India – Application Of Commercial Courts Act, 2015 In Transferred Suits Applications- Delhi High Court Clarifies.

In the appeal titled Dish TV India Ltd V Gulf DTH FZ LLC & Ors. FAO(OS) 26/2019 & CM APPL. 34384/2016, the Division Bench of the Delhi High Court allowed the said appeal filed by the Appellant/Defendant No. 1 Dish TV India Ltd, for taking on record its written statement, which was refused to be taken on record vide order dated April 19, 2016, on account of delay of 120 days.

Facts

The Respondent No. 1/Plaintiff Gulf DTH FZ LLC is a direct-to-home (DTH) satellite subscription pay television platform, having its registered office in Dubai, which claims to hold an exclusive license granted to it by copyright owners for transmission of various television channels in the Middle East and North African region (commonly referred to as ‘OSN territory’). On the other hand, the Appellant/Plaintiff No. 1 is an Indian DTH service provider. The Respondent No. 1/Plaintiff had filed a suit against the Appellant/Defendant No. 1, seeking a permanent injunction as well as damages, to restrain the Appellant/Defendant No. 1 from distributing the set-top boxes and smart cards, as well as from activating any smart cards for use by consumers in the OSN territory.

The Court issued summons on November 16, 2015, which were served upon the Appellant/Defendant No. 1 on December 19, 2015. Subsequently, the Appellant/Defendant No. 1 filed an application under Order VII Rule 10 and 11, seeking rejection of the plaint on the grounds of lack of cause of action as well as lack of territorial jurisdiction. The Single Bench, vide order dated April 19, 2016, closed the right of the Appellant/Defendant No. 1 from filing its written statement under Order VIII Rule 1 beyond the period of 120 days mandated under the Code of Civil Procedure, 1908 (CPC), as amended by the Commercial Courts, Commercial Division and the Commercial Appellate Division of High Courts Act, 2015 (hereinafter referred to as “Commercial Courts Act, 2015”).

The Appellant/Defendant No. 1, on April 21, 2016, filed an application under Order XLVII Rule 1 r/w Section 114 of CPC seeking for review/recall of the order dated April 19, 2016. The Single Bench, vide order dated August 30, 2016 (hereinafter referred to as “the impugned order”), dismissed the application of the Appellant/Defendant No. 1 under Order XLVII Rule 1, which had sought for the review/recall of the order dated April 19, 2016. Vide same impugned order, the Court also dismissed the application filed under Order VII Rule 10 & 11, thereby allowing the application under Order XXXIX Rules 1 and 2 filed by Respondent No.1/Plaintiff, and directed its Registry to renumber the said suit as a commercial suit.

This led to the filing of the present appeal by the Appellant, seeking to set aside the impugned order to the extent that the review application filed by the Appellant was dismissed and that the right to file the written statement was closed.

Submissions by Appellant/Defendant No. 1

The Appellant/Defendant No. 1 made the following submissions in order to show that the present appeal is maintainable:

1. The present appeal would be maintainable as the suit filed by Respondent/Defendant No. 1 was in the nature of an ordinary civil suit, which was converted to a commercial suit only via the impugned order, and the impugned order was passed in exercise of ordinary original civil jurisdiction.
2. The present appeal would be maintainable as the Respondent’s suit was filed on November 5, 2015, i.e. before the formation of the Commercial Division at the High Court on November 17, 2015.
3. The present appeal would be maintainable as Section 13 of the Commercial Courts Act is not applicable to the orders passed prior to the suit being converted into a commercial suit.
4. The impugned order shall be treated as a “judgment” as it affects the valuable right of the Appellant to file its written statement.
5. The second proviso to Sub-Rule (1) of Rule 1 of Order V CPC would not apply if the 120-day period expired before the suit was transferred to a commercial court.
6. The Commercial Court/Commercial Division can exercise its discretionary powers under Section 15(4) of the Commercial Courts Act for extending the time limit for filing written statements in case of transferred suits.
7. The present case will be governed as per unamended Order VIII Rule 1 CPC, to be directory and not mandatory.

