Purolator Ltd. vs State and Another

Y.P. Nargotra, Judge

This is an application under Order 9 Rule 13 read with Sec. 115 (sic) of the CPC and S. 41 of the J&K Arbitration Act, for setting aside the

judgment and decree dated 31.7.2001 passed by this Court in A. A. No. 54/ 1999.

A preliminary objection has been taken to the maintainability of the application on the ground that the judgment and decree sought to be set

aside through this application by the respondent-State is the judgment and decree passed on merits of the case and therefore, the present

application does not lie. It will be necessary to refer to the facts, which may be set out briefly as follows:

The petitioner-company was allotted a contract for supply and installation of mechanical/electrical equipment at Brarinamt, Srinagar. The

agreement executed between the parties contained an arbitration clause. Disputes arose between the parties and the same were referred for

adjudication through arbitration to the arbitrator. The arbitrator entered upon the reference and made and published his award on 2.12.1999. The

award was filed in the court by the Arbitrator for making the same rule of the Court. This Court issued notice to the parties u/s 14(2) A. A. by

order dated 6.12.1999. Respondent-State filed an application for setting aside the award u/s 30/33 AA on 19.4.2000. Objections to the

application were filed by the petitioner company. On 22.8.2000 four weeks time was allowed to the Sate for filing rejoinder to the objections. It

may be pertinent to say that on this date there was no representation from the State before the Court. The matter came up again on 11.10.2000

but on that date also there was no representation on behalf of the State. The court directed issuance of a notice to Sh. B. M. Sadiq Advocate for

the State for his appearance on 15.11.2000. The case was again listed on 21.11.2000. On that date Mr. S.K. Shukla advocate caused his

appearance on behalf of the State. Then on the subsequent dates i.e 27.12.2000, 17.2.2001 and 14.3.2001 the case was listed in the court but

again there was no representation on behalf of the State on these dates but the fact remains that no effective order was passed on any of the said

dates. The matter was taken up by the court on 4.4.2001 and was reserved for judgment and on 31.7.2001 the order impugned came to be

passed. By this order the award was made rule of the court and a decree was directed to be drawn accordingly. The following observations in the

order itself need attention:-

When the award was filed in this court for making a rule of the court, notice was issued to the State and also to the claimant M/S Purolator India

Ltd. hereinafter referred to as the company.

The company put in appearance. This is apparent from the proceedings dated 22.8.2000. Directions were issued to the counsel who was

appearing for the State to put in appearance on 15.11.2000. Notice was issued to the counsel. This was duly served on the counsel. A report to

this effect has been made by the Registry of this Court. Proceedings were adjourned from time to time. Ultimately on 14.3.2001 direction was

given to list the case again. On 4.4.2001 the case was listed. The judgment was reserved. No one appeared for the State. Counsel for the

company pleaded that the application preferred by the State be dismissed for want of prosecution. This course is not adopted. This is because

dismissal in default and dismissal for non-prosecution does no justice to any of the parties. The system of 'administration of justice' which is already

burdened gets further burdened with applications seeking restoration and another channel of litigation starts leaving main litigation by the side-lane.

It is precisely for this reason the suggestion made by the company was not accepted. The matter has been examined on merits.

From the above observations made in the order impugned it is manifest that this order has been passed on merits of the case in absence of counsel

for the State who was the applicant in the application u/s 30/33 A. A. for objecting making the award rule of the court.

Aggrieved by the said judgment dated 31.7.2001 the State filed LPA No. 83/2002 before the Hon'ble Division Bench. During the pendency of

this appeal State also filed the present application under O.9 R. 13 CPC. As this application stood filed, the State was allowed to with draw the

above said L.P.A. by order dated 9.9.2003 by the Hon'ble Division Bench. The Division Bench however considering the nature of the controversy

extended the interim direction dated 26.2.2003 till the matter was considered by the Single Bench.

Mr. Anand, learned Senior counsel, appearing on behalf of the petitioner-company, has raised a preliminary objection to the maintainability of

the present application on the plea that the order impugned being an order on merits passed by invoking the jurisdiction vested in the court by the

provisions contained in Order 17 Rule 2 C.P.C., application under O.9 R. 13 does not lie. In support of his contention he has relied upon two

cases, Delhi Dev. Authority v. Anant Raj Agencies, reported in 2001 (57) DRJ 688(DB) of Delhi High Court and Hoechst Aktiengeselschaft v. B.

