T S SATEESH vs M/S GODREJ PROPERTIES LIMITED
- Court
- Karnataka High Court
®
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HC-KAR
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WP No. 10354 of 2026
CNR: KAHC010235752026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 24 DAY OF JULY, 2026
BEFORE
THE HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
WRIT PETITION NO. 10354 OF 2026 (GM-CPC)
BETWEEN:
T.S.SATEESH
AGED ABOUT 57 YEARS,
SON OF TIRUMALA SRIRANGACHAR,
RESIDING AT NO. 17,
MANTRI ALTIUS, CUBBON ROAD,
OPPOSITE THE HINDU OFFICE,
BENGALURU -560 001
…PETITIONER
(BY SRI.DHANANJAY JOSHI, SENIOR COUNSEL FOR
SRI.KASHYAP N. NAIK, ADVOCATE)
AND:
M/S GODREJ PROPERTIES LIMITED
A COMPANY INCORPORATED UNDER
THE PROVISIONS OF
THE COMPANIES ACT, 2013,
HAVING ITS REGIONAL OFFICE AT
LEVEL 10, PRESTIGE OBELISK,
KASTURBA ROAD, AMBEDKAR VEEDHI,
BENGALURU 560 001,
REPRESENTED BY ITS
AUTHORIZED REPRESENTATIVE
MS.G.APARAJITA
…RESPONDENT
(BY SRI.DHYAN CHINNAPPA, SENIOR COUNSEL FOR
SRI.MOHAMMED SHAMEER, ADVOCATE)
Digitally signed
by SUVARNA T
Location: HIGH
COURT OF
KARNATAKA
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WP No. 10354 of 2026
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THIS WP IS FILED UNDER ARTICLE 227 OF THE
CONSTITUTION OF INDIA, PRAYING TO DIRECTIONS
MODIFYING THE IMPUGNED ORDER DATED 04.03.2026
PASSED BY THE LXXXIX ADDL. CITY CIVIL AND SESSIONS
JUDGE COMMERCIAL COURTS DIVISION, BENGALURU (CCH-
90) BENGALURU IN COM. OS NO. 1151/2025 THEREBY
GRANTING THE PETITIONER UNCONDITIONAL LEAVE OR
IMPOSE SUCH OTHER REASONABLE CONDITIONS WHILE
GRANTING SUCH LEAVE TO DEFEND THE UNDERLYING SUIT
WITH LIBERTY TO FILE HIS WRITTEN STATEMENT WITHIN A
REASONABLE TIME FIXED BY THIS COURT (ANNEXURE-A).
THIS WRIT PETITION HAVING BEEN HEARD AND
RESERVED ON 14.07.2026, COMING ON FOR
PRONOUNCEMENT OF ORDER THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
CAV ORDER
Aggrieved by the order dated 04.03.2026 passed in
I.A.No.1 in Com.O.S.No.1151/2025 by the LXXXIX Additional
City Civil and Sessions Judge, Commercial Courts Division,
Bengaluru, the petitioner/defendant is before this Court.
2. The respondent herein has filed
Com.O.S.No.1152/2025. In that, the petitioner herein has filed
I.A.No.1 under Order XXXVII Rule 3 of the CPC seeking leave to
defend the suit. The Commercial Court has allowed the
application on the condition that the petitioner/defendant shall
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furnish a Bank Guarantee for an amount of Rs.5,00,00,000/-
within 30 days from the date of the order. Aggrieved thereby,
the defendant is before this Court.
3. While passing the impugned order, the Commercial
Court observed that it is of the view that the defendant has
made out a prima facie case that he has got a substantial
defense to raise before the Court by filing written statement
with respect to the point of limitation. Admittedly, the question
of limitation is both question of law and fact and therefore,
issue pertaining to limitation needs to be adjudicated after a
full fledged trial. Another substantial defense which is raised by
the defendant is that he has got every right to forfeit the
amount of Rs.5 crores as the plaintiff has violated the terms of
the term sheet and the plaintiff failed to perform his obligation
under the term sheet and agreement.
4. The Commercial Court observed that when the
defendant contends that he has the right to forfeit the advance
amount of Rs.5 crores and that he is further entitled to
damages of Rs.50 crores for the alleged loss caused by the
plaintiff, the Commercial Court was of the view that the
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defendant should be given an opportunity to raise his defence.
The defendant's case is that he has invested the amount from
his own pocket and, therefore, he is entitled to forfeit the
advance amount of Rs.5 crores. In the opinion of the
Commercial Court, this assertion of the defendant needs to be
tested during the course of the trial. Further, in the case on
hand, as per the plaintiff's case, the defendant, in order to
repay Rs.5 crores, issued a cheque, and the said cheque was
dishonoured. If the defendant had the right to forfeit the said
amount, then what made him issue a cheque for Rs.5 crores to
the plaintiff is an issue which needs to be thrashed out during
the course of the trial.
