2025 (6) TMI 1515 - HC - IBC

Defendant allowed to amend written statement to add counterclaim after filing within 120-day limit

Prabhat Marketing Co. Ltd. Versus Tirrihannah Co. Ltd.

The Calcutta HC allowed a defendant's application to amend their written statement to incorporate a counterclaim. The defendant filed the written ... Amendment in the written statement can be allowed after the period of 120 days from date of receipt of writ of summons or not - HELD THAT:- Writ of summons was served upon the defendant on 24th January, 2024 but the defendant has not filed written statement with the prescribed period of 30 days. The defendant had filed an application for extension of time to file written statement and this Court by an order dated 10th June, 2024, allowed the defendant to file written statement and on 12th June, 2024, the defendant filed the written statement. The defendant has not filed written statement within the prescribed period of 30 days but on an application filed by the defendant, this Court allowed the defendant to file written statement. This Court has granted leave to file written statement within the outer period of 120 days and the same is filed within the said period, thus this Court is of the opinion that the plaintiff cannot take benefit of proviso of Order VIII, Rule 10 of the CPC. Similarly, the plaintiff also cannot take the benefit of the proviso of Order V, Rule 1 of the CPC as the defendant has filed written statement within the outer period of 120 days with the leave of this Court. Admittedly, the defendant has not filed counter claim along with written statement. The defendant has filed written statement in the month of June, 2024 with the leave of this Court. This application for amendment incorporating counterclaim is filed on 11th December, 2024. The suit is at the stage of discovery and inspection of documents. Till date no issues is framed. Order VIII, Rule 6A is not amended under the Commercial Courts Act, 2015. Order VIII, Rule 1 and Order VIII, Rule 10 of the Code of Civil Procedure, 1908, are amended under the Commercial Courts Act, 2015. Order VI, Rule 17 of the Code of Civil Procedure, 1908, is also not amended under the Commercial Courts Act, 2015. As per proviso clause of Order VI, Rule 17 of the Code of Civil Procedure, 1908, no application for amendment shall be allowed after the trial has commenced, unless the Court comes to the conclusion that in spite of due diligence, the party could not have raised the matter before commencement of trial. Under Order VIII, Rule 6-A of the Code of Civil Procedure, 1908, time for filing of counter claim is not explicitly provided by the legislature. Only limitation as to the accrual of cause of action is provided. In the case in hand, since inception, the defendant is making counter claim against the plaintiff. In the written statement also the defendant has made out the case of counter claim relying upon the report of the Charted Accountant but the plaintiff has not incorporated the prayer for counter claim. In the proposed amendment, the defendant has not made out any new case. The only document which the defendant intent to disclose with the counter claim is the non-starter report issued by the Mediation Centre dated 28th November, 2024 and the said document is after the filing of written statement. Conclusion - The defendant has already pleaded with regard to his claim in terms of the Charted Accountant’s report in the written statement but has not specifically prayed for relief by way of counter claim. This Court finds that the amended sought for by the defendant will not change the nature and character of the suit and has not pleaded any new facts which will be prejudice to the plaintiff. The department is directed to carry out the proposed amendments within a period of two weeks from date. After amendment is carried out by the department, the defendant is directed to re-verify and re-affirm the written statement and to pay the requisite Court Fee within two weeks thereafter - Application disposed off. The core legal questions considered by the Court in this matter are:1. Whether the defendant can be permitted to amend its written statement to incorporate a counter claim after the prescribed time limits under the Code of Civil Procedure, 1908 (CPC), particularly beyond 120 days from the date of receipt of the summons.2. Whether the counter claim sought to be introduced by the defendant is barred by limitation, considering the date when the cause of action arose and when the defendant became aware of the loss.3. The applicability and interpretation of Order VIII, Rules 1, 6A, and 10 and Order V, Rule 1 of the CPC as amended by the Commercial Courts Act, 2015, in relation to filing counter claims and amendments to pleadings.4. The effect of the defendant's failure to file the counter claim along with the written statement and the subsequent filing of the application for amendment after filing the written statement.5. The impact of the pre-institution mediation process under Section 12A of the Commercial Courts Act, 2015, on the timing and admissibility of the counter claim.6. Whether the amendment sought changes the nature and character of the suit or introduces new facts prejudicial to the plaintiff.Issue-wise Detailed Analysis:1. Permissibility of Amendment to Incorporate Counter Claim After Prescribed Time:The relevant legal framework includes Order VIII, Rule 1, Rule 6A, and Rule 10 of the CPC, alongside Order V, Rule 1. Order VIII, Rule 1 prescribes that the defendant shall file a written statement within 30 days of service of summons, extendable up to 90 days for reasons recorded in writing, with the Commercial Courts Act, 2015 extending this outer limit to 120 days. Rule 6A permits a defendant to set up a counter claim 'before the defendant has delivered his defence or before the time limited for delivering his defence has expired.' Rule 10 provides that failure to file a written statement within the prescribed time may lead to a decree against the defendant.The plaintiff contended that the defendant's application for amendment to incorporate the counter claim filed after 120 days was barred under these provisions and relied on precedent establishing forfeiture of the right to amend after this period.The Court noted that although