MR. B.S. RAJA v. MR. B.S. HEMANTH

3. MR. S.N. BALAJI S/O S.K NAGARAJU AGED ABOUT 42 YEARS

4. MRS. G.S. PRATHIMA S/O S.N. BALAJI AGED ABOUT 37 YEARS 3RD AND 4TH RESPONDENT BOTH ADDRESSES AT: NO.20, J. RAGHAVA NILAYA, 2ND CROSS, 2ND MAIN, GELEYARA BALAGA, BENGALURU-560 022.

5. M/S RBH IMPEX PRIVATE LIMITED (A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT) NO.507, BDA LAND, APMC YARD, YESHWANTHPUR, BENGALURU-560 022.

6. M/S UNION BANK OF INDIA (FORMERLY ANDHRA BANK) A NATIONALIZED BANK REG. OFFICE AT NO.2/3, RAJA BUILDING, N.R. ROAD, BENGALURU-560 002 REP. BY ITS ASST. GENERAL MANAGER

7. MR. SATHYAPRASAD K S/O GUNESHWAR RAO MAJOR IN AGE RETIRED DGM OF ANDHRA BANK NO.2/3, RAJA BUILDING, N.R. ROAD, BENGALURU-560 002 …RESPONDENTS (BY SRI. PANCHAM R.D., ADVOCATE FOR RESPONDENT NOS.1 AND 2; VIDE ORDER DATED 05.09.2024, NOTICE TO RESPONDENT NOS.3 AND 4 IS DISPENSED WITH; NOTICE SERVED ON RESPONDENT NOS.5, 6 AND 7 BUT UNREPRESENETD) - 3 - NC: 2024:KHC:51741 WP No. 6570 of 2024 THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ORDER DATED 13.02.2019 OF THE HON'BLE LXXXII ADDL. CITY CIVIL AND SESSIONS COURT, BENGALURU (CCH-83) PASSED AGAINST THE PETITIONERS IN COM.O.S.NO.3468/2018 PRODUCED VIDE ANNEXURE-A AND ETC. THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE R. NATARAJ ORAL ORDER The defendant Nos.1 and 2 in Com.O.S.No.3468/2018 pending consideration before the LXXXII Additional City Civil and Sessions Judge, Bengaluru (henceforth referred to as 'Commercial Court') are before this Court challenging the correctness of an order dated 13.02.2019 by which, their written statement was taken as not filed and order dated

13.09.2019 by which, their request to file a written statement was rejected.

2. The parties shall henceforth be referred to as they were arrayed before the Commercial Court. The petitioners herein were the defendant Nos.1 and 2, while the respondent Nos.1 and 2 were the plaintiffs. The respondent Nos.3 to 7 were the defendant Nos.3 to 7 before the Commercial Court. - 4 - NC: 2024:KHC:51741 WP No. 6570 of 2024

3. (i) A suit in O.S.No.3468/2018 was filed for rendition of accounts of defendant No.5 and to direct the defendant Nos.1 to 5 to pay the share of the plaintiffs, which is quantified at Rs.74,90,312/- as on 01.10.2013 along with interest. The plaintiffs also sought for a direction to the defendant Nos.1 to 4 to repay loan amount of Rs.1,08,00,000/- along with interest. They further sought for a direction to the defendant Nos.1 to 4 to pay an amount of Rs.50,00,000/- that was paid by them to the defendant No.6 under the instructions of Debt Recovery Tribunal, Bengaluru, along with interest. They also sought for a direction to the defendant Nos.1 to 4 to pay Rs.2,64,00,000/-, which was recovered by the defendant No.6 by way of auctioning the property of the plaintiffs and the interest thereon and sought for award of Rs.2,00,00,000/- as compensation for the mental agony and litigation expenses. (ii) The summons in the suit was served on the defendant Nos.1, 2 and 6 and they entered appearance through an advocate on 30.07.2018. The suit was posted on

29.08.2018 for written statement of the defendant Nos.1, 2 and 6. The suit was transferred to the Commercial Court in - 5 - NC: 2024:KHC:51741 WP No. 6570 of 2024 view of the notification dated 10.01.2019 and the case was renumbered as Com.O.S.No.3468/2018 and posted on

18.01.2019. (iii) On 13.02.2019, the request of the defendant Nos.1 and 2 for time to file written statement was rejected and the written statement of the defendant Nos.1 and 2 was taken as not filed. Later on 13.09.2019, the defendant Nos.1 and 2 filed I.A.No.6 under Section 151 of the Code of Civil Procedure, 1908 (henceforth referred to as 'CPC') with written statement and requested the Commercial Court to receive the written statement. (iv) This application was rejected by the Commercial Court on the ground that the written statement ought to have been filed within 120 days from the date of service of summons, failing which, the defendants would forfeit the right to file the written statement.

