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CASE NO.: Appeal (civil)  90 of 2008

PETITIONER: Sify Ltd.                                               

RESPONDENT: First Flight Couriers Ltd.

DATE OF JUDGMENT: 08/01/2008

BENCH: Tarun Chatterjee & Dalveer Bhandari

JUDGMENT: J U D G M E N T [Arising out of SLP [C] No. 4144 of 2006] TARUN CHATTERJEE,J. 1.      Leave granted. 2.      This appeal is directed against the order dated 13th  of December, 2005 passed by a Division Bench of the  High Court of Judicature at Bombay in Appeal No. 1128  of 2005 whereby the Division Bench had allowed the  appeal of the respondent thereby setting aside the order  passed by a learned Single Judge of the same High Court  granting conditional leave to defend, to the respondent on  deposit of a sum of Rs. 15 lacs.  3.      The facts giving rise to the filing of this appeal may  be briefly stated as follows.  4.      The appellant company is engaged in the business  of providing service in setting up of Networks and other  value added services in the field of information and  technology. The respondent company is engaged in the  business of providing Courier services. The respondent  hired the services of the appellant as the service provider  for the connection of its Networks across India, which  included Internet Access and Virtual Private Network  (VPN). It is the case of the appellant that the respondent  committed defaults in making payments in respect of the  services provided by the appellant to the respondent. In  view of the continued failure of the respondent to clear the  outstanding dues in respect of invoices, the appellant filed  a summary suit, being SS No. 1576 of 2004, under O. 37  R.2 of the Code of Civil Procedure (in short \023the CPC\024)  against the respondent seeking recovery of a sum of                     Rs. 25,73,793/- along with 18 % interest p.a. in the High  Court of Judicature at Bombay. The appellant, thereafter,  filed the summons for judgment, being SJ No. 652 of  2004, in the afore said suit claiming Rs. 25,73,793/- and  further interest at 18 % on the principle amount Rs.  23,18,797/- till payment. The respondent filed its reply to  the summary suit and the summons for judgment seeking  unconditional leave to defend the suit. It was the case of  the respondent that there was deficiency in service  provided by the appellant and that the appellant\022s suit was  based on accounts and not on invoices. The learned  Single Judge, as noted herein earlier, disposed of the  application for leave to defend the suit filed by the  appellant holding that the respondent shall be entitled to  defend the suit on condition of deposit of Rs. 15 Lacs.  The learned Single Judge, therefore, granted leave to  defend the suit to the respondent on the aforesaid  condition. It is an admitted position that the respondent  had deposited the sum of Rs. 15 Lacs in the court within

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the time specified in the aforesaid order. Feeling  aggrieved, the respondent preferred an appeal being  Appeal No. 1128 of 2005 which, as noted herein earlier,  was allowed by the Division Bench of the High Court of  Judicature at Bombay holding that the respondent was  entitled to defend the suit without any condition. It is this  order of the Division Bench, which is challenged before us  by way of a special leave petition in respect of which  leave has already been granted.  5.      The question that needs to be decided in this  appeal is whether, in view of the pleadings in the suit as  well as the application filed by the respondent for leave to  defend the suit, it was entitled to an unconditional leave to  defend the suit as was directed by the Division Bench of  the High Court of Bombay.  6.      We have heard the learned counsel for the parties  and examined the orders passed by the Division Bench  and the learned Single Judge of the High Court of  Bombay, the application for grant of unconditional leave,  the pleadings in the suit and the other materials on  record. Before we decide the question posed before us, it  would be appropriate to take into consideration Order 37  Rule 3 Sub-rule (5) of the CPC, which provides for grant  of leave to a defendant to defend a suit either  unconditionally or upon such terms as may appear to the  Court or Judge to be just. A bare reading of Sub-rule (5)  of Rule 3 of Order 37 would clearly indicate that leave to  defend may be granted to a defendant unconditionally or  upon such terms as may appear to the Court or Judge to  be just, that is to say, the discretion is left to the Court to  put the defendant on terms, in the facts and  circumstances of a particular case, on compliance  whereof the defendant shall be entitled to defend the suit.   Proviso to Sub-rule (5) lays down 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.  7.      Having noted the aforesaid provisions of the CPC  under Order 37 Rule 3 Sub-rule (5), it would be expedient  at this stage to enumerate the position of law as to when  an unconditional leave to defend a summary suit can be  granted. In M/s. Mechelec Engineers & Manufacturers Vs.  M/s. Basic Equipment Corporation [(1976) 4 SCC 687],  this court enumerated certain propositions as to when an  unconditional leave can be granted or the defendant can  be put on terms. The said propositions, as enumerated by  this court in the aforesaid decision, may be stated as  follows: - a)      If the defendant satisfies the court that he  has a good defence to the claim on its merits the  plaintiff is not entitled to leave to sign judgment  and the defendant is entitled to unconditional  leave to defend. b)      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. c)      If the defendant discloses such facts as  may be deemed sufficient to entitle him to  defend, that is to say, although the affidavit does  not positively and immediately make it clear that

