Appeals under "unhappily worded" Section 13, Commercial Courts Act: What Madras High Court held

The Madras High Court recently passed a detailed judgment on the scope of appeals under Section 13 of the Commercial Courts Act, 2015 (Hindustan Unilever v. S Shanthi)..While deciding on the maintainability of thirteen appeals in commercial suits, a Bench of Chief Justice Sanjib Banerjee and Justice PD Audikesavalu concluded:.An appeal under the Commercial Courts Act would lie against all decrees, except those prohibited by the Code of Civil Procedure (CPC) itself, even though the content of Section 13 (1A) does not expressly include the word "decree." The Court opined that the term "judgment" used in this provision would also include "decrees" by implication, relying on how "judgment" has been defined in the CPC. This is as opposed to how the term "judgment" has been defined in Clause 15 of the Letters Patent applicable to the chartered High Court, and how it has been defined over the years in a long line of cases starting from The Justices of Peace for Calcutta case. An appeal under the Commercial Courts Act would also lie against certain orders. Only orders mentioned under Order XLIII of the CPC and those provided for under Section 37 of the Arbitration Act, 1996 are appealable under Section 13 of the Commercial Courts Act. The Court arrived at the conclusion on a meaningful reading of the appeal provision in Section 13, and given the object of the Commercial Courts Act i.e. the speedy resolution of commercial disputes. The Court arrived at this conclusion although the term "only" has been omitted from the proviso to Section 13, which lays down what kind of orders are appealable under the provision. Just as all matters pertaining to arbitration were carved out of the CPC and placed in the Arbitration Act, 1940 (later replaced by the 1996 Act), the Commercial Courts Act has to be seen as the complete code for civil suits involving commercial disputes of the specified value. After the Commercial Courts Act came into force on October 23, 2015, the scope of appealability in suits in respect of commercial disputes of specified value filed on or after such date would be governed by the provisions of the said Act..In these respects, the judgment stated:"An appeal under the said Act would lie against all decrees, except against those which are prohibited by the Code itself, and appeals would also lie under the said Act against certain orders ... a meaningful reading of the entirety of the appeal provision in Section 13 of the said Act would imply that no appeal from any order other than those enumerated in Order XLIII of the Code and those provided for in Section 37 of the Act of 1996 would lie under the said Act in respect of civil suits involving commercial disputes of specified value as defined therein.".Referring to the Supreme Court judgments in Kandla Export Corporation and BGS SGS Soma JV, the High Court opined that the scope of appealability under Section 13 of the said Act is quite restricted. .The view taken by the Madras High Court deviates from other views favouring a more broader scope for appeals under the Commercial Act, including for those orders not specifically mentioned in Order XLIII of the CPC. For instance, such a broader view was taken by the Bombay High Court in Hubtown Ltd v. IDBI Trusteeship Ltd..A lot of avoidable confusion let loose through unhappily worded Section 13: Court.The discussion on the provision was prompted by the wording of Section 13 of the Commercial Courts Act, which led to contradictory court interpretations over time.."Initially, the appeal provision permitted any person aggrieved by the decision of the relevant Court or Division to carry an appeal. Post- amendment, the word “decision” has been substituted by the equally unsatisfactory and equivocal expression of “judgment or order” as two sub-sections (1) and (1A) have been created out of the original sub-section (1) of Section 13 of the said Act," the Court said. .The Madras High Court has criticised the drafting of the said provision on at least two counts, i.e. the absence of the word "decree" in Section 13 (1A) and the absence of the word "only" in the proviso to the Section.."There can be no doubt that the appeal provision in the said Act has been unhappily worded. Even though no reasonable person may contend that an appeal from a decree has not been provided for in the said Act, there is no doubt that there is no express provision in such regard and it is only by inference that an appeal against a decree passed in a civil suit pertaining to commercial disputes may be maintainable.That is because the said Act, in Section 16 thereof, makes the provisions of the Code applicable. The provisions of the Code recognise the right of appeal against a decree and, by inference, such provision has to be read into the said Act despite it not expressly providing for an appeal from a decree. There is also a reference to “an appeal against the decree of the Commercial Court” at the end of Section 8 of the said Act, which points to the fact that the said Act permits an appeal from a decree though neither Section 8 nor Section 13 thereof can be said to expressly confer such right", the Court opined in its latest ruling..The Court took the opportunity to empahsise that it is ordinarily expected that the language of a statute is crafted in such a way as to make it precise and unambiguous to the extent possible and to make it free from confusion..While so, the Court criticised both the use of the term "decision" in the original avatar of Section 13, of the Commercial Courts Act