Aminchand Pyarelal Vs. Union of India - Court Judgment

Vimadalal, J.

1. This is a Notice of Motion taken out by the plaintiffs for order for stay under Section 10 of the Code of Civil Procedure in respect of the counterclaim filed by the first defendant herein which raises an interesting question of law in regard to the applicability of Section 10 of the Code of Civil Procedure to a counter-claim. The facts necessary for the purpose of disposing of the Motion are, that the plaintiffs, who are importers and dealers in iron and steel, submitted a tender to supply M.S. angles, channels and plates of various sizes to the Iron and Steel Controller who is an officer of the first defendant Union, and that tender was accepted on behalf of the President of India under contract No. CS/48/N/58/8/1023 dated June 17/23, 1958. At all times material to the suit, the import and sale of iron and steel goods was controlled by the provisions of the Iron and Steel Order. One of the terms of the said tender was that the plaintiffs would import angles, channels and plates, of certain specifications mentioned therein on account of the Koyna Project, which was an irrigational project under construction by the State of Maharashtra (second defendant). Under the terms of the said contract, the price payable was the price mentioned in col. 1 of the Indian Price Schedule, plus certain admissible extras. It was further provided that if the landed cost as defined in the first defendant's notification dated April 22, 1952, as amended, was more than the price which the plaintiffs recovered from the consignee (second defendant), the plaintiffs would be entitled to the difference from the Iron and Steel Equalisation Fund, and if the landed cost was less than the price recovered by the plaintiffs, then the plaintiffs have to reimburse the said fund to the extent thereof. Pursuant to the said contract, the plaintiffs imported the said goods from Japan and delivered the same to the chief engineer of the Koyna Project from whom the plaintiffs received payments from time to time. The said engineer having raised certain disputes in regard to the payment of the plaintiffs' invoices on the basis of actual weight, by consent of parties and in accordance with the provisions of the Iron and Steel Control Order, the said question was referred to the Price & Accounts Officer who held in favour of the plaintiffs that the price payable for imported steel was always on the basis of actual weights. In pursuance of that decision, the plaintiffs submited supplementary bills aggregating to Rs. 50,904.70, but the defendants having failed to pay the same, the plaintiffs filed the present suit on January 31, 1968 to recover that amount. On of April 30, 1969, the plaintiffs also filed a suit in the High Court at Calcutta against the first defendant and the Iron & Steel Controller, being Suit No. 4046 of 1969 in which the plaintiffs sought to recover a sum of Rs. 2,45,862.51 from the defendants, being the balance due to them as a result of a series of transactions that had taken place between the plaintiffs and the defendants in respect of various contracts entered into at Calcutta which, it may be stated, included contract No. CS/48/N/58/8/1023, dated June 17/23, 1958 in respect of angles, channels, etc. stating in paragraph 24 of the plaint in the said suit that lawful adjustments had been given effect to by the plaintiffs in the accounts maintained by them. Thereafter on September 13, 1971, the first defendant Union filed a written statement and counter-claim in the present suit, and in that counter-claim, the first defendant Union prayed for a decree for a sum of Rs. 8,40,292.63 which comprised two claims. The first claim contained in prayer (a) of the counter-claim, the facts in regard to which are set out in paragraph 11 of the written statement, was for a sum of Rs. 5,61,063.10 on the basis that the landed cost, of the material supplied by the plaintiffs for the Koyna Project was less than the Col. 1 prices, and the difference between the two was, under the terms of the contract, payable by the plaintiffs to the Iron and Steel Equalization Fund. The facts in regard to the second claim comprised in the counter-claim, are set out in paragraph 13 of the written statement. That claim is in respect of 39.231 long tonnes of Mild Steel Plates alleged to have been imported by the plaintiffs in excess of the quantity authorised by the first defendant for which, according to the first defendant, the plaintiffs were bound and liable to account, as prayed for in prayer (c) of the counter-claim. The plaintiffs have thereafter taken out the present Motion for stay of the counter-claim filed by the first defendant in this suit under Section 10 of the Code of Civil Procedure on the ground that the subject-matter thereof was already the subject-matter of the said suit No. 4046 of 1969 filed earlier by the plaintiffs in the High Court at Calcutta.

