Full Judgment Text
REPORTABLE
IN TH SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7314 OF 2008
(Arising out of SLP (C) No.10870 of 2006)
Wada Arun Asbestos (P) Ltd. …
Appellant
Versus
Gujarat Water Supply & Sewerage Board …
Respondent
J U D G M E N T
S.B. Sinha, J.
1. Leave granted.
2. This appeal is directed against a judgment and order dated 31.8.2005
passed by the High Court of Judicature at Gujarat whereby and whereunder
a first appeal filed by the respondent herein was allowed setting aside a
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decree passed in favour of the appellant herein under Order 37 Rule 3(6)(b)
of the Code of Civil Procedure and remitting the suit to the trial court with
the direction that the amount already deposited with the respondent by them
in terms of the directions of the High Court shall be deemed to be the
amount deposited under the lease granted by the trial court.
3. The basic fact of the matter is not in dispute.
Appellants supplied AC pressure pipes to the respondents. A sum of
Rs.1,57,488/- became due. On the premise that as a small scale industrial
unit, it cannot afford to block such a huge amount, plaintiff requested the
defendants to release the said payment. The defendants having not released
the outstanding payment, plaintiff became entitled to interest at the rate of
23% per annum being 5% higher than the bank rate per annum thereupon.
Plaintiff filed a Summary Civil Suit in the court of Civil Judge (SD),
Gandhinagar. Respondent filed an application for grant of leave to defend
the suit. By reason of an order dated 27.11.2002, conditional leave was
granted, directing :
“The application for leave to defend is hereby
granted with a condition that the defendant may
give security of 50% amount of the suit claim.”
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4. Concededly, the said amount was not deposited and, thus, the said
condition was not complied with. On the premise that the defendants-
respondents having not complied with the said directions, the conditional
leave granted by the court would be deemed to have been refused, a decree
as prayed for in paragraph 17 of the plaint was passed in the following
terms:
“The present suit of the plaintiff is hereby
allowed.
The decree as prayed for in para 17 of the suit
as per Order XXXVII, Rule 3(6)(b) of the CPC
is hereby passed accordingly and the
defendants are hereby directed to pay the sum
of Rs.21,18,335.65 ps. Jointly and Severally to
the Plaintiff along with interest @ 23% per
annum.”
5. An appeal was preferred thereagainst. By an Order dated 3.3.2004,
the High Court directed as under :
“At the suggestion of the Court, learned counsel
for the parties pray for time to explore possibility
of an amicable settlement. Hence S.O. to
16.3.2004.
In the meantime, the cheque for the amount of
Rs.15,50,000/- deposited by the appellant –
Gujarat Water Supply and Sewerage Board
(original defendants) may be encashed by the
Court of the learned Civil Judge (S.D.),
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Gandhinagar, but the amount shall not be
permitted to be withdrawn by the decree holder till
further orders. Till further orders there shall also
be further ad-interim stay of further execution
proceedings.”
6. Indisputably, the said order has been complied with. By reason of the
impugned judgment, the High Court allowed First Appeal, opining :
“True it is that details of such defence were not
given by the defendant, but non-supply of the
material would not deter the defendant from
raising a defence that the plaintiff did not perform
his part of the agreement in supplying the material.
True it is that the Court had granted the
conditional leave in favour of the defendant and
the defendant did not comply with the order but
according to Mr. Munshaw, a big amount of
Rs.10,59,168/- was to be deposited and before the
amount could be arranged after due negotiation,
the plaintiff applied for grant of a decree in his
favour. It is submitted by Mr. Munshaw, that
present is the case where this Court should
condone lapses in making deposit and remit matter
back to the trial court with a direction to decide
matter on merits.