as well as the subsequent use of "judgment or order" (without mentioning "decree") in the amended version (of 2018).."There is a lot of avoidable confusion that has been let loose," the Court added.."Notwithstanding the overarching purpose of the said Act, the avowed attempt to expedite the process of trial of commercial disputes, the loose words or expressions have resulted in arguments being made that go against the grain of the statute and defy common sense. The fundamental canons of statutory interpretation require the usual and ordinary meanings to be ascribed to the words used in any provision; or how such words have been judicially interpreted over a long period of time. The appeal provision in the said Act has resulted in more time being taken up on the preliminary issue of maintainability than what the merits of the matters otherwise deserved," the judgment stated further. .On why "Judgment" in Section 13 includes "decrees".In justifying, why it has concluded that Section 13 would cover "decrees" as well, despite the absence of the term "decree" in the provision, the Court said:The word “judgment” used in Section 13 would otherwise be superfluous or meaningless. "Judgment" should not be understood as contrarily interpreted in Clause 15 of the Letters Patent and ensuing judgments. Firstly, it is noted that sub-section (2) of Section 13 seeks to obliterate the operation of the Letters Patent on the aspect of appealability. As such, it would be extremely irrational that the meaning of the word “judgment” used in the sole appeal provision of the Commercial Courts Act (Section 13) would take colour from the appeal provision in the Letters Patent (Clause 15). Secondly, there does not appear to be any intention in Section 13 of the Commercial Courts Act to make the provision applicable in a certain way for Chartered High Courts (to which alone Letters Patents are applicable) while making it applicable differently for other High Courts. The word “judgment” could not have been used to imply something in a few High Courts and something altogether different in the remaining High Courts, the Court said..On the suit brought by 63 Moons against DHFL's promoters, directors, auditors etc. .Upon applying its judgment regarding the scope of appeals in commercial suits, the Court ultimately also allowed four of the thirteen appeals before it, which concerned a suit by 63 Moons Technologies Limited against the promoters, directors and auditors of the Dewan Housing Finance Limited (DHFL)..The said suit alleged fraud and deceit, while seeking damages. The appeals by 63 Moons before the High Court were filed against trial court orders revoking leave under Clause 12 of the Letters Patent on various applications filed by different defendants. The trial court had opined that a similar issue is pending before the Bombay High Court and also ordered the return of the plaint so that the suit may be filed in Bombay High Court instead..The Madras High Court, however, agreed with 63 Moons that the action sought to be initiated in Chennai is different from the case before the Bombay High Court. .The suit before the Bombay High Court was a commercial summary suit against DHFL for recovery of money in respect of non-convertible debentures and these proceedings stood halted following a moratarioum imposed under Section 14 of the Insolvency and Bankruptcy Code, the Madras High Court was told. On the other hand, the suit in Chennai alleged fraud on the part of the promoters, directors and auditors of DHFL and was not against DHFL itself. This apart, the High Court also agreed with 63 Moons that DHFL was not a necessary party to the suit since Section 35 of the Companies Act, 2013 contemplates joint and several liability. ."The objection taken as to the maintainability of the four appeals does not appear to be meritorious ... In fact, the plaintiff's Bombay suit, for all practical purposes, does not survive upon the resolution plan pertaining to DHFL being approved by the NCLT ... There is sufficient basis to the plaintiff's contention that the impugned judgment is perverse", the Court said..It proceeded to set aside the trial Court's April 2021 judgment in the matter, although it also opined that the natural forum for the suit may have been the Bombay High Court. All the same, this does not imply that the Madras High Court has no jurisdiction in the matter, the Bench said.."The judgment and order impugned dated April 29, 2021 cannot be sustained and none of the grounds indicated therein is acceptable for the plaintiff herein to be shown the door and required to carry the suit to the Bombay High Court," the Court concluded. .The battery of lawyers who represented various parties in the matter included Senior Advocates AR L Sundaresan, Parthasarathy, Vijay Narayan, NL Rajah (for M/s Aditya Reddy) and advocates Madhan Babu, R Parthasarathy, Suhrith Parthasarathy, Arun C Mohan, Lakshmi Kumaran, Nithyaesh Natraj, P Giridharan, Rohan K George, A Abdul Hameed (for M/s AAV Partners), Ravindhran, Harshavardhan Ganesan, Anirudh Krishnan assisted by Advocates Adarsh Subramanian and Shiva Krishnamurthy, Advocates Akhil Bhansali (for M/s BFS Legal), R Sathish Kumar, PCN Raghupathy, K Jagannathan, Rahul Balaji, Madhu Preetha Elango and Disha Jain. Advocate Sricharan Rangarajan also assisted the Court as an intervenor. .The Court expressed its appreciation for the lawyers, stating: ."The court expresses its appreciation of the erudite assistance rendered all round, not the least by the intervenor.".Section 13 of the Commercial Courts Act: A lesson on the interpretation of statutes?.[Read Judgment]