Winds of Change in Commercial Disputes via Summary Judgments ― The Why, the How and the Way Forward

Introduction

Summary judgment, as the combination of two words suggests, is an outcome of a case decided summarily, based on the documentary evidence produced before the court by the parties, without going for a recording of the oral evidence.

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015¹, as amended (in short “CCA”) has been enacted with the goal of creating a streamlined procedure to be used for the conduct of cases in the commercial courts and in the commercial divisions by amending the Code of Civil Procedure, 1908² (hereinafter “CPC”), so as to improve the efficiency and reduce delays in disposal of commercial cases.Commercial disputes will be resolved in a timely way thanks to the proposed case management system and summary judgment provisions.³ The Law Commission of India recommended the reforms in order to bring Indian commercial litigation up to par with international standards.⁴

Order 13-A⁵ has been incorporated in CPC only for purposes of adjudication of commercial suit under the said Act. The said order reads as under:

1. Scope of and classes of suits to which this order applies. ― (1) This order sets out the procedure by which courts may decide a claim pertaining to any commercial dispute without recording oral evidence.

(2) For the purposes of this order, the word “claim” shall include―

(a) part of a claim;

(b) any particular question on which the claim (whether in whole or in part) depends; or

(c) a counterclaim, as the case may be.

(3) Notwithstanding anything to the contrary, an application for summary judgment under this order shall not be made in a suit in respect of any commercial dispute that is originally filed as a summary suit under Order 37⁶.

2. Stage for application for summary judgment. ― Once the defendant has received summons, an application for summary judgment may be requested at any time thereafter:

Provided that, no application for summary judgment may be made by such applicant after the court has framed the issues in respect of the suit.⁷

It was held in Christian Louboutin Sas v. Abubaker⁸ that the provisions relating to summary judgment which enable courts to decide claims pertaining to commercial disputes without recording oral evidence are exceptional in nature and out of the ordinary course which a normal suit has to follow. In such an eventuality, it is essential that the stipulations are followed scrupulously otherwise it may result in gross injustice. A specific period of time has been provided during which an application for summary judgment can be made. That period begins upon the service of summons on the defendant and ends upon the court framing issues in the suit. Power also would have to be exercised during this window. In addition to this, a summary judgment under Order 13-A CPC is not permissible without there being an appropriate application for summary judgment. The contents of an application for summary judgment are stipulated in Rule 4⁹ of Order 13-A. The application is required to precisely disclose all material facts and identify the point of law, if any. In the event, the applicant seeks to rely on any documentary evidence, the applicant must include such documentary evidence in its application and identify the relevant content of such documentary evidence on which the applicant relies. The application must also state the reason why there are no real prospects of succeeding or defending the claim, as the case may be.

Rule 4(2) of Order 13-A also requires that where a hearing for summary judgment is fixed, the respondent must be given at least thirty-day notice of the date fixed for the hearing and the claim that is proposed to be decided by the court at such hearing. Rule 4(3) of Order 13-A makes provision which enables the respondents to file a reply within the stipulated time addressing the matters set forth in clauses (a) to (f) of the said sub-rule. In particular, the reply of the respondent ought to precisely disclose all the material facts and identify the point of law, if any, and the reasons why the relief sought by the applicant for summary judgment should not be granted. Just as in the case of the applicant, the respondent is also given the opportunity to rely upon documentary evidence in its reply which must be included in the reply and the relevant content identified. The respondent’s reply is also required to give reason as to why there are real prospects of succeeding on the claim or defending the claim, as the case may be. Importantly, the reply must also concisely state the issues that should be framed for trial and that it must identify what further evidence would be brought on record at trial that could not be brought on record at the stage of summary judgment. The reply should also state as to why in the light of the evidence or material on record, if any, the court should not proceed to summary judgment.

Rule 2 of Order 13-A: Mandatory or directory?

Although the proviso to Rule 2 of Order 13-A clearly states that no application for summary judgment may be made after the court has framed the issues, it must be remembered that the Supreme Court has previously ruled in ITC Ltd. v. Debts Recovery Appellate Tribunal¹⁰ that just because the issues have been framed, that does not mandate a trial if it is made clear to the court that the same is not required.