Though learned cousel for the plaintiff opposed
the prayer but taking into consideration the totality
of the circumstances and the fact that under the
directions and orders of this Court 50 per cent of
the suit amount has already been deposited and
further that the defendant is raising certain
defences which if are allowed then same may non-
suit the plaintiff, we are of the opinion that the
decree granted in favour of the plaintiff under
Order 37 Rule 3(6)(b) of the Civil Procedure Code
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deserves to be set aside. The matter is remitted to
the trial court with the direction that the amount
already deposited by the defendant under the
directions of this Court shall be deemed to be
amount deposited under the leave granted by that
Court. The defendant would be allowed proper
opportunity to submit his written statement. The
appeal is allowed. No order as to costs.”
7. Mr. Shridhar Chitale, learned counsel appearing on behalf of the
appellant, in support of this appeal, would submit :
(1) Respondent having been granted conditional leave to defend the
suit and as a Revision Application was maintainable thereagainst
which having not been availed of, their contention before the High
Court that unconditional leave should not have been granted was
liable to be rejected.
(2) The decree passed in a summary suit by the Trial Judge should not
have been overturned without adequate reasons.
8. Mr. Pritesh Kapoor, learned counsel appearing on behalf of the
respondent, on the other hand, would contend :
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(1) That the appeal having been preferred against the decree under
Section 96 of the Code of Civil Procedure, the appellate Court could
exercise its jurisdiction in the manner as has been done.
(2) It is not correct to contend that the High Court accepted the
respondent’s contention that in a case of this nature, the Trial Judge
should have granted unconditional leave but it proceeded on the basis
that the direction to deposit the amount in terms of the High Court’s
order dated 3.3.2004 having been complied with, the lapse on the part
of the respondents to comply with the Trial Judge’s order should be
condoned.
(3) In any event unconditional leave ought to have been granted as was
prayed for by the appellant.
(4) For grant of interest at the rate of 23% per annum in terms of the
Interest on the Late Payment on Small Scale and Ancillary Industrial
Undertakings Act, 1993, appellant was bound to prove that the
provisions of the said Act were applicable in which event,
respondents were entitled to take recourse to the provision for taking
recourse to arbitration as contained in sub-section (2) of Section 6
thereof.
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9. Indisputably, an appeal was preferred against the decree and not
against the order dated 3.3.2004 granting conditional leave in favour of the
respondent. Indisputably again, the said condition was not complied with.
The question which, therefore, arises for consideration is as to whether in
the aforementioned situation, the respondent could raise a contention that it
was a fit case where unconditional leave should have been granted.
10. Order XXXVII of the Code of Civil Procedure provides for a
summary procedure. It is not in dispute that having regard to the prayer
made in the suit, Order XXXVII of the Code was attracted. Rule 3 of Order
XXXVII provides for the procedure for appearance of the defendant. Rule
5 reads as under :
“ 5. Power to order bill, etc. to be deposited with
officer of Court —In any proceeding under this
Order the Court may order the bill, hundi or note
on which the suit is founded to be forthwith
depositing with an officer of the Court, and may
further order that all proceedings shall be stayed
until the plaintiff gives security for the costs
thereof.
11. Whether leave is granted unconditionally or upon terms, in view of
the aforementioned provision in a case of this nature for all intent and
purport, stand on the same footing. However, it is well settled that the
defence in the suit should not be considered to be a mere ‘moonshine’ ruse
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or sham. Ordinarily, the court shall grant leave to defend the suit in favour
of the defendant in terms of the first proviso appended thereto. Rule 3 of
Order XXXVII provides for a judgment at the hearing of such summons;
clause 6(b) whereof reads as under :
“(6) At the hearing of such summons for
judgment—
(a) …
(b) if the defendant is permitted to defend as to the
whole or any part of the claim, the Court or Judge
may direct him to give such security and within
such time as may be fixed by the Court or Judge
and that, on failure to give such security within the
time specified by the Court or Judge or to carry
out such other directions as may have been given
by the Court or Judge, the plaintiff shall be
entitled to judgment forthwith.”
