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CASE NO.: Appeal (civil)  4100 of 2OO6

PETITIONER: Tea Auction Ltd.                                                         

RESPONDENT: Grace Hill Tea Industry and Anr.                                         

DATE OF JUDGMENT: 13/09/2006

BENCH: S.B. Sinha & D.K. Jain

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No.18059/2005)

S.B. Sinha, J.

       Leave  granted.         Interpretation and application of the provisions of Order IX Rule 13 of  the Code of Civil Procedure, 1908 (for short, ’CPC’) is in question in this  appeal which arises out of a judgment and order dated 2nd May, 2005 passed  by a Division Bench of the Calcutta High Court in A.P.O.T.No.86 of 2005  arising out of C.S.No.234 of 2002 modifying an order passed by a learned  Single Judge of the said court.   The plaintiff is the appellant before us.  It filed a suit on the original  side of the Calcutta High Court claiming a decree for a sum of  Rs.37,26,498/- with interest against the respondents.  Leave under Clause 12  of the Letters Patent of the said court was also obtained.  An application was  filed for recording a decree under Order XII Rule 6 of Code of Civil  Procedure on 23rd May, 2002.  On the said application, notice of motion was  to be served upon the defendants/respondents.  The notice was returnable on  12th June, 2002.  On the said notice, nobody had appeared on behalf of  defendant No.1.  A direction for filing of Affidavit in opposition was issued  upon the plaintiff’s application.  Allegedly the said order was communicated  to the respondent No.1 by Registered Post.  The matter was again listed on  15th July, 2002.  On that date nobody appeared on behalf of defendant No.1.   A judgment and decree, upon admission for a sum of Rs.37,26,428/- along  with interest, was passed against defendant No.1.   

Defendant No.2 was a tea broker of defendant No.1.  It was impleaded  as the guarantor of defendant No.1.  No decree, however, was passed against  it.  An appeal was preferred by the plaintiff-appellant thereagainst as no  decree had been passed against defendant No.2.  The said appeal was  dismissed.  The defendant-respondent No.1, thereafter, filed an application  for recalling the said ex-parte decree, inter alia, contending that they came  to know about the institution of the said suit only when a memorandum of  appeal together with a copy of the stay petition was served upon them in  August, 2002.   

In terms of an order dated 7th December, 2004, a learned Single Judge  found the said application to be thoroughly mischievous and devoid of any  merit but still a direction for recalling the decree was passed on condition  that respondent furnishes a security of Rs.37 lakhs either in the form of bank  guarantee or in cash within a period of three months therefrom.   

An appeal preferred thereagainst has been allowed by the Division  Bench by reason of the impugned judgment.  The Division Bench of the  High Court while passing the impugned judgment, proceeded on the basis  that the learned Single Judge having exercised his discretionary jurisdiction  under Order IX Rule 13 of CPC, could not have imposed such a harsh  condition, stating :

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"It is also stated before us that the  appellant/petitioner was advised by the Lawyers not to  appear before this Court without service of writ of  summons.  Admittedly, no writ of summons even today  has been served upon the appellant/petitioner excepting  that under the Original Side Rules of this Court Notice of  Motion was taken out in respect of Order 12 Rule 6 of  the Code and that notice has been served upon the  appellant/petitioner. Therefore, there may be misunder- standing by the said litigant on the basis of the advice  given by his learned Advocate and thereby prevented by  a sufficient cause to appear before the Court when the  matter was called on for passing the decree under Order  12 Rule 6 of the Code.  When we look into the matter  from that angle we feel that the order so passed by the  Hon’ble First Court directing to secure claim of the  respondent for the same amount, being the order so  passed by Court, being a sum of Rs.37 lacs, we feel that  order cannot be sustained in law."

Mr. Bhaskar P. Gupta, learned Senior Counsel appearing on behalf of  the appellant would submit that the Division Bench committed a manifest  error of law in so far as it failed to take into consideration that the Court had  the power to direct furnishing of security as a pre-condition for recalling a  money decree passed ex-parte.   

Mr. B. Raghunath, learned counsel appearing on behalf of the  respondents, on the other hand, submitted that the condition imposed by the  learned Single Judge being too harsh, the Division Bench rightly set aside  the same.   

The appellant filed an application for passing a decree on admission.   The decree passed, however, was ex parte in nature.  Applicability of the  provisions of Order IX of Rule 13 of CPC is not in dispute.  It 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 was 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 where 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 notice of the date of  hearing and had sufficient time to appear and answer  the plaintiff’s claim.

Explanation. \026 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 has withdrawn the appeal,

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no application shall lie under this rule for setting aside  the ex parte decree."   

We may at once notice that whereas Order IX Rule 7 postulates  setting aside of orders passed by the Court upon such terms of costs or  otherwise; Order IX Rule 13, inter alia, postulates "payment into Court".   

