SCA/3269/2003 1/25 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 3269 of 2003 For Approval and Signature: HONOURABLE MS.JUSTICE H.N.DEVANI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= SWIL LIMITED - Petitioner(s) Versus ENVIRONMENTAL PLANNING GROUP LTD. - Respondent(s) ========================================================= Appearance : MISS AMRITA THAKORE FOR MR MIHIR H JOSHI for Petitioner MISS NITA PANCHAL FOR MR AR GUPTA for Respondent ========================================================= CORAM : HONOURABLE MS.JUSTICE H.N.DEVANI Date : 20/07/2006 ORAL JUDGMENT 1. By this petition under Article 227 of the Constitution of India, the petitioner challenges the judgment and order dated 28th February, 2003 SCA/3269/2003 2/25 JUDGMENT passed by the learned Judge of the City Civil Court, rejecting the Civil Miscellaneous Application No.771 of 2001 filed by the petitioner for setting aside the exparte judgement and decree dated 28th January, 2000 passed against it in Summary Suit No.4206 of 1999 filed by the respondent for recovery of an amount of Rs.3,33,368/- along with interest at the rate of 18% per annum from 1st August, 1999. 2. The respondent herein instituted Summary Suit No.4206 of 1999 against the petitioner Company on 23rd August, 1999 for recovery of an amount of Rs.3,33,368/- with costs and interest at the rate of 18% per annum from 1st August, 1999 till payment thereof. It is the case of the petitioner that no process fee was paid by the respondent for service of summons, but an application was made by respondent to serve the summons of the above suit on the petitioner by substituted service – RPAD which was allowed by the Court. It is further the case of the petitioner that, on 3rd January, 2000, summons was sent to the factory of the petitioner at Jhagadia which was at the relevant time not the registered office of the petitioner, which according to the petitioner was the only place where such service could have been effected. That, the said summons was purportedly accepted by one Shri K.B.S.Rawat, an employee of the petitioner. It is the case of the petitioner SCA/3269/2003 3/25 JUDGMENT that the said employee did not inform the petitioner about the receipt of the summons and neither did he ensure appearance in the proceedings, which resulted into an exparte decree being passed by the Ahmedabad City Civil Court, on 28th January, 2000, for an amount of Rs.2,95,670/- with interest at the rate of 12% per annum from 1st May, 1999 till payment thereof. 3. It is the case of the petitioner that there was substantial dispute between the parties on account of failure of the respondent to fulfill its contractual obligations. That, even if the claim of the respondent was accepted, there was an overpayment by the petitioner, as a result of which it had also demanded a refund of Rs.2,30,075/- from the respondent vide letter dated 2nd April, 1999, which had not been produced by the respondent 4. On 5th February, 2001, the respondent filed a Precept Application No.91 of 2001 in the aforesaid Summary Suit under Section 46 of the Code of Civil Procedure, 1908 (the Code) for a direction to the Civil Judge (S.D.), Bharuch to attach movable goods of the petitioner. However, by an order dated 1st March, 2001, the said application for issuance of precept came to be rejected without issuing notice, by the Ahmedabad City Civil Court on the ground that SCA/3269/2003 4/25 JUDGMENT the respondent did not show good-faith by taking prompt action on the decree. 5. On 29th March, 2001, the respondent filed Special Execution Petition No.15 of 2001 under order 21 Rule 11 of the Code against the petitioner, seeking execution of the exparte decree, claiming an amount of Rs.3,66,328=58. 6. It is the case of the petitioner that notice of the said Execution Petition was again served upon Shri K.B.S.Rawat, who appeared in the proceedings and purportedly admitted the liability to make payment to the respondent. On 19th September, 2001, the Executing Court issued a Jungam Warrant on the petitioner, which was served on the same day. It is the case of the petitioner that it was then, for the first time, that the petitioner came to know that a Summary Suit had been filed against it by the respondent, and that, a decree had been passed thereon and execution proceedings had also been initiated by the respondent That, the petitioner deposited the entire decreetal amount with the Executing Court and requested for time to take necessary action for setting aside the exparte decree. That, thereafter the petitioner issued a show cause notice to Shri Rawat for his aforesaid conduct and subsequently, the said Shri Rawat has resigned from the Company. SCA/3269/2003 5/25 JUDGMENT 7. On 3rd October, 2001, the petitioner, after making necessary inquiry in the trial Court and obtaining copies of the pleadings and documents, filed Civil Misc. Application No.771 of 2001 for setting aside the exparte decree dated 28th January, 2000 in Summary Suit no.4206 of 1999. By an order of the same date, in the Notice of Motion moved by the petitioner in the said application, the trial Court restrained the respondent from withdrawing the decreetal amount deposited in the Executing Court. 