Full Judgment Text
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CASE NO.:
Appeal (civil) 90 of 2008
PETITIONER:
Sify Ltd.
RESPONDENT:
First Flight Couriers Ltd.
DATE OF JUDGMENT: 08/01/2008
BENCH:
Tarun Chatterjee & Dalveer Bhandari
JUDGMENT:
J U D G M E N T
[Arising out of SLP [C] No. 4144 of 2006]
TARUN CHATTERJEE,J.
1. Leave granted.
2. This appeal is directed against the order dated 13th
of December, 2005 passed by a Division Bench of the
High Court of Judicature at Bombay in Appeal No. 1128
of 2005 whereby the Division Bench had allowed the
appeal of the respondent thereby setting aside the order
passed by a learned Single Judge of the same High Court
granting conditional leave to defend, to the respondent on
deposit of a sum of Rs. 15 lacs.
3. The facts giving rise to the filing of this appeal may
be briefly stated as follows.
4. The appellant company is engaged in the business
of providing service in setting up of Networks and other
value added services in the field of information and
technology. The respondent company is engaged in the
business of providing Courier services. The respondent
hired the services of the appellant as the service provider
for the connection of its Networks across India, which
included Internet Access and Virtual Private Network
(VPN). It is the case of the appellant that the respondent
committed defaults in making payments in respect of the
services provided by the appellant to the respondent. In
view of the continued failure of the respondent to clear the
outstanding dues in respect of invoices, the appellant filed
a summary suit, being SS No. 1576 of 2004, under O. 37
R.2 of the Code of Civil Procedure (in short \023the CPC\024)
against the respondent seeking recovery of a sum of
Rs. 25,73,793/- along with 18 % interest p.a. in the High
Court of Judicature at Bombay. The appellant, thereafter,
filed the summons for judgment, being SJ No. 652 of
2004, in the afore said suit claiming Rs. 25,73,793/- and
further interest at 18 % on the principle amount Rs.
23,18,797/- till payment. The respondent filed its reply to
the summary suit and the summons for judgment seeking
unconditional leave to defend the suit. It was the case of
the respondent that there was deficiency in service
provided by the appellant and that the appellant\022s suit was
based on accounts and not on invoices. The learned
Single Judge, as noted herein earlier, disposed of the
application for leave to defend the suit filed by the
appellant holding that the respondent shall be entitled to
defend the suit on condition of deposit of Rs. 15 Lacs.
The learned Single Judge, therefore, granted leave to
defend the suit to the respondent on the aforesaid
condition. It is an admitted position that the respondent
had deposited the sum of Rs. 15 Lacs in the court within
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the time specified in the aforesaid order. Feeling
aggrieved, the respondent preferred an appeal being
Appeal No. 1128 of 2005 which, as noted herein earlier,
was allowed by the Division Bench of the High Court of
Judicature at Bombay holding that the respondent was
entitled to defend the suit without any condition. It is this
order of the Division Bench, which is challenged before us
by way of a special leave petition in respect of which
leave has already been granted.
5. The question that needs to be decided in this
appeal is whether, in view of the pleadings in the suit as
well as the application filed by the respondent for leave to
defend the suit, it was entitled to an unconditional leave to
defend the suit as was directed by the Division Bench of
the High Court of Bombay.
6. We have heard the learned counsel for the parties
and examined the orders passed by the Division Bench
and the learned Single Judge of the High Court of
Bombay, the application for grant of unconditional leave,
the pleadings in the suit and the other materials on
record. Before we decide the question posed before us, it
would be appropriate to take into consideration Order 37
Rule 3 Sub-rule (5) of the CPC, which provides for grant
of leave to a defendant to defend a suit either
unconditionally or upon such terms as may appear to the
Court or Judge to be just. A bare reading of Sub-rule (5)
of Rule 3 of Order 37 would clearly indicate that leave to
defend may be granted to a defendant unconditionally or
upon such terms as may appear to the Court or Judge to
be just, that is to say, the discretion is left to the Court to
put the defendant on terms, in the facts and
circumstances of a particular case, on compliance
whereof the defendant shall be entitled to defend the suit.
Proviso to Sub-rule (5) lays down that leave to defend
shall not be refused unless the Court is satisfied that the
facts disclosed by the defendant do not indicate that he
has a substantial defence to raise or that the defence
intended to be put up by the defendant is frivolous or
vexatious.
