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Supreme Court Declares 'Suit Not Pending' in Landmark Anish M Rawther Case

Updated: Jul 9

Summary of the Judgement


  • Case Name: Anish M Rawther @ Anees Mohammed Rawther v. Hafeez Ur Rahman & Ors.

  • Date: 14 June 2024

  • Judges: Honorable Justice Vikram Nath and Honorable Justice Prashant Kumar Mishra

  • Acts and Sections: Order XXXVII of Code of Civil Procedure, 1908 (CPC) Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC)

  • Cited Judgements: Special Leave Petition (C) No. 20626 of 2019


Introduction


The Supreme Court of India in the case of Anish M Rawther @ Anees Mohammed Rawther v. Hafeez Ur Rahman & Ors. delivered a significant judgement on 14 June 2024, resolving a civil appeal that challenged an order of the Karnataka High Court. This case revolved around procedural aspects under Order XXXVII of the Code of Civil Procedure, 1908, and touched upon implications of the Insolvency and Bankruptcy Code, 2016. The judgement, authored by Honorable Justice Prashant Kumar Mishra, offers critical insights into the interplay between civil procedure and insolvency proceedings.


Case Background


The case originated from a suit filed by the respondents/plaintiffs under Order XXXVII of the CPC for the recovery of Rs. 1,04,16,576/- with interest from the appellant/defendant. The trial court had allowed the appellant/defendant to defend the suit on the condition of depositing 50% of the suit claim. This order was contested by the appellant in the High Court of Karnataka, which was subsequently dismissed, leading to a special leave petition (SLP) in the Supreme Court.


High Court Proceedings


The High Court, in its order dated 21 March 2022, had allowed the respondents' writ petition, setting aside the trial court’s order from 07 March 2020. The High Court directed the trial court to accept the memo dated 14 November 2019, submitted by the plaintiffs, and to pass appropriate orders accordingly. This memo requested a decree under Order XXXVII Rule 3(6)(b) of the CPC due to the appellant's failure to comply with the deposit condition.


Arguments and Findings


The appellants argued that under Section 14 of the IBC, a moratorium had become operational, which should prevent the suit from proceeding. However, the High Court rejected this argument, directing the trial court to proceed based on the memo filed by the respondents.

The appellants did not pursue further variation of the High Court’s order as permitted by the Supreme Court in its interim order dated 06 September 2019. Subsequently, the trial court's rejection of the respondents' memo was overturned by the High Court, prompting the appeal in the Supreme Court.


Supreme Court Judgement


The Supreme Court noted the procedural history and the implications of the moratorium under the IBC. It observed that despite the interim stay granted by the Supreme Court on 01 December 2023, the suit was ultimately decreed on 20 April 2023. Since the decree had not been further challenged by the defendants, the Supreme Court deemed the present appeal infructuous.

Honorable Justice Prashant Kumar Mishra stated, “It is not brought to our notice that the said decree has been challenged any further by the defendants. Thus, for the present, the suit is not pending, therefore, the present appeal which arises out of an interim order passed by the Trial Court during pendency of the suit, has been rendered infructuous.”

Legal Implications

This judgement elucidates several crucial legal points:


Interplay Between CPC and IBC


The case highlights the boundaries and intersections between the procedural mandates under the CPC and the moratorium provisions under the IBC. The Supreme Court’s dismissal of the appeal as infructuous underscores the importance of addressing substantive decrees rather than procedural interim orders once a final judgement is rendered.

This aspect of the judgement is particularly significant for legal practitioners. The procedural safeguards under Order XXXVII are designed to ensure expeditious disposal of commercial disputes. However, the interplay with insolvency proceedings can complicate matters, as seen in this case. The court’s decision to prioritise the procedural aspects over the moratorium provisions indicates a judicial preference for resolving commercial disputes within the framework of the CPC, unless compelling insolvency issues are presented.


Role of Moratorium under IBC


The Supreme Court’s decision to overlook the moratorium argument indicates that procedural compliance under Order XXXVII of CPC may prevail over a general moratorium unless specifically contested and ruled otherwise by a higher court. This sets a precedent that moratorium provisions may not necessarily halt all procedural actions in pending suits, especially when the underlying suit has reached a significant procedural milestone.


Significance of Procedural Compliance


The Supreme Court’s reliance on the procedural history, including the appellant’s failure to seek variation of the order, emphasizes the need for strict adherence to procedural directives. The judgement reinforces that non-compliance with court orders can lead to unfavourable outcomes, irrespective of subsequent statutory protections like the IBC moratorium. This serves as a reminder to legal professionals about the critical importance of procedural diligence and timely compliance with court orders.


Broader Impact on Commercial Litigation


The judgement has broader implications for commercial litigation in India. It reaffirms the judiciary's commitment to upholding procedural rules and ensures that parties cannot circumvent procedural obligations by invoking statutory protections belatedly. This reinforces the integrity of the judicial process and ensures that commercial disputes are resolved efficiently and fairly.

For legal professionals, this judgement underscores the importance of strategic litigation planning. Understanding the nuances of procedural and substantive law, and anticipating potential complications arising from statutory provisions like the IBC, can significantly influence the outcome of commercial disputes. The ability to navigate these complexities effectively is crucial for achieving favourable outcomes for clients.


Conclusion


The Supreme Court's decision in Anish M Rawther @ Anees Mohammed Rawther v. Hafeez Ur Rahman & Ors. is a pivotal judgement for legal professionals dealing with procedural law and insolvency issues. It reaffirms the judiciary's stance on procedural compliance and provides clarity on the interaction between civil procedural rules and insolvency provisions.


Moreover, this judgement serves as a critical reminder of the importance of procedural diligence and the necessity of timely compliance with court orders. It highlights the judiciary’s approach to balancing procedural mandates and statutory protections, ensuring that the administration of justice remains both efficient and fair.

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