Bank of India Vs M/s. Mehta Brothers .

REPORTABL E

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO: 2982 OF 2001 Bank of India … Appellant

VERSUS

M/s Mehta Brothers & Ors. … Respondents

J U D G M E N T

TARUN CHATTERJEE, J.

1. The appellant - Bank of India, a body corporate

constituted under the Banking Companies [Acquisition and

Transfer of Undertakings] Act, 1970 filed a suit for recovery of

Rs.91,58,480.09 against the defendants – respondents on 30th of

August, 1982, inter alia, alleging that on the request of

defendant nos. 1 to 5, namely, M/s Mehta Brothers and Ors. on

26th of June, 1979, the appellant Bank issued an irrevocable

Letter of Credit for US $ 6,10,900, equivalent to Indian

currency about Rs.50,00,000/-, in favour of M/s Bentrex and

Co., Singapore. The said Letter of Credit was expressly made

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subject to the terms and conditions of Uniform Customs and

Practice for Documentary Credits [1974] Revision,

International Chamber of Commerce Publication No.290. On

1st of September, 1979, the beneficiary drew a site draft for an

amount of US $ 6,10,740 and presented the same along with

other documents to Deutsche Bank Asia [formerly known as

European Asian Bank], a body corporate incorporated in West

Germany being a foreign company under the Companies Act,

1956 – defendant No.6 - respondent no. 6 (in short ‘the

respondent No.6’) for negotiations. On 4th of September, 1979,

respondent no.6 after negotiating the documents dispatched the

original and duplicate set of the documents from Singapore

directly to the Chandni Chowk Branch of the appellant Bank

and called upon the New York Branch of the appellant Bank

for reimbursement under the Letter of Credit. The appellant

Bank further alleged that this was done without furnishing the

necessary certificate of compliance which was required under

the terms of letters of credit. On 5th of September, 1979, the

New York Branch of the appellant Bank on receipt of the

aforesaid claim, in good faith, paid on account, without

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prejudice, the said amount of US $ 6,10,740. On 13th of

September, 1979 the appellant Bank received the documents

from respondent no.6 and found that there were many

discrepancies in the documents and they were not as per the

Uniform Customs and Practice of Documentary Credits [1974

Revision]. On 14th of September, 1979, by a telex the appellant

Bank pointed out to respondent no.6 some of the discrepancies

in the documents and stated that the documents were being

held at its risk and responsibility. Respondent no.6 was

requested to reverse the reimbursement already claimed by it

from the New York Branch of the appellant Bank. On the same

day respondent no.6 by its telex to the appellant Bank rejected

the claim of the appellant Bank alleging that these

discrepancies were of minor nature and all the terms and

conditions of the Letter of Credit were complied with. On 14th

of September, 1979, Mehta Brothers– defendant nos. 1 to 5 –

respondent nos.1 to 5 (in short ‘respondent nos. 1 to 5’) also

did not honour and return the documents as they were not at all

in accordance with the terms of Letter of Credit. The appellant

Bank – further alleged that respondent no.6 had failed and

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neglected to reply and reimburse to the appellant Bank the

amount received by it from the New York Branch. Respondent

no.6 had failed to furnish to the New York Branch of the

appellant Bank the certificates of compliance in terms of the

said Letter of Credit, for that reason also respondent no.6 acted

in breach of its obligation under the Letter of Credit to do so

and, therefore, was not entitled to claim and return the payment

received thereunder. Despite repeated requests and reminders,

respondent nos. 1 to 5 did not honour and return the said

documents and went on contending that there were

discrepancies in the documents. Respondent nos. 1 to 5 also

stated that their claim with the insurance company was likely to

be finalized soon and the amount payable thereunder shall be

received by the appellant Bank directly from the insurance

company for the adjustment of the amount due and payable by

them under the Letter of Credit. Respondent nos. 1 to 5 as also

respondent no.6 had denied their respective liability to repay to

the appellant Bank the amounts claimed by it and the appellant

Bank was in doubt as to the persons from whom it was entitled

to redress, accordingly, the appellant Bank joined respondent

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nos.1 to 5 and respondent no.6 as parties to the suit in order to

determine the question as to which of the defendants was liable

to the appellant Bank and to what extent. If separate suits were

brought against respondent nos. 1 to 5 and respondent no.6,

common question of law and fact would arise, therefore, the

appellant Bank had a right to relief against respondent nos. 1 to

5 or respondent no. 6.

