Cross-examination — Closure of opportunity — One final opportunity — Grant of costs. Where party failed to cross-examine defence witness despite earlier opportunities, High Court in exercise of supervisory jurisdiction under Article 227 granted one final opportunity for cross-examination subject to payment of costs, holding that denial of opportunity would cause grave prejudice and that interests of justice would be adequately balanced by compensating opposite party through costs. (Paras 6 to 8)

 

Delhi High Court held that 

Constitution of India — Art.227 — Supervisory jurisdiction — Cross-examination — Closure of opportunity — One final opportunity — Grant of costs.

Where party failed to cross-examine defence witness despite earlier opportunities, High Court in exercise of supervisory jurisdiction under Article 227 granted one final opportunity for cross-examination subject to payment of costs, holding that denial of opportunity would cause grave prejudice and that interests of justice would be adequately balanced by compensating opposite party through costs.
(Paras 6 to 8)

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Civil Procedure Code, 1908 — Procedural law — Opportunity to lead evidence and cross-examination — Approach of Court.

Procedural rules are intended to advance cause of justice. Opportunity to cross-examine material witness may be granted upon terms where refusal would result in prejudice and inconvenience caused to opposite party can be compensated monetarily.
(Para 8)

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FACTS OF THE CASE

1. Petitioner invoked supervisory jurisdiction of High Court under Article 227 of Constitution challenging orders passed by Trial Court dismissing applications for bringing additional documents on record and for striking off defence.
2. During hearing before High Court, petitioner confined relief only to grant of opportunity to cross-examine DW-1.
3. Petitioner contended that denial of opportunity to cross-examine defence witness would cause grave prejudice to its case.
4. Respondents opposed petition contending that sufficient opportunities had already been granted earlier and petitioner failed to avail same.
5. High Court considered rival submissions and examined whether further opportunity ought to be granted in interests of justice.

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ANALYSIS OF FACTS AND LAW

The High Court exercised supervisory jurisdiction under Article 227 of the Constitution in relation to procedural orders passed by the Trial Court.

The Court noticed that though the petitioner had earlier failed to cross-examine DW-1 despite opportunities granted by the Trial Court, complete denial of opportunity to cross-examine the witness could seriously prejudice adjudication of the petitioner’s case.

The Court adopted a balanced procedural approach by recognizing two competing considerations:

• necessity to avoid prejudice caused by denial of cross-examination; and
• need to compensate opposite party for delay and inconvenience caused by repeated defaults.

The judgment reflects settled procedural jurisprudence that rules of procedure are intended to facilitate adjudication on merits and not to defeat substantive justice.

Accordingly, while disapproving petitioner’s earlier conduct, the Court held that interests of justice would be sufficiently protected by granting one final opportunity for cross-examination subject to payment of costs to respondents.

The Court therefore granted a single effective opportunity to cross-examine DW-1 upon payment of Rs.3,000/- as costs.

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RATIO DECIDENDI

In exercise of supervisory jurisdiction under Article 227 of the Constitution, High Court may grant one final opportunity to cross-examine a witness despite earlier defaults by the party, where denial of such opportunity would cause grave prejudice to adjudication of the case, and inconvenience caused to opposite party can be adequately compensated by imposition of costs.

Civil Procedure Code, 1908 — Order XII Rule 6 — Judgment on admissions — Scope — Recovery suit — Admissions in e-mails — Refund of advance amount — Preliminary decree. Where correspondence exchanged through e-mails clearly disclosed unequivocal admission by defendant regarding refund of specified amount after agreed deductions towards modification charges, Court was justified in passing decree under Order XII Rule 6 CPC to extent of admitted liability, while leaving disputed balance claims for trial. Conditional stipulation regarding time of repayment did not dilute clear admission of liability to refund admitted amount. (Paras 51 to 56)

 

Delhi High Court held that

Civil Procedure Code, 1908 — Order XII Rule 6 — Judgment on admissions — Scope — Recovery suit — Admissions in e-mails — Refund of advance amount — Preliminary decree.