4. Being aggrieved by the said order, the defendant Nos.1 and 2 are before this Court in this writ petition.

5. The learned counsel for the defendant Nos.1 and 2 contended that the defendant Nos.1 and 2 and the plaintiffs - 6 - NC: 2024:KHC:51741 WP No. 6570 of 2024 started business of import and export of spices and other grocery items. He contended that the defendant Nos.1 and 2 along with the plaintiffs mortgaged their personal immovable properties and obtained credit facilities from the respondent No.6. He alleged that the defendant No.1 noticed several abnormalities in the book of accounts of defendant No.5 for the period 2012-13 and when he confronted the plaintiff No.1, he was shocked. The defendant No.1 therefore, lodged a complaint before the jurisdictional police, who registered Crime No.153/2014. He claimed that the plaintiffs, requested the defendant No.1 to withdraw the criminal case and assured that they would restore all the amounts diverted by them for their personal use. Later, they filed a counter complaint against defendant Nos.1 and 2 and others in Crime No.245/2014 on

16.12.2014. The plaintiffs thereafter resigned from their posts of Directors of the Company. He contends that due to the loan becoming stale, the defendant No.5 initiated proceedings under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, as a result of which, the defendant Nos.1 and 2 had to redeem their properties by obtaining the loan from another bank during the - 7 - NC: 2024:KHC:51741 WP No. 6570 of 2024 year 2016 and paid it off to the defendant No.5. He contended that the plaintiffs also compelled the defendant Nos.1 and 2 to undergo an ordeal facing a criminal C.C.No.15095/2016. The defendant Nos.1 and 2 alleged that while the plaintiffs were anticipating an adverse impact out of the criminal case lodged against them, they filed the suit in O.S.No.3468/2018 for various reliefs. He contended that the defendant Nos.1 and 2 filed an application (I.A.No.3) under Order VII Rule 11(a) and (d) to reject the plaint as it was not maintainable. He contends that the suit was then transferred to the Commercial Court in view of the notification dated

10.01.2019 and renumbered as Com.O.S.No.3468/2018 on

18.01.2019. The application for rejection of plaint was dismissed on 26.07.2019. He contends that on 13.09.2019, the defendant Nos.1 and 2 filed an application (I.A.No.6) under Section 151 of CPC along with the written statement and requested the Commercial Court to accept the written statement, which however was rejected in terms of the impugned order. The learned counsel therefore, submits that an opportunity be granted to the defendant Nos.1 and 2 in view of the far-reaching reliefs sought for by the plaintiffs in the suit. - 8 - NC: 2024:KHC:51741 WP No. 6570 of 2024

6. Per contra, the learned counsel for the plaintiffs contended that the defendant Nos.1 and 2 were bound to file the written statement within 120 days before the Civil Court. He contends that since the defendant Nos.1 and 2 did not take any steps to file the written statement, they were not entitled to any further indulgence before the Commercial Court.

7. I have considered the submissions of the learned counsel for the defendant Nos.1 and 2 as well as the learned counsel for the plaintiffs.

8. Chapter - V of the Commercial Courts Act, 2015 deals with the procedure to be adopted in the case of transfer of pending suits from Civil Court to Commercial Court. Section 15(4) of the Commercial Courts Act mandates that the Commercial Court may hold case management hearings in respect of such transferred suit in order to prescribe new timelines or issue further directions as may be necessary for speedy and efficacious disposal of such suit or application in accordance with order XV-A of CPC.

9. A perusal of the order sheet maintained in the present case shows that the Commercial Court after transfer of - 9 - NC: 2024:KHC:51741 WP No. 6570 of 2024 the suit from the Civil Court to it, did not conduct any case management hearings. However, the Commercial Court treated the written statement of the defendant Nos.1 and 2 as not filed. The outer limit prescribed for filing the written statement under Order VIII Rule 1 of CPC had not expired by the time the suit was transferred to the Commercial Court. Therefore, the Commercial Court was bound to prescribe timelines within which the written statement had to be filed. The application filed by the defendant Nos.1 and 2 under Order VII Rule 11 (a) and (d) of CPC was dismissed for non-prosecution on

26.07.2019. Therefore, it is evident that there was violation of the procedure to be adopted by the Commercial Court in not fixing new timelines for the defendant Nos.1 and 2 to file the written statement. At the same time, the defendant Nos.1 and 2, who were served with the summons in the suit on

30.07.2018 must have acted with alacrity in filing the written statement within 30 days or must have filed application for extension of time to file the written statement. Their failure to do so shows their neglect in defending the proceedings and are bound to atone for their mistake. In that view of the matter, the impugned orders passed by the Commercial Court treating - 10 - NC: 2024:KHC:51741 WP No. 6570 of 2024 the written statement of the defendant Nos.1 and 2 as not filed and further rejecting the application filed by the defendant Nos.1 and 2 to accept the written statement deserve to be interfered with but by placing the defendant Nos.1 and 2 on terms.

10. Hence, the following ORDER (i) This writ petition is allowed. (ii) The impugned orders dated 13.02.2019 and

13.09.2019 passed by the LXXXII Additional City Civil and Sessions Judge, Bengaluru in Com.O.S.No.3468/2018 are set aside. (iii) The application (I.A.No.6) filed by defendant Nos.1 and 2 under Section 151 of CPC seeking permission to file the written statement is allowed subject to the payment of cost of Rs.25,000/- (Rupees Twenty Five Thousand only) payable by the defendant Nos.1 and 2 to the plaintiffs in equal portion - 11 - NC: 2024:KHC:51741 WP No. 6570 of 2024 before the Commercial Court on the next date of hearing. (iv) It is made clear that if the cost is not paid, the Commercial Court shall proceed in accordance with law and dispose off the suit in accordance with law.

11. In view of disposal of the petition, pending I.As., if any, do not survive for consideration and the same stand dismissed. Sd/- (R. NATARAJ) JUDGE PMR List No.: 1 Sl No.: 49