2. Upon the aforesaid allegations, the appellant Bank had

filed the aforesaid suit for recovery of Rs.91,58,480.08, being

the amount of Letter of Credit and interest. Decree was

claimed primarily against respondent no.6 and alternatively,

against respondent nos. 1 to 5 in case, the court would come to

the conclusion that respondent no.6 was not liable to pay any

amount to the appellant Bank. It would be appropriate at this

stage to reproduce the reliefs claimed in the suit itself which

read as under:

“[a] This Hon’ble Court will be pleased to decree and order defendant no.6 to pay to the plaintiff the equivalent in rupees at the time of payment, the sum of US $11,46,492.99 together with interest thereon at 21% per annum with quarterly rests from the said 30th day of August, 1982 untill payment and costs of the suit and such further and other reliefs as this Hon’ble Court may deem fit.

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[b] That in the event of this Hon’ble Court holding that defendant no.6 is not liable to pay any amount to the plaintiff, this Hon’ble Court will in the alternative be pleased to decree and order defendant Nos. 1 to 5 jointly and each severally to pay to the plaintiff bank the said sum of Rs.91,58,480.00 with further interest at the 21`% per annum with quarterly rests from the 30th day of August, 1982 until payment.

[c] Costs of the suit and

[d] Such other and other reliefs which this Hon’ble Court may deem fit.”

3. On 24th of July, 1984 a written statement on behalf of

respondent no.6 was filed. Although, respondent no.6 filed the

written statement but finally no body appeared on its behalf and

accordingly the suit had proceeded against it ex parte. The suit

was decreed on 10th of March, 1987 ex parte against respondent

no.6 with costs. However, the suit against respondent nos. 1 to

5 was dismissed on contest and they were left to bear their own

costs. However, the appellant Bank did not file any appeal in

so far as that part of the decree by which the suit against

respondent nos. 1 to 5 had been dismissed. Accepting this

position, on 4th of April, 1988, two applications were filed by

respondent no.6 under Order 9 Rule 13 of the Code of Civil

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Procedure (in short the ‘Code’) for setting aside the ex

parte decree and under Section 5 of the Limitation Act for

condonation of delay in filing the application under Order 9

Rule 13 of the Code. By an order dated 28th of February, 1991,

the learned single judge of the High Court allowed both the

applications filed by respondent no.6. Accordingly, the

ex parte decree passed against respondent no.6 was set aside

subject to payment of Rs.25,000/- as costs out of which

Rs.15,000/- was payable to the appellant Bank and Rs.10,000/-

to respondent nos. 1 to 5. While setting aside the ex parte

decree against respondent no.6, by the same order, the learned

Single Judge also set aside that portion of the decree whereby

the suit against respondent nos. 1 to 5 was dismissed. To set

aside that part of the decree, the learned single judge had relied

on the proviso to Order 9 Rule 13 of the Code. Feeling

aggrieved by the said judgment of the learned single judge,

respondent nos. 1 to 5 filed first appeal being FAO [OS]

No.78 of 1991 before the High Court of Delhi. The appellant

Bank also filed FAO [OS] No.100 of 1991.

4. By the judgment and final order dated 9th of November,

2000 passed by a Division Bench of the High Court of Delhi in

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FAO (OS) No.78 of 1991, the Division Bench had set aside

the order dated 28th of February, 1991 of the learned single

judge to the extent that the said order had set aside an ex parte

decree dated 10th of March, 1987 dismissing the suit of the

appellant Bank against respondent nos. 1 to 5. In so far as the

respondent no.6 was concerned, the Division Bench of the

High Court affirmed the order dated 28th of February, 1991

setting aside the ex parte decree dated 10th of March, 1987

passed against the respondent no. 6. It is against this judgment

of the Division Bench of the High Court, the appellant Bank

filed this special leave petition which, on grant of leave, was

heard in presence of the learned counsel for the parties.

5. We have heard the learned counsel for the parties and

examined the judgments of the High Court including the

Division Bench as well as the Single Judge. We have also

considered the materials available on record including the

plaint of the suit of the appellant Bank in respect of which the

reliefs claimed by it which has been noted herein earlier and

the application under Order 9 Rule 13 of the Code and the

objections thereto.

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6. Having heard the learned counsel appearing for the

parties and after going through the materials on record, the

moot question that needs to be decided in this appeal is as

follows:

“Whether, under the proviso to Order 9 Rule 13 of the Code of Civil Procedure, a decree passed in favour of the contesting defendants can be set aside as against a defendant also being part of the same suit, on an application made by him, for setting aside an ex-parte decree against him.”

