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Appeals under the Commercial Courts Act: The Saga Continues! By Saurabh Seth

By Adv Saurabh Seth      12 August, 2021 01:13 PM      0 Comments
Appeals under the Commercial Courts Act

The Division Bench of the Delhi High Court in a recent decision rendered in Delhi Chemicals and Pharmaceutical Works Pvt. Ltd. v. Himgiri Realtors Pvt. Ltd. (“Delhi Chemicals”) EFA (OS)  (Comm) No. 4 / 2021 has added yet another chapter to the continuing saga regarding maintainability of intra court appeals under the Commercial Courts Act, 2015 (“CC Act”). 

In Delhi Chemicals, the Division Bench was called upon to adjudicate on the validity of an order passed by the Commercial Division of the Delhi High Court in enforcement / execution proceedings. The order assailed before the Division Bench was an order directing the judgment debtor to disclose its assets under the provisions of Order XXI Rule 41 of the Code of Civil Procedure, 1908 (“CPC”) and also an affidavit in terms of the annexures to the judgment in Bhandari Engineers & Builders P. Ltd. v. Maharaja Raj Joint Venture (“Bhandari”) reported as MANU/DE/4601/2019.

While adjudicating the validity of such a direction, the question of maintainability of the appeal once again cropped up, and the Division Bench was called upon to opine on an issue which was the subject matter of two contradictory views of earlier Division Benches in (1) HPL (India) Ltd. v. QRG Enterprises (“HPL”) (2017) 238 DLT 608 (DB) and (2) D&H India Ltd. Superon Schweisstechnik India Ltd. (“Superon”) 2020 (268) DLT 15 (DB). 

This case presented a perfect opportunity to the Division Bench to settle this vexed question and clear the air of uncertainty looming large over the very maintainability of such appeals.

Unfortunately, the Division Bench seems to have spurned this opportunity! 

Instead, the Division Bench seems to have added to the confusion by attempting to marry the judgments in HPL and Superon and carving out additional categories of appeals available to parties under the CC Act, which are elaborated later in this article.

The CC Act was introduced with much fanfare in the year 2015 with the avowed object of streamlining and expediting high value commercial litigation. The centrifugal purpose of the legislation, or so it seems, was to accelerate economic growth by instilling a sense of confidence in judicial process in the eyes of Indian and foreign investors by promising them speedy and efficient adjudication of legal disputes. 

The object and purpose with which the CC Act was enacted seems to have been forgotten. That, ofcourse, is a larger debate. For the purposes of this piece, I restrict myself to the issue of maintainability of appeals under the CC Act. 

Section 13 is arguably one of the most controversial provisions in the CC Act. Section 13, read plainly, seeks to minimise judicial interference by an Appellate Court in cases / matters pending before the Commercial Division or a Commercial Court, as the case may be. However the language of Section 13 leaves much room for interpretation and thus causes immense confusion. To add insult to injury we find Courts taking contrary views with respect to the interpretation of the said provision. 

One of the earliest judgments interpreting Section 13 was rendered by the Bombay High Court in the case of Hubtown Ltd. v. IDBI Trusteeship Service Ltd (“Hubtown”) [2016 SCC Online 9019]. In that case, the Bombay High Court gave a liberal interpretation to the language of  Section 13. The Court adopted the test laid down in the celebrated judgment - Shah Babulal Khimji v. Jayaben D. Kania [1981 (4) SCC 8] (“Khimji”) to, inter alia, hold that even interim / interlocutory orders passed by a Commercial Division or a Commercial Court would be appealable to the Commercial Appellate Division. The well known test of “matters of moment” was adopted in Hubtown to hold that the term ‘judgment’ appearing in S. 13 would have to be given an expansive meaning.

This interpretation was read down and frowned upon by the Division Bench of the Delhi High Court in HPL. The Court found that the judgment rendered in Hubtown did not correctly interpret the law and was thus erroneous. The Division Bench in HPL, after considering the scope and object of the CC Act, came to the conclusion that appeals against interlocutory orders which were not final judgments or a decree could not be appealed against unless they fall strictly in the categories provided in Section 13 of the CC Act.

Both Hubtown and HPL were assailed before the Supreme Court and it was expected that the Supreme Court would settle this issue once and for all. The disputes in Hubtown however were settled amongst the parties, and the appeal was accordingly withdrawn. The appeal in HPL, on the other hand, is currently pending adjudication before the Supreme Court. 