Where correspondence exchanged through e-mails clearly disclosed unequivocal admission by defendant regarding refund of specified amount after agreed deductions towards modification charges, Court was justified in passing decree under Order XII Rule 6 CPC to extent of admitted liability, while leaving disputed balance claims for trial. Conditional stipulation regarding time of repayment did not dilute clear admission of liability to refund admitted amount.
(Paras 51 to 56)

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Civil Procedure Code, 1908 — Order XII Rule 6 — Admission — Nature of admission required.

For exercise of jurisdiction under Order XII Rule 6 CPC, admission must be clear, categorical and unambiguous. Once defendant unequivocally admits liability to refund definite amount, Court can decree suit to that extent notwithstanding subsisting disputes relating to remaining claims or allegations regarding breach of contract.
(Paras 51 to 55)

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FACTS OF THE CASE

1. Plaintiff instituted suit for recovery of amounts arising out of transactions relating to supply of screen-printing and allied machinery pursuant to purchase orders issued in favour of defendant.
   
2. Plaintiff alleged delay and failure in supply of one of machines and consequently cancelled purchase order seeking refund of advance amount paid to defendant.
   
3. Defendant contended that delay occurred due to non-payment of second instalment by plaintiff and asserted that substantial expenditure had already been incurred towards manufacture and modification of machinery.
   
4. Plaintiff filed application under Order XII Rule 6 CPC relying upon e-mail correspondence wherein defendant agreed to refund advance amount after deduction of specified sum towards modification charges.
   
5. Trial Court found clear admission regarding refund of Rs.4,98,500/- and passed preliminary decree to that extent while directing trial to continue regarding remaining disputed claims.
   
6. Defendants challenged decree contending that correspondence did not constitute unequivocal admission and that several disputed questions required adjudication after full trial.
   

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ANALYSIS OF FACTS AND LAW

The High Court examined scope of Order XII Rule 6 CPC relating to judgment on admissions.

The Court undertook detailed analysis of e-mail correspondence exchanged between parties after cancellation of purchase order. The Court found that defendant had consistently acknowledged receipt of advance amount and had expressly agreed to refund the amount after deduction of Rs.2,10,000/- towards modification costs required for converting specially manufactured machinery into standard form for sale to another customer.

The Court observed that e-mail dated 14.12.2015 specifically stated that advance would be refunded after deducting Rs.2,10,000/- and thereby unequivocally admitted liability to refund balance amount of Rs.4,98,500/-.

The judgment clarifies that existence of disputes regarding breach of contract, delay in delivery or entitlement to additional claims does not preclude passing of decree under Order XII Rule 6 CPC where part liability stands clearly admitted.

The Court further held that stipulation regarding timing of repayment, namely refund upon securing another customer or before end of financial year, merely qualified the mode or timing of payment and did not dilute substantive admission of liability itself.

Accordingly, Trial Court was justified in partly decreeing suit to extent of admitted amount while leaving remaining disputed claims to be adjudicated after evidence.

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RATIO DECIDENDI

Where correspondence exchanged between parties contains clear and unequivocal admission by defendant acknowledging liability to refund a definite amount after agreed deductions, Court is empowered under Order XII Rule 6 CPC to pass decree to extent of such admitted liability notwithstanding pendency of disputes relating to remaining claims, and a stipulation regarding timing or manner of repayment does not detract from the unequivocal nature of the admission.
(Paras 51 to 56)

Civil Procedure Code, 1908 — S.20(c) — Territorial jurisdiction — Recovery suit — Part of cause of action arising within jurisdiction — Effect. Where consignments were handed over at Delhi, payments and dishonoured cheques were received and presented at Delhi, accounts were maintained at Delhi and defendant company had registered office at Delhi, part of cause of action arose within Delhi conferring territorial jurisdiction upon Delhi Courts under Section 20(c) CPC. Mere mention of administrative office at another place in invoices or airway bills, in absence of exclusive jurisdiction clause, does not oust jurisdiction of Delhi Courts. (Paras 7 to 14)

 

Delhi High Court held that 

Civil Procedure Code, 1908 — S.20(c) — Territorial jurisdiction — Recovery suit — Part of cause of action arising within jurisdiction — Effect.

