SUPREME COURT OF INDIA
Defiance Knitting Industries Private Limited
Vs
Jay Arts
C.A. No. 3846 of 2006
(Arijit Pasayat and L. S. Panta, JJ)
30.08.2006
ARIJIT PASAYAT, J.
1. Leave granted.
2. 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 37, Rule 2
of the Code of Civil Procedure, 1908 (in short the
'C.P.C.').
3. 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, 8
1, 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
5.7.2001. After issuing notice, the Writ Petitioner-defendant filed an
Application under Order 37, 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 2.5.2002. 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 bona fides 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
11.3.2005 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.
4. Before the High Court, by referring to the numerous correspondence between
the parties right from 5.11.1997 onwards, Writ Petitioner submitted that the
Summary Suit raised several disputed questions which needed trial and at no
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.
5. 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 19.4.1999. 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.
6. 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 19.4.1999 by the Architect of the defendant and thereafter, vide
letter dated 27.4.1999, 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 19.4.1999.
7. 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:
(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.
(2)Cost shall be cause in the Suit".
8. 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.
9. 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.
10.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.
11. Order 37, Rules 2 and 3 so far as relevant reads as follows:
2. Institution of Summary Suits.-
(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-
(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 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.-
(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
annexure 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 plaintiffs 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.
(4)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.
12.This Court in Mechalec Engineers and Manufactures v. Basic Equipment
Corporation, , has laid down the principles to be followed in granting
leave to defend the Suit under Order 37, 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 the plaintiff is entitled to
leave to sign judgment and the defendant is not entitled to leave to defend.
13. 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 La! Bros., . 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, 1949
AIR(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.
14. In Mrs. Raf Duggal v. Ramesh Kumar Bansal, , 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".
15.In the instant case much would depend upon the effect of the order passed by
the High Court in the earlier case i.e. Civil Revision No. 659 of 2002. The
operative portion reads as follows:
"The applicants in order to establish their bona fides 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 on 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 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 has been disposed of and subject to
the outcome of the Application".
16. 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.
17. 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.
18. Appeal is allowed but without any order as to costs.
J