Is Order XXV Rule 1(1) CPC Mandatory? Delhi High Court Larger Bench To Decide

Observing that appears to be a "clear inconsistency" in the views expressed by different coordinate benches of the high court on whether the proviso to Order XXV Rule 1(1) of CPC is mandatory in nature or whether the court has a discretion while deciding an application under Order XXV Rule 1(1), the court said “as a matter of judicial propriety, the present matter may be referred to a larger Bench of this Court, so that an authoritative judgment may be passed by the Court on the interpretation of Order XXV Rule 1(1) of the CPC”.

Justice Amit Bansal framed the following questions for the larger bench reference:

(i) Whether it is mandatory for the court to direct the plaintiff residing outside India and not possessing any sufficient immovable property within India, to furnish a security in terms of Order XXV Rule 1(1) of the CPC for payment of costs incurred or likely to be incurred by the defendant or whether the Court can exercise discretion in this regard?

(ii) Whether the proviso to Order XXV Rule 1(1) of the CPC is only applicable in respect of the suits relating to immovable property?

The court made the reference while observing that though there is no dispute that in terms of the main provision of Rule 1(1) of Order XXV, the court has a discretion for directing the plaintiff to deposit security for costs, however, the coordinate benches have expressed different opinions while interpreting the proviso to Order XXV Rule 1(1).

The bench was dealing with an application filed by the defendant, Ace Technologies Corp., under Order XXV Rule 1(1) of CPC, seeking a direction to the plaintiff, Communication Components Antenna Inc, to deposit security with the court. Ace Technologies argued that in terms of the proviso to Order XXV Rule 1(1) of 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.

Communication Components Antenna in response submitted that the word ‘shall’ contained in the proviso to Order XXV Rule 1(1), must be read as ‘may’ and therefore, it is not mandatory for the plaintiff to deposit security for costs in all cases where the plaintiff resides outside India and does not own any immovable property in India.

The court observed that while a coordinate bench in Alberto-Culver USA Inc. v. Nexus Health & Home Care (P) Ltd. (ILR (2010) 1 Delhi 680) has held that it is not mandatory to direct the plaintiff to deposit security for costs in every case under the proviso to Order XXV Rule 1(1), the coordinate benches in S.A. Brothers & Co. v. Bartholomow & Sons Ltd. (2000 (56) DRJ 68) and Kiran Shoes Manufacture v. Welcome Shoes Pvt. Ltd. 2017 SCC Online Del 6590 have held that the proviso is mandatory in nature.

Justice Bansal further noted that the high court in Millennium & Copthorne International Limited v. Aryans Plaza Services Pvt. Ltd. (2018) has held that the proviso to Order XXV Rule 1(1) would apply only in cases where the subject matter of the suit is an immovable property and the same would not apply in a suit where the subject matter is an ‘intellectual property’

“From the discussion above, there appears to be a clear inconsistency in the views expressed by different Coordinate Benches of this Court. On one hand, in Kiran Shoes (supra) and S.A. Brothers (supra), it has been observed that the proviso to Order XXV Rule 1(1) of the CPC is mandatory in nature. On the other hand, it has been observed in Millennium & Copthrone (supra) and Alberto Culver USA (supra) that the provisions of Order XXV Rule 1(1) of the CPC are not mandatory in nature and the Court has a discretion," the court said.

The bench thus referred the matter regarding the interpretation of Order XXV Rule 1(1) to the larger bench.

“Let the matter be placed before Hon’ble the Chief Justice for constitution of a Larger Bench/Division Bench for consideration of the interpretation of Order XXV Rule 1(1) of the CPC," the court said.

Case Title: Communication Components Antenna Inc. versus Ace Technologies Corp. and Ors.

Citation: 2023 LiveLaw (Del) 33

Counsel for the Plaintiff: Mr. J. Sai Deepak, Mr. Sidhant Goel, Mr. Mohit Goel and Mr. Deepankar Mishra, Advocates

Counsel for the Defendant: Mr. Sandeep Sethi, Senior Advocate with Mr. Vineet Rohilla and Mr. Rohit Rangi, Advocates