IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.6058 OF 2009 (Arising out of S.L.P. (C) No.10386 of 2007)

Green Gold Timber Pvt. Ltd.                ...Appellant(s)

Versus

Shipra Ocean Trade Pvt. Ltd.               ...Respondent(s)

O  R  D  E  R

Leave granted.

The  respondent  filed  summary  Suit  No.19/2003  under  

Order 37 of the Code of Civil Procedure (for short, “CPC”)  

for  recovery  of  Rs.89,76,162.80  from  the  appellant.   On  

notice,  the  appellant  filed  an  application  for  leave  to  

defend. By an order dated 26.7.2005, the trial Court allowed  

the application and granted unconditional leave to defend.  

That order was set aside by the High Court in Special Civil  

Application No.17851/2005 on the premise that the trial Court  

did not record a clear finding whether the claim put forward  

by the plaintiff is genuine or not and whether the defence of  

the defendant gave rise to a triable issue. In the opinion of  

the High Court, without recording a clear finding on these  

issues, the trial Court was not justified in granting the  

unconditional leave to defend.  After remand, the trial Court  

passed  order  dated  16.10.2006,  whereby  it  allowed  the  

application for leave to defend subject to production of bank  

guarantee of Rs.60 lacs by the appellant herein.  That order  

has been confirmed by the High Court by dismissing Special  

Civil Application No.24969/2006.

...2/-

- 2 -

We have heard learned counsel for the parties and  

scrutinized the record.  A perusal of the trial Court’s order  

shows that while granting conditional leave to defend to the  

appellant, the trial Court recorded a specific finding that  

triable issue is involved in the present case.  Though the  

High Court dismissed the Special Civil Application filed by  

the appellant, it did not disturb the finding recorded by the  

trial  court  that  triable  issue  is  involved  in  the  case.  

Therefore, the only question which requires consideration is  

whether  the  trial  court  was  justified  in  requiring  the  

appellant  to  produce  bank  guarantee  of  Rs.60  lacs  as  a  

condition for grant of leave to defend the suit filed by the  

respondent.  That question will have to be answered in favour  

of the appellant in view of the judgment of a 3-Judge Bench  

of  this  court  in  the  case  of  M/s.  Mechalec  Engineers  &  

Manufactureres vs. M/s. Basic Equipment Corporation, AIR 1977  

SC 577.  In that case, it has been laid down that if the  

defendant is able to show that there was triable issue in the  

suit then it is entitled to grant of leave unconditionally.  

The ratio of that judgment is squarely applicable to the  

present case.

Accordingly, the appeal is allowed and the condition  

of producing bank guarantee of Rs.60 lacs imposed by the  

trial Court while granting leave to the appellant to defend  

the suit filed by the respondent, which condition has been  

approved by the High Court, is set aside.  The Trial Court is  

directed to dispose of the suit within a period of one year  

from the date of receipt/production of copy of this order.

......................J.               [B.N. AGRAWAL]

......................J.               [G.S. SINGHVI]

New Delhi,

September 04, 2009.