2. The basic question that arises on this Motion is whether Section 10, Civil Procedure Code applies at all to a counter-claim, or whether it applies only to cases in which the proceeding which is sought to be stayed is a suit. The Code of Civil Procedure does not provide for a counter-claim being made by the defendant, though in Order VIII, Rule 6 thereof provision is made for a set-off against the claim which a plaintiff makes in a suit. It may, however, be noted that Sub-rule (2) of Rule 6 of Order VIII, Civil Procedure Code enacts that a written statement containing a set-off is to have the same effect as a plaint in a cross-suit so as to enable the Court to pronounce a final judgment in respect both of the original claim and of the set-off. In the case of Laxmidas v. Nanabhai : [1964]2SCR567 , which arose out of proceedings in subordinate Courts which were governed by the Code of Civil Procedure, the Supreme Court observed (para. 6) that the right to make a counter-claim is statutory, but, since the Civil Procedure Code does not contain any provision for a counter-claim, the Supreme Court stated that the said case was, admittedly, not within Order VIII, Rule 6 of the Code of Civil Procedure. The Supreme Court, therefore, adopted the course of treating the counter-claim which was filed in the said proceedings as a cross-suit. Since the written statement in the said case complied with all the requirements of a plaint, the Supreme Court took the view (para. 11) that to hold otherwise, would be to deny justice by reason of a mere defect in the form of pleading. The decision of the Supreme Court in Laxmidas's case cannot, however, be construed as laying down a proposition of law that a counter-claim is a cross-suit and must be regarded as such in all respects. Reliance was sought to be placed on Rule 137 of the Original Side Rules of this Court which provides that a defendant in a suit, in addition to his right of pleading to set-off under Order VIII, Rule 6, Civil Procedure Code, may set up by way of counter-claim against the claims of the plaintiff, any tight or claim in respect of a cause of action accruing to the defendant either before or after the filing of the suit, 'and such counter-claim shall have the same effect as a cross-suit, so as to enable the Court to pronounce a final judgment in the same suit, both on the original claim and on the counterclaim'. It is important to note that the said Rule, however, gives a discretion to the Judge not to allow a counter-claim, but to require the defendant to file a separate suit in respect thereof, and Rule 143 prescribes the nature of the application that would have to be made by the plaintiff for that purpose. Rule 144 lays down that the Court may proceed with the counterclaim even though the suit itself may be stayed, discontinued or dismissed, and Rule 146 provides that where, in any suit, a set-off or counter claim is established as a defence against the plaintiff's claim the Court may, if the balance is in favour of the defendant, give judgment for the defendant for such balance. In my opinion, to say that a counter-claim is to have 'the same effect' as a cross-suit, as Rule 137 says, is not the same thing as to say that it is in fact and in all respects a cross-suit in the real sense of the term. Similar language has been used by the Legislature in Section 295 of the Indian Succession Act, 1925, and in Rule 710 of the Rules of this Court on its Original Side. Section 295 provides that when probate proceedings become contentious, the proceedings shall take, as nearly as may be, the form of a regular suit, according to the provisions of the Code of Civil Procedure, in which the petitioner for probate shall be the plaintiff and the caveator he defendant. Similar language is used in Rule 710. I have, however, held in my judgment in the case of Manekji Manchersha v. Phiroze (1969) 72 Bom. L.R. 21 at pp. 24-25 that neither Section 295 nor Rule 710 actually makes the proceedings a suit in the real sense of the term, and that no question of the right to sue surviving on the death of the executor arises, even though the executor dies after the testamentary proceedings have become contentious. Moreover, if a counter-claim is in all respects really a cross-suit, it is difficult to conceive how the concluding part of Rule 137 read with Rule 143 could give the Court a discretion to refer the defendant to a separate suit in respect of the subject-matter of the counterclaim. When Rule 137 states that a counter-claim is to have the same effect as a cross-suit, it is using precisely the same language as Order VIII, Rule 6(2) uses in respect of a set-off, and nobody has ever suggested that a set-off is really a cross-suit. Moreover, the plain language of Rule 146 shows that the counterclaim is also in the nature of 'a defence against the plaintiff's claim', and it is for that reason that it empowers the Court to pass judgment in favour of the defendant for the balance, if the balance be in favour of the defendant, instead of providing for separate decrees being passed in the suit and on the counter-claim and leaving the parties to adjust the same in the usual manner in execution under the provisions of Order XXI, Rule 18 of the Code of Civil Procedure. It is true that a counter-claim need not relate to the subject-matter of the suit itself, but so also, a legal set-off under Order VIII, Rule 6 of the Code of Civil Procedure need not arise out of the transaction in suit, though both parties must fill the same character in the set-off as they fill in the suit. As far as Court-fees are concerned, they would have to be paid not only on a counter-claim, but also on the value of a claim by way of a legal set-off. Neither of these incidents can, therefore, lead to the conclusion that a counter-claim is purely in the nature of a cross-suit. To the extent to which it wipes out the plaintiff's claim in a suit, a counter-claim is in the nature of a defence to that claim, but to the extent to which it exceeds the subject-matter of the plaintiff's claim in a suit, it is, in my opinion, a weapon of offence. Since a counter-claim is not wholly defensive in nature, it has rightly been said to be a weapon of offence, but, even so, a counter-claim is undoubtedly a part of the suit itself, and it is precisely for that reason that it became necessary to frame Rule 144 expressly empowering the Court to proceed with the counter-claim, even though the plaintiff's suit may be stayed, discontinued or dismissed. To stay a counter-claim under Section 10 of the Code of Civil Procedure would, in my opinion, therefore, amount to granting a stay in respect of a part of the suit which, as stated later on in this judgment, is not permissible under that section. It is, therefore, not at all surprising that Mr. Thakkar, inspite of his usual industry, has had to concede that he could not find a single reported case in which the provisions of Section 10, Civil Procedure Code had been applied to a counter-claim and a counter-claim stayed thereunder. Apart from authorities, on a construction of the plain terms of the relevant Rules relating to the procedure by way of counter-claim which have been discussed above, I have, therefore, come to the conclusion that a counter-claim is a part of the original suit itself and is a defence to the extent of the plaintiff's claim, though to the extent to which it exceeds that claim, it has 'the same effect as a cross-suit'.

