Court has power to set aside ex-parte decree on the grounds of fraud: Calcutta High Court

 IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction Commercial Division The Hon’ble Justice Shekhar B. Saraf IA No. GA 19 Old G.A. No. 9119) C.S. No. 1214 Emars Mining and Construction Pvt. Ltd. Manjunath Hebbar For the Applicant Defendant For the Respondent Plaintiff Mr. Swatarup Banerjee Adv. Ms. Manju Bhuteria Adv. Mr. S. Mukherjee Adv. Mr. M. Mukherjee Adv. Ms. P. Sharma Adv. Heard on : September 16 2020 October 9 2020 November 18 2020 December 2 2020 and December 16 2020. Judgment on : 13.01.2021 Shekhar B. Saraf J.: 1. The applicant had filed this application bearing G.A. No. 9119 principally praying for the recall and or setting aside of the ex parte decree dated March 13 2019 rendered by this Court. The applicant defendant has filed this application seeking such recall and or setting aside of such ex parte decree under O. IX R. 13 of the Code of Civil Procedure 1908had made claims that they had made a series of advance payments to the tune of Rs. 15 66 50 000 on various dates through RTGS and electronic fund signed between respondent plaintiff applicant defendant had only supplied commensurate goods to the respondent plaintiff valued at Rs. 5 84 10 000 thereby leaving a balance amount payable to the respondent plaintiff assessed at Rs. 8 82 40 000 . 3. Accordingly the respondent plaintiff had instituted C.S. No. 125 of 2014 against the applicant defendant praying for the grant of a decree to the tune of Rs. 12 00 06 400 this decretal amount was evaluated based on the principal outstanding amount payable to the respondent plaintiff along with interest claimed @ 18% per annum calculated from January 2012 to December 2013. 4. Based on the perusal of the documents on record the examination of a sole witness on behalf of the respondent plaintiff and the fact that while the applicant defendant had entered appearance but had chosen to not file any written statement I had treated the afore stated suit as an undefended suit and granted an ex parte decree dated March 13 2019 directing the applicant defendant to ensure the payment of the decretal amount as stated above in favour of the respondent plaintiff. 5. Mr. Swatarup Banerjee appearing on behalf of the applicant defendant had averred that the respondent‟s plaintiff‟s contention that an advance payment to the tune of Rs. 15 66 50 000 on various dates through RTGS and electronic fund transfers was utterly misconceived and in page 14 of such application conspicuously drew my attention to the fact that a sum of Rs. 3 00 00 000 dated December 10 2010 by RTGS drawn through the State Bank of India bearing remarks “SBINH10344318588” was never transferred into the account of the applicant defendant. I have also perused the bank statement appended as „Annexure D‟ to the application by the applicant defendant which reflects such an averment. Accordingly the applicant defendant contended that such a brazen act of misleading the court by the in securing an ex parte decree against applicant defendant amounted to fraud and abuse of the process of this 2020. 6. Based on this revelation I had directed respondent plaintiff to justify the purported payment of Rs. 3 00 00 000 dated December 10 2010 by RTGS drawn through the State Bank of India bearing remarks “SBINH10344318588” to the applicant defendant by filing relevant documents as proof of such transaction by an order dated September 16 7. Mrs. Manju Bhuteria learned counsel appearing on behalf of the respondent plaintiff had chosen to rely on the purchase orderbearing no. PO SE 02 dated December 10 2010 wherein the recital “Terms of payment” records a distinct payment to the tune of Rs. Three Crores made to the applicant defendant. The relevant recital is reproduced hereinbelow: Terms of payment Payment would be released as below: 100% against Proforma Invoice to be paid to M S Menezes Shyam Enterprises as mutually agreed. Out of the total order value the following payments are already made: 1) Cost of materials =Rs. 3 00 00 000.00 2) Advance towards handling charges to M S Menezes Enterprises =Rs. 55 30 000.00 3) Customs Duty = Rs. 28 31 202.00 Total =Rs. 3 83 61 202.00 Balance PO Value =Rs. 1 20 38 798.00 Emphasis supplied. 8. Since Mr. Banerjee has prayed for the setting aside of the ex parte decree under O.IX R.13 read with Section 151 of the CPC it is prudent that the relevant provisions are reproduced. O.IX R. 13 provides as follows: 13. Setting aside decree ex parte against defendants.