaim either by way of amendment or by way of subsequent pleading would be prolonging of the trial, complicating the otherwise smooth flow of proceedings or causing a delay in the progress of the suit by forcing a retreat on the steps already taken by the Court, the Court would be justified in exercising its discretion not in favour of permitting a belated counter-claim. The framers of the law never intended the pleading by way of counter-claim being utilized as an instrument for forcing upon a reopening of the trial or pushing back the progress of proceeding. Generally speaking, a counter-claim not contained in the original written statement may be refused to be taken on record if the issues have already been framed and the case set down for trial, and more so when the trial has already commenced".
15. In the process the Apex Court sought to distinguish its earlier two judgments in Mahendera Kumar's case (supra) and another a judgment in Shanti Rani Das Dewanjee v. Dinesh Chandra Day, .
16. In view of the latest judgment of the Apex Court, it is obvious that the counter-claim shall have to be filed by the defendants inter alia in the written statement filed by him resisting the suit. The counter-claim can also be filed after that stage by means of an amendment subject of course with the leave of the Court. A counter-claim can also be filed at a third stage by means of subsequent pleading under Rule 9. In the later two cases, the counter claim though is, referable to the claim under Rule 6-A cannot be permitted to be brought on record as of a right, but shall be governed by the discretion vested in the Court either under Order 6 Rule 17 CPC or under Order 8 Rule 9 C.P.C. This is because the plaintiff gets a vested right in the event of the defendants not filing the counter-claim at the stage when it could be filed in accordance with Rule 6-A of Order 8 of the Code. Therefore, in the subsequent two stages, the defendants cannot file a counter claim as a matter of right. The considerations which are germane for the amendment of the pleadings or for permitting the parties to file subsequent pleadings are equally germane for the Court when the defendants sought to file the counter-claim at the later two stages. The Court shall also where the issues in the suit have already been framed, and the case is set down for trial, or trial has already been commenced; take into consideration the belated stage; at which the defendants sought to file the counter-claim, inasmuch as the defendant has always a right to lay a suit even though he is not permitted to file the counter-claim.
17. Turning to the facts in the instant case, the Defendants 2 to 5 filed their written statement resisting the suit; issues were framed by the Court; the trial in fact had begun; the plaintiff lead evidence and after closure of the evidence of the plaintiff, the suit had been coming up for the evidence of the defendants. Notwithstanding the fact that the claim by then was within the period of limitation, but the stage at which they sought to file is belated and therefore, the defendants cannot be permitted to file the counter-claim at this stage. In that view of the matter, although the reasons assigned by the Court below are different, but it is fairly and eminently a case where the Defendants 2 to 5 cannot be permitted to lay the counterclaim at that belated stage. For the foregoing reasons, the revision must fail.
18. In the result, the civil revision petition fails, and is accordingly, dismissed.
But in the circumstances of the case, no order as to costs.