In numerous rulings, the courts have cited Zubair Ul Abidin v. Sameena Abidin¹¹, Geodis Overseas (P) Ltd. v. Punjab National Bank¹² as well as A.N. Kaul v. Neerja Kaul¹³ and have held that the court must make sure that no deadwood case is left on the roster at the expense of other worthy and deserving cases, and such deadwood cases must be dropped at every stage.¹⁴

The proviso to Rule 2 of Order 13-A is intended to prevent petitions for summary judgment from being filed after the issues have been framed. This is done to ensure that the trial does not get prolonged. The court has the authority to dismiss such an application in limine if it is shown to be dilatory. The proviso to Rule 2 of Order 13-A, cannot be read mandatorily and to that extent is directory. The Commercial Courts Act’s stated goal is to speed up the disposal of commercial lawsuits in all circumstances, and none of its provisions can be interpreted as working counterproductive to that goal. If, despite finding a lawsuit eligible for summary judgment, the court feels constrained solely because issues have been raised, then this would also slow down rather than speed up the disposal of commercial lawsuits.¹⁵

After application of the summary judgment, the respondent must reply in the prescribed manner within 30 days. Accordingly, the court may issue an order it deems fit, including judgment on the claim, dismissal of the claim, dismissal of the application, a conditional order (for instance, subject to providing security for restitution of costs), and the like.¹⁶

Assessing the aim of summary judgments

Despite litigations having a clear outcome that could be determined on merits, it was necessary for them to go through the procedure under the CPC, thereby making it a time-consuming process. This is why Order 13-A of the Code of Civil Procedure, 1908, was created to provide for a process of summary judgment in order to end the delays brought by technicalities.An application for summary judgment could be made in relation to a relief in a commercial dispute, whereas summary suits were made in relation to reliefs connected to liquidated demand or a fixed sum of debt.¹⁷

Summary judgments seek to eliminate drawn-out processes of presenting oral evidence in specific circumstances, thereby permitting quick disposal of commercial disputes in a time- bound manner.¹⁸ The purpose of summary judgment is to ascertain whether the parties have evidence justifying the burden of a trial.¹⁹

Summary judgment is referred to as a crude tool that has the power to abruptly terminate legal proceedings. While a summary judgment does not replace a formal trial, it is a mechanism that courts can use to eliminate situations that can be settled without one. Additionally, it enables the court to streamline and simplify the cases in order to make the trial more efficient and focused on the areas of actual contention.

Grounds on which summary judgment can be sought²⁰

Emphasising the scope of Order 13-A CPC, the Delhi High Court in the judgment of Bright Enterprises (P) Ltd. v. MJ Bizcraft LLP²¹, held as under:

Rule 3²² of Order 13-A CPC authorises the Court to give a summary judgment against a plaintiff or defendant on a claim if it believes that ―

(a) the plaintiff has no genuine possibility of succeeding on the claim or the defendant has no real prospect of successfully defending the claim, as the case may be; and

(b) there is no other cogent reason why the claim should not be disposed of before recording of oral evidence.

In the judgment of Rockwool International A/S v. Thermocare Rockwool (India) (P) Ltd.²³, the Delhi High Court marked the following essentials for passing a summary judgment:

(a) there is no real prospect of a party succeeding in a claim;

(b) no oral evidence would be required to judge the matter; and

(c) there are persuasive grounds for permitting or not permitting the claim without oral evidence.

In Ambalal Sarabhai Enterprises v. K.S. Infraspace LLP²⁴, the Supreme Court held that a review of the Statement of Objects and Reasons of the Commercial Courts Act, 2015²⁵ as well as the various amendments to the CPC and the addition of new rules to the Code (applicable to suits of commercial disputes) shows that they were introduced to facilitate expeditious and fair disposal of high-value commercial disputes at a reasonable cost. To accelerate the resolution of commercial disputes, the statutory requirements of the Commercial Courts Act and the phrases incorporated therein must be understood meaningfully. This will further contribute to the nation’s economic growth.