— In any case in which a decree is passed ex parte against a defendant he may apply to the Court by which the decree was passed for an order to set it aside and if he satisfies the Court that the summons was not duly served or that he was prevented by any sufficient cause from appearing when the suit was called on for hearing the Court shall make an order setting aside the decree as against him upon such terms as to costs payment into Court or otherwise as it thinks fit and shall appoint a day for proceeding with the suit: Provided that where the decree is of such a nature that it cannot be set aside as against such defendant only it may be set aside as against all or any of the other defendants also: Provided further than no Court shall set aside a decree passed ex parte merely on the ground that there has been an irregularity in the service of summons if it is satisfied that the defendant had notice of the date of hearing and had sufficient time to appear and answer the plaintiff s claim. Explanation.—Where there has been an appeal against a decree passed ex parte under this rule and the appeal has been disposed of on any ground other than the ground that the appellant has withdrawn the appeal no application shall lie under this rule for setting aside that ex parte decree. 9. On the other hand Section 151 of the CPC saves the inherent powers of the Court which provides as follows: 151. Saving of inherent powers of Court. Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the Court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court. 10. As is evident from a bare reading of the two provisions of law extracted above the grounds of fraud and or abuse of the process of the Court are not conditions which would merit the Court‟s interference specifically under O. IX R. 13. Rather O. IX R. 13 stricto sensu envisages two particular conditions either of which if fulfilled warrants an interference by the Court to set aside an ex parte decree these conditions are: a) Either the defendant satisfies the Court that the summons were not duly served upon him or b) The defendant was prevented by any sufficient cause from appearing when the suit was called on for hearing. 11. The applicant defendant has not pressed either of these conditions before this Court. The predominant plea has been that of fraud and or abuse of the process of the Court. Therefore the natural progression would be to examine if the grounds of fraud and or abuse of the process of the Court are not covered under O. IX R.13 would it be statutorily permissible for the Court to rely on Section 151 and invoke its inherent powers to provide relief to the applicant defendant and set aside an ex parte decree that may have been so obtained by either resorting to fraud and or abuse of the process of this Court 12. The Supreme Court in Ram Prakash Agarwal v Gopi Krishnanreported in11 SCC 296 had held: “15. In exceptional circumstances the Court may exercise its inherent powers apart from Order 9 CPC to set aside an ex parte decree. An ex parte decree passed due to the non appearance of the counsel of a party owing to the fact that the party was not at fault can be set aside in an appeal preferred against it. So is the case where the absence of a defendant is caused on account of a mistake of the court. An application under Section 151 CPC will be maintainable in the event that an ex parte order has been obtained by fraud upon the court or by collusion. The provisions of Order 9 CPC may not be attracted and in such a case the court may either restore the case or set aside the ex parte order in the exercise of its inherent powers. There may be an order of dismissal of a suit for default of appearance of the plaintiff who was in fact dead at the time that the order was passed. Thus where a court employs a procedure to do something that it never intended to do and there is miscarriage of justice or an abuse of the process of Court the injustice so done must be remedied in accordance with the principle of actus curia neminem gravabit an act of the court shall prejudice no person. 19. In view of the above the law on this issue stands crystallised to the effect that the inherent powers enshrined under Section 151 CPC can be exercised only where no remedy has been provided for in any other provision of the CPC. In the event that a party has obtained a decree or order by playing a fraud upon the court or where an order has been passed by a mistake of the court the court may be justified in rectifying such mistake either by recalling the said order or by passing any other appropriate order. However inherent powers cannot be used in conflict of any other existing provision or in case a remedy has been provided for by any other provision of the CPC. Moreover in the event that a fraud has been played upon a party the same may not be a case where inherent powers can be exercised.” Emphasis supplied 13. Therefore this Court does possess the power to invoke its inherent powers under Section 151 of the CPC to provide relief to the applicant defendant in such a case where fraud and or abuse of the process of the Court may transpired. However whether the applicant defendant has successfully discharged his burden in proving the same by contending that the nature of payments made by the respondent plaintiff to M s. Lotus Enterprises purportedly on behalf of the applicant defendant merits a different consideration altogether. 