7. Having noted the aforesaid provisions of the CPC
under Order 37 Rule 3 Sub-rule (5), it would be expedient
at this stage to enumerate the position of law as to when
an unconditional leave to defend a summary suit can be
granted. In M/s. Mechelec Engineers & Manufacturers Vs.
M/s. Basic Equipment Corporation [(1976) 4 SCC 687],
this court enumerated certain propositions as to when an
unconditional leave can be granted or the defendant can
be put on terms. The said propositions, as enumerated by
this court in the aforesaid decision, may be stated as
follows: -
a) If the defendant satisfies the court that he
has a good defence to the claim on its merits the
plaintiff is not entitled to leave to sign judgment
and the defendant is entitled to unconditional
leave to defend.
b) If the defendant raises a triable issue
indicating that he has a fair or bona fide or
reasonable defence although not a positively
good defence the plaintiff is not entitled to sign
judgment and the defendant is entitled to
unconditional leave to defend.
c) If the defendant discloses such facts as
may be deemed sufficient to entitle him to
defend, that is to say, although the affidavit does
not positively and immediately make it clear that
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he has a defence, yet, shows such a state of
facts as leads to the inference that at the trial of
the action he may be able to establish a defence
to the plaintiff\022s claim the plaintiff is not entitled to
judgment and the defendant is entitled to leave to
defend but in such a case the court may in its
discretion impose conditions as to the time or
mode of trial but not as to payment into court or
furnishing security.
d) If the defendant has no defence or the
defence set up is illusory or sham or practically
moonshine then ordinarily the plaintiff is entitled
to leave to sign judgment and the defendant is
not entitled to leave to defend.
e) If the defendant has no defence or the
defence is illusory or sham or practically
moonshine then although ordinarily the plaintiff is
entitled to leave to sign judgment, the court may
protect the plaintiff by only allowing the defence
to proceed if the amount claimed is paid into
court or otherwise secured and give leave to the
defendant on such condition, and thereby show
mercy to the defendant by enabling him to try to
prove a defence.\024
On the same lines is the decision of this court in Sunil
Enterprises & anr. Vs. SBI Commercial & International
Bank Ltd. [(1998) 5 SCC 354] wherein the propositions,
as noted herein above, were summed up.
8. From the propositions, as noted herein above, it is
clear that it is only in cases which fall in class (e) that an
imposition of the condition to deposit an amount in court
before proceeding further is justifiable. We, therefore,
have to decide whether the case before us falls in class
(e) or whether it falls in class (b) or (c). To answer this
question, it is necessary to note the grounds taken by the
learned Single Judge to grant conditional leave to defend
to the respondent and those taken by the Division Bench
to set aside the order of the learned Single Judge. While
directing the respondent to deposit a sum of Rs. 15 Lacs
thereby granting it conditional leave to defend the suit, the
learned Single Judge made the following findings: -
1. There is no material evidence to show that
there is any deficiency of service of the Plaintiffs.
2. The suit is based on each of the invoices
and is therefore, a fit case where leave be
granted on condition.
The Division Bench, while setting aside the order of the
learned Single Judge, recorded the following findings: -
1. The defence raised by the Defendant that
there was deficiency of service is not after
thought in as much as way back by the
communication dated 26th of June, 2002, the
defendant raised the dispute about the deficiency
in service and communicated to the plaintiff that
the VPN link was shut down without any prior
intimation causing the loss of goodwill and image
in the market. Grievance was also raised by the
defendant that the defendant had incurred heavy
loss to the tune of more than Rs. 1,00,00,000/-.
2. The contention of the plaintiff before the
learned trial judge that the amount paid by the
defendant is not towards the service charges but
towards the installation charges which the
defendant was liable to pay even though the
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services were not rendered at the relevant time
and that the claim was not waived and that
contention was contested by the defendant also
raises a serious question to be tried during the
trial.
3. The contention of the defendant that a
close scan of the plaintiff\022s suit would show that it
is based on accounts and not on invoices and
therefore, the summary suit was not maintainable
cannot be said to be frivolous.
4. The defendant has been able to raise
triable issues.