Where consignments were handed over at Delhi, payments and dishonoured cheques were received and presented at Delhi, accounts were maintained at Delhi and defendant company had registered office at Delhi, part of cause of action arose within Delhi conferring territorial jurisdiction upon Delhi Courts under Section 20(c) CPC. Mere mention of administrative office at another place in invoices or airway bills, in absence of exclusive jurisdiction clause, does not oust jurisdiction of Delhi Courts.
(Paras 7 to 14)

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Civil Procedure Code, 1908 — Order VII Rule 10 — Return of plaint — Territorial jurisdiction — Scope of enquiry.

While considering question of territorial jurisdiction at stage of Order VII Rule 10 CPC, Court is required to proceed on basis of averments contained in plaint and documents relied upon by plaintiff assuming same to be correct. Unrebutted pleadings and evidence cannot be discarded on presumptions.
(Para 10)

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FACTS OF THE CASE

1. Plaintiff instituted suit for recovery of money arising out of shipment and freight forwarding transactions alleging outstanding dues against defendant company.
   
2. Trial Court returned plaint under Order VII Rule 10 CPC holding that Delhi Courts lacked territorial jurisdiction and that cause of action pertained to Mumbai.
   
3. Plaintiff contended in appeal that consignments were handed over at Delhi, payments and dishonoured cheques were received and presented at Delhi and accounts relating to transactions were maintained at Delhi.
   
4. Defendant company did not appear before Trial Court and proceedings were conducted ex parte.
   
5. Material placed on record disclosed that defendant company had its registered office at Punjabi Bagh, New Delhi, though certain invoices reflected Mumbai office address.
   
6. Plaintiff challenged order returning plaint contending that part of cause of action had arisen within Delhi attracting Section 20(c) CPC.
   

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ANALYSIS OF FACTS AND LAW

The High Court examined scope of Section 20(c) CPC governing territorial jurisdiction based upon place where cause of action wholly or partly arises.

The Court held that even partial accrual of cause of action within territorial limits of a Court is sufficient to confer jurisdiction under Section 20(c) CPC.

Upon examination of pleadings and unrebutted evidence, the Court found that substantial parts of commercial transactions occurred at Delhi. Consignments were handed over at Delhi, payments were received at Delhi, post-dated cheques were presented through Delhi bank accounts and defendant’s registered office was situated at Delhi.

The Court further held that mere mention of Mumbai administrative office in invoices or airway bills could not divest Delhi Courts of jurisdiction particularly in absence of any exclusive jurisdiction agreement between parties.

The judgment reiterates settled principle governing Order VII Rule 10 CPC that at stage of deciding territorial jurisdiction, Court must proceed on assumption that averments in plaint are correct. Since defendant remained ex parte and plaintiff’s pleadings remained unrebutted, Trial Court could not discard those assertions on presumptive reasoning.

The Court also relied upon earlier precedents holding that place where payment is received or where order is placed may constitute part of cause of action for purposes of territorial jurisdiction.

Accordingly, the High Court concluded that Delhi Courts possessed territorial jurisdiction and order returning plaint was unsustainable.

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RATIO DECIDENDI

For purposes of Section 20(c) CPC, where material parts of commercial transaction including handing over of consignments, receipt and presentation of cheques, maintenance of accounts and existence of registered office of defendant occur within territorial jurisdiction of a Court, part of cause of action arises therein conferring territorial jurisdiction upon such Court, and while deciding an application under Order VII Rule 10 CPC the Court must proceed on basis of plaint averments and unrebutted documents assuming them to be correct.
(Paras 7 to 14)

SARFAESI Act, 2002 — Security Interest (Enforcement) Rules, 2002 — Rule 9(2), Second Proviso — Public auction of secured asset — Highest bid equal to reserve price — Confirmation of sale — Consent of borrower and secured creditor — Mandatory requirement.