7. The learned counsel appearing on behalf of the appellant

Bank vehemently argued before us that on account of the ex-

parte decree against the respondent no. 6, the alternative claim

against respondent nos. 1 to 5 was dismissed without trial,

therefore, the Division Bench of the High Court was in error in

setting aside the decree of dismissal passed in favour of

respondent nos. 1 to 5. Thus, according to Mr. K.N.Bhatt,

learned senior counsel for the appellant Bank, on respondent

no. 6’s default being condoned, the suit filed by the appellant

Bank was rightly restored in toto by the learned single judge

which, however, was set aside in appeal. Learned senior

counsel for the appellant Bank further contended that in the

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present case, the ex-parte decree passed by the learned single

judge was of such a nature that it could not be set aside only

against respondent no. 6 and hence the order of the learned

single judge setting aside the decree in its entirety was fully

justified. On the interpretation/construction of the provisions

of Order 9 Rule 13 of the Code, in particular, its

proviso, the learned counsel appearing for respondent nos. 1 to

5 strongly urged that on a plain reading of this provision under

Order 9 Rule 13 of the Code and the proviso therein, there

should not be any difficulty to come to the conclusion that the

language of Order 9 Rule 13 is very clear and that the said

provision will apply only to a decree which has been passed ex-

parte and to the defendants against whom, ex-parte decree has

been passed and not against the defendants who have been

successful in the suit and the suit has been dismissed in their

favour. According to the learned counsel for the respondent

nos. 1 to 5, the proviso to Order 9 Rule 13 of the Code also

contemplates setting aside of an ex-parte decree only against

the defendants who were proceeded ex-parte but had not made

an application for its setting aside. Relying on paragraph 8 of a

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Full Bench decision of the Assam High Court reported in

Khargesh Chandra Vs. Chandra Kanta Barua, AIR 1954

Assam 183, learned counsel for respondent nos. 1 to 5

contended that two significant changes in the provisions under

the Code of 1908 namely, the words, ‘as against him’ have

been added after the words ‘shall make an order setting

aside the decree and the proviso’ to the rule. According to the

learned counsel for respondent nos. 1 to 5, these changes left

no room for doubt that as a general rule, the decree was to be

set aside as against the defendant making the application under

Order 9 Rule 13 of the Code but in exceptional cases,

contemplated by the proviso, it could be set aside against all or

any of the other defendants. Further, relying on paragraph 8 of

the aforesaid decision, the learned counsel for the respondent

nos. 1 to 5 argued that the decree set aside must be a decree

“against the defendant and not a decree in their favour”.

Accordingly, the learned counsel for the respondent Nos. 1 to 5

contended that proviso to Order 9 Rule 13 of the Code cannot

have any application as the decree dated 10th of March, 1987

was in favour of respondent nos. 1 to 5 and not against them. It

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was next contended on behalf of learned counsel for the

respondent nos. 1 to 5 that the learned single judge was not

correct in reviving the suit in its entirety on the ground that the

decree was one and indivisible. According to the learned

counsel for the respondent nos. 1 to 5, in view of the liability of

the respondent Nos. 1 to 5 and in view of the alternative reliefs

claimed in the suit itself, the decree was separate and,

therefore, it could be split up. Therefore, the learned counsel

for the respondent nos. 1 to 5 contended that the Division

Bench of the High Court was fully justified in setting aside that

portion of the decree by which the suit against respondent nos.

1 to 5 was dismissed.

8. Mr. Jayant Bhushan, learned senior counsel appearing

for respondent no.6 supported the contention of the learned

senior counsel appearing for the appellant Bank and contended

that since the decree was indivisible and in view of the nature

of the order of the trial court deciding the issues which were

interlinked, the learned single judge was fully justified in

setting side a decree in toto and restored the suit against all the

defendants.

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9. Having heard the learned counsel for the parties and after

noting the arguments advanced by them, we are of the view

that the judgment of the Division Bench of the High Court

which is impugned in this appeal so far as that part of the order

of the Division Bench setting aside the order of the learned

single judge restoring the suit in its entirety cannot be sustained

in law. Now, let us interpret the provisions under Order 9 Rule

13 of the Code and particularly examine the scope of the

Proviso to Order 9 Rule 13 of the Code. In the light of the issue

framed by us, as noted herein earlier, we need to ascertain

whether under Order 9 Rule 13 of the Code, it is

permissible for the court, on an application of a defendant

against whom a decree has been passed ex-parte, to set aside

the decree also against the other defendants appearing in the

same suit and dismissed on contest.

10. At the risk of repetition, we may also examine whether

the Division Bench of the High Court was justified in setting

aside the judgment of the learned single judge to the extent that

the decree of dismissal passed in favour of respondent nos. 1 to

5 could also be set aside along with the ex parte decree being

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set aside against respondent no. 6 or, whether under Order 9

Rule 13 of the Code, the court on an application by a defendant

against whom the decree has been passed exparte can set aside

the decree not only against the defendant applying for setting

aside the ex parte decree but also the decree passed in

favour of the other defendants who appeared and contested the

suit.

