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2023 Supreme(Del) 2339
IN THE HIGH COURT OF DELHI AT NEW DELHI
AMIT BANSAL, J.
Communication Components Antenna Inc. - Plaintiff
Versus
ACE Technologies Corp. and Ors. - Defendants
CS(COMM) No. 1222 of 2018 & I.A. No. 13481 of 2019 (O-XXXIX R-1 & 2 of CPC), CC(COMM) No. 7 of 2020, I.A. No. 10917 of 2021(O-XXXIX R-2A of CPC)
Decided On : 10-01-2023
For the Plaintiff : Mr. J. Sai Deepak, Mr. Sidhant Goel, Mr. Mohit Goel and Mr. Deepankar Mishra.
For the Defendant :Mr. Sandeep Sethi, Senior Advocate with Mr. Vineet Rohilla and Mr. Rohit Rangi.
The conflicting views on the mandatory nature of the proviso to Order XXV Rule 1(1) of the CPC and its applicability to suits relating to immovable property led to the referral of the matter to a larger Bench for authoritative judgment.
Headnote:
Order XXV Rule 1(1) of CPC - Security for Costs - Kiran Shoes Manufacture v. Welcome Shoes Pvt. Ltd., 2017 SCC Online Del 6590, S.A. Brothers & Co. and Anr. v. Bartholomow & Sons Ltd.& Ors., 2000 (56) DRJ 68, Gotham Entertainment Group LLC and Ors. v. Diamond Comics Pvt. Ltd., (2010) 42 PTC 136 - The court discussed the interpretation of Order XXV Rule 1(1) of the CPC and the conflicting views on its mandatory nature and applicability to suits relating to immovable property.
Fact of the Case:
The defendants filed an application seeking a direction to the plaintiff to deposit a security of Rs. 8,00,00,000/- with the Court under Order XXV Rule 1(1) of the CPC. The plaintiff contested, arguing that it is not mandatory for the plaintiff to deposit security for costs when residing outside India and not owning immovable property in India.
Finding of the Court:
The court found conflicting views on the mandatory nature of the proviso to Order XXV Rule 1(1) of the CPC and its applicability to suits relating to immovable property. As a matter of judicial propriety, the court referred the matter to a larger Bench for authoritative judgment.
Issues: Interpretation of Order XXV Rule 1(1) of the CPC, mandatory nature of security for costs, applicability of the proviso to suits relating to immovable property.
Ratio Decidendi: The court found inconsistency in the views expressed by different Benches of the Court and referred the matter to a larger Bench for consideration.
Final Decision: The matter was referred to a larger Bench of the Court for authoritative judgment on the interpretation of Order XXV Rule 1(1) of the CPC.
JUDGMENT :
Amit Bansal, J.
I.A. 13482/2019 (O-XXV R-1(1) of CPC)
1. The present application has been filed on behalf of the defendants under Order XXV Rule 1(1) of the Code of Civil Procedure, 1908 (CPC) seeking a direction to the plaintiff to deposit a security of Rs. 8,00,00,000/- with this Court.
2. Notice in this application was issued on 27th September, 2019. Reply has been filed on behalf of the plaintiff.
3. Senior counsel for the defendants submits that in terms of the proviso to Order XXV Rule 1(1) of the CPC, in all cases, where the plaintiff is residing outside India and does not possess any immovable property in India, it is mandatory for the Court to direct the plaintiff to deposit security for payment of costs incurred or likely to be incurred by the defendant for contesting the suit. Reliance has been placed on behalf of the defendants on the judgments in Kiran Shoes Manufacture v. Welcome Shoes Pvt. Ltd., 2017 SCC Online Del 6590, S.A. Brothers & Co. and Anr. v. Bartholomow & Sons Ltd.& Ors., 2000 (56) DRJ 68 and Gotham Entertainment Group LLC and Ors. v. Diamond Comics Pvt. Ltd., (2010) 42 PTC 136.
4. Per contra, the counsel appearing on behalf of the plaintiff submits that in the proviso to Order XXV Rule 1(1) of the CPC, the word ‘shall’ has to be read as ‘may’ and therefore, it is not mandatory for the plaintiff to deposit security for costs with the Court in all cases where the plaintiff resides outside India and does not own any immovable property in India.
5. Counsel for the plaintiff has placed reliance on the judgment dated 5th March, 2018 passed in CS(COMM) 774/2016, titled Millennium & Copthorne International Limited v. Aryans Plaza Services Pvt. Ltd. & Ors., wherein it has been held that the proviso to Order XXV Rule 1(1) of the CPC shall only apply in relation to the suits, the subject matter of which is an immovable property. In the alternative, the counsel for the plaintiff submits that the proviso to Order XXV Rule 1(1) of the CPC has to be interpreted in the light of sub-rule (2) of Order XXV Rule 1 of the CPC and therefore, the deposit of security for costs is not mandatory.
6. I have heard the counsels for the parties.
7. Since the submissions of the counsels for both the parties revolve upon the interpretation of Order XXV Rule 1 of the CPC, it may be relevant to set out Order XXV Rule 1 of the CPC :
“1. When security for costs may be required from plaintiff - (1) At any stage of a suit, the Court may, either of its own motion or on the application of any defendant, order the plaintiff, for reasons to be recorded, to give within the time fixed by it security for the payment of all costs incurred and likely to be incurred by any defendant:
Provided that such an order shall be made in all cases in which it appears to the Court that a sole plaintiff is, or (when there are more plaintiffs than one) that all the plaintiffs are, residing out of India and that such plaintiff does not possess or that no one of such plaintiffs possesses any sufficient immovable property within India other than the property in suit.
2. Whoever leaves India under such circumstances as to afford reasonable probability that he will not be forthcoming whenever he may be called upon to pay costs shall be deemed to be residing out of India within the meaning of the proviso to sub-rule (1).”
8. There is no dispute that in terms of the main provision of Rule 1(1) of Order XXV of the CPC, the Court has a discretion for directing the plaintiff to deposit security for costs in view of the use of the word ‘may’. However, the proviso to Order XXV Rule 1(1) has been the subject matter of various judgments passed by the Coordinate Benches of this Court.
9. In S.A. Brothers (supra), another Coordinate Bench of this Court held that the proviso to Order XXV Rule 1(1) of the CPC is mandatory in terms. The relevant observations of the court in S.A. Brothers (supra) are set out below :
“A perusal of its provisions suggests that it was mandatory in terms