8. By the impugned order dated 28th February, 2003, the aforesaid application made by the petitioner was rejected, which has given rise to the present petition. 9. Heard Ms.Amrita Thakore, learned advocate for Mr.Mihir Joshi on behalf of the petitioner and Ms.Nita Pandit, learned advocate for Mr.A.R.Gupta on behalf of the respondent. 10.The learned advocate for the petitioner drew the attention of the Court to the facts narrated hereinabove and submitted that the trial Court had erred in not setting aside the exparte decree, despite the petitioner having a meritorious case. It was submitted that the learned Judge has erred in holding that since its employee was negligent in ensuring appearance pursuant to the summons of the SCA/3269/2003 6/25 JUDGMENT Summary Suit initiated by the respondent, received by him, the petitioner was vicariously liable for the same, and that, the exparte decree should not, therefore, be set aside as it would amount to the petitioner taking benefit of its own wrong and snatch away a right which had accrued in favour of the respondent on account of exparte decree. 11.It was submitted that the learned Judge has erred in concluding that the petitioner has concocted the case of its ex-employee being negligent on the sole ground that no action appeared to have been taken against that employee after the show cause notice, overlooking the fact that the said employee had resigned sometime thereafter. It was submitted that the petitioner had not been duly served with the summons of the subject Suit since the same had been sent by Registered Post to its factory at Jhagadia, which was not a registered office of the petitioner at the relevant time. It was submitted that the petitioner had a substantial defence and counter claim against the Suit filed by the respondent, and therefore, for doing substantial justice, it was necessary to set aside the decree and afford an opportunity to the petitioner to present its case, particularly when the decreetal amount had already been deposited by the petitioner in the Executing Court, at Bharuch and no prejudice SCA/3269/2003 7/25 JUDGMENT would be caused to the respondent 12.The learned advocate for the petitioner submitted that, despite the fact that the registered office of the company was located at Calcutta, the petitioner company was impleaded through its Copper Division, at Bharuch as a defendant in the said Suit. It was submitted that, moreover, there was a specific clause in the contract between the parties providing that in case of any dispute, the jurisdiction shall lie with the City Courts, at Calcutta, West Bengal being the place of registered office of the petitioner company. It was submitted that the respondent had failed to draw the notice of the Court to the aforesaid facts and hence, the judgement and decree being bad also on the ground of lack of territorial jurisdiction, ought to have been set aside by the trial Court. 13.The learned advocate for the petitioner submitted that the petitioner should not be penalised on account of the negligence of its employee. It was submitted that, on the facts of the case, the petitioner had made out a case for setting aside the decree under “special circumstances” as contemplated under Order 37 Rule 4 of the Code. It was submitted that, in the circumstances, coupled with the fact that the petitioner had a good case on merits, and that, “special circumstances” as contemplated SCA/3269/2003 8/25 JUDGMENT under Order 37 Rule 4 of the Code had been made out, the learned Judge had erred in rejecting the application of the petitioner. 