11. Before we examine the scope and impact of Order 9 Rule

13 of the Code and the proviso to it and the definition of

“decree” made in the Code and other relevant provisions, we

may look into earlier provisions made in the Code of Civil

Procedure, 1882. Section 108 of the 1882 Code dealt with

applications for setting aside an exparte decree which read as

under:

“In any case in which a decree is passed ex parte against a defendant, he may apply to the Court by which the decree was made for an order to set it aside, and if he satisfies the Court that the summons were not duly served, the Court shall pass an order to set aside such decree upon such terms as to costs, payment into Court or otherwise as it thinks fit and shall appoint a date for proceeding with the suit”

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From a plain reading of the provisions made under

Section 108 of the Code of Civil Procedure, 1882, it is evident

that on the Court being satisfied with the merits of an

application for setting aside of an ex-parte decree, it was

required to set aside the decree and proceed with the suit. The

words used in this section, namely, “the decree” “set aside the

decree” and “proceeding with the suit” would clearly show that

in Section 108 there was no provision to set aside an ex

parte decree only against the defendant against whom the ex

parte decree was passed and who had, accordingly, made an

application for setting it aside. Therefore, it is clear from this

provision that if an ex parte decree was to be set aside by the

court, the same had to be set aside in toto i.e. as against all the

defendants in the suit. In our opinion, the expression

“proceeding with the suit” would also clearly show that the

intentions of the Legislature that the court was required to

proceed with the suit, i.e. between all the plaintiffs and the

defendants. However, in the interpretation of Section 108

particularly “decree”, “ex parte decree” and “proceeding with

the suit” there was a difference of opinion expressed by

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different High Courts in India, that is to say, as to whether the

ex parte decree had to be set aside in toto, or whether the same

was required to be set aside only as against the party against

whom the ex parte decree was passed. This

difference of opinion of different High Courts was, however,

removed by the introduction of Order 9 Rule 13 of the Code.

12. At this stage, it would be relevant to mention and

reproduce the provisions of Order 9 Rule 13 of the Code which

reads as under:

“13. Setting aside decree ex-parte against defendant- In any case in which a decree is passed ex-parte against a defendant, he may apply to the Court by which the decree was passed for an order to set it aside; and if he satisfies the Court that the summons were not duly served, or that he was prevented by any sufficient cause from appearing when the suit was called on for hearing, the Court shall make an order setting aside the decree as against him upon such terms as to costs, payment into Court or otherwise as it thinks fit, and shall appoint a day for proceeding with the suit:

Provided that here the decree is of such a nature that it cannot be set aside as against such defendant only it may be set aside as against all or any of the other defendants also:

Provided further that no Court shall set aside a decree passed ex-parte merely on the ground that there has been an irregularity in the service of summons, if it is satisfied that the defendant had

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notice of the date of hearing and had sufficient time to appear and answer the plaintiff’s claim.

Explanation- Where there has been an appeal against a decree passed ex-parte under this rule, and the appeal has been disposed of on any ground other than the ground that the appellant Bank has withdrawn the appeal, no application shall lie under this rule for setting aside that ex-parte decree.”

13. We have carefully examined the provisions under Order

9 Rule 13 of the Code as well as its proviso and other relevant

provisions under Order 9 of the Code. A reading of Order 9

Rule 13 of the Code would clearly show that under this

provision it was clarified that an ex parte decree was ordinarily

to be set aside only against the defendant against whom the

decree was ex parte and the suit was to be revived only qua the

said defendant applying for setting aside the ex parte decree. It

is true that the heading of Order 9 Rule 13 of the Code starts

with the expression “setting aside of an ex parte decree”. But if

we examine this provision under Order 9 Rule 13 of the Code

as well as its proviso in depth and in detail, it would not be

difficult for us to come to a conclusion that under Order 9 Rule

13, it has been clarified that an ex parte decree is ordinarily to

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be set aside only as against the defendants against whom the

decree has been ex parte and the suit is to be revived only qua

the defendant who applied for setting aside the ex parte decree.

Keeping this in mind, let us now examine whether the proviso

to Order 9 Rule 13 of the Code gives ample power to the court

to set aside the decree passed in favour of the contesting

defendants at the time of setting aside the ex parte decree

against other defendants. Therefore, let us now deal with the

proviso to Order 9 Rule 13 of the Code. It provides that in

cases where the decree is of such a nature that the same cannot

be set aside only as against the defendant applying for setting it

aside, the decree could also be set aside as against any or all of

the other defendants. Therefore, in our view, this proviso

confers power on the court to set aside the entire decree if the

court is of the view that the decree passed was of such a nature

that the same could not be set aside only as against the

defendant applying for setting aside the decree, the decree

could also be set aside as against any or all of the other

defendants. Therefore, this proviso clearly confers powers on

the Court to set aside the entire decree where the said decree

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was of such a nature that it is expedient in the interest of justice

