In a significant decision, the Andhra Pradesh High Court has ruled that a defendant cannot be prevented from presenting arguments in an ongoing case, even if an ex-parte order has been passed against them. The ruling came in response to Civil Revision Petition Nos. 1933 and 1934 of 2024, involving a dispute between M/s. Navayuga Engineering Company Ltd. (petitioner) and M/s. Structicon India Pvt. Ltd. (respondent).
Case Background
The dispute originated from Company Suit No. 5 of 2023 filed before the Special Court for Trial and Disposal of Commercial Disputes in Vijayawada. The petitioner, M/s. Navayuga Engineering Company Ltd., was the first defendant in the case, while Union Bank of India was the second defendant. Initially, the trial court had proceeded ex-parte against the defendants after they failed to appear on the designated date. The petitioner subsequently filed applications to reopen the case and to set aside the ex-parte order under Order IX Rule 7 of the Code of Civil Procedure (CPC), which were dismissed by the trial court on August 9, 2024.
Legal Issues Considered by the Court
The High Court had to address several key issues in this case:
1. Nature of the Ex-Parte Order: Whether the order passed under Order IX Rule 7 of CPC was an interlocutory order, making a revision under Section 115 of CPC inadmissible under Section 8 of the Commercial Courts Act, 2015.
2. Right to Convert Revision: Whether the petitioner could convert the revision filed under Section 115 of CPC to a petition under Article 227 of the Constitution, considering that the order was interlocutory.
3. Participation Rights: Whether the defendant could participate in the proceedings from the current stage (arguments), despite the ex-parte order, without affecting prior proceedings.
Arguments Presented
Petitioner’s Stand: Advocate M. Rahul Chowdary, representing M/s. Navayuga Engineering Company Ltd., argued that while the trial court’s ex-parte order could stand, the petitioner should still be allowed to participate in the pending stage of the proceedings, specifically during the arguments. He contended that barring participation at this stage would be contrary to natural justice principles.
Respondent’s Stand: Represented by Advocate Rosedar S.R.A., the respondents argued that the revision was not maintainable under Section 115 of CPC due to the bar imposed by Section 8 of the Commercial Courts Act. They maintained that the Commercial Courts Act aims to expedite proceedings, and extensive judicial intervention in interlocutory matters should be limited.
Key Observations by the High Court
The bench comprising of Justice Ravi Nath Tilhari and Justice Nyapathy Vijay, delivering the common order for the bench , made critical observations regarding the legal rights of a defendant in commercial disputes:
1. Interlocutory Nature of Ex-Parte Orders: The Court clarified that an order under Order IX Rule 7 of CPC is interlocutory, as it does not conclude the rights of the parties. Hence, revisions under Section 115 CPC are barred by Section 8 of the Commercial Courts Act. However, this does not restrict the High Court’s supervisory powers under Article 227 of the Constitution.
2. Conversion to Article 227: The Court ruled that revisions barred under Section 115 CPC can be treated as petitions under Article 227, allowing the High Court to exercise its broader supervisory jurisdiction. “The High Court’s power under Article 227 cannot be curtailed by statute; it exists to ensure fairness and correct errors of jurisdiction,” the Court noted.
3. Defendant’s Right to Argue: Emphasizing the principles of natural justice, the Court declared that a defendant has the right to present arguments at the ongoing stage of proceedings, even if they missed prior hearings. The Court cited Sangram Singh v. Election Tribunal, asserting that “a defendant cannot be prevented from participating in proceedings simply because they were absent earlier.”
4. Balancing Speed and Fairness: While acknowledging the intent of the Commercial Courts Act to expedite proceedings, the Court emphasized that speed should not come at the cost of justice. “The principle of expeditious disposal must not override the basic tenets of fairness and justice,” the Court observed.
The High Court’s ruling reaffirms that procedural defaults, like an ex-parte order, should not completely bar a party from participation in the ongoing trial. The Court’s decision emphasizes that even when procedural lapses occur, substantive justice must be ensured by allowing defendants to present their case at subsequent stages.
Conclusion and Directions
The High Court concluded that:
1. The ex-parte order under Order IX Rule 7 of CPC remains valid as an interlocutory order.
2. The revision under Section 115 CPC is not maintainable, but the petition can be converted to one under Article 227 of the Constitution.
3. The defendant is allowed to participate in the ongoing proceedings from the stage at which they are currently pending, without ‘setting the clock back.’
The Court directed the Special Court for Trial of Commercial Disputes to permit the petitioner to present their arguments without revisiting previously completed proceedings. It also instructed the lower court to expedite the case’s final resolution, considering the commercial nature of the dispute.
