India: Outer-Limit For Filing Of Counter-Claim In A Civil Suit: An Analysis Of Order VIII Rule 6A Of CPC

INTRODUCTION

Order VIII Rule 6A of the Code of Civil Procedure ("CPC") provides that a defendant in a civil suit may set up a counter-claim involving any claim in respect of a cause of action accruing to the defendant against the Plaintiff. As per Order VIII Rule 6A of CPC, the counter-claim must be set up either before or after the filing of the suit but before Defendant has delivered its defence. Interestingly, Order VIII Rule 6A of CPC does not provide a time limit for filing of counter-claim in a civil suit. This raises the question of whether Order VIII Rule 6A of CPC imposes any restrictions on the filing of counter-claim and whether the filing of counter-claim post occurrence of certain events in a civil suit may be barred by the Civil Court. The Hon'ble Supreme Court of India in Ashok Kumar Kalra v. Surendra Agnihotri¹ had addressed the question of the time limit for filing of counter-claim in a civil suit.

The Hon'ble Supreme Court in the majority judgment of N.V. Ramana and Ajay Rastogi JJ had ruled that the civil court may permit the filing of a counter-claim after filing of the written statement until the framing of the issues in the civil suit. In a concurring opinion, Shantanagoudar J. ruled that filing of counter-claim may be permitted till the stage of commencement of recording of the evidence on behalf of the plaintiff in exceptional circumstances. The majority as well as concurring opinion agreed that the civil court may exercise its discretion and permit the filing of a counterclaim after the written statement, till the stage of framing of issues of the trial. However, the concurring opinion of Shantanagoudar J held that the civil court in its discretion may allow the filing of counter-claim until the recording of evidence in a civil suit in exceptional circumstances. The choice of outer-limit and suitability thereof in promoting prompt resolution and rendering finality to disputes needs to be studied in detail. 

FRAMING OF ISSUES AS OUTER-LIMIT: DELIVERY OF DEFENCE UNDER ORDER VIII RULE 6A OF CPC

Order XIV Rule 1 of the CPC provides that at the first hearing of the suit, the Court shall after reading the plaint and the written statements ascertain upon what material propositions of fact or law the parties are at variance and shall thereupon proceed to frame and record the issues on which the right decision of the case appears to depend in a civil suit. The framing of issues by the Civil Court is also taken to denote the first instance in a civil suit when the Court had applied its mind on the facts and circumstances of the case.² The framing of issues also sets in motion the performance of the first act or steps necessary or essential to proceed with the trial.³ In Ashok Kumar, the Hon'ble Supreme Court reasoned that allowing a counter-claim to be filed after framing of issues would effectively result in a re-trial of the suit as the Civil Court would have to frame new issues, both parties would have to lead evidence leading not only to prolonging of trial but also prejudice to the rights that might get vested with the Plaintiff over the course of time. Nonetheless, the embargo on the filing of counter-claim after framing of issues is not easily reconciled with the requirement of delivery of defence by the defendant as provided for in Order VIII Rule 6A of CPC. Hon'ble Madras High Court inA Nandagopala Krishnan v. Antony⁴ interpreted "Defendant has delivered his defence" as continuing to run until evidence is finally closed by either side.⁵

Previously, the Hon'ble High Court of Calcutta⁶ and Madras⁷ have held that counterclaim cannot be permitted after issues are settled and evidence is adduced. The interpretation of the framing of charges as outer limit forecloses the filing of counter-claim even before "Defendant has delivered his defence" as required under Order VIII Rule 6A of CPC.

RECORDING OF EVIDENCE: COMMENCEMENT AND CONTINUATION

In his concurring opinion, Shantanagoudar J ruled that the Court may entertain a counter-claim even after the framing of issues, so long as the Court had not started recording the evidence. Shantanagoudar J ruled that in exceptional circumstances, a counter-claim may be permitted to be filed after a written statement till the stage of commencement of recording of the evidence on behalf of Plaintiff. Pertinently, the concurring opinion has emphasized commencement as opposed to completion or even continuation of recording of the evidence as to the outer limit for filing of counter-claim. Shantanagoudar J held that as long as the counterclaim is filed before the recording of evidence, the civil court can frame the new issue and record evidence thereupon without seriously prejudicing the rights of either party to the suit.