the defendant did not file the written statement within 30 days, it obtained leave of the Court to file it within the extended period of 120 days, which it complied with. The Court held that since the written statement was filed within the extended period with leave, the plaintiff could not invoke the provisos of Order VIII, Rule 10 or Order V, Rule 1 to claim forfeiture of the defendant's right. This rendered the plaintiff's reliance on the cited precedent inapplicable.Further, the Court observed that Order VIII, Rule 6A does not explicitly prescribe a time limit for filing counter claims but restricts counter claims to causes of action accruing before delivery of defence or expiry of time for defence. The Court referred to the Supreme Court's ruling in Ashok Kumar Kalra v. Wing CDR Surendra Agnihotri, which clarified that while Order VIII, Rule 6A does not bar filing counter claims after the written statement, courts have discretion to consider factors such as delay, limitation, prejudice, and stage of trial before allowing such amendments.Applying these principles, the Court noted that the suit was at the stage of discovery and inspection, with no issues framed and trial not commenced. Therefore, the amendment was not barred under Order VI, Rule 17 proviso, which restricts amendments after trial commencement unless due diligence is shown.2. Limitation and Cause of Action for Counter Claim:The defendant's claim arose from losses suffered due to the alleged supply of an ineffective chemical product ('Miteshot') by the plaintiff, resulting in damage to tea plantations in 2018 and 2019. The defendant became aware of the quantum of loss only after a Chartered Accountant's report dated 3rd February 2020, which quantified the loss at over Rs. 1.09 crore.The defendant contended that the delay in instituting the counter claim was due to the Covid-19 pandemic and that limitation was accordingly extended as per the Supreme Court's suo motu order granting relief from 15.03.2020 to 28.02.2022.The Court accepted that the cause of action for the counter claim accrued only upon receipt of the Chartered Accountant's report and that the defendant had consistently asserted the claim since 2019 through correspondence. It further noted that the defendant had exhausted pre-institution mediation under Section 12A of the Commercial Courts Act, 2015, and that the plaintiff failed to appear in mediation, leading to a non-starter report dated 28th November, 2024.The Court held that the plea on limitation was arguable and could be adjudicated upon after allowing the amendment, referring to the coordinate bench's decision that amendments should not be declined merely on the basis of disputed limitation pleas.3. Nature and Character of the Amendment:The defendant's written statement had already pleaded facts constituting the basis of the counter claim, including the supply of the ineffective chemical, the resulting losses, the return of the product, and the audit report quantifying damages. The proposed amendment sought only to incorporate a formal counter claim with quantified relief and to annex the mediation non-starter report.The Court found that the amendment did not introduce any new facts or change the nature and character of the suit and would not prejudice the plaintiff. The defendant had disclosed the claim in the written statement itself, and the amendment merely formalized the relief sought.4. Effect of Pre-Institution Mediation and Procedural Compliance:The defendant initiated mediation as mandated under the Commercial Courts Act, 2015, but the plaintiff's failure to participate resulted in a non-starter report. The Court considered this compliance with the procedural requirement as a factor favoring allowing the amendment.The defendant also undertook to pay requisite court fees and to serve the amended written statement and counter claim on the plaintiff, who would have the opportunity to file a written statement in response.5. Treatment of Competing Arguments:The plaintiff's primary argument was that the amendment was barred by limitation and procedural rules under the CPC, relying on the strict timelines for filing counter claims and written statements. The Court distinguished the present facts from the precedents cited by the plaintiff, emphasizing the defendant's compliance with Court-granted extensions and the absence of trial commencement.The Court also considered the defendant's explanation for delay due to the pandemic and the procedural adherence to mediation requirements. It balanced the interests of minimizing litigation and avoiding injustice against the plaintiff's claim of prejudice.Conclusions:The Court allowed the defendant's application to amend the written statement to incorporate the counter claim, directing the defendant to re-verify and re-affirm the amended pleadings, pay court fees, and serve the plaintiff. The plaintiff was granted liberty to file a written statement to the counter claim within 30 days.Significant Holdings:'The plaintiff cannot take benefit of proviso of Order VIII, Rule 10 of the CPC or proviso of Order V, Rule 1 of the CPC as the defendant has filed written statement within the outer period of 120 days with the leave of this Court.''Order VIII, Rule 6-A 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.''The Court has discretion to entertain filing of the counterclaim after considering factors such as period of delay, prescribed limitation, reason for delay, assertion of right, similarity of cause of action, cost of fresh litigation, injustice, abuse of process, prejudice to the opposite party, and facts and circumstances of each case.''Since the defendant had pleaded the facts constituting the counter claim in the written statement and the amendment does not change the nature and character of the suit or introduce new facts prejudicial to the plaintiff, the amendment is permissible.''The defendant having exhausted the pre-institution mediation prescribed under Section 12A of the Commercial Courts Act, 2015, and the plaintiff's failure to appear in mediation, the amendment is further justified.''The amendment sought is allowed with directions to the defendant to re-verify, pay requisite court fees, serve the plaintiff, and the plaintiff is at liberty to file written statement within 30 days.'