 AP High Court Held That 

SARFAESI Act, 2002 — Security Interest (Enforcement) Rules, 2002 — Rule 9(2), Second Proviso — Public auction of secured asset — Highest bid equal to reserve price — Confirmation of sale — Consent of borrower and secured creditor — Mandatory requirement.

When Authorised Officer conducting auction of secured asset fails to secure bid higher than reserve price and highest bid received is exactly equal to reserve price, sale cannot be confirmed without obtaining consent of borrower and secured creditor as contemplated under second proviso to Rule 9(2) of Security Interest (Enforcement) Rules, 2002. Expression “at such price” occurring in second proviso refers to reserve price itself. Confirmation of sale at reserve price without consent of borrower is contrary to statutory mandate and renders sale invalid.
(Paras 11 to 16)

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Statutory Interpretation — Proviso — Harmonious construction — Reserve price — Interpretation of “at such price”.

Rule 9(2) and both provisos appended thereto are required to be interpreted harmoniously. First proviso prohibits confirmation of sale below reserve price, while second proviso governs situation where bid received is not higher than reserve price. Interpretation that expression “at such price” means below reserve price is contrary to statutory scheme and legislative intent.
(Paras 15 and 16)

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FACTS OF THE CASE

1. Secured creditor initiated proceedings under SARFAESI Act for recovery of loan dues by bringing mortgaged secured asset to sale in public auction.
   
2. Reserve price for secured asset was fixed at Rs.3,48,00,000/- and in auction proceedings only one bidder participated.
   
3. Sole bidder offered amount exactly equal to reserve price and no bid higher than reserve price was received in auction.
   
4. Authorised Officer confirmed sale in favour of auction purchaser at reserve price without obtaining consent of borrower.
   
5. Borrower challenged validity of sale before Debts Recovery Tribunal under Section 17 of SARFAESI Act contending that second proviso to Rule 9(2) mandated borrower’s consent where sale was confirmed at reserve price after failure to secure higher bid.
   
6. Debts Recovery Tribunal accepted said contention and set aside sale. Debts Recovery Appellate Tribunal affirmed said finding.
   
7. Bank and auction purchaser separately challenged orders of DRT and DRAT before High Court.
   

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ANALYSIS OF FACTS AND LAW

The High Court examined scope and interpretation of Rule 9(2) of the Security Interest (Enforcement) Rules, 2002 along with its two provisos.

The Court noticed cleavage of judicial opinion among various High Courts regarding interpretation of the second proviso to Rule 9(2). While Madras and Delhi High Courts held borrower’s consent mandatory for confirmation of sale at reserve price, Kolkata and Kerala High Courts had taken contrary view.

After analyzing statutory scheme, the Court identified three distinct situations contemplated under Rule 9(2):
(i) where sale price exceeds reserve price;
(ii) where sale price is below reserve price; and
(iii) where sale price is exactly equal to reserve price.

The Court held that second proviso specifically governs third situation, namely where Authorised Officer fails to obtain price higher than reserve price. In such circumstances, sale may be confirmed only with consent of borrower and secured creditor.

Rejecting contrary interpretation, the Court held that expression “at such price” necessarily means reserve price itself and not a price below reserve price. Any other interpretation would conflict with first proviso which prohibits confirmation of sale below reserve price.

The Court further emphasized that statutory rules framed under SARFAESI Act possess binding statutory force and where law prescribes a particular mode for doing an act, same must be strictly complied with.

Consequently, confirmation of sale at reserve price without borrower’s consent was held invalid.

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RATIO DECIDENDI

Under the second proviso to Rule 9(2) of the Security Interest (Enforcement) Rules, 2002, where the Authorised Officer fails to obtain a bid higher than the reserve price and the highest bid received is exactly equal to the reserve price, sale of the secured asset can be confirmed only with consent of borrower and secured creditor, and confirmation of sale at reserve price without such consent is contrary to the statutory mandate and invalid in law.
(Paras 11 to 16)

SARFAESI Act, 2002 — Security Interest (Enforcement) Rules, 2002 — R.9(2), Second Proviso — Sale of secured asset — Reserve price — Authorised Officer failing to secure bid higher than reserve price — Confirmation of sale exactly at reserve price — Consent of borrower — Mandatory requirement.