14.In support of her contentions, the learned Advocate for the petitioner relied upon the following decisions: (i)The decision of the Apex Court in the case of M/s Ram Chand and Sons Sugar Mills Private Ltd., Barabanki (U.P.) v. Kanhayalal Bhargava and others, AIR 1966 SC 1899 was cited to submit that in the facts of the said case where default had been committed by a director of the appellant company who failed to appear in Court when he was so required under O.XXIX, R.3, the Apex Court had held that unless there is a finding of collusion between the appellant and the director in that, the former prevented the latter from appearing in the Court, it would be difficult to make the company constructively liable for the default of one of its directors; whereas in the present case, the petitioner was on even stronger footing, in that, here was a case of default on the part of an employee of the company in ensuring appearance in Court, hence, in the absence of any finding of collusion between the petitioner and the employee whereby the employee was prevented from ensuring attendance in Court, the company could not be held to be constructively liable for SCA/3269/2003 9/25 JUDGMENT default on the part of the said employee. (ii)Reliance was placed upon the decision of the Apex Court in the case of G.P.Srivastava v. R.K. Raizada and others, [2000] 3 SCC 54 wherein it has been held that the words “was prevented by any sufficient cause from appearing” must be liberally construed to enable the court to do complete justice between the parties particularly when no negligence or inaction is imputable to the erring party; to submit that the same principle is required to be adopted while construing the expression “special circumstances” under Order XXXVII Rule 4 of Code. (iii) The decision of the Apex Court in the case of V.K.Industries v. M.P. Electricity Board, Rampur, (2002) 3 SCC 159 was cited to point out that in the said case the direction to deposit part of the decretal amount as well as to furnish a bank guarantee for the remaining sum was held to be onerous, harsh and unreasonable, whereas in the case at hand the entire decretal amount has been deposited. It was urged that in the circumstances, when the entire decretal amount has been deposited with the executing Court, no prejudice would be caused to the respondent if the ex-parte decree is set aside and the case is heard on merits. SCA/3269/2003 10/25 JUDGMENT (iv) Reliance was also placed upon the decision of this Court in the case of Madhur Garments v. Hasmukh Shopping Centre and Others, 1999 (2) GLR 1580, wherein the Court in the facts of the said case wherein the decretal amounts had been recovered by the plaintiff – petitioner, coupled with the fact that on the last date of hearing the Counsel for the defendants – respondents could not remain present in the Court due to personal difficulty has been taken to be a special circumstance. It was submitted that in the present case when the petitioner has deposited the entire decretal amount coupled with the fact that the petitioner was prevented by sufficient cause from remaining present in response to the summons issued by the Court, the same can certainly be said to be a “special circumstance” within the meaning of Order 37 Rule 4 of the Code. 15.In conclusion, it was submitted that the petitioner has a good case on merits, and that, it was prevented from defending the suit for no fault on its part, hence, special circumstances as envisaged under Order 37 Rule 4 of the Code had been made out. In the circumstances, the impugned order as well as the exparte decree dated 28th January, 2000 is required to be quashed and set aside, and the petition deserves to be allowed. SCA/3269/2003 11/25 JUDGMENT 16.Ms.Nita Pandit, the learned advocate for the respondent submitted that the case of the petitioner that it was not aware of the institution of the suit till the Jungam Warrant was served upon the petitioner, is not true, as is evident from the record of the case. Attention was drawn to the show cause notice dated 22nd September, 2001 addressed by the petitioner company to Shri K.B.S.Rawat, Senior Manager – Administration, wherein it was stated that he was assigned the responsibilities to handle the Case No.4206 of 1999 on behalf of the management, and that, he had failed to inform the progress of the case on various dates of hearing and also not attended the case before the Court on due dates and as a result, the case had proceeded exparte and the Court had awarded decree amounting to Rs.3,66,329=58 against the management. That, he had not bothered to inform the management knowing that the party was coming to the site on 19th September, 2001 with execution warrant. It was submitted that, on perusal of the aforesaid show cause notice, it is evident that the management was aware of the institution of the suit, and that, in fact, the said case had been assigned by the management to Mr.K.B.S.Rawat, and that, therefore, the submissions to the effect that the petitioner was not aware of the said proceeding or that Shri Rawat was not authorized to handle the case, are not true. SCA/3269/2003 12/25 JUDGMENT 