2005 (8) TMI 714 - SC - Indian Laws

Constitutional validity of amendments made to the Code of Civil Procedure 'the Code by Amendment Acts of 1999 and 2002 was rejected by this Court - draft rules for ADR and mediation as envisaged by Section 89 of the Code read with Order X Rule 1A, 1B and 1C - HELD THAT - The Governments, Government departments or statutory authorities are defendants in large number of suits pending in various courts in the country. Judicial notice can be taken of the fact that in large number of cases either the notice is not replied or in few cases where reply is sent, it is generally vague and evasive. The result is that the object underlying Section 80 of the Code and similar provisions gets defeated. It not only gives rise to avoidable litigation but also results in heavy expense and cost to the exchequer as well. Proper reply can result in reduction of litigation between State and the citizens. In case proper reply is sent either the claim in the notice may be admitted or area of controversy curtailed or the citizen may be satisfied on knowing the stand of the State. There is no accountability in the Government, Central or State or the statutory authorities in violating the spirit and object of Section 80. These provisions cast an implied duty on all concerned governments and States and statutory authorities to send appropriate reply to such notices. Having regard to the existing state of affairs, we direct all concerned governments, Central or State or other authorities, whenever any statute requires service of notice as a condition precedent for filing of suit or other proceedings against it, to nominate, within a period of three months, an officer who shall be made responsible to ensure that replies to notices under Section 80 or similar provisions are sent within the period stipulated in a particular legislation. The replies shall be sent after due application of mind. Despite such nomination, if the Court finds that either the notice has not been replied or reply is evasive and vague and has been sent without proper application of mind, the Court shall ordinarily award heavy cost against the Government and direct it to take appropriate action against the concerned Officer including recovery of costs from him. The Committee has suggested that the Central Government has to provide substantial funds for establishing courts which are subordinate to the High Court and the Planning Commission and the Finance must make adequate provisions therefore, noticing that it has been so recommended by the Constitution Review Committee. Having regard to the constitutional obligation to provide fair, quick and speedy justice, we direct the Central Government to examine the aforesaid suggestions and submit a report on this Court within four months. Alternative Dispute Resolution and Mediation Rules - As can be seen from Section 89, its first part uses the word shall when it stipulates that the court shall formulate terms of settlement . The use of the word may in later part of Section 89 only relates to the aspect of reformulating the terms of a possible settlement. The intention of the legislature behind enacting Section 89 is that where it appears to the Court that there exists element of a settlement which may be acceptable to the parties, they, at the instance of the court, shall be made to apply their mind so as to opt for one or the other of the four ADR methods mentioned in the Section and if the parties do not agree, the court shall refer them to one or other of the said modes. Section 89 uses both the word shall and may whereas Order X, Rule 1A uses the word shall but on harmonious reading of these provisions it becomes clear that the use of the word may in Section 89 only governs the aspect of reformulation of the terms of a possible settlement and its reference to one of ADR methods. There is no conflict. It is evident that what is referred to one of the ADR modes is the dispute which is summarized in the terms of settlement formulated or reformulated in terms of Section 89. There is no impediment in the ADR rules being framed in relation to Civil Court as contemplated in Section 89 upto the stage of reference to ADR. The 1996 Act comes into play only after the stage of reference upto the award. Applying the same analogy, the Legal Services Authority Act, 1987 (for short 1987 Act ) or the Rules framed thereunder by the State Governments cannot act as impediment in the High Court making rules under Part X of the Code covering the manner in which option to Lok Adalat can be made being one of the modes provided in Section 89. The 1987 Act also does not deal with the aspect of exercising option to one of four ADR methods mentioned in Section 89. Section 89 makes applicable 1996 Act and 1987 Act from the stage after exercise of options and making of reference. When the parties come to a settlement upon a reference made by the Court for mediation, as suggested by the Committee that there has to be some public record of the manner in which the suit is disposed of and, therefore, the Court has to first record the settlement and pass a decree in terms thereof and if necessary proceed to execute it in accordance with law. It cannot be accepted that such a procedure would be unnecessary. If the settlement is not filed in the Court for the purpose of passing of a decree, there will be no public record of the settlement. It is, however, a different matter if the parties do not want the court to record a settlement and pass a decree and feel that the settlement can be implemented even without decree. In such eventuality, nothing prevents them in informing the Court that the suit may be dismissed as a dispute has been settled between the parties outside the Court. Regarding refund of the court fee where the matter is settled by the reference to one of the modes provided in Section 89 of the Act, it is for the State Governments to amend the laws on the lines of amendment made in Central Court Fee Act by 1999 Amendment to the Code. The State Governments can consider making similar amendments in the State Court Fee legislations. The draft rules have been finalised by the Committee. Prior to finalisation, the same were circulated to the High Courts, subordinate courts, the Bar Council of India, State Bar Councils and the Bar Associations, seeking their responses. Now, it is for the respective High Courts to take appropriate steps for making rules in exercise of rule making power subject to modifications, if any, which may be considered relevant. We hope that the High Courts in the country would be in a position to examine the aforesaid rules expeditiously and would be able to finalise the Rules within a period of four months. We place on record our deep appreciation for very useful assistance rendered by Senior Advocates Mr. K. Parasaran and Mr.Arun Mohan who on request from this court readily agreed to render assistance as Amicus Curie. We also record our appreciation for useful assistance rendered by Mr. Gulam Vahnavati, learned Solicitor General on behalf of Union of India and the Attorney General of India and Mr. T. L.V. Iyer, Senior Advocate on behalf of Bar Council of India. In the result, We upheld the constitutional validity of the amendments made to the CPC by the Amendment Acts of 1999 and 2002

