While terming an application in a commercial suit as “vexatious and mischievous”, the Bombay High Court (HC) imposed a cost of Rs25 lakh on the La Fin Financial Services Pvt Ltd in an order. The company has challenged the HC order in the Supreme Court.
The HC observed that the proceedings initiated were a “waste of very, very scarce judicial time” and noted that the Commercial Courts Act is not anti-defendant and is meant for expeditious disposal of commercial disputes.
“It would be meaningless to order a paltry amount. Plaintiffs such as this one will understand that courts are not playgrounds, and litigation is not a pastime,” Justice Gautam Patel observed while directing La Fin Financial Services to pay Multi-Commodity Exchange of India Ltd (MCX) Rs25 lakh within two weeks, failing which the costs will carry interest at 9% per annum.
The HC imposed the cost after giving La Fin Financial Services several chances to withdraw the application.
“In a case such as this, when a suit is initially instituted as a regular suit and not a commercial suit, there is no statutory limitation that runs against a defendant (MCX). The Commercial Courts Act does not apply to a regular suit. It only begins to apply from the date when the suit is registered as a commercial suite in the commercial division…This hardly needed re-stating,” Justice Patel observed.
While passing the order, the bench commented, “Because this is clearly a vexatious and mischievous proceeding that has unnecessarily wasted the court’s time, I can think of no reason to withhold an order of costs against the plaintiffs. The quantum of costs cannot be trivial.”
On 5 November 2015, La Fin Financial Services had initiated a suit against MCX. However, the HC registry had issued a notice with a list of cases to be transferred to the commercial division of this court, including the firm’s suit, and asking those with objections to the transfer to come forward.
Despite this, La Fin Financial Services did nothing. Hence, the suit was transferred to the commercial division and was classified as a commercial suit on 18 October 2016.
The Commercial Courts Act, 2015 came into force with effect from 23 October 2015. Under the Commercial Courts Act, the maximum period for a defendant to submit a written statement is 120 days. However, there is no such limitation for filing written statements for regular suits.
MCX counsel, Sameer Pandit, contended that the Exchange had filed its written statements, which was well within 120 days period of the suit being classified as a commercial suit.
But La Fin Financial Services filed an application stating that since it was a commercial suit, its provisions would apply and the defendants should have filed their written statements within 120 days of the filing of the case – which is within 120 days of 5 November 2015. Its counsel Vikram Nankani contended that 120 days would apply from November 2015 even though on that date, the suit was not filed as a commercial suit at all.
The HC observed that the argument was “inherently flawed” and “manifestly unjust”.
Justice Patel also observed an initial fault of La Fin Financial Services itself in wrongly instituting the suit as a regular suit. The court registry had to object to rectify this problem.
“The initial delay is attributable only to the plaintiff (La Fin Financial Services). It cannot take advantage of this. No court will permit an injustice to be caused, especially when the party seeking an order is itself found to be in default,” the HC said, adding that trying to apply a statute “retrospectively to cover up a failure, default or misstep,” would not be permitted.
Justice Patel dismissed the plaintiff's interim application, terming it as “certainly frivolous, thoroughly misconceived and possibly even mischievous”.