14. On the question of the requirements of proving fraud the Supreme Court in A.C. Ananthaswamy v Boraiahby LRS. reported in8 SCC 588 had ruled: “5. We do not find any merit in this appeal. Firstly in the present case Patel Chikkahanumaiah had moved an application under Order 9 Rule 13 CPC for setting aside the ex parte decree on the ground of non service of summons in which fraud was not alleged. As stated above Patel Chikkahanumaiah had moved R.A. No.54 of 1977 in which there was no such allegation. Secondly the present suit has been instituted to set aside the ex parte decree on the fraud and the decree was obtained by misrepresentation. Fraud is to be pleaded and proved. To prove fraud it must be proved that representation made was false to the knowledge of the party making such representation or that the party could have no reasonable belief that it was true. The level of proof required in such cases is extremely higher. An ambiguous statement cannot per se make the representor guilty of fraud. To prove a case of fraud it must be proved that the representation made was false to the knowledge of the party making such representation.12th Edition page 489].” Emphasis supplied. 15. Mr. Banerjee counsel appearing on behalf of the applicant defendant has submitted that the Rs. Three Crores in question was never paid to his client but was paid to M s. Lotus Enterprises. He submits that there is no relationship of his client with M s. Lotus Enterprises. According to him this Three Crores payment that has been reflected in the plaint is a fraud on the Court and is an abuse of the process of Court. The above argument of Mr. Banerjee has been countered by Ms. Bhuteria appearing on behalf of the respondent plaintiff. She submits that this amount of Rs. Three Crores was paid to M s. Lotus Enterprises on instruction of the applicant defendant. According to her M s. Lotus Enterprises is a sister concern of the applicant defendant. She further relies on bank account details to show that this payment was made and on the purchase orders to show that the same reflect payments made to the defendant. In fact she relies on purchase order bearing no. PO SE 02 dated December 10 2010 to show that subsequent to the payment of Rs. Three Crores the same was in the purchase order as a payment received by the applicant defendant. In light of the same she submits that there is no question of any fraud having been played on the applicant defendant. 16. Mrs. Bhuteria has conspicuously relied on the purchase order bearing no. PO SE 02 dated December 10 2010 which manifestly indicates that an amount to the tune of Rs. Three Crores was indeed transferred into the account of the applicant defendant‟s proprietorship or its purported sister entity M s. Lotus Enterprises by the respondent plaintiff. However Mr. Banerjee strenuously contended that such a payment is disputed since no document had been produced by the respondent plaintiff to prove that the applicant‟s defendant‟s proprietorship is in any way connected to M s. Lotus Enterprises. Apropos this question of fact to my mind it would not be improper to state that had the applicant defendant been present before the Court to contest the suit such fact could have been controverted by placing their reliance upon a written statement as well as cogent evidence that could have been led by the applicant defendant such a fact accordingly could have been proved to the contrary. But that ship has sailed. 17. Upon an application of my mind as well as the yardstick laid down in A.C. Ananthaswamythis new factum as referred to in the immediately preceding paragraph does not appear to me to be a case of fraud and or abuse of the process of the Court. The degree of proving fraud is much higher. An ambiguous question of fact as in this case cannot be categorized as a case of fraud. 18. Moving forward as the options at the disposal of applicant defendant to set aside the ex parte decree dated March 13 2019 the applicant defendant could have: a) Either filed an application under O.IX R.13 of CPC whereupon if such an application is dismissed such an order of dismissal would be appealable under O. XLIII R. 1(d) or b) Filed an appeal under clauseof Section 96 of the CPC. 19. The nature and scope of both these remedies need to be reiterated. Dr. D.Y. Chandrachud J. speaking for a three judges bench of the Supreme Court in Neerja Realtors Pvt. Ltd. v Janglu through Legal Representative 2 SCC 649 had enunciated the „procedural scope‟ of both these remedies in the following terms: “17. A defendant against whom an ex parte decree is passed has two options: the first is to file an appeal. The second is to file an application under Order 9 Rule 13. The defendant can take recourse to both the proceedings simultaneously. The right of appeal is not taken away by filing an application under Order 9 Rule 13. But if the appeal is dismissed as a result of which the exparte decree merges with the order of the appellate court a petition under Order 9 Rule 13 would not be maintainable. When an application under Order 9 Rule 13 is dismissed the remedy of the defendant is under Order 43 Rule 1. However once such an appeal is dismissed the same contention cannot be raised in a first appeal under Section 96. The three Judge bench decision in Bhanu Kumar Jain has been followed by another bench of three Judges in Rabindra Singh v Financial Commissioner Cooperation Punjab and by a two Judge bench in Mahesh Yadav v Rajeshwar Singh. In the present case the original defendant chose a remedy of first appeal under Section 96 and was able to establish before the High Court adequate grounds for setting aside the judgment and decree.” Emphasis supplied. 