Summary

Issues Involved:
1. Constitutional validity of amendments to the Code of Civil Procedure by Amendment Acts of 1999 and 2002.
2. Modalities for the operation of Section 89 and other amendments.
3. Model Case Management Formula and ADR Rules.
4. Specific amendments to various sections and orders of the Code of Civil Procedure.
5. Judicial Impact Assessment.
6. Model Alternative Dispute Resolution and Mediation Rules.
7. Model Case Flow Management Rules.

Detailed Analysis:

1. Constitutional Validity of Amendments to the Code of Civil Procedure:
The Supreme Court upheld the constitutional validity of the amendments made to the Code of Civil Procedure by the Amendment Acts of 1999 and 2002. It was emphasized that these amendments aim to ensure quicker dispensation of justice.

2. Modalities for the Operation of Section 89 and Other Amendments:
A Committee headed by a former Judge of the Supreme Court was constituted to formulate the modalities for the operation of Section 89 and other provisions introduced by the amendments. The Committee's report was divided into three parts, dealing with grievances related to the amendments, draft rules for ADR and mediation, and a conceptual appraisal of case management.

3. Model Case Management Formula and ADR Rules:
The Committee suggested a model case management formula and rules for ADR, which were to be adopted by the High Courts. The Supreme Court emphasized the need for High Courts to adopt these rules to ensure the effective implementation of Section 89.

4. Specific Amendments to Various Sections and Orders of the Code of Civil Procedure:
- Section 26(2) and Order VI Rule 15(4): The requirement of filing an affidavit with pleadings was upheld, emphasizing that it imposes additional responsibility on the deponent regarding the truth of the facts stated.
- Order XVIII Rule 4: The amendment requiring examination-in-chief to be on affidavit was upheld. The Court's power to permit affidavits as evidence and the right to cross-examination and re-examination in open court were maintained.
- Order VIII Rule 1: The provision setting a maximum period of 90 days for filing a written statement was deemed directory. The Court retained discretion to extend this period in exceptionally hard cases.
- Section 39(4): It was clarified that this provision does not override Order XXI Rule 3 and Order XXI Rule 48, which allow execution of decrees against property outside the jurisdiction.
- Section 64(2): The requirement for contracts to be registered to be valid against subsequent attachments was upheld.
- Order VI Rule 17: The provision restricting amendments to pleadings after the commencement of the trial was upheld.
- Order V Rule 9: The provision allowing service of summons through courier was upheld, with a caution to guard against false reports.
- Order XVII: The restriction on granting adjournments more than three times was upheld, with exceptions for circumstances beyond the control of the party.
- Order XVIII Rule 2: The deletion of the provision allowing examination of witnesses at any stage was upheld, restoring the pre-1976 position.
- Order VII Rule 14: The Court directed that the words "plaintiff's witnesses" be read as "defendant's witnesses" to correct a legislative mistake.
- Costs: The Court emphasized the need for realistic and actual costs to be awarded to discourage frivolous suits and defenses.
- Section 80: The Court directed the government to ensure proper replies to notices under this section to reduce litigation.
- Section 115: The Court reaffirmed that the High Courts' constitutional powers under Article 227 remain unaffected by the amendment to this section.
- Section 148: The Court held that it retains inherent power to extend time beyond 30 days for the ends of justice.
- Order IX Rule 5 and Order XI Rule 15: These provisions were deemed directory, allowing flexibility in their application.

5. Judicial Impact Assessment:
The Committee suggested that the Central Government should bear a substantial portion of the expenditure for subordinate courts and conduct a judicial impact assessment for new legislation. The Supreme Court directed the Central Government to examine these suggestions and report back within four months.

6. Model Alternative Dispute Resolution and Mediation Rules:
The Committee provided detailed rules for ADR and mediation, emphasizing the need for High Courts to adopt these rules. The rules cover the procedure for referring cases to ADR, qualifications and disqualifications of mediators, and the conduct of mediation proceedings.

7. Model Case Flow Management Rules:
The Committee proposed model rules for case flow management, dividing cases into different tracks based on their nature and complexity. The Supreme Court urged the High Courts to adopt these rules to ensure timely disposal of cases.

Conclusion:
The Supreme Court's judgment emphasizes the need for effective implementation of the amendments to the Code of Civil Procedure, adoption of ADR and mediation rules, and case flow management to ensure quick and fair dispensation of justice. The Court directed the High Courts and the Central Government to take necessary actions and report back within four months.