17.Attention was drawn to the explanation dated 24th September, 2001 tendered by Shri K.B.S.Rawat pursuant to the show cause notices dated 22nd September, 2001, wherein he had stated that summons in the Summary Suit No.4206 of 1999 was received by him and that the second copy had come by post which was handed over to him along with the relevant files of the respondent by Dr.U.B.Saxena. It was submitted that, in the circumstances, the case of the petitioner that summons had been accepted only by Shri K.B.S.Rawat is belied, as the second copy of which had come by post had been received by the management, and that, the case had been specifically handed over to Shri K.B.S.Rawat. That, accordingly, it is apparent that the Company was well aware of the Suit, but did not take any action to see as to what steps had been taken to defend the Suit. 18.It was submitted that the summons had been served twice. That, Shri K.B.S.Rawat was a Senior Officer of the petitioner company who had been assigned the duty of handling the aforesaid case. That, negligence by Shri K.B.S.Rawat in defending the Suit amounted to negligence by the company, and that, in the circumstances, special circumstances sought to be created before the Trial Court are not substantiated. SCA/3269/2003 13/25 JUDGMENT 19.It was further submitted that the petitioner has preferred an appeal against the exparte decree and was at the same time prosecuting the present proceedings challenging the order rejecting the petitioner's application under Order 37 Rule 4 of the Code for setting aside the exparte decree. It was submitted that it was not permissible for the petitioner to pursue two remedies at a time and hence, even on this count, the petition requires to be rejected. 20.It was submitted that the petitioner company is vicariously liable for the acts of its employee, viz. Shri K.B.S. Rawat as it is the settled position in law that the company is liable for any tort committed by its agent. It was submitted that the observations made by the trial Court in the impugned judgement are supported by evidence on record, and that the trial Court has not travelled beyond the evidence and material on record, no perversity is pointed out in the impugned judgement, hence, this Court may not exercise extraordinary jurisdiction under Article 227 of the Constitution. 21.Learned advocate for the respondent pointed out that the decision in the case of Madhur Garments v. Hasmukh Shopping Centre, 1999(2) GLR 1580 relied upon by the petitioner does not support the case of the petitioner, as in the said case, SCA/3269/2003 14/25 JUDGMENT the exparte decree had been passed as the counsel for the defendant had remained absent due to his personal difficulty. In the circumstances, the Court had come to the conclusion that special circumstances had been made out. That, in the present case, it was not on account of the negligence of the counsel, but on account of negligence of an agent of the company, which amounted to negligence on part of the company itself, hence, the said decision would not be applicable to the facts of the present case. 22.In rejoinder, the learned Advocate for the petitioner submitted that the Apex Court has, in the case of Bhanu Kumar Jain v. Archana Kumar, [2005]1 SCC 787 held that it is permissible to file an application under Order 9 Rule 13 of the Code and an appeal against the exparte decree under Section 96[2] of the Code simultaneously. In the circumstances, it was submitted that the contention raised on behalf of the respondent as regards the maintainability of the present application is required to be rejected. 23.The learned advocate drew the attention to the exparte order dated 28th January, 2000, which reads as under : “Deft. is duly served by R.P.A.D. However, none is appeared. On perusal of documents, evidence SCA/3269/2003 15/25 JUDGMENT (original) as well as from the pleading and on being satisfied, suit is decreed for the sum of Rs.2,95,670=00 with 12% interest from 1/5/1999 till recovery. Costs to follow the cause.” It was submitted that, upon perusal of the aforesaid order, it is evident that the petitioner had been served only by RPAD and that the summons had not been served twice, as is sought to be contended on behalf of the respondent. 