M/S Vinayaka Travels vs. Smt Sivagami N
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The petitioners, M/s Vinayaka Travels and its partners, filed a suit for recovery of money. Defendant No. 1, Smt. Sivagami N., filed a written statement and a counterclaim seeking audited balance sheets and supporting documents for specific financial years, along with IT returns and GST returns. The Trial Court, by an order dated 14.10.2022, allowed Defendant No. 1's application for production of these documents. This order was challenged by the petitioners, and the High Court directed that adverse inference could be drawn if the documents were not produced. Subsequently, the petitioners withdrew their suit on 25.01.2024. Following the withdrawal, the petitioners filed an application under Section 151 of the CPC to recall the order dated 14.10.2022, arguing that the substratum of the order no longer existed as the suit was withdrawn. The Trial Court rejected this application by an order dated 19.10.2024, holding that the counterclaim was still pending adjudication.
Held
The Court held that the application to recall the order dated 14.10.2022 was not maintainable. The reasoning was that under Order XI Rule 5 of the Commercial Courts Act, 2015, any party to a lis can call upon the other party to produce documents related to the suit reliefs at any stage. The defendant No. 1 was therefore entitled to call upon the plaintiffs to produce the financial statements of plaintiff No. 1. The Court found that the Trial Court rightly allowed this in its order dated 14.10.2022. The withdrawal of the suit by the plaintiffs did not affect the order dated 14.10.2022, as the defendant No. 1 was still bound to prove their counterclaim. The Court concluded that the Trial Court had rightly rejected the application to recall the order and found no error in the impugned order warranting interference. The ratio decidendi is that an order for production of documents, passed under Order XI Rule 5 of the Commercial Courts Act, 2015, remains valid and enforceable for the adjudication of a counterclaim, even after the original suit has been withdrawn.
Key Issues
1. Whether the order dated 14.10.2022, directing the plaintiffs to produce documents, should be recalled following the withdrawal of the suit, considering the pendency of the defendant's counterclaim? (Mixed question of law and fact, turning on Order XI Rule 5 of the Commercial Courts Act, 2015 and Section 151 of the CPC). Petitioner's Contention: The petitioners argued that the order dated 14.10.2022 was premised on the subject matter of the suit. Since the suit was withdrawn, the only outstanding issue is the counterclaim. They contended that they cannot be compelled to produce documents to prove the defendant's case, especially after the issues were recast placing the burden on the defendant. They relied on the principle that the substratum of the order no longer subsisted. Revenue/State's Contention: The judgment does not record any specific arguments from the respondents (who are private parties, not revenue or state). However, the Trial Court's reasoning, as reflected in the impugned order, was that the counterclaim was still in existence and required adjudication, and therefore, an order passed during the pendency of the suit, affirmed by a higher court, does not lose its significance or existence merely because the suit was withdrawn.
Sections Cited
Order XI Rule 5, Section 151, Commercial Courts Act, 2015, CPC
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Cause title — parties, addresses and appearances
ORAL ORDER
The plaintiff in Comm.O.S No.64/2022 pending consideration before LXXXV Addl. City Civil and Sessions Judge, Bengaluru, have filed this petition challenging an order dated 19.10.2024, by which an application( I.A No.19) filed by them to recall the order dated 04.10.2022 was rejected.
(i) The suit in Comm.O.S No.64/2022 was filed for recovery of 1,19,76,581/- and for recovery of 19,50,589/- being the EMIs paid by the plaintiff No.1 to the defendant No.4 together with interest and for other reliefs. The suit was contested by the defendant No.1 who filed written statement and sought a counter claim to direct the plaintiff to furnish the audited balance sheet for the financial year 2015-16 to 2019- NC: 2024:KHC:46017 2020 along with supporting documents and to furnish audited balance sheet from 13.11.2020, till the date of decree of counter claim and to render accounts till the final settlement of accounts and ascertainment of value of the share of late Anup Kumar Dey and for incidental reliefs. ii) During the course of the suit, the defendant No.1 filed an application under Order XI Rule 5(1) of the Commercial Courts Act, 2015 read with section 151 of CPC seeking for a direction to the plaintiffs to produce the audited balance sheet for the financial year 2014-15 to 2019-2020, audited balance sheet from 13.11.2020 till 31.03.2022, IT returns for the corresponding years, IT forms, GST returns, Tax audit reports and Vehicle Insurance copies.