Since then a large number of judgments have been rendered on this aspect, most of which have sided with the reasoning rendered in HPL. Both the Delhi High Court and the Bombay High Court, in particular, have been following the dicta laid down in HPL, and even expanding the same to a certain extent. 

One significant judgment deserves special mention. In Sigmarq Technologies P. Ltd. v. Manugrah India Ltd. [2017 SCC Online 9191] (“Sigmarq”), the Bombay High Court has attempted to reconcile the views in Hubtown with later views of that Court [which follow HPL]. The judgment in Sigmarq goes on to suggest that even an interlocutory order would be appealable, if it finally decides the rights of a party in a matter. Thus, in essence, the principles enunciated by Hubtown [following Khimji] have once again been reiterated by the Bombay High Court to a certain extent.

In Superon however, a completely tangential reasoning is adopted by the Delhi High Court. While construing the proviso to S. 13 in an expansive manner, it was held that appeals not expressly provided therein could also be filed. The earlier view in HPL [followed by others] seems to have been abandoned by such reasoning;

“(iii) The proviso to Section 13 (1A) cannot, in our view, be read as limiting the right to appeal, conferred by Section 13 (1A). The said proviso merely states that, from orders passed by the Commercial Division of the High Court, as are specifically enumerated under Order XLIII of the CPC, an appeal would lie under Section 13 (1A). In our view, the proviso cannot be read as meaning that no appeal would lie in any other case, especially where the order under appeal has not been passed under the CPC at all, but under Rule 5 in Chapter II of the 2018 Original Side Rules.”

The above view is completely at variance with the reasoning in HPL. Thus, rather than resolving this vexed question, the Bench in Superon seems to have created more issues and confusion.

Delhi Chemicals gave the perfect opportunity for the Division Bench to have resolved this issue and lend clarity on the subject. The Division Bench in its reasoning tends to sway towards the view taken in HPL, and adversely comments on Superon for not following HPL in letter and spirit. Having said that the Division Bench then attempts to marry the conclusion of the judgments by providing various additional avenues for appeal under S. 13 of the CC Act. The ultimate finding in Delhi Chemicals is as under:

“During the hearing, we had also wondered whether holding that the appeals arising from orders made in the course of execution proceeding to be also governed by Section 13 of the Commercial Courts Act would result in no appeal whatsoever lying from any order or judgment in a proceeding for execution of a judgment, decree or arbitral award in a commercial dispute. We however find it to be not so. Rules 46H and 103 of Order XXI of the CPC provide for adjudication of the disputes specified therein to be having the force of a decree and which would then be appealable as a judgment within the meaning of Section 13 of the Commercial Courts Act, in accordance with HPL (India) Ltd. supra. Similarly, it is not as if Order XLIII of the CPC, to orders specified wherein the right of appeal against orders is confined by the proviso after Section 13(1A), does not cater to any orders in the course of an execution. Order XLIII Rule 1(j) and (ja) provide for appeals against orders passed in the course of an execution proceeding. Of course, an order under Order XXI Rule 41 is not covered therein but in view of the dicta of this Court in D&H India Ltd. supra, the appeal against such an order would also be maintainable.”

Thus three distinct categories of appeals have thus been carved out in the above case. In fact, the judgment renders the interpretation of maintainability open ended in a sense. 

One of the questions posed by the Division Bench in this case was whether a reference to a larger bench was warranted. In my view, having regard to the findings in the contrary judgments, this was a fit case where the matter should have been referred to a larger bench for adjudication. Interestingly, none of the judgments refer to the view of the Supreme Court in Kandla Export Corporation v. M/s OCI Corporation (CA No. 1661-63 of 2013) where the Supreme Court has touched upon this subject. Ofcourse, HPL could not have referred to this view since it was rendered later, but I find that neither Superon nor Delhi Chemicals makes any reference to the view of the Supreme Court.

Since this question arises in large number of cases, it is inevitable that sooner rather than later, this question would be referred to a larger Bench or be decided in an appropriate case by the Supreme Court. 

Till this happens, the question of maintainability of appeals under the CC Act remains an unsolved puzzle. The saga continues, unfortunately! 

The Author is an advocate practicing in the Delhi High Court. The view expressed are personal to the author.

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