S. Chem, 1979 RLR (Note) 39. On the strength of these judgments Mr. Anand has argued that the court was competent to dispose of the case on

merits under the provisions of O.17 Rule 2 CPC and therefore application under O.9 Rule 3 is not maintainable, the order impugned being passed

on merits. According to him the only remedy available to the petitioner-State is by way of tiling an appeal.

Per contra Mr. Naik, learned Advocate General of the State, has argued that the order impugned cannot be treated to be an order on merits for

the reasons that the court possesses no power to dispose of the case on merits in absence of the defendant-State by invoking the provisions of

0.17 Rule 2 CPC. He submits that Rule 2 of Order 17 does not confer any jurisdiction upon the court to dispose of the matter finally on merits in

absence of the defendant as according to him in the case issues were yet to be framed and the parties were yet to be put on evidence. According

to Mr. Naik the State had not been called upon to lead evidence in the case yet and therefore no evidence was available on record and as such the

court was not justified in passing the order on merits.

I have considered the respective contentions of the parties. The moot question on which the decision of the controversy raised hinges is could

the court decide the case on merits by involving provision of 0.17 Rule 2 or 3 in the circumstances of the present case? Mr. Anand learned counsel

for the respondent-company has argued that such power is possessed by the court. Let us take note of the judgments being relied upon by Mr.

Anand in support of his submissions.

In Delhi Dev. Authority v. Anant Raj Agencies, the Delhi High Court was considering the question about the applicability of 0.9 R. 13 CPC to the

case, which is decided on merits in absence of a party after pleadings and evidence of the parties were complete. In the facts of that case the

appellant had filed objections against an award in the proceedings pending before the learned Single Judge for making the award rule of the court.

The court had framed issues on the basis of objections filed against the award. After framing of the issues both the parties had made a statement

before the court that they did not want to lead any evidence with respect to the issues framed in the suit and requested that the arbitration record

be read in evidence at the time of hearing objections. Thereafter the suit came to be listed for final hearing and disposal on several dates before the

learned Single Judge. The matter was adjourned to 1.8.1996 and on this date counsel for the claimant was heard for sometime and case was

adjourned to 19.8.96 for giving another chance to the objector DDA to appear but when on that date none appeared the matter was heard and

decided on merits. The objector-DDA subsequently filed an application under O.9 Rule 13 for setting aside the decree before the learned Single

Judge. Learned Single Judge dismissed the application on the ground that the same was not maintainable as on those facts O.9 Rule 13 CPC could

not be applied. The matter was taken before the Division Bench and the Hon'ble Division Bench after noticing the provisions contained in the

explanation of Rule 20.17 held as follows:-

This explanation makes it very clear that when evidence or a substantial portion of evidence of a party has already been recorded and such party

fails to appear on the date fixed for hearing of the suit, the court can proceed to decide the case as if the party was present. This explanation

squarely applies in the facts of the present case. The evidence of the parties was complete in the sense that counsel for both the parties had made a

statement before the court that they did not want to lead any evidence on the issues framed in the case and that they wanted the record of

arbitration to be read in evidence. Apart from this, it is to be noted that the case was decided on merits and not by way of ex-parte proceedings.

In fact the court modified the award while making it a rule of the court.

Coming to the case cited by the learned counsel for the appellant i.e M/s. Avis International Ltd. Vs. M/s. Avi Footwear Industries and another, ,

it is to be noted that this is a case where objections were dismissed in default and were not dealt with on merits. Therefore, this case can have no

application to the present facts.

On the aforesaid reasoning the appeal was dismissed and it was held that O.9 R. 13 CPC had no application.

In the other case, Hoechst v. B. S.Chem, the plaintiff had sued the defendant for infringement of trade mark and applied for in term direction.

During the hearing of the application the parties stated on 17.5.77 that decision on application be treated as decision in the suit.

