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CASE NO.: Appeal (civil)  3846 of 2006

PETITIONER: Defiance Knitting Industries Pvt. Ltd

RESPONDENT: Jay Arts

DATE OF JUDGMENT: 30/08/2006

BENCH: ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No. 20393 of 2005)

ARIJIT PASAYAT, J.

       Leave granted.   

       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 XXXVII Rule 2 of the Code of Civil Procedure,  1908, ( in short the ’CPC’).   

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.98,81,426.63. 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 05.07.2001. After issuing notice, the writ petitioner- defendant filed an application under Order XXXVII 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 02.05.2002. 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 bonafides 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 11.03.2005  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.  

Before the High Court, by referring to the numerous  correspondence between the parties right from 05.11.1997  onwards, writ petitioner submitted that the summary suit  raised several disputed questions which needed trial and at no

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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.  

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  19.04.1999. 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.  

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 19.04.1999 by the Architect of the defendant and  thereafter, vide letter dated 27.04.1999, 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 19.04.1999.

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:\027  

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.

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2. Cost shall be cause in the suit".

       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.

       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.  

       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.

       Order XXXVII Rules 2 and 3 so far as relevant reads as  follows:

2. Institution of Summary Suits.\027(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,\027

(a) 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

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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.\027(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 annexures 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 plaintiff’s 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.

(5) 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.                  This Court in Mechalec Engineers and Manufactures v.  Basic Equipment Corporation, (AIR 1977 SC 577) has laid  down the principles to be followed in granting leave to defend  the suit under Order XXXVII, 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

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the plaintiff is entitled to leave to sign judgment and the  defendant is not entitled to leave to defend.  

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 Lal  Bros. [AIR 1965 SC 1698]. 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 [AIR 1949 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.  

       In Mrs. Raj Duggal v. Ramesh Kumar Bansal (AIR 1990  SC 2218) 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".

       In the instant case much would depend upon the effect of  the  order passed by the High Court in the earlier case i.e.

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Civil Revision no. 659 of 2002.  The operative portion reads as  follows:

"The applicants in order to establish their  bonafides 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  No.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 j 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 ahs been disposed of and  subject to the outcome of the application".

       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.

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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.  

Appeal is allowed but without any order as to costs.