Section 13 of the Commercial Courts Act: A lesson on the interpretation of statutes?

Section 13 and more importantly its proviso are here to stay, but its interpretation is not.
Bombay High court and Delhi High Court
Bombay High court and Delhi High Court

The interpretation of statutes continues to be one of the tougher subjects in a law student’s curriculum. The language used in a statute is at times confusing and leads to judges interpreting the statute differently. We are all aware of the several rules of interpretation and their relevance and importance in judging.

Section 13 of the Commercial Courts Act, 2015 (Act) is one such provision that has and can be interpreted in several ways, by applying different rules of interpretation. To summarise, Section 13 of the Act lays down the right to appeal against orders passed in matters governed by the Act.

For the purposes of the present analysis, we shall focus on the proviso to Section 13, which states:

“Provided that an appeal shall lie from such orders passed by a Commercial Division or a Commercial Court that are specifically enumerated under Order XLIII of the Code of Civil Procedure, 1908 (5 of 1908) as amended by this Act and section 37 of the Arbitration and Conciliation Act, 1996 (26 of 1996).”

Beneficial Rule of Interpretation

In Hubtown Ltd v. IDBI Trusteeship Ltd the Commercial Appellate Division of the Bombay High Court had to adjudicate an appeal from the order of the Commercial Division wherein conditional leave to defend was given to the appellant. The Court, whilst noticing that the impugned order was not one specified in Order XLIII of the CPC, applied the principles enunciated in Shah Babulal Khimji v. Jayaben D Kania, which held,

Every interlocutory order cannot be regarded as a judgment but only those orders would be judgments which decide matters of moment or affect vital and valuable right of the parties and which work serious injustice to the party concerned."

The Court was therefore of the opinion that the ambit of Section 13 of the Act was broader that the category of orders falling under Order XLIII, CPC. It finally held,

Therefore, an Appeal under Section 13(1), even if there is an order, but which has a tinge or colour of judgment as laid down by the Hon'ble Supreme Court in Shah Babulal Khimji v. Jayaben D. Kania and Midnapore Peoples' Co-op. Bank Ltd. (supra), the Appeal under Section 13 against such order being a “judgment” within the meaning of CPC, is maintainable.”

The rationale behind the same was that in case the proviso was not interpreted widely, it will restrict the right to appeal. As such, the Bombay High Court seems to have applied the “Beneficial Rule”, whose object is premised on equity. In the opinion of the Bombay High Court, the restricted right to appeal in matters governed by the Act needed a liberal interpretation so as to serve the cause of justice.

Golden Rule of Interpretation and Purposive Rule of Interpretation

In HPL (India) Ltd & Ors v. QRG Enterprises & Anr, the Appellate Division of the Delhi High Court was faced with an appeal from an order of the Commercial Division wherein documents filed along with the affidavits by way of examination-in-chief of new witnesses of the plaintiffs was taken on record. The Appellate Division was tasked to adjudicate the issue of maintainability of the appeal, as the impugned order was not one specified under Order XLIII, CPC. Disagreeing with the Bombay High Court in Hubtown, the Court applied the “Golden Rule of Interpretation”, thereby restricting the right to appeal under Section 13 of the Act to only orders specified in Order XLIII and no other.

It was noticed by the Court that Section 13 of the Act does refer to appeals from “judgment” and “orders”. However, the term “judgment” in Section 13 was interpreted to mean “decree”, given the axiomatic relationship between the CPC and the Act. The Court disagreed with the interpretation of the Bombay High Court in applying the definition of “judgment” as stipulated in Shah Babulal Khimji, as the same could not be imported to appeals under the Act because the CPC does not provide for appeals against judgments, but only against decrees and orders.

In applying the Golden Rule, the Court was interpreting the proviso so as prevent the anomalous situation whereby all orders deciding matters of the moment or affecting the vital and valuable right of the parties passed by the Commercial Division, would be appealable. The interpretation would also further object of the Act, and in a sense was a form of “Purposive Interpretation”, since one of the hallmarks of the Act was speedy adjudication of commercial matters.