12. Where a conditional leave is granted and the conditions therefor are
not complied with, a judgment in favour of the plaintiff can be passed. It is
not in dispute that the first appeal was maintainable. Where a decree is
appealed from, any error, defect or irregularity in any order affecting the
decision of the case may be set forth as a ground of objection in the
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memorandum of appeal as envisaged under Section 105 of the Code of Civil
Procedure.
13. It is in the aforementioned backdrop, the question as to whether a
revision petition was maintainable against an order granting conditional
leave must be considered. We will proceed on the basis that an order
imposing a conditional leave to defend the suit was a jurisdictional question
and, thus, a revision application would be maintainable as has been held by
various High Courts, notable amongst them are The New Ashapuri Co-
operative Housing Society Ltd. & Anr. v. Arvindkumar Manilal Patel [AIR
1975 Gujarat 76]; Fateh Lal v. Sunder Lal [AIR 1980 Rajasthan 220]; Modi
Ram & Anr. v. Smt. Sugan Bai [AIR 2005 Rajasthan 12]; and A.K. Velan v.
M/s. Narnyanan and Co. (P) Ltd. [AIR 1972 Madras 118].
14. But if a right of appeal from the decree is conceded to a defendant, in
our opinion, he cannot be denied a right to challenge an order which was
subject to revision in his memorandum of appeal filed from the decree
ultimately passed.
15. This Court in Santosh Kumar v. Bhai Mool Singh [1958 SCR 1211]
noticing that a clear defence to the suit having been made out, no condition
could be imposed, stated the law thus :
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“This is a surprising conclusion. The facts given in
the affidavit are clear and precise, the defence
could hardly have been clearer. We find it difficult
to see how a defence that, on the face of it, is clear
becomes vague simply because the evidence by
which it is to be proved is not brought on file at
the time the defence is put in.
18. The learned Judge has failed to see that the
stage of proof can only come after the defendant
has been allowed to enter an appearance and
defend the suit, and that the nature of the defence
has to be determined at the time when the affidavit
is put in. At that stage all that the Court has to
determine is whether "if the facts alleged by the
defendant are duly proved" they will afford a
good, or even a plausible, answer to the plaintiff's
claim. Once the Court is satisfied about that, leave
cannot be withheld and no question about
imposing conditions can arise; and once leave is
granted, the normal procedure of a suit, so far as
evidence and proof go, obtains.
19. The learned High Court Judge is also error in
thinking that even when the defence is a good and
valid one, conditions can be imposed. As we have
explained, the power to impose conditions is only
there to ensure that there will be a speedy trial. If
there is reason to believe that the defendant is
trying to prolong the litigation and evade a speedy
trial, then conditions can be imposed. But that
conclusion cannot be reached simply because the
defendant does not adduce his evidence even
before he is told that he may defend the action.”
This Court again in M/s. Mechalec Engineers & Manufacturers v.
M/s. Basic Equipment Corporation [AIR 1977 SC 577] reiterated the
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following principles laid down in respect of grant of leave in a summary suit
by Das J. in Sm. Kiranmoyee Dassi v. Dr. J. Chatterjee [(1945) 49 CWN
249] :
“( 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 he has a
defence, yet, shews such a state of facts as leads to
the inference that at the trial of the action be may
be able to establish a defence to the plaintiff’s
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
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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.”
It was opined that the case did not fall within clause (e) and
unconditional leave should have been granted.
16. Yet again in Raj Duggal v. Ramesh Kumar Bansal [1991 Supp.(1)
SCC 191, this Court held :
“ 3. Leave is declined where the court is of the
opinion that the grant of leave would merely
enable the defendant to prolong the litigation by
raising untenable and frivolous defences. The test
is to see whether the defence raises a real issue
and not a sham one, in the sense that if the facts
alleged by the defendant are established there
would be a good or even a plausible defence on
those facts. If the court is satisfied about that leave
must be given. If there is a triable issue in the
sense that there is a fair dispute to be tried as to
the meaning of a document on which the
claim is based or uncertainty as to the amount
actually due or where the alleged facts are of such
a nature as to entitle the defendant to interrogate
the plaintiff or to cross-examine his witnesses
leave should not be denied. Where also, the
defendant shows that even on a fair probability he
was a bona fide defence, he ought to have leave.