3. The next question that I must proceed to consider is whether there is anything in the authorities that were cited before me that should lead me to a conclusion different from the one at which I have arrived on a plain reading of the relevant Rules of this Court on its Original Side relating to counter-claims. In the case of Najan v. Salemahomed : AIR1923Bom113 , Mulla J., sitting as a single Judge and dealing with the question of limitation in regard to a counter-claim, observed (at pp. 1007-1008) that a set-off is a ground of defence, whilst the counter-claim does not afford any defence to the plaintiff's claim, but is a weapon of offence which enables a defendant to enforce a claim against the plaintiff as effectually as in an independent action, and had, therefore, to be in time when it was pleaded. In the case of Lassoo & Sons v. Krishna : AIR1932Bom617 , Wadia J., sitting as a single Judge of this Court, before whom a question in regard to jurisdiction in respect of a set-off claimed by the defendant arose, sought to distinguish a set-off from a counter-claim in the following terms (p. 1403):.In this respect, however, the distinction between a set-off and a counter-claim must be borne in mind. In one sense both are cross-actions, but a set-off is also a ground of defence. If established, it affords an answer to the plaintiffs' claim either wholly or pro tanto, for a set-off is really a debt claimed by a defendant against the plaintiff balancing a debt claimed by the plaintiff against the defendant. A counter-claim on the other hand is really a weapon of offence, and enables a defendant to enforce a claim against the plaintiff as effectually as in an independent action. It is allowed to be pleaded by the defendant at his option, subject to certain rules, in order to avoid multiplicity of proceedings between the parties. Reliance was placed by counsel for the plaintiffs on Order VIII, Rule 6, Sub-rule (2), which says that a written statement containing a set-off shall have The same effect as a plaint in a cross-suit, but that is so in order to enable the Court to pronounce a final judgment in respect of both the original claim and the set-off. A set-off and a counter-claim, therefore, are essentially different, and in India we are governed by Order VIII, Rule 6, of the Civil Procedure Code, and the High Court Rules as regards set-off, and by the High Court Rules only as regards counter-claim.

The learned Judge observed that whether the Rules of the High Court relating to counter-claim would also apply if the amount in excess in favour of the defendant is in respect of a claim on which a separate action cannot for want of jurisdiction be brought in this Court was a point which was not free from doubt, but he held that the set-off before him was permissible and proceeded to pass judgment in favour of the plaintiff for the balance under Order VIII, Rule 6(2) of the Code of Civil Procedure. I do not read the observations of Mulla J. or of Wadia J. to mean that a counter-claim is in all respects a cross-suit. As stated earlier, a counter-claim is a 'weapon of offence' to the extent to which it exceeds the plaintiff's claim, and their observations that a counter-claim is really a 'weapon of offence' must, therefore, be understood in the context of Rule 146 which permits a decree to be passed for the balance in favour of the defendant, and cannot be understood as laving down that a counter-claim is, in fact, a cross-suit. In the case of Hirji Ramji v. Daulatram Ratanji & Co. : AIR1940Bom117 another single Judge of this Court held that a counterclaim abates by reason of the omission to bring the heirs of a deceased defendant to the counter-claim on record. Having regard to the rules applicable to a counter-claim, he held (at p. 1289) that a counter-claim stands 'in the same category as a cross-suit for the purposes of the Civil Procedure Code.' It is pertinent to note that the learned Judge has advisedly used language which is not unqualified in terms and has not stated that a counter-claim is in all respects and for all purposes the same as a cross-suit. There is, therefore, nothing in the authorities cited before me which would lead me to a conclusion different from the one at which I have arrived on a construction of the plain terms of the relevant Rules. Holding, as I do, that those Rules do not make a counter-claim a suit in the real sense of the term, I further hold that Section 10 of the Code of Civil Procedure which applies to a suit does not apply to a counter-claim. On that ground alone I would, therefore, decline to grant the order for stay under Section 10 sought by the plaintiff on the present Motion.

