Full Judgment Text
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CASE NO.:
Appeal (civil) 3846 of 2006
PETITIONER:
Defiance Knitting Industries Pvt. Ltd
RESPONDENT:
Jay Arts
DATE OF JUDGMENT: 30/08/2006
BENCH:
ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
(Arising out of SLP (C) No. 20393 of 2005)
ARIJIT PASAYAT, J.
Leave granted.
Challenge in this appeal is to the judgment rendered by a
learned Single Judge of the Bombay High Court dismissing
the writ petition No. 2521 of 2005 filed by the appellant. By
the impugned judgment the High Court upheld the view of the
trial court in Summary Suit No.10 of 2001 that the appellant
has not made out a case for unconditional leave to defend in
terms of Order XXXVII Rule 2 of the Code of Civil Procedure,
1908, ( in short the ’CPC’).
The factual background in a nutshell are as follows:
Summary Suit No.10 of 2001 has been filed by the
respondent before the learned Civil Judge (Senior Division) at
Kalyan for recovery of an amount of Rs.98,81,426.63. In
addition, the plaintiff has claimed interest from the date of
filing of the suit till the realisation of the amount. The suit was
filed on 05.07.2001. After issuing notice, the writ petitioner-
defendant filed an application under Order XXXVII Rule 3(5) of
C.P.C. for leave to defend unconditionally and the said
application was rejected by the trial Court. The writ Petitioner,
therefore, approached the High Court in Civil Revision
Application No. 659 of 2002 and in terms of the consent
orders, it was disposed of on 02.05.2002. The said order was
to the effect that the writ petitioner was to deposit an amount
of Rs. 20,00,000/- with the trial Court within four months to
show his bonafides and was entitled to take out an application
for leave to defend which was required to be heard on merits.
If he succeeded in his application for leave to defend, he was
allowed to withdraw the amount deposited. The trial Court
heard the parties afresh and by order dated 11.03.2005
allowed the application (Ex. 34) on the condition that the writ
petitioner was to deposit an additional amount of
Rs.50,00,000/- in two instalments. The said order was
challenged before the High Court.
Before the High Court, by referring to the numerous
correspondence between the parties right from 05.11.1997
onwards, writ petitioner submitted that the summary suit
raised several disputed questions which needed trial and at no
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point of time, the writ petitioner had accepted the claim made
by the plaintiff. It was also pointed out that the writ petitioner
had taken up the issue with its Architect and all the bills
submitted by the plaintiff were returned to the Architect.
Thus, the writ petitioner had not accepted the payments as
claimed by the plaintiff. It was further submitted that the trial
court failed to give proper reasonings and a cryptic order has
been passed rejecting the application for leave to defend
unconditionally.
The High Court noted that after issuing notice in the trial
court, the defendant has not filed its written statement. In the
application, the defendant has disputed the contents and in
fact denied the claim made by the plaintiff. However, the
plaintiff has set out its case to point out that the work as per
the tender was completed some times in March, 1999, the
final bills submitted by it were certified by the Architect of the
defendant and certificate to that effect was issued on
19.04.1999. The Architect had forwarded the bills to the
defendant for clearance and the final bill amount was Rs.
2,07,11,475/-, out of which, an amount of Rs.1,08,29,989/-
was received. The correspondences brought on record show
that the meeting was held between the parties and the issue
regarding incomplete work, payments and final settlement
were discussed by them in the meeting as is clear from the
letter addressed by the writ Petitioner dated 20.11.1998 to its
Architect Mr. Qutub Mandviwala. Reference was made to
possible dates for final discussion and settlement of the dues.
During this period, the contractor and the Architect should
discuss and settle all the payments etc. after completing the
jobs as agreed.
According to the High Court, the correspondence
thereafter, between the writ petitioner and its Architect goes to
show that there were some defective jobs which were to be
completed. The final bills submitted by the plaintiff were
certified on 19.04.1999 by the Architect of the defendant and
thereafter, vide letter dated 27.04.1999, the defendant took up
the issue with its Architect. All this correspondence goes to
show that the claim made by the plaintiff is not totally denied
and there may be some subtractions in terms of the interest or
defective work but there is nothing on record to show that the
Architect of the writ petitioner has finally worked out the
figure, quantified the payment to be made to the plaintiff and
in any case less than the amount certified by the said
Architect on 19.04.1999.