Submissions by Respondent No. 1/Plaintiff

1. The Commercial Courts Act, 2015 came into force on October 23, 2015, and the Commercial Division of the High Court was constituted via notifications dated November 6, 2015, and November 17, 2015, effective November 15, 2015. Therefore, the present Act will be applicable to all pending suits before this Court, which are subject matter provided in Section 2(c) of the Act.
2. The present suit is in nature of a commercial dispute, which has to be looked at as per Section 13 of the Commercial Court Act.
3. The Appellant has forfeited its right to file its written statement within 120 days as per proviso to Order VIII Rule 1 of CPC as amended by the Commercial Courts Act.
4. The impugned order has neither affects any valuable right of the Appellant, nor does it finally or conclusively decide the disputes between the parties.
5. The Single Bench has rightly exercised its discretion provided to Section 15(4) of the Commercial Courts Act by not extending the time for the Appellant to file the written statement.

Analysis

The Bench, after a careful hearing of the arguments from both sides, observed that the present suit filed by the Respondent No.1/Plaintiff is an ordinary civil suit on November 5, 2015, whereas the Commercial Division of the High Court was constituted via notifications dated November 6, 2015, and November 17, 2015, with effect from November 15, 2015. The Bench added that since the present suit was filed as an ordinary civil suit, it ought to be transferred to the Commercial Divisions of this Court as per the provisions of Section 15(1) of the Commercial Court Act. The above provision specifies that all suits/applications relating to a commercial dispute of a specified value shall be transferred to the Commercial Division of the High Court. Sub-section (4) of Section 15 further provides that after such suits/applications have been transferred to the Commercial Division of the High Court, the Commercial Division is empowered to hold case management hearings in order to prescribe fresh timelines as per the provisions of the Act.

However, the proviso to sub-section (4) of Section 15 clearly indicates that the proviso to sub-rule (1) of Rule 1 of Order V of the Code of Civil Procedure, 1908 shall not be applicable to such transferred suits/applications, and the Court has the discretion to provide fresh timelines for filing of the written statement post the issuance of the summons. The Court, by applying the above provisions in the present case, observed that the present suit, though filed as a civil suit, will qualify as a “commercial dispute” and thus was required to be transferred to the Commercial Division of the High Court, wherein the above provisions of Section 15 of the Act will come into the picture. The Court observed that Respondent No. 1/Plaintiff had not filed the suit in terms of the Commercial Courts Act; it was only by the impugned order that the Single Bench had directed the suit to be renumbered as a commercial suit.

The Bench later dealt with the next issue as to whether the present appeal is maintainable under Section 10(1) of the Delhi High Court Act, 1966. The Respondent No. 1/Plaintiff had referred to the judgement of HPL (India) Limited and others v. QRG Enterprises and another stating that the present appeal is not maintainable as Section 13 (2) of the Commercial Courts Act excludes the application of Letters Patent, whereas Section 21 provides that the Act would have overriding effects over other laws for the time being in force as a result of conflict, to which the Bench disagreed with the above arguments and stated that the same is not applicable as in the present suit, the impugned order was passed prior to the conversion of the suit into a commercial suit, and that the time period for filing the written statement will apply from the date on which the suit has been converted to a commercial suit.

The Court relied on the observation of the Apex Court in Shah Babulal Khimji (supra) and went on saying that the impugned order would qualify as a “judgement”, and if the Appellant’s written statement is not taken on record, vital rights of the Appellant in defending the suit would be affected. Thus, it held that the present appeal is maintainable under Section 10(1) of the Delhi High Court Act, 1966.

Lastly, the Court dealt with the issue of the right of the Appellant/Defendant No. 1 to file its written statement after the expiry of a 120-day period from the date of issuance of the summons. The Bench referred to the decision of the Supreme Court in Raj Process Equipments and Systems Pvt. Ltd. v. Honest Derivatives Pvt. Ltd., and by applying the ratio of the same, it held that the period of 120 days to file the written statement would only be applicable from the date when the suit has been transferred to the Commercial Division of the High Court and that the Court can exercise its discretion under Section 15(3) of the Act for putting up the matter for case management hearings and to provide a fresh timeline for filing of the written statement. The Bench disagreed with the submission of Respondent No.1/Plaintiff that the Single Bench has rightly exercised its discretion as per proviso to Section 15(4) of the Act for not extending the timeline to file the written statement.

Conclusion

Accordingly, the Bench allowed the present appeal and thereby set aside the impugned order. The Bench further ordered that the written statement filed by the Appellant/Defendant No. 1 be taken on record, and the suit shall proceed from that aforesaid stage.