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he has a defence, yet, shows such a state of  facts as leads to the inference that at the trial of  the action he may be able to establish a defence  to the plaintiff\022s claim the plaintiff is not entitled to  judgment and the defendant is entitled to leave to  defend but in such a case the court may in its  discretion impose conditions as to the time or  mode of trial but not as to payment into court or  furnishing security. d)      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.  e)      If the defendant has no defence or the  defence is illusory or sham or practically  moonshine then although ordinarily the plaintiff is  entitled to leave to sign judgment, the court may  protect the plaintiff by only allowing the defence  to proceed if the amount claimed is paid into  court or otherwise secured and give leave to the  defendant on such condition, and thereby show  mercy to the defendant by enabling him to try to  prove a defence.\024 On the same lines is the decision of this court in Sunil  Enterprises & anr. Vs. SBI Commercial & International  Bank Ltd. [(1998) 5 SCC 354] wherein the propositions,  as noted herein above, were summed up. 8.      From the propositions, as noted herein above, it is  clear that it is only in cases which fall in class (e) that an  imposition of the condition to deposit an amount in court  before proceeding further is justifiable. We, therefore,  have to decide whether the case before us falls in class  (e) or whether it falls in class (b) or (c). To answer this  question, it is necessary to note the grounds taken by the  learned Single Judge to grant conditional leave to defend  to the respondent and those taken by the Division Bench  to set aside the order of the learned Single Judge. While  directing the respondent to deposit a sum of Rs. 15 Lacs  thereby granting it conditional leave to defend the suit, the  learned Single Judge made the following findings: - 1.      There is no material evidence to show that  there is any deficiency of service of the Plaintiffs. 2.      The suit is based on each of the invoices  and is therefore, a fit case where leave be  granted on condition.

The Division Bench, while setting aside the order of the  learned Single Judge, recorded the following findings: - 1.      The defence raised by the Defendant that  there was deficiency of service is not after  thought in as much as way back by the  communication dated 26th of June, 2002, the  defendant raised the dispute about the deficiency  in service and communicated to the plaintiff that  the VPN link was shut down without any prior  intimation causing the loss of goodwill and image  in the market. Grievance was also raised by the  defendant that the defendant had incurred heavy  loss to the tune of more than Rs. 1,00,00,000/-.  2.      The contention of the plaintiff before the  learned trial judge that the amount paid by the  defendant is not towards the service charges but  towards the installation charges which the  defendant was liable to pay even though the

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services were not rendered at the relevant time  and that the claim was not waived and that  contention was contested by the defendant also  raises a serious question to be tried during the  trial. 3.      The contention of the defendant that a  close scan of the plaintiff\022s suit would show that it  is based on accounts and not on invoices and  therefore, the summary suit was not maintainable  cannot be said to be frivolous. 4.      The defendant has been able to raise  triable issues.