 AP High Court Held that 

SARFAESI Act, 2002 — Security Interest (Enforcement) Rules, 2002 — R.9(2), Second Proviso — Sale of secured asset — Reserve price — Authorised Officer failing to secure bid higher than reserve price — Confirmation of sale exactly at reserve price — Consent of borrower — Mandatory requirement.

Where Authorised Officer in public auction fails to obtain bid higher than reserve price and sole bid received is exactly equal to reserve price, sale of secured asset cannot be confirmed without consent of borrower and secured creditor as mandated under second proviso to Rule 9(2) of Security Interest (Enforcement) Rules, 2002. Expression “at such price” occurring in second proviso refers to reserve price itself and not a price below reserve price. Confirmation of sale at reserve price without consent of borrower is contrary to statutory mandate and renders sale invalid.
(Paras 11 to 16)

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Statutory Interpretation — Proviso — Harmonious construction — SARFAESI Rules.

Rule 9(2) and both provisos appended thereto are required to be read harmoniously. First proviso prohibits confirmation of sale below reserve price, while second proviso governs situation where no price higher than reserve price is obtained. Statutory proviso being mandatory in nature must be strictly complied with.
(Paras 13 to 16)

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FACTS OF THE CASE

1. Secured creditor initiated proceedings under the SARFAESI Act against secured asset belonging to borrower consequent upon default in repayment of loan advanced to partnership firm.
   
2. Secured asset was brought to sale in public auction after fixation of reserve price at Rs.3,48,00,000/-.
   
3. In auction proceedings, only one bidder participated and offered bid exactly equal to reserve price. There was no bid higher than reserve price.
   
4. Authorised Officer confirmed sale in favour of sole bidder at reserve price without obtaining consent of borrower.
   
5. Borrower challenged validity of sale before Debts Recovery Tribunal contending that under second proviso to Rule 9(2) of the Security Interest (Enforcement) Rules, consent of borrower was mandatory where Authorised Officer failed to secure price higher than reserve price.
   
6. Debts Recovery Tribunal accepted contention and set aside sale. Appeal before Debts Recovery Appellate Tribunal was dismissed affirming said view.
   
7. Bank and auction purchaser separately approached High Court challenging legality of orders passed by DRT and DRAT.
   

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ANALYSIS OF FACTS AND LAW

The principal issue before the High Court concerned interpretation of the second proviso to Rule 9(2) of the Security Interest (Enforcement) Rules, 2002.

The Court noticed divergence of judicial opinion amongst various High Courts regarding meaning of expression “at such price” used in second proviso to Rule 9(2).

The Court analyzed Rule 9(2) and identified three distinct situations contemplated by statutory scheme:

1. where sale price obtained is higher than reserve price;
2. where sale price is below reserve price;
3. where sale price obtained is exactly equal to reserve price.
   

The Court held that second proviso specifically governs third situation, namely where Authorised Officer fails to obtain price higher than reserve price. In such circumstances, confirmation of sale at reserve price can be effected only with consent of borrower and secured creditor.

Rejecting contrary interpretation adopted by Kolkata High Court and Kerala High Court, the Court held that expression “at such price” necessarily refers to reserve price itself and not to any amount below reserve price.

The judgment emphasized that statutory rules framed under SARFAESI Act possess mandatory force and where statute prescribes that a thing shall be done in a particular manner, it must be done strictly in that manner alone.

The Court therefore concluded that confirmation of sale at reserve price without borrower’s consent was contrary to mandatory statutory requirement and consequently invalid.

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RATIO DECIDENDI

Under the second proviso to Rule 9(2) of the Security Interest (Enforcement) Rules, 2002, where the Authorised Officer conducting auction of secured asset fails to obtain a bid higher than the reserve price and the highest bid received is exactly equal to the reserve price, confirmation of sale can be effected only with consent of borrower and secured creditor, and any confirmation of sale at reserve price without such consent is invalid and contrary to the statutory mandate.
(Paras 11 to 16)