4. In the event, however, of my being wrong in the view which I have taken above, I must proceed to consider whether the counter-claim in the present case should be stayed under Section 10 of the Code of Civil Procedure. In that connection, the first question that arises is, whether there is substantial identity in regard to the subject-matter of the counter-claim filed in the present suit, and the subject-matter of Suit No. 4046 of 1969 filed in the Calcutta High Court which is, admittedly, earlier in point of time to the counter-claim. Mr. Thakkar strongly relied on the fact that in Schedule 'A' annexed to the plaint to the Calcutta Suit which comprises the aggregate claim resulting from various contracts entered into between the parties, Contract No. CS/48/N/58/8/1023 is expressly specified as Item No. 2, and that there is an averment in paragraph 24 of the said plaint that the claim therein was made after giving effect to all 'lawful adjustments' in the accounts maintained by the plaintiffs. I am, however, not prepared, merely from a general statement of that nature, to come to the conclusion that the amount claimed by the plaintiffs in the Calcutta suit has been arrived at after giving credit for the claim of Rs. 5,61,063.10 referred to in para. 11 of the written statement and counterclaim in the present suit. I am also not prepared to come to such a conclusion merely because by a process of working out certain figures, the aggregate amount would tally with the amount claimed in the Calcutta suit, as Mr. Thakkar attempted to show. I am, therefore, not satisfied that the subject-matter of the claim in prayer (a) of the counter-claim in the present suit is included in the claim in the Calcutta suit. In any event, it is not disputed by the parties before me that the claim for account comprised in para. 13 of the written statement and counter-claim in the present suit relating to 39.231 long tonnes of Mild Steel Plates is not included in the Calcutta Suit. It is true that it is now well-settled that in order to attract the provisions of Section 10 of the Code of Civil Procedure, it is not necessary that the matter in issue in the two proceedings should be entirely identical, and that the language used by the Legislature in Section 10 makes it clear that the identity required is only a substantial identity of the subject-matter of the two proceedings Jai Hind Iron Mart v. Tulsiram : AIR1953Bom117 . That, however, is not the same thing as to say that Section 10 can be invoked even cases in which the claims or transactions comprised in the two proceedings are different as, for instance, when an earlier suit comprises one claim, and a counter-claim filed later on in another proceedings comprises that claim plus one other claim. That is precisely the position in the present case. This question arose before a Division Bench of the Calcutta High Court in the case of J.T. Republike v. Rungta and Sons : AIR1966Cal382 . In that case, both the suits were in respect of the same contract and the plaintiff claimed Rs. 4,50,880 for 95 per cent, of the price of 7037 long tons of iron ore supplied per s.s. Edison Mariner and the extra loading charges for loading the goods midstream. The later of the two suits, however, also comprised a claim for Rs. 26,056 being the balance of the 5 per cent, price of 3510 tons of iron ore shipped per S.S. Alriadah, together with the claim for despatch money in respect of the said shipment. The earlier suit was dismissed, but an appeal from the decree dismissing the same was pending. Declining to grant stay under Section 10 in respect of the later suit which was filed shortly after the dismissal of the earlier suit, Mitter J. held (para. 7) that there was 'no substantial identity as regards the matter in issue in the two suits', because even if the plaintiff was to succeed in the pending appeal, the trial of the second suit with regard to the claim for shipment per S.S. Alriadah could not be avoided. Agreeing with Mitter J. that Section 10 was not applicable, Bijayesh Mukharji J. observed as follows (para. 15, p. 387):.True it is that the entire subject in controversy and the matter in issue in both suits need not be identical in every particular. As a proposition of law, it appears to be unexceptionable. To insist on the identity of every particular is to render the word 'substantially' in Section 10 idle. But the word is there to do duty and to receive effect. It is therefore enough if the matters in issue in both suits are substantially the same. To say so however is not to say that two different matters-X in one suit and Y in another or X plus Y in one suit and only X in the other (as here)-are substantially the same-a reductio ad absurdum.