The Madras High Court observed in Syrma Technology (P) Ltd. v. Powerwave Technologies Sweden AD²⁶ that the Commercial Courts Act was passed with the goal of providing both qualitative and quantitative judgments. The law places responsibility for attaining the stated goal on all parties involved, including the judiciary, in achieving the avowed object.

It was held by the Delhi High Court in Su-Kam Power Systems Ltd. v. Kunwer Sachdev²⁷ that according to Rule 3 of Order 13-A CPC, the Court may issue a summary judgment against the defendant if it is determined that the defendant has no realistic chance of defeating the claim and that there are no other compelling reasons why the claim should not be resolved before the taking of oral testimony. The Court further stated that the purpose of the introduction of summary judgment under Order 13-A of the Code was to offer a remedy that was independent, separate, and different from judgment on admissions, as defined under Order 37 of the Code.

The Delhi High Court was pleased to grant the defendant’s motion for summary judgment in a case involving alleged software plagiarism, where the outcome of the case largely depended on the expert testimony of a third party who examined the two software’s program code and concluded that there was no evidence of copying.²⁸

Cases wherein summary judgment has been set aside

There are plenty of cases where summary judgments have also been set aside. In Syrma Technology (P) Ltd. v. Powerwave Technologies Sweden AD²⁹, the defendant had received an advance payment for a full shipment of antennae but still it only shipped a part of the order. The defendant also did not refund the remainder of the amount paid, claiming to have adjusted the money against other dues from the plaintiff on oral instructions given by the plaintiff’s holding company. The Single Judge granted the plaintiff’s request for summary judgment, noting in particular the defendant’s lack of clarification in its pleadings by failing to name the individuals who had given and received the oral instructions on which the defendant’s case hinged. The Madras High Court’s Division Bench reversed the order of the Single Judge. The Division Bench concluded that the case should go to trial because there was a chance, albeit remote, that the defendant might succeed. However, this was made conditional to the deposit of a sum of Rs 2.8 crores by the defendant in court. This made up a sizeable chunk of Rs 3.9 crores in dispute.

In Bright Enterprises (P) Ltd. v. MJ Bizcraft LLP³⁰, the Court held that Rule 3 of Order 13-A CPC empowers the Court to give a summary judgment against a plaintiff or defendant on a claim by the other party. However, this authority can only be used in response to an application made at any time after the defendant has received summons, but not after the court has set the issues of the case. Therefore, the window for summary judgment is after the defendant has been served with the summons and before the court frames the issues in the case. The learned Single Judge was thus wrong in invoking the provisions of summary judgment because he was first required to summon the respondents and defendants, particularly given that they had not appeared at the time of presentation of the plaint and did not admit the claim of the appellant-plaintiffs. However, the learned Single Judge did not return the plaint in accordance with Order 7 Rule 10³¹ and also, did not reject it in accordance with Order 7 Rule 11³² CPC. The doctrine of “audi alteram partem” or “hear the other side” is a part of Order 5 Rule 1 sub-rule (1)³³ read in conjunction with Section 27 CPC³⁴. Contrary to the statute’s provisions, the Single Judge rejected the lawsuit at the admitting stage without issuing a summons.

In Marco Polo Restaurant (P) Ltd. v. Amit Tiwari³⁵, the moot question for consideration raised before the Court was whether the summary judgment of eviction of tenant under Chapter XIII-A of the Delhi High Court (Original Side) Rules and decree dated 12-4-2016 passed by the learned Single Judge was sustainable or not. A curious thing about the impugned judgment is that the learned Single Judge did not clearly state that the defendant has no good defence to the plaintiff’s claim on merit. Still the learned Judge adjudicated on the disputed questions on merit by determining preponderance of probability, which could have been done only after a full-fledged trial of the suit. The clear finding that a defendant has no defence to the plaintiff’s claim is sine qua non for pronouncement of a judgment in favour of a plaintiff in a summary procedure under Chapter XIII-A of the Original Side Rules. This has been the ratio of the judgment rendered in W. Newman & Co. Ltd. v. Apollo Zipper India Ltd.³⁶ The Court believed that the appellant-defendant had a strong defence and a strong case for trial based on the observations made. The findings of the learned Single Judge in the contested judgment were also disapproved, and the contested judgment was accordingly annulled.

