The Hon’ble Supreme Court, on 19th November 2019, in the matter of Ashok Kumar Kalra v. Wing Cdr. Surendra Agnihotri & Ors. pronounced that court can permit filing of counter claim even after filing of written statement but not after issues have been framed. However, in exceptional circumstances, to prevent multiplicity of proceedings and a situation of effective retrial, the Court may entertain a counterclaim even after the framing of issues, so long as the Court has not started recording the evidence.
Questions before the Court?
Whether Order VIII Rule 6A of the CPC mandates an embargo on filing the counterclaim after filing the written statement? If not, then what are the restrictions on filing the counter claim after filing of the Written Statement?
There is no gainsaying that the procedural justice is imbibed to provide further impetus to the substantive justice. It is this extended procedural fairness provided by the national courts, which adds to the legitimacy and commends support of general public. (Para 7)
The defendant shall, within thirty days from the date of service of summons on him, present a written statement of his defence. In case he fails to file the written statement within the said period of thirty days, he shall be allowed to file the same on such other day, as may be specified by the Court, for reasons to be recorded in writing, but which shall not be later than ninety days from the date of service of summons. (Para 8)
(Para 11) The conditions for filing a counterclaim under Order VIII Rule 6A of CPC are:
- Counterclaim can be for claim of damages or otherwise.
- Counterclaim should relate to the cause of action, which may accrue before or even after filing the suit.
- If the cause of action in the counterclaim relates to one accrued after filing of suit, it should be one accruing before filing of the written statement or the time given for the same.
Any provision under the procedural law should not be construed in such a way that it would leave the Court helpless. Procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice.(Para 13)
The right to file a counterclaim in a suit is explicitly limited by the embargo provided for the accrual of the cause of action under Order VIII Rule 6A. Having said so, this does not mean that counterclaim can be filed at any time after filing of the written statement. (Para 16)
As counterclaim is treated to be plaint, generally it needs to first of all be compliant with the limitation provided under the Limitation Act, 1963 as the timebarred suits cannot be entertained under the guise of the counterclaim just because of the fact that the cause of action arose as per the parameters of Order VIII Rule 6A. (Para 16)
If the provision is interpreted in such a way, to allow delayed filling of the counterclaim, the provision itself becomes redundant and the purpose for which the amendment is made will be defeated and ultimately it leads to flagrant miscarriage of justice. At the same time, there cannot be a rigid and hypertechnical approach that the provision stipulates that the counterclaim has to be filed along with the written statement and beyond that, the Court has no power. The Courts, taking into consideration the reasons stated in support of the counter claim, should adopt a balanced approach keeping in mind the object behind the amendment and to subserve the ends of justice. (Para 17)
There cannot be any hard and fast rule to say that in a particular time the counterclaim has to be filed, by curtailing the discretion conferred on the Courts. The trial court has to exercise the discretion judiciously and come to a definite conclusion that by allowing the counterclaim, no prejudice is caused to the opposite party, process is not unduly delayed and the same is in the best interest of justice and as per the objects sought to be achieved through the amendment. (Para 17)
The defendant cannot be permitted to file counterclaim after the issues are framed and after the suit has proceeded substantially. (Para 17)
Even if a counterclaim is filed within the limitation period, the trial court has to exercise its discretion to balance between the right to speedy trial and right to file counterclaim, so that the substantive justice is not defeated. The discretion vested with the trial court to ascertain the maintainability of the counter claim is limited by various considerations based on facts and circumstances of each case. (Para 18)
Order VIII Rule 6A of the CPC does not put an embargo on filing the counterclaim after filing the written statement, rather the restriction is only with respect to the accrual of the cause of action. Having said so, this does not give absolute right to the defendant to file the counterclaim with substantive delay, even if the limitation period prescribed has not elapsed. The court has to take into consideration the outer limit for filing the counterclaim, which is pegged till the issues are framed. (Para 20)
(This inference has been drawn on the basis of Para 20) While exercising discretion in order to ascertain whether counterclaim can be filed after filing the written statement, the court has to take into consideration and evaluate inclusive factors provided below which are only illustrative, though not exhaustive:
- Period of delay.