9. Having heard the learned counsel for the parties
and after going through the judgment of the Division
Bench as well as of the learned Single Judge in detail, we
are of the view that the order passed by the learned
single judge, granting conditional leave to the respondent
to defend the suit, ought not to have been interfered with
by the Division Bench as (i) the order of the learned
Single Judge was a discretionary order and (ii) the
amount of Rs. 15 Lacs was already deposited by the
respondent. In view of the aforesaid admitted fact, the
Division Bench of the High Court ought not to have
interfered with the discretionary order of the learned
Single Judge granting conditional leave to defend to the
respondent when no case was made out by the
respondent that the said order was either arbitrary or
unreasonable. The order of the learned Single Judge
imposing the condition for deposit of Rs. 15 Lacs on the
respondent to defend the suit cannot be, in our view, said
to be an arbitrary or unreasonable order. As noted herein
earlier, it is an admitted position that in compliance with
the order of the learned Single Judge, the deposit of Rs.
15 Lacs was duly made by the respondent. Therefore, it is
clear that the respondent had practically complied with
the order of the learned Single Judge and for this reason,
it was not open to the Division Bench to interfere with the
discretionary order of the learned Single Judge.
10. It is also an admitted finding that the respondent
used the services of the appellant and failed to pay the
outstanding dues despite various demands. The learned
Single Judge, after noting down the contentions of the
appellant that the amount paid by the respondent was not
towards service charges but it was towards installation
charges which they were liable to pay even though the
services were not rendered at the relevant time and that
there was no deficiency of service and after looking at the
correspondence between the parties, found no merit in
the defence put up by the respondent. The learned Single
Judge also observed that there was no material evidence
to show that there was any such deficiency of service of
the appellant not providing services to the respondent. A
close scrutiny of the record, in our view, would indicate
that no material was produced to show that the
respondent had complained about the deficiency in
service prior to 26th of June, 2002. The learned Single
Judge, after considering, inter alia, the contention of the
appellant that the appellant had waived the service
charges and not the installation charges, granted leave to
defend the suit to the respondent on deposit of Rs. 15
Lacs. That apart, from the available record, we are of the
view that the respondent had not satisfied even the
Division Bench that it was entitled to defend its case
without any condition. From the materials produced by the
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respondent, it would also be evident that it was liable to
pay for the services provided by the appellant. The letter
dated 26th of June, 2002 produced by the respondent
claiming for the first time after 2000 that there was
deficiency of service must be, prima facie, found to be an
afterthought exercise on the part of the respondent. The
materials, as admitted by the respondent, would clearly
show that the respondent was making payments towards
various invoices raised by the appellant. It is also evident
from the record that the respondent did not raise any such
claim regarding deficiency of service when the appellant
was demanding its past balance/dues for the services
rendered. It also appears from the record that the
appellant has established that the respondent remitted
certain sums against various invoices raised by it and that
the respondent did not raise any question about the
deficiency of service earlier. Once the respondent
admitted its liability to pay for the services rendered by
the appellant, it was not open to it to repudiate the same
by taking a stand that the services provided by the
appellant were deficient. In any view of the matter, the
Division Bench granted unconditional leave to defend to
the respondent without considering any of the materials
produced by the parties. In view of the aforesaid findings,
which, of course, are prima facie in nature, it would not be
unwise for this court to hold that the condition (e),
enumerated in the decision of this court in M/s. Mechelec
Engineers & Manufacturers Vs. M/s. Basic Equipment
Corporation [supra], as noted herein earlier, was satisfied
in the present case and accordingly, the conditional leave
granted by the learned Single Judge was a proper order,
which the Division Bench ought not to have interfered
with. At the risk of repetition, we may also note that the
respondent had also accepted the order of the learned
Single Judge and complied with the condition imposed
therein. In view of the discussions made herein above,
we are, therefore, of the view that the Division Bench was
not justified in interfering with the discretionary order of
the learned Single Judge granting conditional leave to
defend to the respondent on deposit of Rs. 15 Lacs. We,
therefore, hold that when the respondent had duly
complied with the conditions imposed by the learned
Single Judge in its discretionary order, the Division Bench
was not justified in interfering with such discretionary
order. In any view of the matter, we are of the view that
the order of the Division Bench, granting leave to the
respondent without any condition, in the facts and
circumstances of the case, was not justified.
11. For the reasons aforesaid, we set aside the order of
the Division Bench and restore the order of the learned
Single Judge by which the learned Single Judge had
granted leave to defend the suit to the respondent on the
condition of deposit of Rs. 15 Lacs in the court. As the
amount of Rs. 15 Lacs has been withdrawn by the
respondent, we grant 2 months time to the respondent to
deposit the aforesaid amount in the High Court of
Bombay and in default of such deposit, the leave granted
to the respondent to defend shall stand refused. The
appeal is thus allowed to the extent indicated above.
There will be no order as to costs.