Summary judgments in USA

Rule 56 of the Federal Rules of Civil Procedure state that summary judgment may be granted, without trial, on the basis of affidavits, depositions, and other materials showing “that there is no genuine issue as to any material fact and that the moving party is entitled to relief as a matter of law”.³⁷ The purpose of the summary judgment device is to ascertain whether the parties have evidence justifying the burden of a trial.³⁸

The 1938 rule makers placed primary reliance on Rule 56 providing for summary judgment as the means to extinguish unfounded allegations, claims and defences. This device was not a 1938 invention; it bore some resemblance to the old demurrer to the evidence, and to other devices in use in the nineteenth century.³⁹ Summary disposition offers the promise of being more “speedy and inexpensive” and hence more just.⁴⁰ Summary judgment procedure is properly regarded not as a disfavoured procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed “to secure the just, speedy, and inexpensive determination action”.

Summary judgment is proper only when there is no dispute about material facts. The old song that summary judgment is to be “used sparingly” in complex cases seems outmoded; nowadays, courts are willing to consider summary judgment in any kind of case.⁴¹

Unraveling the consequences and the way forward in India

Though Order 13-A CPC, provides for presentation of a formal application as also the outer time-limit for moving such an application, however, not only in view of the Original Side Rules of the Delhi High Court to the contrary but also interpreting the provisions of Order 13-A CPC by the Delhi High Court on the touchstone of doctrine of purposive legislation, while interpreting the same, held that a request for summary judgment is not necessarily required to be made in an application, and that the court is empowered to determine whether a case for summary judgment is made out, even after the settlement of the issues. The court can do so on its own/“suo motu” or at the request of either party.⁴² In this regard, reference can be made to K.R. Impex v. Punj Lloyd Ltd.⁴³, Mallcom (India) Ltd. v. Rakesh Kumar⁴⁴ and Jindal Saw Ltd. v. Aperam Stainless Services and Solutions Precision Sas⁴⁵.

The Delhi High Court has held that the Court may even pass summary judgment suo motu in a commercial dispute if enabled by the rules of the Court.⁴⁶ Rule 1 of newly added Chapter X-A of the Delhi High Court (Original Side) Rules, 2018⁴⁷, introduced with effect from 1-11-2018 also permits the Court to, of its own, pass summary judgment at the time of case management hearing which can also be post-framing of issues in the suit.⁴⁸

The Bombay High Court⁴⁹ recently exercised its powers under Order 13-A CPC to dismiss the suit of the plaintiff, before recording of evidence, on the grounds that the plaintiff had approached the Court with a completely false case (including submitting fabricated documents) only with a view to extort monies from the defendant. Accordingly, it was found that the plaintiff had no real prospect of succeeding in the litigation and that the defendant were thereby entitled to a summary judgment under the Act.

The fact that the courts are willing to consider such motions does suggest that summary judgments are being used as a powerful tool by the applicants in commercial disputes to speed up the legal process.⁵⁰ It is undeniable that the courts have used this provision to reduce delays brought about by the adoption of frivolous or unfounded grounds.

This provision is useful, particularly in situations where there has been a default by defendants i.e. where they have not entered an appearance or have failed to file a written statement. There are also “ex parte” cases, in which the courts have examined documents, that have been provided by the plaintiffs to determine if a defendant has genuine chances or prospects of success. Keeping such relevant factors in mind, the court conclude accordingly.⁵¹

It is irrefutable that the provisions relating to summary judgment in the CPC are an extremely useful tool in ensuring that commercial suits are disposed of efficiently and quickly, without unnecessary delay. Although it is commendable that the provision for a summary judgment was included, still courts have seen far too many frivolous litigations. As pointed out by learned Judges time and again, the conditions outlined in Order 13-A are to be adhered to with extreme strictness, and the “real prospect” of prevailing in a claim or defence must be interpreted not only to prevent injustice to parties but also to prevent frivolous litigation.⁵² It is essential that the stipulations are followed scrupulously otherwise it may result in gross injustice.⁵³