Insofar as the recording of evidence is concerned, Rule 4(1) to Order XVIII of the CPC provides that examinationin-chief of a witness shall be on affidavit and copies thereof shall be supplied to the opposite party by the party who calls him for evidence. In Ajit Narsinha Talekar, Hon'ble Bombay High Court held that the actual hearing is said to commence only when a party files an affidavit of himself or his first witness in lieu of examination-in-chief.⁸ Accordingly, all proceedings prior to the filing of the affidavit of the first witness in lieu of examination-in-chief are to be treated proceedings preliminary to trial.⁹ Interestingly, the ruling in Ashok Kumar also referred to Vijay Prakash Jarath v. Tej Parakh Jarath¹⁰ wherein the Hon'ble Supreme Court had permitted the filing of counter claim after 2.5 years from the framing of issues as the Respondent's evidence was still being recorded by the trial court when the counter-claim was filed by the Defendant and Hon'ble Court was satisfied that no "serious injustice" or "irreparable loss" would be caused to the Plaintiff. Pertinently, neither the majority opinion nor the concurring opinion overruled the judgment of Vijay Prakash Jarath v. Tej Parakh Jarath¹¹. Resultantly, there is some uncertainty as to whether the civil court in the exercise of its discretion may allow the filing of counter-claim when recording of evidence has commenced but had not been completed.

EXERCISE OF DISCRETION: INGREDIENTS OF INJUSTICE, LOSS, AND PREJUDICE

Against this backdrop, the most pertinent question in allowing/disallowing leave to file counter-claim is whether the grant of leave causes any injustice or irreparable loss to the parties in the civil suit. Hon'ble High Court in Ashok Kumar has rightly emphasized that mere presence of discretion does not vest a right in favor of the litigant nor can the civil court be compelled to exercise its discretion. Nonetheless, the exercise of discretion must be guided in order to promote substantive justice and finality between the parties. In Ashok Kumar, both opinions i.e. majority opinion and concurring opinion had prescribed a set of guidelines and considerations for the exercise of discretion by the civil in allowing/disallowing filing of counter-claim. The majority judgment also provided an illustrative inclusive factor¹² for the exercise of discretion by Courts to entertain the filing of counterclaim. Shantanagoudar J listed three considerations that must be borne in mind while allowing the filing of a belated counter-claim: first, the Court must consider that no injustice or irreparable loss was being caused to the Defendant due to a refusal to entertain the counter-claim, or to the Plaintiff by allowing the same. Second, the interest of justice must be given utmost importance and procedure should not outweigh substantive justice. Third, the specific objectives of reducing the multiplicity of litigation and ensuring speedy trials underlying the provisions for counterclaims must be accorded due consideration. 

CONCLUSION

The question of whether leave to file counter-claim may be allowed in a civil suit is ultimately a balancing exercise on part of the civil court. However, the lack of clarity on the outer limit for filing of counter-claim and the exercise of discretion therein would only increase the uncertainty regarding whether counter-claim may be allowed in a civil suit. The Hon'ble Supreme Court's ruling in Ashok Kumar strikes a positive note insofar as it accommodates counter-claim beyond the filing of written statement by the Defendant based on the exercise of discretion by the civil court. Under such circumstances, Parties would be well-advised to firmly establish the foundation of their counter-claim in their pleadings and justification for the delay in filing thereof to secure the leave-in filing counter-claim after filing of the written statement.

Footnotes

1. Ashok Kumar Kalra v. Surendra Agnihotri, MANU/SC/1590/2019. (Hereinafter, "Ashok Kumar")

2. Sham Lal v. A.N. Jain Sabha, AIR 1987 SC 187.

3. Union of India and Ors v. Major General Madan Lal Yadav (Retd.), MANU/SC/0355/1996.

4. A Nandaopala Krishnan v. Antony, CRP (PD) (MD) No. 1011 of 2012.

5. A Nandagopala Krishnan v. Antony, 2012 (4) CTC 807

6. M/s Oriental Ceramic Products Pvt. Ltd v. Calcutta Municipal Corporation, MANU/WB/0217/1999.

7. Southern Ancillaries Pvt Ltd. V. Southern Alloy Foundaries, MANU/ TN/0486/2003.

8. Ajit Narsinha Talekar Vs. Smt. Nirmala Wamanrao Kakade and others" 2010 (5) Mah. L.J. 481

9. Kailash v. Nankhu, MANU/SC/0264/2005.

10. Vijay Prakash Jarath v. Tej Prakash Jarath, (2016) 11 SCC 800.

11. Ibid.

12. The inclusive factors provided by the Supreme Court are as follows: (i) Period of delay, (ii) Prescribed limitation period for the cause of action pleaded, (iii) Reason for the delay, (iv) Defendant's assertion of his right, (v) Similarity of the cause of action between the main suit and the counter-claim, (vi) Cost of fresh litigation, (vii) Injustice and abuse of process, (viii) Prejudice to the opposite party, (ix) facts and circumstances of each case, (x) in any case, not after framing of issues.

Originally published February 2022

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