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“Any attorney experienced in civil litigation necessarily would agree that a rule intended to promote settlement can effectively serve that function only if it authorizes shifting the payment of attorney’s fees from the party offering settlement to the party rejecting that offer. Parties to civil litigation often incur extremely sizeable fees. Consequently, a rule that shifts the burden of paying fees from one party to the other can be a powerful—indeed intimidating—tool for promoting settlement. By like measure, parties seeking to induce a settlement with their adversary likely will not even bother to invoke a rule that does not shift the burden of paying attorney’s fees, reasoning that the shifting of costs alone is not worth the effort.”
– Jay Horowitz
The content of this article is something which I have brainstormed and debated with my colleagues and peers quite a few times after the inclusion of a particular provision in the recently amended rules and the possibility of its utilization in ongoing matters.
To give some background, the Supreme Court vide its order dated January 09, 2018, in Suo Moto Writ Petition in Re: Case Management of Original Suits, asked the Delhi High Court to lead by framing new procedural rules for cases heard under its Original Jurisdiction. It was stated in the order,“the Hon’ble Judges of the Delhi High Court have to work out ways and means for effective disposal of the IPR matters before it so that a model for disposal of civil suits can be culled out from the ways and means adopted by the Delhi High Court which can form the basis of a uniform action plan for the rest of the country.”
Following the said order, the Delhi High Court notified the Delhi High Court (Original Side) Rules, 2018, which provide for reducing the time of litigation by streamlining the procedure for completion of pleadings, interrogatories, discovery, the appointment of Local Commissioner, checking unnecessary adjournments and imposing cost for causing delay etc. The same is consistent with Sections 129 ,130 and 131 of the Code of Civil Procedure, 1908 (“CPC”). The said rules came into force with effect from 01.03.2018 and were subsequently amended on 16.10.2018.
Vide the recent amendment on 16.10.2018, a new rule i.e. Rule 7 to Chapter IX was inserted in the aforesaid Rules. The newly inserted Rule 7 introduced the concept of “Settlement Offer With Prejudice”, as follows: –
“7. Settlement offer with prejudice-A proposal to settle shall be in writing and shall be with prejudice to the proposer. The proposal shall remain valid till the conclusion of the suit/petition/original proceeding unless otherwise provided.
A proposal to settle may be responded by a counter proposal in writing, which shall also be with prejudice and would remain valid till the conclusion of the suit/petition/original proceeding, unless otherwise provided.
Where a proposal/counter proposal is declined and/or refused, and the suit/petition/original proceedings results in terms less favourable than those contained in the proposal/counter proposal, the party declining and/or refusing to accept the proposal/counter proposal, notwithstanding being entitled to grant of relief, as awarded by the Court, shall however, be burdened with costs as provided in Rule 2(i) of Chapter XXIII of these Rules.
In case the suit/petition/original proceedings results in terms more favourable than those contained in the proposal/counter proposal, the party declining/refusing to accept the same shall, in addition, to the grant of reliefs, as awarded by the Court, be also entitled to full costs of the suit/petition/original proceedings.”
In the Indian scenario, this provision is unique not only because it introduces the concept of “with prejudice”, but also because in a pro-litigation country like India it introduces the placing of burden of paying the full costs of the proceedings onto one party if the case is vexatious, weak and in essence without merits largely depending on whether the proceedings have culminated on terms more or less favourable than those contained in the written proposal/counter-proposal as decided by the Courts, essentially following the idiom ‘putting your money where your mouth is’.
In the succeeding paragraphs, I shall be explaining how the provision (as it currently stands) itself is a little dubious.
The concept of “With” and “Without” Prejudice
Almost everyone in the legal fraternity has, at some point of time, dealt with the concept of ‘without prejudice’ which essentially means ‘without detriment to any existing right or claims’. Black’s Law Dictionary explains the concept as follows: “Where an offer or admission is made ‘without prejudice’, or a motion is denied or a bill in equity dismissed ‘without prejudice’, it is meant as a declaration that no rights or privileges of the party concerned are to be considered as thereby waived or lost, except in so far as may be expressly conceded or decided.” . On the other hand, the concept of “With Prejudice” is a complete ‘U’-turn of sorts and is a clear departure from the concept of “without prejudice”. It attaches a tone of finality to the proposals and counter-proposals, as the case may be, offered during the process of settlement under the provision.
Generally, when something is undertaken “without prejudice”, it leads to an inference that the discussion, cause or matter has not been discussed or decided on merits and no rights and remedies are hit/barred under the law. Therefore, when during the course of negotiations, offers to settle have been made without prejudice and such negotiation/talks fail, the offers made before the commencement of those proceedings cannot be taken advantage of or held against the parties during the course of legal proceedings, not even for the determination of whether or not there is good cause for depriving a successful litigant of costs.
Whereas, ‘With Prejudice’ automatically signifies some kind of injury or loss. The moment one says ‘With Prejudice’, it is done to the harm, injury, or disadvantage of a party. Therefore, when discussions, offers to settle and/or proposals are made ‘With Prejudice’ during the course of a negotiation, and the negotiation fails, then such offers made by the parties may, can and will be held against them during the course of litigation. Such is the nature of the “settlement” contained in the impugned provision.
(This post has been authored by Abhimanyu Chopra, Counsel at AZB & Partners, New Delhi. The author would also like to thank Ms. Rachana Yadav and Ms. Mitali Gupta for their thoughts, research and inputs)
(2010) Vol. 87 485 Denver University Law Review, ‘Rule 68: The Settlement Promotion Tool That Has Not Promoted Settlements’, Jay Horowitz ↑
Suo Moto Writ Petition (Civil) No(s). 08/2017 ↑
Notification No. No. 100/Rules/DHC ↑
Notification No. 722/Rules/DHC ↑
Supt. (Tech I) Central Excise v. Pratap Rai; (1978) 3 SCC 113. ↑
Supra 8 ↑
Walker v. Wilsher; (1889) 23 QBD 335 (CA). ↑
Manharibhai Muljibhai Kakadia v. Shaileshbhai Mohanbhai Patel; (2012) 10 SCC 517. ↑