- Prescribed limitation period for the cause of action pleaded.
- Reason for the delay.
- Defendant’s assertion of his right.
- Similarity of cause of action between the main suit and the counterclaim.
- Cost of fresh litigation.
- Injustice and abuse of process. Prejudice to the opposite party.
- and facts and circumstances of each case.
- In any case, not after framing of the issues.
In exceptional circumstances, the subsequent filing of a counterclaim may be permitted till the stage of commencement of recording of the evidence on behalf of the plaintiff. (Para 1 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
A counter claim can be filed if two conditions are met: first, its cause of action complies with Order VIII Rule 6A(1); and second, it is filed within the period specified under the Limitation Act. (Para 7 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
Subsequent pleading or additional written statement may include a counterclaim. This is because Rule 9 does not create a bar on the nature of claims that can be raised as subsequent pleadings. . (Para 8 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
It is also possible to introduce a belated counterclaim by way of an amendment to the original written statement under Order VI Rule 17, CPC. However, as is the case with Order VIII Rule 9, the filing of such a counterclaim through an amended written statement is subject to the leave of the Court, and not accorded to the defendant as a matter of right. (Para 8 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
A conjoint and harmonious reading of Rules 6A, 9 and 10 of Order VIII as well as Order VI Rule 17, CPC thus reveals that the Court is vested with the discretion to allow the filing of a counter claim even after the filing of the written statement, as long as the same is within the limitation prescribed under the Limitation Act, 1963. (Para 11 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
The provisions under Order VIII should not be read in isolation, but in a conjoint and harmonious manner, and Rule 6B cannot be read as a limitation on the Court’s discretion to permit the filing of a belated counterclaim. (Para 12 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
The nature of a setoff and a counterclaim is different. For instance, a setoff must necessarily be of the same nature as the claim of the plaintiff and arise out of the same transaction. These requirements do not hold for counterclaims, which may be related to “any right or claim in respect of a cause of action accruing to the defendant against the plaintiff” as stated in Order VIII Rule 6A(1). Further, in case of setoffs, there is no provision akin to Order VIII Rule 6A(4), which provides that a set off must be treated as a plaint. Thus, it appears that the Legislature has consciously considered it fit to omit a specific time limit for filing of counterclaims in Rule 6A. In such a scenario, a limitation cannot be read into this Rule. (Para 13 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
Order VIII Rule 1A, which requires the documents in support of a counter claim to be presented along with the written statement itself, this requirement should not be read as being mandatory. (Para 14 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
Procedural rules should not be interpreted so as to defeat justice, rather than furthering it. This is because procedural law is not meant to serve as a tyrant against justice, but to act as a lubricant in its administration. Thus, when Courts set out to do justice, they should not lose sight of the end goal amidst technicalities. (Para 17 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
Even though Rule 6A permits the filing of a counterclaim after the written statement, the Court has the discretion to refuse such filing if it is done at a highly belated stage. (Para 23 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
In exceptional circumstances, to prevent multiplicity of proceedings and a situation of effective retrial, the Court may entertain a counterclaim even after the framing of issues, so long as the Court has not started recording the evidence. (Para 23 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
There are several considerations that must be borne in mind while allowing the filing of a belated counterclaim. First, the Court must consider that no injustice or irreparable loss is being caused to the defendant due to a refusal to entertain the counterclaim, or to the plaintiff by allowing the same. Of course, as the defendant would have the option to pursue his cause of action in a separate suit, the question of prejudice to the defendant would ordinarily not arise. Second, the interest of justice must be given utmost importance and procedure should not outweigh substantive justice. Third, the specific objectives of reducing multiplicity of litigation and ensuring speedy trials underlying the provisions for counterclaims, must be accorded due consideration. (Para 24 of the judgement by Hon’ble Justice Mohan M. Shantanagoudar)
Copy of judgement: Judgement_19-Nov-2019
-Adv. Tushar Kaushik