The matter came before the court on 15.11.77, none was present. The application was decided on merits. Same decision was given in the suit.

The defendant applied under O.9 R. 13 for setting aside of the decree. The court held as follows: -

Under O.17 R.2 it is provided that if the hearing of suit is adjourned, then the court may proceed to dispose of the suit under O.9 if either of the

parties do appear. Hence even if the defendant is absent at a subsequent hearing the suit can be proceeded with exparte. However can it be

properly said than when the evidence is complete and the case is ready then also the decision is ex-parte if the counsel of the party is absent. I am

of the view that in order to provide for such a contingency the explanation has now been added to O.17 R 2 stating that where the evidence of

substantial portion has already been recovered then the court may proceed as if the party was present. I am of the view that this is exactly what

happened at the hearing of the present case. The evidence was recorded, the matter was complete and arguments were heard in the absence of

one of the parties. The decision is on the merits and recorded just as if the party was present. It may be that if the party had actually been present

but virtually this is a decision on the merits and therefore not a decision under O.9.

From the judgments relied upon by learned counsel for the respondent-company the proposition of law which emerges to have been settled is

that where evidence of the parties is complete and case is ripe for hearing then even if either of the parties is absent, case can be decided on merits

by assuming as if such party was present. It would be beneficial to take note of the provisions contained in Rule 2 & 3 of 0.17 CPC. These are

being reproduced hereunder:-

Procedure if parties fail to appear on day fixed where on any day to which the hearing of the suit is adjourned, the parties or any of them fail to

appear, the court may proceed to dispose of the suit in one of the mode directed in that behalf by Order IX or make such other order as it thinks

fit.

Explanation - Where the evidence or a substantial portion of the evidence of any party has already been recorded and such party fails to appear on

any day to which the hearing of the suit is adjourned, the court may in its discretion, proceed with the case as if such party was present.

Court may proceed notwithstanding either party fails to produce evidence etc. where any party to a suit to whom time has been granted fails to

produce his evidence or to cause the attendance of his witnesses or to perform any other act necessary to the further progress of the suit for which

time has been allowed, the court may, notwithstanding such default;

(a) if the parties are present, proceed to decide the suit forthwith; or

(b) if the parties are, or any of them is absent, proceed under rule 2.

What is the true scope of these provisions is the question in issue. Further question arising for consideration is what is the correct interpretation

of the expression ""make such other-order as it thinks fit"" as used in Rule 2. From the bare reading of rule 2 it appears that the court is empowered

to take recourse to any of the two modes for disposal of the suit in the event of either of the parties failing to appear on the date of hearing before

the court. The court may dispose of the suit by taking recourse to provision contained in O.9 or alternatively make such order as it thinks fit. Can

the expression ""make such order as it thinks fit"" be construed to mean that the court may dispose of the matter on merits in absence of a party?

Rule 3 of O.17 deals with such situation. The provision contained in R.3 also need to be taken note of for interpreting the above said expression

used in Rule 2.

Rule 3 provides that where any party to the suit whom time has been granted fails to produce his evidence, or to cause the attendance of his

witnesses, or to perform any other act necessary to the further progress of the suit, for which time has been allowed the court may notwithstanding

of such default proceed to decide the suit forthwith if the parties are present and if the parties or any of them is absent then the court may if it does

not decide the suit forthwith proceed under Rule 2 i.e. either to dispose of the suit by taking recourse to 0.9 or make such order as it thinks fit. The

provisions contained in Rules 2 & 3 of 0.17 of J&K C.P.C. are in para materia with the provisions contained in Rule 2 & 3 of the Central C.P.C.

amended by 1976 amendment. Before amendment of these rules there was sharp divergence of opinion amongst the different High Courts. This

divergence of opinion resulted in material uncertainty as the scope of these two rules was the subject matter of consideration by the Law

Commission in its 27th Report (vide pages 164-170) in recommending the amendment ultimately adopted in 1976 for removal of such uncertainty.

After considering different views expressed by different High Courts the Commission proceeded to observe:-

Perhaps an approach to the matter would be clear if two situations are kept apart, namely plaintiffs absence and defendant's absence. In the former

case, misunderstanding of the law to the effect that the Court is bound to dismiss the suit causes hardship. In such a case the position is that:-

i) an adjournment can be granted;

ii) a decision on the merits in the plaintiffs favour could cause no grievance to any party. Question of hardship will arise only if a decision on merits

is given against the plaintiff.