Both the learned Judges, however, took the view that, though no stay could be granted under Section 10, Civil Procedure Code, the said case was one in which stay should be granted under Section 151 of that Code and ordered accordingly. I agree with the view expressed in the passage in the judgment of the Calcutta High Court quoted above, though for reasons which I will state later on, Section 151 was wrongly invoked by the learned Judges. I hold that Section 10 of the Code of Civil Procedure is not attracted where two proceedings relate to different claims or transactions, and that the test of substantial identity laid down in decided cases is applicable only to substantial identity in regard to the subject-matter of the same claim or transaction. If I were to hold otherwise, I would have to stay the counter-claim filed in the present suit in regard to the transaction set out in paragraph 11 of the written statement, but would have to proceed with it in regard to the transaction set out in paragraph 13 of the written statement, and indeed, Mr. Thakkar has been compelled to concede that that would have to be done by me if I were to accept his submissions. In my opinion, a proceeding cannot be stayed partially under Section 10 Order of the Code of Civil Procedure, and no authority has been cited before me in which such a course has been adopted. In the decision in the case of S.K. Rungta & Co. v. Nawal Kishore : AIR1964Cal373 which was relied upon by Mr. Thakkar, a partial stay was granted only in the sense that the suit was stayed under Section 10, Civil Procedure Code against one of the defendants and not in; the sense of its being a stay in respect of some of the claims or transactions in suit. It is not necessary for me to decide that question on the present Motion, but if the judgment in the Calcutta suit intended to lay down that 'partial stay' could be granted under Section 10 of the Civil Procedure Code in the full sense of that expression, I do not agree with the same. Even if I am wrong in the view which I have taken that Section 10 does not apply to a counter-claim, I would1 still decline to grant the stay sought on the present Motion on the grounds, (1) that I am not satisfied that the claim in prayer (a) of the counter-claim based on paragraph 11 of the written statement is included in the suit filed at Calcutta; (2) that Section 10 is not attracted to cases in which the claims or transactions comprised in the two proceedings are not the same though, where they are the same, all that is required is substantial identity of the subject-matter of those claims or transactions; and (3) that partial stay in respect of some only of the claims or transactions comprised in a suit or counter-claim cannot be granted under Section 10 of the Code of Civil Procedure.

5. It was lastly sought to be contended by Mr. Thakkar on behalf of the plaintiffs that, even if Section 10 of the Code of Civil Procedure is not applicable to this case, I should grant a stay of the counter-claim in the exercise of my inherent powers under Section 151 of that Code. In support of that contention, reliance was sought to be placed by Mr. Thakkar on the decision of the Calcutta High Court in the case of J.T. Republike, already cited above, in which an order of that nature was made by the Court. In my opinion, however, there are two answers to this contention of Mr. Thakkar. First and foremost, in prayer (a) the Notice of Motion in the present case the plaintiff has, in terms, prayed for a stay only under Section 10 of the Code of Civil Procedure, and has not invoked the inherent powers of the Court under Section 151 of that Code. He is, therefore, not entitled to ask me to exercise those powers at the hearing of this Motion. Secondly, in my opinion, the course followed by the Calcutta High Court in J.T. Republike's case was erroneous and, in taking that view, the learned Judges overlooked the decision of the Supreme Court in the case of Manohar Lal v. Seth Hiralal : AIR1962SC527 in which the majority view was (para. 39) that, when there is a special provision in the Code of Civil Procedure for dealing with the contingencies of two suits being instituted, such as is to be found in Section 10 of that Code, 'recourse to the inherent powers Under Section 151 is not justified'. It is true that the application which was made in the said case was for an injunction restraining the plaintiff to the earlier suit from proceeding with it notwithstanding the provisions of Section 10 of the Code but, in my opinion, those observations apply a fortiori to a case like the present one in which it is the later suit that is sought to be stayed, a matter which is expressly provided for by Section 10 of the Code. I, therefore, reject this contention of Mr. Thakkar, and hold that, for the reasons stated above, it is not open to me to grant a stay of the counter-claim in exercise of my inherent powers under Section 151 of the Code.

6. In the result, this Notice of Motion fails and must be dismissed with costs.