5. The Commercial Court further observed that
considering the documents produced by the plaintiff and the
averments made by the defendant in the application, the
defendant has a substantial defence regarding the question of
limitation, forfeiture of Rs.5 crores, and the plaintiff's failure to
comply with the terms of the term sheet. Hence, the defendant
should be given an opportunity to file the written statement
and to lead evidence. The Commercial Court held that the Court
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has to balance the rights of both parties evenly and, if
necessary, by imposing conditions regarding time, mode of
trial, or security. Accordingly, I.A.No.1 was allowed on the
condition that the defendant shall furnish a Bank Guarantee for
Rs.5 crores.
6. Learned Senior counsel Sri.Dhanjay Joshi, representing
the learned counsel for the petitioner has drawn the attention
of this Court to the order passed by the Commercial Court,
noting that the Court has recorded satisfaction that the
defendant could make out a substantial case, and the leave
was granted. After granting the leave, the Commercial Court
ought not to have imposed condition. Learned Senior Counsel
has drawn the attention of this Court to the judgment of the
Apex Court in B.L. Kashyap and Sons Ltd. Vs. M/s. JMS
1
Steels and Power Corporation and Another . He has relied
on paragraph No.33 which reads thus:
“33. It is at once clear that even though in the case of
IDBI Trusteeship, this Court has observed that the
principles stated in paragraph 8 of Mechelec
Engineers’ case shall stand superseded in the wake of
amendment of Rule 3 of Order XXXVII but, on the core
theme, the principles remain the same that grant of
1
(2022) 3 SCC 294
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leave to defend (with or without conditions) is the
ordinary rule; and denial of leave to defend is an
exception. Putting it in other words, generally, the
prayer for leave to defend is to be denied in such cases
where the defendant has practically no defence and is
unable to give out even a semblance of triable issues
before the Court.”
7. Learned Senior counsel has also relied on the
judgment of the Apex Court in IDBI Trusteeship Services
2
Limited Vs. Hubtown Limited . Relying on these judgments,
it is submitted that the Commercial Court has failed to consider
the purport of Order XXXVII Rule 3 of CPC and, having
recorded a finding that there is a substantial defence to the
defendant, ought not to have imposed the condition.
8. Learned Senior counsel Sri.Dhyan Chinnappa,
representing the learned counsel for respondent, submits that
the provision itself makes it clear that in a given case the
Commercial Court can impose conditions. The Commercial
Court, having given leave to defend and considering the
respective cases of the parties and balancing their interests,
has only asked for a deposit of the amount. There is no order
for the plaintiff to withdraw the amount. In those
2
(2017) 1 SCC 568
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circumstances, there is no hardship to the defendant. It is
submitted that, in fact, the defendant stated that he is entitled
for damages, has not filed any counter claim so far. Without
filing a counter claim, they are not entitled for any such relief.
It is submitted that all these aspects were rightly considered by
the trial Court, and the Commercial Court has rightly passed
the order, and there are no grounds to interfere with the
impugned order.
9. Having heard the learned Senior counsels on either
side, perused the material on record. The principal question
that fall for consideration is “whether, after recording a
finding that the defendant has disclosed a substantial
defence within the meaning of Order XXXVII Rule 3(5) of
the CPC, the Commercial Court could nevertheless
impose a condition requiring the furnishing of a bank
guarantee” . Order XXXVII of the CPC embodies a special
procedure intended to ensure expeditious adjudication of
commercial and other specified claims where the defendant
does not possess a real defence. Simultaneously, the provision
protects defendants who demonstrate that the dispute is not
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one capable of summary disposal. The amended Rule 3(5), as
applicable to commercial disputes, consciously classifies the
nature of the defence disclosed by the defendants. The
discretion conferred upon the Court is therefore neither
absolute nor unstructured. It is guided by the quality of the
defence. Where the Court finds that the defence is frivolous,
vexatious or illusory, leave may be refused. Where the defence
appears plausible but doubtful or improbable, conditional leave
may be granted.
10. However, where the defendant discloses a substantial
defence, the legislative consequence is that the defendant is
entitled to defend the suit without onerous conditions. The
statutory clarification cannot be diluted by importing equitable
considerations alien to the scheme of the provision. In the
present case, the Commercial Court has consciously recorded
that the petitioner has disclosed a substantial defence. That
finding has not been questioned by the respondent. The
Commercial Court has further observed that the issues raised
by the petitioner cannot be adjudicated without recording
evidence and that the controversy requires a full-fledged trial.
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These findings necessarily exclude the possibility of the
petitioner's defence being characterised as illusory, shown, or
improbable. The petitioner disputes the very existence of an
enforceable liability. The specific plea is that the respondent
committed breaches of obligation, that the petitioner was
entitled to forfeit the amount, and that consequently the
cheque does not represent a legally recoverable debt. The
petitioner further asserts that it has itself suffered damages.