to set aside the decree as against any or all of the other

defendants also. After carefully examining the provision under

Order 9 Rule 13 of the Code along with its proviso, the

following, therefore, emerges:-

14. As noted herein earlier, the heading of Order 9 Rule 13

of the Code starts with “setting aside decrees ex parte” But, if

we read the entire provision under Order 9 Rule 13 of the

Code, it would be clear that the said provision provides that the

decree must be ex parte against one defendant or ex parte

against all the defendants. The proviso also does not provide

that the decree can be set aside against the defendants, other

than the applying defendant, only if it is ex parte against them

also. The only requirement for the applicability of this order is

that the decree should be ex parte against the defendant

applying to have it set aside. Thus, the language of the order

does not suggest that for the order to apply the decree must be

entirely ex parte. Secondly, if the proviso was to apply only if

the decree was ex parte against the other defendants also, that

would have rendered the proviso practically infructuous, as in

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such a situation, the other defendants would have an

independent right to have the decree set aside against them. In

our view, the idea behind the proviso is that if the decree is

being set aside as against some defendants, and the decree as

against the other defendants is connected, interlinked or

dependent on that part of the decree which is being set aside,

the decree may have to be set aside as against the other

defendants also. There is another aspect to be considered by us

relating to the provision under Order 9 Rule 13 of the Code

The proviso to Order 9 Rule 13 does not use the expression “ex

parte decree” but it had used the term “decree”. Therefore, the

question would be whether the proviso to Order 9 Rule 13 says

that the decree would mean an ex parte decree. This can be

looked at from two angles. We shall consider both of them and

then determine which of the two is the most appropriate. One

of the ways to look at that the term “decree” over here means

the ex parte decree, which was passed against the defendant

who had afterwards applied for setting it aside. This

interpretation can be illustrated with the help of the following

hypothetical situation. Let us assume that there are many

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defendants and the decree is passed ex-parte against all the

defendants, defendant No.1 subsequently applies for setting

aside the said ex-parte decree, according to the proviso to

Order 9 Rule 13 of the Code, if the decree is of such a nature

that it cannot be set aside as against the defendant No.1 only,

then it would be open for the court to set aside the decree as

against all or any of the other defendants as well. Of course, we

are considering the decrees which have been passed ex parte

against all of them at the present moment. Thus, according to

this interpretation, for the court to be able to exercise power

under this proviso, the word “decree” used in the proviso must

be construed to mean ex-parte decree only. The arguments

which can be made in support of this interpretation may be

summarized as follows:

a) The heading to Order 9 Rule 13 says, “ex parte decree”,

b) The expression “ex-parte” is used under Order 9 Rule 13

only once and then it uses the word either “decree” or

“it” in this context. Therefore, if we read the proviso, it

should mean ex parte decree only.

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Therefore, according to the above-discussed

interpretation, only that decree can be set aside under the

proviso to Order 9 Rule 13 of the Code, which was passed ex-

parte. Therefore, a decree which is not ex-parte, that is to say, a

decree against persons who appeared and contested, cannot be

set aside, much less persons who not only appeared but in

whose favour the suit was dismissed. This is the one look on

the interpretation of the proviso to Order 9 Rule 13 of the

Code. Let us now take up the second way to look at this

proviso by interpreting that the word “decree” used in the

proviso means a decree in general and not necessarily an ex-

parte decree. In support of this interpretation we may note the

points emerged :

If the subsequent words used in the proviso were to

mean ex-parte decree, the Legislature would have expressly

provided so. Therefore, from the intention of the Legislature it

cannot be said that the ex parte decree can only be set aside and

not a decree passed in toto.

At this juncture, we may look at the second proviso to

Order 9 Rule 13 of the Code which runs as under:-

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“Provided further that no Court shall set aside a decree passed ex-parte merely on the ground that there has been an irregularity in the service of summons, if it is satisfied that the defendant had notice of the date of hearing and had sufficient time to appear and answer the plaintiff’s claim.

Therefore, looking at the second proviso to Order 9 Rule

13 of the Code and also the explanation, we see that the word

“decree” is preceded by the word “ex parte” This would, in our

view, effectively mean that the Legislature while drafting the

proviso No.1 to Order 9 Rule 13, intentionally omitted “ex

parte” before the word “decree” because they intended to mean

decree in general.