9.      Having heard the learned counsel for the parties  and after going through the judgment of the Division  Bench as well as of the learned Single Judge in detail, we  are of the view that the order passed by the learned  single judge, granting conditional leave to the respondent  to defend the suit, ought not to have been interfered with  by the Division Bench as (i) the order of the learned  Single Judge was a discretionary order and (ii) the  amount of Rs. 15 Lacs was already deposited by the  respondent. In view of the aforesaid admitted fact, the  Division Bench of the High Court ought not to have  interfered with the discretionary order of the learned  Single Judge granting conditional leave to defend to the  respondent when no case was made out by the  respondent that the said order was either arbitrary or  unreasonable. The order of the learned Single Judge  imposing the condition for deposit of Rs. 15 Lacs on the  respondent to defend the suit cannot be, in our view, said  to be an arbitrary or unreasonable order. As noted herein  earlier, it is an admitted position that in compliance with  the order of the learned Single Judge, the deposit of Rs.  15 Lacs was duly made by the respondent. Therefore, it is  clear that the respondent had practically complied with  the order of the learned Single Judge and for this reason,  it was not open to the Division Bench to interfere with the  discretionary order of the learned Single Judge.  10.     It is also an admitted finding that the respondent  used the services of the appellant and failed to pay the  outstanding dues despite various demands. The learned  Single Judge, after noting down the contentions of the  appellant that the amount paid by the respondent was not  towards service charges but it was towards installation  charges which they were liable to pay even though the  services were not rendered at the relevant time and that  there was no deficiency of service and after looking at the  correspondence between the parties, found no merit in  the defence put up by the respondent. The learned Single  Judge also observed that there was no material evidence  to show that there was any such deficiency of service of  the appellant not providing services to the respondent. A  close scrutiny of the record, in our view, would indicate  that no material was produced to show that the  respondent had complained about the deficiency in  service prior to 26th of June, 2002. The learned Single  Judge, after considering, inter alia, the contention of the  appellant that the appellant had waived the service  charges and not the installation charges, granted leave to  defend the suit to the respondent on deposit of Rs. 15  Lacs. That apart, from the available record, we are of the  view that the respondent had not satisfied even the  Division Bench that it was entitled to defend its case  without any condition. From the materials produced by the

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respondent, it would also be evident that it was liable to  pay for the services provided by the appellant. The letter  dated 26th of June, 2002 produced by the respondent  claiming for the first time after 2000 that there was  deficiency of service must be, prima facie, found to be an  afterthought exercise on the part of the respondent. The  materials, as admitted by the respondent, would clearly  show that the respondent was making payments towards  various invoices raised by the appellant. It is also evident  from the record that the respondent did not raise any such  claim regarding deficiency of service when the appellant  was demanding its past balance/dues for the services  rendered. It also appears from the record that the  appellant has established that the respondent remitted  certain sums against various invoices raised by it and that  the respondent did not raise any question about the  deficiency of service earlier. Once the respondent  admitted its liability to pay for the services rendered by  the appellant, it was not open to it to repudiate the same  by taking a stand that the services provided by the  appellant were deficient. In any view of the matter, the  Division Bench granted unconditional leave to defend to  the respondent without considering any of the materials  produced by the parties. In view of the aforesaid findings,  which, of course, are prima facie in nature, it would not be  unwise for this court to hold that the condition (e),  enumerated in the decision of this court in M/s. Mechelec  Engineers & Manufacturers Vs. M/s. Basic Equipment  Corporation [supra], as noted herein earlier, was satisfied  in the present case and accordingly, the conditional leave  granted by the learned Single Judge was a proper order,  which the Division Bench ought not to have interfered  with. At the risk of repetition, we may also note that the  respondent had also accepted the order of the learned  Single Judge and complied with the condition imposed  therein.  In view of the discussions made herein above,  we are, therefore, of the view that the Division Bench was  not justified in interfering with the discretionary order of  the learned Single Judge granting conditional leave to  defend to the respondent on deposit of Rs. 15 Lacs. We,  therefore, hold that when the respondent had duly  complied with the conditions imposed by the learned  Single Judge in its discretionary order, the Division Bench  was not justified in interfering with such discretionary  order. In any view of the matter, we are of the view that  the order of the Division Bench, granting leave to the  respondent without any condition, in the facts and  circumstances of the case, was not justified.  11.     For the reasons aforesaid, we set aside the order of  the Division Bench and restore the order of the learned  Single Judge by which the learned Single Judge had  granted leave to defend the suit to the respondent on the  condition of deposit of Rs. 15 Lacs in the court. As the  amount of Rs. 15 Lacs has been withdrawn by the  respondent, we grant 2 months time to the respondent to  deposit the aforesaid amount in the High Court of  Bombay and in default of such deposit, the leave granted  to the respondent to defend shall stand refused. The  appeal is thus allowed to the extent indicated above.  There will be no order as to costs.