Whether such plea ultimately succeeds is beside the point. At
the stage of considering leave to defend, the trial Court is not
expected to pronounce upon the correctness of the defence,
but only upon its nature. The Commercial Court itself having
found that the defence is substantial, it was not open to
proceed as though the respondent's claim deserves protection
by directing security. Much emphasis was laid by the
respondent on the absence of a counterclaim for damages. This
submission does not commend acceptance. A counterclaim
enables the defendant to obtain an affirmative decree in his
favour. Its absence does not prevent the defendant from
disputing the plaintiff's entitlement or from pleading that the
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plaintiff's own breach is entitled to any relief. The
maintainability of a claim on the existence of a substantial
defence operates in a different sphere.
11. Learned Senior counsel appearing for the respondent
would contend that the Commercial Court has merely balanced
the competing interests of the parties by directing the
furnishing of a bank guarantee and that no prejudice is caused
to the defendant. But this submission overlooks the statutory
framework under Order XXXVII Rule 3(5) of the CPC. The
jurisdiction under Order XXXVII Rule 3(5) of the CPC is not
founded on abstract notions of equity or convenience. The
legislature has itself balanced the rights of the plaintiff and the
defendant by prescribing different consequences depending
upon the nature of the defence. The Court recorded that the
defendant has disclosed a substantial defence and the
consequence is the grant of unconditional leave. The
Commercial Court cannot substitute the legislative mandate
with its own perception of what may appear to be an equitable
arrangement between the parties. Judicial discretion cannot
travel beyond the limits prescribed by the statute. The
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respondent's contention that the plaintiff's monetary interest
deserves protection cannot justify the condition imposed.
12. The Commercial Court itself provides a separate and
distinct remedy when the plaintiff seeks security for the
satisfaction of a prospective decree. The jurisdiction under
Order XXXVII Rule 3(5) of the CPC cannot be converted into a
substitute for attachment before judgment. The object of
conditional leave is not to secure the plaintiff's claim but to
regulate the defendant's right to defend where the defence is
found to be doubtful or lacking credibility. The direction given
by the Commercial Court to furnish a bank guarantee virtually
proceeds on the premise that the respondent possesses a
superior prima facie entitlement to the suit amount.
Notwithstanding the Commercial Court's own finding that the
petitioner has disclosed a substantial defence, such a course
necessarily prejudices the controversy. If the petitioner's plea
that he was entitled to forfeit the amount ultimately succeeds,
the very foundation of the respondent's claim would disappear.
Whether the plea of forfeiture is legally sustainable can only be
determined after the parties adduce evidence. To compel the
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petitioner to secure the entire claim, pending such adjudication,
amounts to treating the defence as inferior despite the Court's
own conclusion to the contrary.
13. Accepting the submission of the learned Senior
counsel for the respondent would produce consequences
inconsistent with the legislative scheme. In every commercial
suit involving a substantial monetary claim, the plaintiff could
seek security, notwithstanding the existence of a substantial
defence. Such an interpretation would obliterate the distinction
drawn by the legislator between a substantial defence and a
plausible but doubtful defence, rendering the statutory
classification redundant. The Commercial Court must give full
effect to every expression employed by the legislation, not
adopt an interpretation which reduces any part of the provision.
Hence, in the considered opinion of this Court, the impugned
order suffers from an inherent inconsistency, having
unequivocally held that the petitioner has disclosed a
substantial defence requiring adjudication at trial. The
Commercial Court ought not to have burdened the petitioner
with the obligation of furnishing the bank guarantee and
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securing the suit claim. The finding regarding the nature of the
defence and the consequential condition cannot legally stand.
The discretion vested under Order XXXVII Rule 3(5) of CPC has
been exercised on an erroneous understanding of the statutory
scheme. It is needless to observe that this Court has not
expressed any opinion on the merits of the rival claims. Both
the parties are at liberty to establish their liability and their
case before the Commercial Court in accordance with law.
Accordingly, the issue is answered in favour of the petitioner.
Hence, this Court is passing the following order:
ORDER
i. The order dated 04.03.2026 passed in I.A.No.1
Com.O.S.No.1151/2025 by the LXXXIX
Additional City Civil and Sessions Judge,
Commercial Courts Division, Bengaluru, is set
aside , as far as imposing the condition of
furnishing the Bank Guarantee for an amount of
Rs.5,00,00,000/- is concerned.
ii. The finding recorded by the Commercial Court
that the petitioner has a substantial defence
within the meaning of Order XXXVII Rule 3(5) of
the CPC is affirmed.
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iii. Accordingly, the writ petition is allowed .
iv. All I.As. in this petition shall stand closed.
SD/-
(LALITHA KANNEGANTI)
JUDGE
MEG
List No.: 1 Sl No.: 0