The trial court passed the following order:
"After hearing arguments of the parties, I am of
the opinion that defendant has no defence, but
it is moon shine defence. Therefore, a
permission can be granted to leave defence to
the deserves to be allowed on condition, I pass
the following order:\027
1. The application Exh.34 is allowed for
leave to defence to the defendant on following
conditions: -
(i) The defendant shall deposit an amount
of entire Rs.50 Lacs in the Court in a two
instalments on or before next date, in addition
to earlier deposited amount of Rs 20 Lacs.
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2. Cost shall be cause in the suit".
The High Court felt that the trial court ought to have
given proper reasons in support of the impugned order. But it
was observed that the correspondences between the parties
does show that the application submitted by the writ
petitioner could not be allowed and the discretion exercised by
the trial court granting leave to defend conditionally i.e. on
total deposit of Rs.70,00,000/- cannot be termed to be
perverse or totally erroneous. Four years had passed from the
filing of the claim before the trial court and the original claim
was Rs.98,81,426.63/-. As noted above writ petition was
dismissed.
Learned counsel for the appellant submitted that both
the trial court and the High Court completely lost sight of the
earlier order passed by the High Court which in no uncertain
terms laid down that the quantum of deposit to be directed
could not be more than Rs.20,00,000/-. Without noticing
these relevant aspects, the trial court directed deposit of
Rs.70,00,000/- and High Court upheld it.
Per contra, learned counsel for the respondent submitted
that even according to the correspondences and the
statements filed by the appellant the admitted amount was
more than Rs. 90,00,000/- and, therefore, after taking note of
the deposit of Rs.20,00,000/- made earlier, the trial court and
the High Court had directed deposit of Rs.50,00,000/- more.
In essence, his submission was that in the earlier order in the
Civil Revision the amount to be fixed was let to be decided by
the trial court.
Order XXXVII Rules 2 and 3 so far as relevant reads as
follows:
2. Institution of Summary Suits.\027(1) A suit, to
which this Order applies, may if the plaintiff
desires to proceed thereunder, be instituted by
presenting a plaint which shall contain,\027
(a) a specific averment to the effect that the
suit is filed under this Order;
(b) that no relief, which does not fall within
the ambit of this rule, has been claimed in
the plaint; and
(c) the following inscription, immediately
below the number of the suit in the title of
the suit, namely
(2) The summons of the suit shall be in Form
No. 4 in Appendix B or in such other form as
may, from time to time, be prescribed.
(3) The defendant shall not defend the suit
referred to in sub rule (1) unless he enters an
appearance and in default of his entering an
appearance the allegations in the plaint shall
be deemed to be admitted and the plaintiff
shall be entitled to a decree for any sum, not
exceeding the sum mentioned in the
summons, together with interest at the rate
specified, if any, up to the date of the decree
and such sum for costs as may be determined
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by the High Court from time to time by rules
made in that behalf and such decree may be
executed forthwith.]
3. Procedure for the appearance of
defendant.\027(1) In a suit to which this Order
applies, the plaintiff shall, together with the
summons under rule 2, serve on the defendant
a copy of the plaint and annexures thereto and
the defendant may, at any time within ten
days of such service, enter an appearance
either in person or by pleader and, in either
case, he shall file in Court an address for
service of notices on him.
(2) Unless otherwise ordered, all summonses,
notices and other judicial processes, required
to be served on the defendant, shall be deemed
to have been duly served on him if they are left
at the address given by him, for such service.
(3) On the day of entering the appearance,
notice of such appearance shall be given by
the defendant to the plaintiff’s pleader, or, if
the plaintiff sues in person, to the plaintiff
himself, either by notice delivered at or sent by
a pre-paid letter directed to the address of the
plaintiff’s pleader or of the plaintiff, as the case
may be.
(5) The defendant may, at any time within ten
days from the service of such summons for
judgment, by affidavit or otherwise disclosing
such facts as may be deemed sufficient to
entitle him to defend, apply on such summons
for leave to defend such suit, and leave to
defend may be granted to him unconditionally
or upon such terms as may appear to the
Court or Judge to be just:
Provided 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:
Provided further that, where a part of the
amount claimed by the plaintiff is admitted by
the defendant to be due from him, leave to
defend the suit shall not be granted unless the
amount so admitted to be due is deposited by
the defendant in Court.
This Court in Mechalec Engineers and Manufactures v.