24.From the facts emerging on the record of the case, it appears that the petitioner was served by Registered Post A.D., which was received by its employee, one Shri K.B.S.Rawat. The said Shri Rawat neither entered appearance on behalf of the Company, nor did he inform the company as regards the service of the summons in the said Suit. The contention of the respondent, by placing reliance upon the explanation tendered by Shri K.B.S.Rawat, that the petitioner had been served with the summons twice, is not borne out from the record of the Suit, as is evident from the exparte order dated 18th January, 2000. Strong reliance has been placed by the respondent upon a show cause notice issued by the petitioner to Shri K.B.S.Rawat wherein it is stated that he had been assigned the responsibility to handle the case, but had failed to inform the management about the SCA/3269/2003 16/25 JUDGMENT progress and had not attended the case, resulting in the case having proceeded exparte. The learned Judge has also relied upon the aforesaid show cause notice to come to the conclusion that that the petitioner was aware of the institution of the suit. However, the case of the petitioner throughout is that the petitioner was not aware of the very institution of the suit, and that, for the first time, the petitioner came to know of the institution of the suit and the passing of the exparte decree upon the Jungam Warrant being served upon the company by the bailiff of the Bharuch Court, wherein the execution proceedings have been filed by the respondent Moreover, it is the case of the petitioner that it has a good case on merits. In the circumstances, there would be no cause or reason for the petitioner not to defend the suit, had it been aware of the institution of the same. In the circumstances, there is no reason to throw away the explanation tendered by the petitioner, stating that it was not aware of the institution of the suit, and that, it had come to know about the same only upon Jungam Warrant being served upon the petitioner company. Though the decision of the Apex Court in the case of Ram Chand and Sugar Super Mills Pvt. Ltd. (supra) was rendered in a different set of facts, on analogous principles it can be stated that in absence of any finding that the petitioner had not entered appearance SCA/3269/2003 17/25 JUDGMENT in response to the summons issued by the Trial Court on account of collusion between the petitioner and Shri K.B.S. Rawat, the petitioner company cannot be held to be constructively liable for the default on the part of Shri Rawat. 25.As can be seen from the impugned order dated 28th February, 2002, the learned Judge has given his findings in paragraphs 18 to 20 of the said judgement. In paragraph 18, after considering the rival submissions and perusing the pleadings and documentary evidence, the learned Judge has recorded thus, “It is clear and admitted fact that the applicant-company had assigned the responsibility to handle the Civil Suit on behalf of the management and Mr.K.B.S. Rawat is holding a Superior Administrative Post as Senior Manager (Administration) and there was a clear- cut negligence on the part of Mr. K.B.S.Rawat.” The learned Judge has found the explanation given on behalf of the petitioner as regards issuance of show cause notice and tendering of explanation by Shri Rawat, admitting that there was no negligence on his part to be a fairy tale. The explanation has been jettisoned on the ground that the learned Advocate for the petitioner had not stated as to what action was taken against Shri Rawat after his admission of negligence. When the very case of the petitioner is that it was never aware of the SCA/3269/2003 18/25 JUDGMENT institution of the suit till being served with the Jungam Warrant in the execution proceedings, one fails to comprehend as to how the learned Judge has come to the conclusion that it was an admitted fact that the applicant company had assigned the responsibility to handle the Summary Suit on behalf of the management to Shri K.B.S.Rawat. 26.In paragraph 19 of the judgement, the learned Judge has considered the question as to whether the application is required to be allowed when the Senior Manager (Administration) of the petitioner company himself was negligent and willfully did not attend the Court? The learned Judge has referred to the decision of this Court in the case of Madhur Garments (supra) relied upon on behalf of the petitioner and found that, in the said case, the defendant was prosecuting the case with diligence whereas the learned counsel for the defendant had remained absent, that too, on account of personal difficulty, and the defendant was not aware of the absence of counsel, whereas in the present case, the applicant itself had remained careless in prosecuting the case. The learned Judge has thereafter referred to certain observations made by the Apex Court reported 1993 SCW 1178 and found that relying upon the said observations, the Karnataka High Court had, in the case reported in AIR 2001 Karnataka 104, refused