Literal Rule of Interpretation

In D&H India Ltd v. Superon Schweisstechnik India, the matter before the Commercial Appellate Division was against an order passed by the Single Judge adjudicating a statutory appeal under Rule 5 in Chapter II of the Delhi High Court Rules (Original Side), 2018 . Admittedly, the impugned order was not specified under Order XLIII, CPC and as matter of fact, not under the CPC at all. The Court, applying the “Literal Rule”, distinguished the case at hand from the ratio of HPL. It held,

The proviso to Section 13 (1A) cannot, in our view, be read as limiting the right to appeal, conferred by Section 13 (1A). The said proviso merely states that, from orders passed by the Commercial Division of the High Court, as are specifically enumerated under Order XLIII of the CPC, an appeal would lie under Section 13 (1A). In our view, the proviso cannot be read as meaning that no appeal would lie in any other case, especially where the order under appeal has not been passed under the CPC at all, but under Rule 5 in Chapter II of the 2018 Original Side Rules.”

Therefore, the Court held that since the proviso does not specifically prohibit appeals from other statutes - besides the CPC and the Arbitration Act - the legislature in all its wisdom had not restricted the right to appeal from other statues akin to the Original Side Rules. Besides the fact that the said decision would open a flood gate of appeals from decisions of the Joint Registrar eventually to the Commercial Appellate Division, the decision is an impediment to the object of the Act i.e. speedy adjudication.

Expressio unius est exclusio alterius

In Kandla Export Corporation & Anr v. M/s OCI Corporation & Anr, the Supreme Court applied the principle of “Expressio unius est exclusio alterius,” which means that the express mention of one thing excludes all others, which in itself is a facet of the Literal Rule. It held,

It will at once be noticed that orders that are not specifically enumerated under Order 43 CPC would, therefore, not be appealable, and appeals that are mentioned in Section 37 of the Arbitration Act alone are appeals that can be made to the Commercial Appellate Division of a High Court.”

By virtue of the language used in the proviso, that only appeals from Order XLIII CPC and Section 37 of Arbitration Act were maintainable, it is the opinion of the author that the Supreme Court impliedly held that appeals from all other statues were excluded.

The Delhi High Court in Prasar Bharati v. M/s Stracon India Ltd & Anr. followed the principles enunciated in Kandla, and accordingly held that appeals from an order under Section 36 of the Arbitration Act were not maintainable as an appeal against only those orders enumerated in Section 37 of the Arbitration Act were maintainable. The interpretation yet again furthered the purport of the Act, necessitating speedy adjudication and limited appeals.

Where are we now?

i. The Delhi High Court’s interpretation in Superon is impliedly in conflict with the decision of the Supreme Court in Kandla. Whilst the Supreme Court applied the principles of expressio unius est exclusio alterius, the Delhi High Court took a contrarian view to suggest that “what is not expressly excluded, is impliedly included”. Both principles emanate from the Literal Rule, but lead to contradictory results.

ii. By giving a literal interpretation and widening the scope of the proviso, the decision in Superon is in conflict with the purposive interpretation given by the co-ordinate bench in HPL. In order to ascertain some sort of interpretative finality, it is imperative that a Full Bench of the Delhi High Court take a view on the “correct” interpretation of the proviso. Even though it is clear that appeals under Section 13 of the Act, if from the CPC or Arbitration Act, are limited to those from orders under Order XLIII and Section 37 respectively, it needs to be authoritatively decided whether appeals are maintainable from orders emanating from other statutes or not.

iii. The decision of the Bombay High Court in Hubtown as challenged before the Supreme Court, but was disposed of vide a consent order. The Beneficial Rule applied by the Bombay High Court is in conflict with the objects of the Act, as well as the decision of the Supreme Court in Kandla. Time will tell, whether the Bombay High Court aligns its view with that of the Supreme Court.

Section 13 and more importantly its proviso are here to stay, but its interpretation is not. As some student said,

“Welcome to statutory interpretation, where the rules are made up and the words don’t mean anything.”

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