15. Therefore, if we go by the above mentioned

interpretation, a decree can be set aside as against all or any of

the other defendants, regardless of the fact whether they

appeared, contested or not. Keeping this interpretation of the

first proviso to Order 9 Rule 13 of the Code in mind, let us now

take up the other question to be answered in this case, which is

whether a decree can be set aside against a defendant against

whom the suit has been dismissed on contest. At the first

blush, we thought it fit to think that a defendant who contested

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a suit and got the suit dismissed on contest it would be unjust

to call back the said defendant who had already contested the

matter and got the suit dismissed. This is because, it would

amount to jeopardizing his interest but it would also result in

unending litigation for him.Therefore, before expressing any

opinion on the issue posed before us, we have to solve this

aspect also. For this reason, we wish to ascertain that there

cannot be a rigid answer to this problem. As regards the

question as to whether the term “decree”in the first proviso

connotes ex-parte decree or the decree in general, we have

already come to a firm opinion, as discussed herein above, that

it actually meant a decree in general. It may be kept on record

that, in our view, the intention of the Legislature to use the

word “decree” in the first proviso to mean decree in general in

view of the changes in the expression made in the Code of

Civil Procedure, 1882 and the Code of Civil Procedure, 1908.

16. Therefore, keeping this in mind, let us now consider

whether a contested decree by some of the defendants can be

set aside while considering the application for setting aside the

ex parte decree against one of the defendants. This would, in

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our view, certainly depend on the nature of reliefs claimed by

the plaintiff in his plaint and the nature of the decree in

question. If the decree is indivisible, the court would be at

liberty to set aside the decree not only against the defendant

who applied for setting aside the ex parte decree passed against

him, but also as against all or any of the other defendants. In

the instant case at our disposal, the Division Bench of the High

Court had set aside that part of the order of the learned single

judge by which the learned single judge had set aside the order

of dismissal of the suit as against the respondent Nos. 1 to 5 on

the application under Order 9 Rule 13 only by the respondent

No. 6 for setting aside its ex-parte decree, on the ground that

the decree passed was divisible. Therefore, the question

remains to be considered as to whether the decree passed in the

suit filed by the appellant Bank is indivisible or not. To answer

this query, it would be necessary for us to look into the issues

framed in the suit and the reliefs claimed in so far as it is

relevant, but before doing that we may note that the suit was

filed by the appellant Bank seeking a decree against respondent

no. 6 and in the alternative, as against respondent nos. 1 to 5 if

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the respondent no. 6 was found not to be liable. The issues

which were framed in the suit in so far as it is relevant for the

disposal of this appeal, may be set down below:

1) Whether the defendant no. 6 did not comply with the terms and conditions of the letter of credit and if it acted in breach of its terms in claiming reimbursement of the amount of $6 10740/- from the appellant Bank branch in New York.

2) Did the defendant nos. 1 to 5 wrongly fail to retire the documents? If so, to what effect?

3) ---- 4) ----- 5) ---- 6) ---- 7) Whether the claim of the plaintiff lies in the alternative,

i.e., one against defendant no. 6 and in the alternative against defendants no. 1 to 5?

8) In case it is held that defendants no. 1 to 5 are liable to any amount are they entitled to pay that amount in installments?

17. We have already quoted the relevant reliefs claimed by

the appellant Bank in their plaint and the issues now quoted

herein above. As has been noted herein earlier, the suit was

decreed ex parte holding that respondent no. 6 only was liable

and in view of such issue being decided, the suit against

respondent Nos. 1 to 5 was dismissed. Such dismissal of the

suit, as noted herein earlier, as against respondent Nos. 1 to 5

was held by the Court that since respondent No.6 alone was

26

liable to pay the decretal amount to the appellant Bank the suit

had to be dismissed against respondent Nos. 1 to 5 as the relief

claimed in the suit was in the alternative, that is to say, if the

suit is decreed against respondent No.6 only or it is held by the

court that respondent No. 6 only was liable to pay the decretal

amount, respondent Nos. 1 to 5 cannot be held to be liable for

the amount claimed. However, as an illustration, we may refer

to Issue No.1 in which it was held that the documents

negotiated by respondent No.6 were deficient and thus there

was non compliance/breach of the terms and conditions of the

Letter of Credit by respondent No.6. Having found this Issue

No.1 in favour of the appellant Bank and against respondent

No.6 and the remaining issues, namely, Issue Nos. 2, 7 and 8

which were also decided may be referred to at this stage.

Issue No.2 – “In view of my decision in Issue No.1, the

defendants 1 to 5 were justified in refusing to retire the

documents. Issue is decided accordingly.

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Issue No.7 - “ It was not shown to me how the suit in the

alternative was not maintainable”

Issue No. 8 -“In view of my finding that defendants 1 to

5 were not liable to pay any amount, this issue does not

arise.

18. From the examination of the issues and the findings

arrived at by the learned single judge, it is pellucid that the suit

against respondent Nos. 1 to 5 was found to be maintainable in

law but they were held not to be liable because respondent No.