In the case of the defendant's absence-

a) an adjournment can be granted. Or

b) a decision subject to the setting aside procedure under O.9 R. 13 would cause no grievance.

A decision strictly under O.9 R. 13 is to be excluded would cause hardship to the defendant. The Commission then proceeded further to

recommend :-

In view of the obscurity of the present position, a clarification is considered desirable. While provision authorizing the court in every case to

dispose of the suit as if the parties had appeared may be abused, there is no harm, it is felt, if a limited power to do where the evidence of the

defaulting party is substantially over, be inserted as in the Allahabad Amendment. Necessary change is proposed.

A Full Bench of the Calcutta High Court, consisting of three Hon'ble Judges, in case Braithwaite Burn & Jossep v. Abdul Gaffoor, reported in

AIR 1977 Cal 128, after noticing the above referred report of the Law Commission observed as follows:-

In our considered opinion the 1976 Amendment adopted on the recommendation of the Law Commission referred to hereinbefore overrides the

view that the two Rules are mutually exclusive. Amendment to Rule 3 now makes it clear that even in case of default within the meaning of Rule 3

there can be no decision on merits unless both or either the court is to fall back upon R.2 no doubt still authorise the court ""to dispose of the suit in

one of the modes directed in that behalf by O.9 or make such other order as it thinks fit."" But an explanation has been added to explain and guide

what would be such other order. The guideline incorporated is that the party absent shall not be treated as absent but shall be deemed to be

present if his evidence or the substantial portion of his evidence had already been recorded.

Similarly in case titled Rama Rao and Others Vs. Shantibai and Others, , a Five Judges Bench of the Madhaya Pradesh High Court considered

the scope of these provisions and the majority view was thus:-

The construction of 0.17 R.2 and 3 should be such that where it is permissible to treat an order as falling within the ambit of R.2, it must be taken

as being outside the ambit of R.3 for the obvious reason that R.3 is a more stringent provision requiring a strict construction.

It was further held:-

The plain and unambiguous language of the two provisions; the deliberate departure made in the phraseology of the two rules the undisputed need

to construe or R.3 strictly, the consequences which necessarily follow as a result of the construction made and the heading of the two rules are

factors which lead without any hesitation to the conclusion that rule 2 applies to all cases of default in appearance of all or any of the parties with

the result that R.3 does not apply to any of these cases. This conclusion also enables the defaulting party to have the order made under O.9 CPC

set aside in the manner provided for that purpose in the Code by showing there was valid reason for default in appearance on the dates fixed. This

is done in the manner prescribed by the Code. The expression such other order as it thinks fit used in R.2 permits disposal of the suit and not a

decision thereof on merits contemplated by R.3 in a mode other than that provided in O.9 e.g. by an order of the adjournment. It follows that R3

presupposes the presence of all parties and then the failure of the party at whose instance and for whose benefit the hearing was adjourned on the

previous date to perform the act necessary to the further progress of the suit. It is only to this class of cases that R.3 applies and it has no

application to cases falling within the ambit of R.2. Whenever such a question arises it has first to be seen whether R.2 applies to the facts of a case

since on R.2 being attracted the operation of R.3 would be automatically excluded. It is only when there is no default in appearance of all or any of

the parties that the question of applying R.3 would arise to the facts of a case provided the requirement laid down in R.3 are fulfilled.

Now adverting the facts of the present case, undisputedly the State had not led any evidence in the case in respect of its application under Sec.

30/33 and for this matter even issues had not been framed nor the State called upon to lead evidence. Though the provisions of the CPC applied

to the proceedings yet the stage for disposing of the application of the State on merits by invoking the provisions of R.20.17 had not been reached.

Therefore the order impugned dated 31.7.2001, which is said to be an order on merits, cannot be regarded as an order passed under R.20.17

under the expression ""make such order as it thinks tit."" The order impugned as such would still be an order passed under O.9 of the Code for

having been passed in absence of the State-petitioner. Application of O.9 Rule 13 shall not be thus excluded.

