SC Upholds 423-Day Delay Condonation In Bid To Set Aside ₹21.88-Crore Ex Parte Decree, Keeps ₹75 Lakh In Deposit

Integrated Finance Company Limited sued Business India, a partnership firm, and its partners to recover approximately ₹21.88 crore under hire-purchase and lease agreements.

The Madras High Court decreed the suit ex parte on 15 November 2021.

The fourth defendant applied to set aside the decree and sought condonation of a 423-day delay, asserting that he had not been served and had learned of the decree in February 2023.

The Single Judge dismissed the delay application, finding that he likely knew of the suit.

The Division Bench condoned the delay, but required him to pay ₹75 lakh to the plaintiff for distribution to depositors.

Both the fourth defendant and the plaintiff appealed: the former challenged payment to the plaintiff, and the latter challenged condonation of delay.

While the appeals were pending, the Supreme Court directed that the ₹75 lakh be deposited with the High Court and invested.

Order IX Rule 13 of the Code of Civil Procedure, 1908, provides the procedural basis for an application to set aside an ex parte decree.

The Court assessed the Division Bench’s exercise of discretion in condoning delay and held that it did not warrant interference under Article 136 of the Constitution because it was not shown to be arbitrary or irrational.

A monetary condition imposed while condoning delay may require a deposit to secure the parties’ positions, but directing payment to the plaintiff is unwarranted where the ex parte decree is itself under challenge; the deposit may instead abide by the final outcome.

No precedent was cited.

The Court reviewed the grounds advanced for condonation and concluded that the Division Bench’s decision to allow the fourth defendant an opportunity to contest the proceedings was not so arbitrary or irrational as to justify interference under Article 136.

However, because the fourth defendant sought to set aside the ex parte decree, directing the ₹75 lakh to be paid to the plaintiff—and then distributed to depositors—was unwarranted before the dispute was determined.

Requiring the amount to remain deposited and invested instead preserved the position pending the proceedings’ outcome.

The Court left open the plaintiff’s ability to seek appropriate conditions if the fourth defendant sought a stay of execution.

It modified the payment condition: the ₹75 lakh was to remain deposited with the High Court in an interest-bearing deposit, subject to the final outcome of the proceedings.

The application to set aside the ex parte decree was left for determination on its own merits, uninfluenced by the observations of the Division Bench or the Supreme Court.

Both appeals were disposed of without an order as to costs.