6 alone was held to be liable. At this stage, it may be kept on

record that a suit being Suit No. 475 of 1980 has been filed by

respondent No.1 against the Oriental Fire and General

Insurance Company, which has now been adjourned sine die at

the instance of respondent no. 1 in view of the judgment of the

Division Bench of the High Court which affirmed the decree

passed in favour of respondent Nos. 1 to 5 by dismissing the

suit against them. In the aforesaid pending suit, there has been

an order passed by the Court which may be relevant for us to

reproduce and we quote as under :-

28

“It has been submitted by the learned counsel for the plaintiff that the proceedings in the suit may be adjourned sine-die in view of the judgment in Suit No. 1182 of 1982 in Bank of India Vs. Mehta Brothers given on 10th of March, 1987. It is further submitted that it should be left open to the plaintiff to get the proceedings revived as and when necessary. The request of the learned counsel for the plaintiff is not being opposed on behalf of the defendant. In view thereof further proceedings in this suit are adjourned sine die. It should be open to the plaintiff to apply for reviving the proceeding as and when necessary.”

On a plain reading of this order and the stand taken by

respondent No.1 in the aforesaid suit, it is clear to us that

respondent No.1 has reserved liberty to revive the pending suit,

if necessary.

19. As has been noted herein earlier, the ex-parte decree

passed by the learned single judge was set aside in toto on an

application made by respondent no. 6, that is to say, the suit has

also revived against respondent nos. 1 to 5 who contested the

suit and got the suit dismissed in the above manner. According

to the learned single judge, the decree passed in the suit was a

single indivisible decree and the ex parte decree was

accordingly set aside not only against respondent no. 6 but also

29

against respondent nos. 1 to 5 as well. It is against this decision

of the learned single judge, as noted herein earlier, an appeal

was preferred to the Division Bench of the High Court, which,

however, upheld the finding of the learned single judge on the

setting aside of ex parte decree passed against respondent No.6.

But at the same time the appellate court differed with the view

of the learned single judge holding that the decree passed was

indivisible and held that the learned single judge was not

justified in setting aside the decree against respondent Nos.1 to

5 who contested the suit and got the suit dismissed. According

to the Division Bench of the High Court, the said decree was

actually two distinct decrees, i.e., one against the respondent

no. 6 and one in favour of the respondent nos. 1 to 5, and on

that finding the Division Bench had set aside the finding of the

learned single judge on the question whether the decree was

divisible or not and accordingly, had set aside the order of the

learned single judge to that extent and against which the

present appeal has now been preferred by the appellant Bank.

20. In our view, the Division Bench was not justified in

setting aside the above part of the order of the learned Single

30

Judge on the ground that the decrees were two distinct decrees :

one against respondent No.6 and one in favour of the

respondent Nos. 1 to 5. It is to be noted that the judgment of

the learned single judge as well as of the Division Bench had

not proceeded on the basis that the decree was entirely ex parte

against all the defendants. Therefore, we have to see the nature

of the decree for the purpose of coming to a proper conclusion

whether the decree could be indivisible or the decree that was

passed were two separate distinct decrees. In this connection, it

would be important to refer to a minority decision of the Assam

High Court in the case of Khargesh Chandra Vs. Chandra

Kanta Barua [AIR 1954, Assam 183], which would be

relevant for us to illustrate and answer this question.

Accordingly, we quote the observations made by the Assam

High Court with which we are in full agreement which are as

follows :

“(51)…….What is to be considered is not whether the plaintiff is estopped from claiming relief against the defendant without going to the appellate court, since there has been an adjudication between him and the defendant who appeared at the earlier hearing, but whether the defendant who was absent at the time (for sufficient reasons) should not get a chance to

31

reopen the entire suit in his interest, if the justice of the case so demands. To my mind, the intention of the Legislature is to give him such relief and therefore the proviso to Order 9 Rule 13, Civil Procedural Code, admits of no narrower interpretation, and when the decree is of such a nature that proper relief cannot be given to the applying defendant without setting aside the decree against other defendants (no matter in what shape it existed), the decree may be set aside as against the other defendants also.”

At this stage, paragraph 8 of the Full Bench decision of

the Assam High Court in Khargesh Chandra (supra) may also

be dealt with. The said paragraph noted two significant

changes which were effected in Order 9 Rule 13 of the Code

namely, the words “as against him” were added after the words

“shall make an order setting aside the decree” and the proviso

to the Rule. Accordingly, from this paragraph of the Full

Bench decision, the changes left no room for doubt that as a

general rule, the decree was to be set aside against the person

making the application under Order 9 Rule 13 of the Code, but

in exceptional cases, contemplated by the proviso, it could be

set aside against all or any of the other defendants. Emphasis

was made in this paragraph that the decree to be set aside must

32

be a decree “against the defendants and not a decree in their

favour”.