Basic Equipment Corporation, (AIR 1977 SC 577) has laid
down the principles to be followed in granting leave to defend
the suit under Order XXXVII, rule 3 of the Code. One of the
aforesaid principles is, that 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. It has also been laid down
therein that if the defendant has no defence or the defence set
up is illusory or sham or practically moonshine then ordinarily
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the plaintiff is entitled to leave to sign judgment and the
defendant is not entitled to leave to defend.
While giving leave to defend the suit the Court shall
observe the following principles:
(a) If the Court is of opinion that the case
raises a triable issue then leave to defend
should ordinarily be granted unconditionally.
See Milkhiram (India) Pvt. Ltd v. Chaman Lal
Bros. [AIR 1965 SC 1698]. The question
whether the defence raises a triable issue or
not has to be ascertained by Court from the
pleadings before it and the affidavits of parties.
(b) If 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 put by the defendant is
frivolous or vexatious is may refuse
leave to defend altogether. Kiran Mryace
Dassi v. Dr. J. Challrjae [AIR 1949 Cal.
479]. (noted and approved in Mechalec’s
case (supra).
(c) In cases where the Court entertains a
genuine doubt on the question as to whether
the defence is genuine or sham or whether it
raises a triable issue or not, the Court may
impose conditions in granting leave to defend.
In Mrs. Raj Duggal v. Ramesh Kumar Bansal (AIR 1990
SC 2218) it was held as follows:
"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 has a bona fide defence, he ought to have
leave. Summary judgments under Order 37
should not be 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".
In the instant case much would depend upon the effect of
the order passed by the High Court in the earlier case i.e.
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Civil Revision no. 659 of 2002. The operative portion reads as
follows:
"The applicants in order to establish their
bonafides agree and undertake that they shall
deposit before the Trial Court in amount of Rs.
20 lacs within a period of four months from
today.
Upon deposit of the aforesaid amount of
Rs.20 lacs by the Applicants, the impugned
order of the learned Civil Judge, Senior
Division, Kalyan dated. 7th March, 2002
declining to grant unconditional leave to
defend. and the consequential decree passed
No.8th March, 2002 shall stand quashed and
set aside.
The learned Trial Judge shall dispose of
the summons for Judgment after hearing the
parties, uninfluenced by the earlier order
dated 7th March, 2002, which is with the
consent of the parties quashed and set aside.
The learned Trial Judge will proceed to deal
with the matter in accordance with the
directions as aforesaid and keeping in view the
requirements of order 37, of the Code of Civil
procedure, 1908.
In the event that the deposit of an
amount of Rs.20 lacs as aforesaid is made, it
shall be without prejudice to the right of the
Applicants to contend that they are entitled to
the grant of unconditional leave to defend the
suit. In the event that the learned Trial Judge
comes to the conclusion that the Applicants
are entitled to j unconditional leave to defend,
the Applicants would be at liberty to make an
application before the Trial court for refund of
the amount which has been deposited by them
of Rs.20 lacs, in pursuance of the statement
which has been made herein above, similarly,
in the event of leave being granted to defend
the suit subject to deposit of an amount less
than Rs.20 lacs, the Applicants would be at
liberty to move an application for the refund of
the balance amount of Rs.20 lacs. The
Respondents would similarly be at liberty to
move an application for the withdrawal of the
amounts deposited after the application for
leave to defend ahs been disposed of and
subject to the outcome of the application".
A bare reading of the order shows that the High Court in
the earlier occasion took the view, on the consent of parties,
that Rs.20,00,000/- was to be deposited and on deposit being
made certain follow up action were to be taken. The fact that
the High Court wanted the quantum to be pinned at
Rs.20,00,000/- and not more than that is clear from the fact
that the High Court directed refund in case the trial court on
consideration of merits came to conclusion that the amount to
be deposited was less than Rs.20,00,000/-. There is no
indication that in case the amount was to be more, then the
appellant would pay the differential amount.
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The stand of the appellant that the maximum deposit
that could have been directed was fixed at Rs.20,00,000/- is
on a sound footing. The order of the trial court as well as that
of the High Court cannot be maintained. However as an
interim measure by order dated 26.9.2005 this Court has
stayed the operation of the High Court’s order subject to
deposit of Rs.20,00,000/-. It is stated that the deposit has
already been made. Though we have held the trial Court’s
order and the High Court’s order are not sustainable, the
amount deposited pursuant to this Court’s order need not be
refunded. The trial Court is directed to proceed with the
matter and make effort for its expeditious disposal.
Appeal is allowed but without any order as to costs.