Judgment on admissions is unsustainable absent unequivocal admission where liability requires interpretation through trial.

The Respondent (Plaintiff) filed a suit [CS(Comm.) No. 76/2023] for the recovery of ₹1,08,30,382, representing a principal sum for goods supplied and accrued interest.

The Appellants (Defendants) resisted the suit, claiming a "back-to-back" business arrangement involving a distributor, M/s Bhavya Electricals, as evidenced by a Memorandum of Understanding (MoU) dated 30th August 2020.

The Appellants contended that dues were to be set off against amounts owed by the distributor.

Despite the Appellants filing a cross-suit and the Trial Court framing issues on 9th October 2023—including the effect of the MoU—the ld. District Judge (Commercial) subsequently decreed the Respondent’s suit under Order 12 Rule 6 CPC, citing purported admissions in the written statement.

1. Whether the Trial Court was justified in passing a judgment on admissions under Order 12 Rule 6 CPC when the written statement raised a substantive defense based on a "back-to-back" payment arrangement and an MoU.

2. Whether a decree under Order 12 Rule 6 CPC can be sustained after issues have already been framed regarding the very document (MoU) that forms the basis of the defense.

Order 12 Rule 6 of the Civil Procedure Code (CPC), 1908, which permits the court to pass a judgment based on admissions of fact made either in the pleading or otherwise, provided such admissions are "express or implied" and "unequivocal".

Where a defense raises triable issues requiring oral evidence and interpretation of trade customs, a summary decree on admissions is impermissible.

The High Court held that for a decree to be passed under Order 12 Rule 6 CPC, there must be an unambiguous admission of liability.

Upon reviewing the pleadings, the Court found that the Appellants had not admitted the liability; rather, they raised a specific defense that the Respondent had agreed to adjust the dues of M/s Bhavya Electricals as per the MoU.

The Court observed that the Trial Court had already framed an issue specifically regarding the maintainability of the suit in view of the MoU.

The High Court reasoned that the interpretation of the MoU's language and the nature of the "back-to-back" arrangement were matters of trial that required oral evidence.

Consequently, the High Court determined that the Trial Court's decision to grant a decree on admissions was "unwarranted" and "not tenable" because the defense was not a mere denial but a plausible claim requiring adjudication.

The Court held that the matter required a full trial to interpret the MoU and the liability of the parties.

It directed that the Respondent's suit and the Appellants’ cross-suit [CS (Comm.) No. 433/2023] be adjudicated together by the Trial Court.

The Court further ordered that the ₹40 lakhs deposited by the Appellants remain in an interest-bearing FDR with the Registrar General until the final disposal of the suits.

The Trial Court was directed to conclude the trial within three months.