What would be the meaning of "payment into Court" is the core  question.   In G.P. Srivastava v. R.K. Raizada & Ors. [(2000) 3 SCC 54], a  similar question came up for consideration.  A Division Bench of this Court  opined that the provision under Order IX Rule 13 of the Code of Civil  Procedure should receive a broad construction and no hard and fast  guidelines can be prescribed.  The courts have a wide discretion to set aside  an ex parte decree on satisfying itself as regards existence of a "sufficient  cause", opining :

"The "sufficient cause" for non-appearance refers  to the date on which the absence was made a ground for  proceeding ex parte and cannot be stretched to rely upon  other circumstances anterior in time. If "sufficient cause"  is made out for non-appearance of the defendant on the  date fixed for hearing when ex parte proceedings were  initiated against him, he cannot be penalised for his  previous negligence which had been overlooked and  thereby condoned earlier. In a case where the defendant  approaches the court immediately and within the  statutory time specified, the discretion is normally  exercised in his favour, provided the absence was not  mala fide or intentional. For the absence of a party in the  case the other side can be compensated by adequate costs  and the lis decided on merits."

In Ramesh & Ors. vs. Ratnakar Bank Ltd. [JT 2000 (10) SC 325],  however, this Court, while directing that the ex parte decree be set aside,  also directed deposit of a further sum of Rs.5 lakhs over and above the  amount of Rs.7 lakhs directed by the Court on an earlier occasion.  No law  has been, however, laid down therein.   

In Vijay Kumar Madan & Ors. vs. R.N. Gupta Technical  Education Society & Ors. [(2002) 5 SCC 30], this Court deprecated the  practice of imposing an undue condition and putting the defendant on  onerous terms, stating :  

"Power in the court to impose costs and to put the  defendant-applicant on terms is spelled out from the  expression "upon such terms as the court directs as to  costs or otherwise". It is settled with the decision of this  Court in Arjun Singh v. Mohindra Kumar that on an  adjourned hearing, in spite of the court having proceeded  ex parte earlier the defendant is entitled to appear and  participate in the subsequent proceedings as of right. An  application under Rule 7 is required to be made only if  the defendant wishes the proceedings to be reflected back  and reopen the proceedings from the date wherefrom  they became ex parte so as to convert the ex parte  hearings into bi-parte. While exercising power of putting  the defendant on terms under Rule 7 the court cannot  pass an order which would have the effect of placing the  defendant in a situation more worse off than what he  would have been in if he had not applied under Rule 7.  So also the conditions for taking benefit of the order  should not be such as would have the effect of decreeing  the suit itself. Similarly, the court may not in the garb of

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exercising power of placing upon terms make an order  which probably the court may not have made in the suit  itself. As pointed out in the case of Arjun Singh the  purpose of Rule 7 in its essence is to ensure the orderly  conduct of the proceedings by penalizing improper  dilatoriness calculated merely to prolong the litigation."

However, the interpretation of the expression "payment into Court"  did not directly fall for consideration in those cases.

Order IX Rule 13 of CPC did not undergo any amendment in the year  1976.  The High Courts, for a long time, had been interpreting the said  provision as conferring power upon the courts to issue certain directions  which need not be confined to costs or otherwise.  A discretionary  jurisdiction has been conferred upon the court passing an order for setting  aside an ex parte decree not only on the basis that the defendant had been  able to prove sufficient cause for his non-appearance even on the date when  the decree was passed, but also other attending facts and circumstances.  It  may also consider the question as to whether the defendant should be put on  terms.  The court, indisputably, however, is not denuded of its power to put  the defendants to terms.  It is, however, trite that such terms should not be  unreasonable or harshly excessive.  Once unreasonable or harsh conditions  are imposed, the appellate court would have power to interfere therewith.   But, it would not be correct to hold that no error has been committed by the  Division Bench in holding that the learned Single Judge did not possess such  power.  The learned Single Judge exercised its discretionary jurisdiction  keeping in view that the matter has been disposed of in fact finally at the  interim stage at the back of defendant and it was in that view of the matter a  chance was given to it to defend the suit, but, then the learned Single Judge  was not correct to direct securing of the entire sum of Rs.37 lakhs in the  form of bank guarantee or deposit the sum in cash.  The condition imposed  should have been reasonable.  What would be reasonable terms would  depend upon facts and circumstances of each case.

In Karumuri Surayya vs. Thadepalli Pushpavalli Thayaramma &  Ors. [AIR (37) 1950 Madras 618], a learned Single Judge of the Madras  High Court stated the law in the following terms :

"It seems to me that the wording "upon such terms  as to" in the Rule should be read as applying not only to  costs but to "payment into Court or otherwise as it thinks  fit" as well.  I do not think that the punctuation referred  to above in the rule in any way lends support to the  contention of the advocate for the petitioner.  It looks to  me that the Rule does not restrict the power of the Court  to impose conditions for setting aside an ex parte decree  to payment of costs only.  The wording of the Rule is  comprehensive enough to include conditions as to  payment into Court of decretal amount or such other  conditions as the Court thinks fit.  Ordinarily the Court  will not impose onerous conditions upon the defendant,  such as the payment into Court of the whole or part of the  decretal amount or as to furnishing of security therefor  etc.  The conditions as to deposit of decretal amount or  such similar terms are imposed only under special  circumstances.  It is one thing to say that it is either  inequitable or unjust to put the defendant to such onerous  terms, but it is quite a different thing to say that the Court  has no jurisdiction at all to impose such terms under any  circumstances."  