(iii) The said application was allowed by the Trial Court in terms of the order dated 14.10.2022. This was challenged by the plaintiffs in W.P No.22053/2022, which was disposed off holding that, if the plaintiffs fail to produce the document, the Trial Court subject to all just exception in law, will have to consider drawing appropriate adverse inference.
iv) After issues were recast on 20.08.2024, the plaintiffs withdrew the suit on 25.01.2024. Thereafter, the plaintiffs filed NC: 2024:KHC:46017 I.A No.18 under Section 151 of CPC to recall the order dated 14.10.2022. It was contended in the affidavit filed in support of application that since the suit was withdrawn on 25.01.2024, the only outstanding issue was the counter claim of the defendant No.
It was therefore contended that the records that was summoned as per the order dated 14.10.2022 were no longer related to the subject matter of the suit, as the suit was withdrawn. Therefore, it was contended on withdrawal of the original suit, the order dated 14.10.2022 should be recalled as the substratum of the order dated 14.10.2022 no longer subsisted.
The Trial Court rejected the application in terms of the impugned order where it was held that "though it is true that the suit has been withdrawn, the counter claim is still in existence and is required to be adjudicated. Under such circumstances, merely because the suit was withdrawn, it cannot be said that the order passed during the pendency of suit will lose its existence or significance more so when it was affirmed by higher Court". Being aggrieved by the said order, the plaintiff is before this Court. NC: 2024:KHC:46017
Learned senior counsel for the plaintiffs contended that the suit was filed for recovery of money and the defendant No.1 had raised a counter claim. He contends that the order dated 14.10.2022 passed by the Trial Court and affirmed by this Court in W.P No.22053/2022 was on the premise that the documents summoned, related to the subject matter of the suit. He submits that since the suit was itself was withdrawn on 25.01.2024, the only outstanding issue is the counter claim of defendant No.
He therefore contends that plaintiffs cannot be compelled to produce the document as per the order dated 14.10.2022. He contended that, the Trial Court recasted the issues on 20.08.2024 placing the burden on the defendant No.1 to prove issue No.3 namely, "Whether defendant No.1 proves that the plaintiff No.1 shall furnish detailed audited balance sheet for the period 2015-16 to 2019-2020 with all relevant documents as sought?".
He therefore contends that it was for defendant No.1 to prove his case and the plaintiff cannot be compelled to produce the document to prove the case of defendant No.1. NC: 2024:KHC:46017
I have considered the submissions of learned senior counsel for the plaintiffs. I have also perused the documents enclosed with the writ petition.
The defendant No.1 in his written statement contended inter-alia that there was tri-parte agreement entered into between late Anup Kumar Dey and defendant Nos.3 and 4. He contended that the EMI's towards repayment of loan to Kotak Mahindra Bank had to be paid from the profit/income of the plaintiff No.1, in which the partners of the plaintiff were equally entitled. He contended that the plaintiff No.1 made huge profits for three consecutive years before financial year 2017-18. However plaintiff No.2 and 3 refused to share the balance sheet and supporting documents of the firm for five year prior to death of husband of defendant No.1 that is on 13.11.2020. Therefore, the counter claim of defendant No.1 revolved around the audited financial statements of the plaintiff No.1. 7. Under Order XI Rule 5 of Commercial Courts Act, 2015, any party to the lis, at any stage of the suit can NC: 2024:KHC:46017 call upon the other party to produce documents related to the suit reliefs. Therefore, the defendant No.1 was entitled to call upon the plaintiffs to produce the financial statement of plaintiff No.
This was rightly allowed by the Trial Court in terms oif the order dated 14.10.2022. The plaintiff cannot stone wall the order dated 14.10.2022, by withdrawing the suit, as the defendant No.1 is bound to prove the counter claim. Even if, the plaintiff withdrew the suit, that did not in any way affect the order dated 14.10.2022 and hence, the application filed by the plaintiff to recall the order dated 14.10.2022 was not maintainable. As the Trial Court has rightly rejected the application, there is no error in the impugned order and it does not warrant any interference.
Hence, the petition is dismissed. (R. NATARAJ) JUDGE
THM List No.: 1 Sl No.: 28
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.