The preliminary contention of Mr. Anand learned counsel for the company therefore, is devoid of any merit.

The ground for setting aside the order impugned urged by the State-petitioner is that for prosecuting the case on its behalf the State had

engaged Mr. B. M. Sadiq Advocate who was paid his fee and whatever was possible within its means to do was done by engaging the counsel,

getting the objections drafted and filed. As a responsible counsel had been engaged who was earlier an Advocate General of the State it was

expected from him that he would not allow the litigation to be abandoned and he would prosecute the case diligently but contrary to the

expectation of the State the counsel engaged did not appear before the court for prosecuting the same on behalf of the State without any

justification nor he informed the State about his non-appearance. It is only on 6.11.2001 when petitioner No.2, the Chief Engineer, a functionary of

the State, happened to be in Jammu in connection with another arbitration matter, that he came to know about the judgment and decree impugned.

He applied for getting copies of the same which were issued on 29.11.2001. He then wrote a letter to the Administrative Department on

13.11.2001 and simultaneously took the matter with the Advocate General. It was decided that appeal should be filed and the matter was again

taken up with the Administrative Department who directed the Addl. Advocate General to file the appeal. After this decision petitioner No.2 wrote

a letter to Mr. B. M. Sadiq to return the papers of the case. He did so on 8.12.2001 and after examination of the same the Addl. Advocate

General prepared the appeal on 8th 9th December and filed the same on 11.12.2001. The appeal came to be disposed of as earlier said by the

Hon'ble Division Bench and hence this application was filed on 13.3.2003. The learned Advocate General has argued that there is no inaction or

want of diligence attributable to the State. It is oilier matter that the counsel engaged by the State has remained negligent in prosecuting the case on

its behalf. He has submitted that the State should not be allowed to suffer because of negligence of its counsel.

The case projected by the respondent-company in its objections is that the ex-parte order came to be passed against the State-petitioner not

only because of negligence of its counsel but also because of the negligence of the State to prosecute its case diligently. It has been stated that it

was the duty of the petitioner-State to ensure the appearance of its counsel and if that its counsel was not appearing, it should have engaged

another advocate.

I have considered the respective contention raised by learned counsel for the parties in this behalf and in my view application of the petitioner

merits to be allowed for the reason that a party cannot be allowed to suffer because of the negligence or inaction on the part of his counsel alone.

In Rafiq and Another Vs. Munshilal and Another, , the Apex Court in this behalf held as follows:-

Where an appeal filed by the appellant was disposed of in absence of his counsel, so also his application for recall of order of dismissal was

rejected by the High Court, the Supreme Court in appeal set aside both the orders of dismissal on ground that a party who, as per the present

adversary legal system, has selected his advocate, briefed him and paid his fee can remain supremely confident that his lawyer will look after his

interest and such a innocent party who has done everything in his power and expected of him, should not suffer for the inaction, deliberate omission

or misdemeanour of his counsel.

In the present case the State had engaged the services of a senior counsel for prosecuting its case. The counsel was expected to perform his

duties in accordance with the contract of his engagement. If the counsel has failed to perform his duty by appearing and prosecuting the case on

behalf of the State, the State under law cannot be allowed to suffer because of the default on part of its counsel. Moreover the case in hand refers

to an award passed by the Arbitrator through which claim of the respondent-company has been allowed to the extent of Rs. 88.30 lacs and the

counter claims of the State made to the tune of 1447.228 lacs against the company have been rejected. The State having been aggrieved of the

granting of the award in favour of the company filed an application u/s 30/33 A. A. seeking setting aside of the same. The application of the State

has been rejected by the impugned order. Looking at the merits of the case, in my view, it is a case where State should not be allowed to go

undefended. This appears to be an added reason for allowing the application of the State.

For the reasons staled above, the application of the State-petitioner under O.9 R. 13 C.P.C. is allowed, and the ex-parte judgment dated

31.7.2001 is set aside. Arbitration Petition No.54/99 is, therefore, directed to be restored to its original number and shall be listed for further

proceedings on a date to be fixed by the Registry in due course.