In Somalal Nathalal Mistri vs. The Vasant Investment  Corporation Ltd. & Anr. ILR (1954) Bom. 371, it was held :

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"The next question is whether the condition which  has been imposed by the Court below is a reasonable  condition.  The expression "such terms as to costs,  payment into Court or otherwise as it thinks fit" suggests  that the matter is one of discretion, but the discretion is to  be exercised in a judicial manner.  The condition to be  imposed, therefore, upon a defendant should be  reasonable and not oppressive.  What condition should be  imposed in a particular case must depend upon the facts  of each case.  In a particular case the Court may come to  the conclusion that the defendant should pay into Court  the entire amount.  In another case the Court may come  to the conclusion that it will suffice if the defendant is  ordered to pay a portion of the decretal amount, and in a  third case it is conceivable that the Court may come to  the conclusion that the ends of justice will be met if the  defendant is made to pay the amount of costs only.  The  true principle seem to me to be that while the Court has  got power to impose conditions upon a defendant  including the condition of the payment of the entire  amount of the decree, the conditions to be imposed  should be reasonable and should not be oppressive or at  least should not be conditions which will result in the  defendant not being able to defend the suit."

In B. Padmavathi Rai vs. Parvathiamma [AIR 1976 Karnataka 97],  Shetty, J., as the learned Judge then was, opined :

".......The question herein is, whether the Court, while  setting aside the ex parte decree under Order IX, Rule 13,  is competent to impose such conditions apart from the  direction to pay costs.  The scope of Order IX, Rule 13,  was considered in Shyam Lal Sahai v. Ram Narain Lal  Seth, (1920) 57 Ind Cas 300 = (AIR 1920 Pat 660) in  which Miller, Chief Justice, observed :

"The Court may, first of all, impose conditions as  to the payment of costs, it may, secondly, impose  conditions as to the payment into Court and, in my  opinion, this covers the payment into Court of the  decretal amount or some portion thereof or payment into  Court of the costs. ....."

I respectfully agree with the above view.  The Court is  competent to ask the defendant to pay a portion of the  decretal amount or of the costs while setting aside the ex  parte decree, but such conditions should not be  unreasonable or illegal.

       In the instance case, I feel that the circumstances  amply justify a direction to the defendant to deposit the  admitted portion of the suit claim.  The defendant does  not dispute her liability to pay the balance of unpaid  purchase money with 5= per cent interest from 3-6-1970.   All that she prayed in the reply notice dated 15-5-1970  was that she might be given two years time for that  payment."

The expression "or otherwise" is also required to be construed widely.   

In Packwood vs. Union-Castle Mail Steamship Company Limited  [(1903) 20 Times Law Reports 59], it was observed :

".....But the clause went on "or otherwise," and he  thought that meant "in any other way," and that the

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clause did apply to the negligence of the butcher in  allowing the dog to go loose and be lost."

In Kavalappara Kottarathil Kochuni @ Moopil Nayar etc. vs.  State of Madras & Kerala & Ors. [AIR 1960 SC 1080], this Court opined:

"On the basis of this rule, it is contended, that the  right or the custom mentioned in the clause is a distinct  genus and the words "or otherwise" must be confined to  things analogous to right or contract such as lost grant,  immemorial user etc.  It appears to us that the word  "otherwise" in the context only means "whatever may be  the origin of the receipt of maintenance".  One of the  objects of the legislation is to by-pass the decrees of  courts and the Privy Council observed that the receipt of  maintenance might even be out of bounty.  It is most  likely that a word of the widest amplitude was used to  cover even acts of charity and bounty.  If that be so,  under the impugned Act even a payment of maintenance  out of charity would destroy the character of an admitted  sthanam which ex facie is expropriatory and  unreasonable."    

In The Union of India vs. Shri Om Prakash [(1976) 4 SCC 32], it is  observed :

"The words "or is otherwise invalid" in clause (c)  of Section 30 are wide enough to cover all forms of  invalidity including invalidity of the reference."

While setting aside a decree, conditions can be imposed but such  conditions should not be unreasonable or harshly excessive.     

Keeping in view the peculiar facts and circumstances, we are of the  opinion that interest of justice would be sub-served if respondent No.1  herein is directed to furnish security to the extent of Rs.5 lakhs.  Such  security should be furnished to the satisfaction of the learned Single Judge.   The security, other than the deposit of the amount in cash, should be  furnished within 12 weeks from the date.  Plaintiff-Appellant would be  entitled to press his application for passing a decree on admission.   Defendant-Respondent No.1 would also be entitled to file his objection as to  why a decree under Order XII Rule 6 shall not be passed.  Such a cause, if  not already filed, must be filed within 8 weeks from date.   

The Court shall consider the matter, upon hearing the counsel for the  parties, on the expiry of said period of 12 weeks on merits, if the said  defendant-respondent complies with this order, failing which the decree  passed by the trial court shall stand.

This appeal is allowed to the extent aforementioned.  No costs.