It is needless to say that the learned single judge of the

Delhi High Court had followed the minority decision of the

Assam High Court and held that the decree was indivisible

which was set aside by the Division Bench in the aforesaid

manner. In our view, considering the issues framed in the

present suit and the reliefs claimed by the appellant Bank and

the findings arrived at on such issues, as noted herein above,

we are of the opinion that the learned single judge was fully

justified in restoring the suit in toto and was correct in setting

aside the entire decree and restore the suit in its entirety on an

application under Order 9 Rule 13 of the Code which also, in

view of our discussions made herein earlier, was correct in the

approach of Order 9 Rule 13 of the Code.

Reliance on paragraph 8 of the Full Bench decision of

the Assam High Court as relied on by the learned counsel for

respondent Nos. 1 to 5 cannot be considered to be a good law

in view of the fact that it itself accepts the position that in

33

exceptional cases contemplated by the proviso under Order 9

Rule 13 of the Code, the ex-parte decree could be set aside not

only on the defendant who applied for setting aside the ex-parte

decree but also on or any other defendants. In view of the

discussions made hereinabove, we are not in a position to agree

with the submission of the learned counsel for respondent Nos.

1 to 5 who placed strong reliance on paragraph 8 of the

aforesaid decision to contend that the decree to be set aside

must be a decree “against defendants and not a decree in their

favour”, irrespective of the fact whether the decree was passed

in favour of the defendants on contest.

As noted herein earlier, we have already discussed that in

the judgment, it was held that respondent No. 6 against whom

the ex-parte decree was passed, was only liable to pay the

decretal amount to the appellant Bank. The suit was dismissed

as against respondent Nos. 1 to 5 only on the ground that the

claim of the appellant Bank was satisfied against respondent

No. 6 and in view of such relief already obtained by the

appellant Bank against respondent No. 6, Issue Nos. 2, 7 & 8

were held in favour of respondent Nos. 1 to 5 and as a result of

34

that, the suit was dismissed on contest as against respondent

Nos. 1 to 5. Accordingly, we are of the firm opinion that the ex

parte decree was indivisible and rightly set aside not only

against respondent No.6 but also against respondent Nos.1 to 5.

Since no argument was advanced by the learned counsel for the

appellant Bank that the findings of the learned Single Judge as

well as the Division Bench on the question whether there was

sufficient cause for respondent No.6 to get the ex-parte decree

set aside, we do not intend to examine the correctness of the

findings of the learned single judge as well as of the Division

Bench to the extent that respondent No. 6 had made out

sufficient cause for non-appearance on the date, the suit was

decreed ex-parte against it.

23. Before we conclude, we may mention one short

submission of the learned counsel for respondent Nos. 1 to 5.

According to the learned counsel for respondent Nos. 1 to 5, it

was not open to the appellant Bank to restore the suit in toto on

the application under Order 9 Rule 13 of the Code filed by

respondent No.6, because the appellant Bank did not choose to

prefer any appeal against the order of dismissal of the suit

35

passed in favour of respondent Nos. 1 to 5. In view of our

discussions made herein above in which we have already come

to the conclusion that the decree was indivisible and was

dependent on the decision of the issues indicated herein earlier,

it was not possible for the court to set aside the ex parte decree

only against respondent No.6. Therefore, we do not think that

this argument of the learned counsel for respondent Nos. 1 to 5

would be of any help. That apart, the learned single judge

having set aside the decree in toto and restored the suit in its

entirety, it was not necessary for the appellant Bank to file any

appeal against the dismissal of the suit as against respondent

Nos. 1 to 5.

24. Accordingly, we set aside the judgment of the Division

Bench of the Delhi High Court so far as it had set aside the

order of the learned Single Judge restoring the suit in its

entirety and therefore, the judgment of the learned single judge

is restored to its original file. Since, the suit of the appellant

Bank was filed in the year 1982 without expressing any

opinion on the merits of the suit, we request the learned single

36

judge to decide the suit at an early date preferably within six

months from the date of supply of a copy of this order to him.

25. For the reasons aforesaid, the appeal is allowed and the

impugned judgment of the Division Bench is set aside to the

extent indicated above and the judgment of the learned Single

Judge is restored. There will be no order as to costs.

………………….J. [Tarun Chatterjee]

New Delhi; ………………….J. September 23, 2008. [Dalveer Bhandari]

37

BANK OF INDIA Vs M/S. MEHTA BROTHERS .

BANK OF INDIA Vs M/S. MEHTA BROTHERS .

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