20. However in a subsequent decision of the Supreme Court in Bhivchandra Shankar More v Balu Gangaram More reported in6 SCC 387 while also relying on the dictum of Bhanu Kumar Jain1 as was done in Neerja Realtorsthe Court had ruled on the „substantive scope‟ of both these remedies as follows: “11. It is to be pointed out that the scope of Order 9 Rule 13 CPC and Section 96(2) CPC are entirely different. In an application filed under Order 9 Rule 13 CPC the Court has to see whether the summons were duly served or not or whether the defendant was prevented by any ―sufficient cause‖ from appearing when the suit was called for hearing. If the Court is satisfied that the defendant was not duly served or that he was prevented for “sufficient cause” the court may set aside the exparte decree and restore the suit to its original position. In terms of Section 96(2) CPC the appeal lies from an original decree passed exparte. In the regular appeal filed under Section 96(2) CPC the appellate court has wide jurisdiction to go into the merits of the decree. The scope of enquiry under two provisions is entirely different. Merely because the defendant pursued the remedy under Order 9 Rule 13 CPC it does not prohibit the defendant from filing the appeal if his application under Order 9 Rule 13 CPC is dismissed. 1Bhanu Kumar Jain v Archana Kumar 1 SCC 787. 12. The right of appeal under Section 96(2) CPC is a statutory right and the defendant cannot be deprived of the statutory right of appeal merely on the ground that the application filed by him under Order 9 Rule 13 CPC has been Emphasis supplied. 21. The powers of the Court are guided controlled and circumscribed by the statutory limitations of the CPC. Hence while the scope of enquiry under O. IX R. 13 is severely constricted but well defined nonetheless it remains quite expansive in its scope under a regular appeal envisaged under clause 2) of Section 96 of the CPC wherein the appellate court can go into merits of the decree under challenge dated March 13 2019 which this Court cannot while exercising its powers under O. IX R. 13. 22. I have previously ruled that Mr. Banerjee had not pressed either of the conditions envisaged under O. IX R. 13 of the CPC. As far as the other limb of Mr. Banerjee‟s argument is concerned which had consistently focused on the facet of fraud and or abuse of the process of the Court such a limb also fails to pass the test as laid down in A.C. Ananthaswamyas discussed in paragraphs 15 to 17. 23. Accordingly for the reasons discussed above in detail this application bearing G.A. No. 9119 seeking the recalling setting aside of the ex parte order dated March 13 2019 is hereby dismissed. There shall be no orders as to costs. 24. Urgent photostat certified copy of this order if applied for should be made available to the parties upon compliance with the requisite formalities. 

Summary: Civil Courts can set aside an ex-parte decree on the grounds of fraud or abuse of court process under Section 151 of the Code of Civil Procedure. The provision allows the Court to pass such orders that may be necessary for the ends of justice or to prevent the abuse of the process of the Court. The Calcutta High Court presided over by J S.B. Saraf laid down this ratio in the case of Emars Mining and Construction Pvt. Ltd. Vs. Manjunath Hebbar,[C.S. No. 125 of 2014]. The facts of the case are that a civil dispute arose between the parties because the defendant failed to deliver good commensurate with the advance payments made by the plaintiff. The Plaintiff had obtained an ex-parte decree in his favor in March 2019. Aggrieved by this order Defendant moved to this court to set aside this decree on the ground that the ex-parte decree was obtained by misleading the Court about the payments made by the plaintiff totaling up to a sum of Rs. 3 crores. Under Order IX, Rule 13 of the Code of Civil Procedure an ex-parte decree can only be set aside if – i. the Court is satisfied that summons was not duly served upon the defendant or ii. there was some sufficient cause preventing the defendant from appearing for the court proceedings. However, the High Court was of the opinion that, “.. this Court does possess the power to invoke its inherent powers under Section 151 of the CPC to provide relief to the applicant/defendant in such a case where fraud and/or abuse of the process of the Court may have transpired.”