Summary judgments under Order 37 should not be
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granted where serious conflict as to matter of fact
or where any difficulty on issues as to law arises.
The court should not reject the defence of the
defendant merely because of its inherent
implausibility or its inconsistency.”
17. We fail to persuade ourselves to agree with the contention of Mr.
Chitale that although a revision from an order granting conditional leave
was maintainable, the same could not have been a subject matter of
challenge in an appeal from a decree as envisaged under Section 105 of the
Code of Civil Procedure.
18. A statutory right conferred on a litigant cannot ordinarily be taken
away. A civil revision application might have been maintainable as against
the order dated 27.11.2002 granting conditional leave. The said remedy was
also available where leave to defend a suit is refused. Leave to defend a
suit, as noticed hereinbefore, should ordinarily be granted. It was, therefore,
permissible for the defendant to raise the said contention in the appeal
although it had asked for time to comply with the conditions.
19. Mr. Kapoor, in our opinion, is right in his submission that keeping in
view the rate of interest prayed for by the petitioner in terms of the
provisions of the 1993 Act, it was obligatory on the part of the plaintiff to
show that he was entitled to take recourse thereto.
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20. This Court in Assam Small Scale Industries Development
Corporation Ltd. & Ors. v. J.D. Pharmaceuticals & Anr. [(2005) 13 SCC
19], held :
“ 40. We, therefore, are of the opinion that in
relation to the transactions made prior to coming
into force of the said Act, simple interest at the
rate of 9% per annum, which was the bank rate at
the relevant time, shall be payable both prior to
date of filing of the suit and pendente lite and as
future interest in terms of Section 34 of the Code
of Civil Procedure. Interest, however, will be
payable in terms of the provisions of the 1993 Act
(compound interest at the rate of 23.5% per
annum) in relation to the transactions made after
coming into force of the Act, both in respect of
interest payable up to the date of institution of the
suit and pendente lite and till realisation. The
judgment and decree to that extent requires to be
modified. It is directed accordingly.”
In Ajay Bansal v. Anup Mehta & Ors. [(2007) 2 SC 275], this Court
held as under :
“12 . A decree passed in a summary suit where
leave to defend the suit has been refused is almost
automatic. The consequence of passing a decree
cannot be avoided.
13 . Ordinarily, an application under Article 227 of
the Constitution of India would not be
maintainable where an appeal lies. An appeal lay
from the decree under Section 96 of the Code.
When an appeal could be filed, ordinarily, an
application under Article 227 of the Constitution
of India would not be entertained.
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14 . A decree passed subsequent to the refusal of
leave to defend could either be under Order 37
Rule 3(6) of the Code or it could be based on the
affidavit evidence on the side of the plaintiff and
the documents produced or even based on oral
evidence formally proving, say, the execution of a
promissory note by the defendant. It may not be
proper or necessary to apply the theory of
“dependent order” in such circumstances. For one,
the theory may not apply. Even if this Court were
to set aside the order of the court below and give
the defendant leave to defend the suit, the decree
that is passed may not go automatically. It may
have to be set aside. Secondly, the defendant can
always go to the court which passed the decree
and move under Rule 4 of Order 37 of the Code to
reopen the decree.”
21. Keeping in view the facts and circumstances of this case, we are of
the opinion that it is not a fit case where the impugned judgment of the High
Court should be interfered with. This appeal is dismissed accordingly.
However, in the facts and circumstances of this case, there shall be no order
as to costs.
..………………………J.
[S.B. Sinha]
..………………………J.
[Cyriac Joseph]
New Delhi;
December 16, 2008