Mechelec Engineers and Manufacturers Vs.
M/S. Basic Equipment Corporation  INSC 273 (1 November 1976)
BEG, M. HAMEEDULLAH BEG, M. HAMEEDULLAH RAY,
A.N. (CJ) SINGH, JASWANT
CITATION: 1977 AIR 577 1977 SCR (1)1060 1976
SCC (4) 687
Civil Procedure Code, S. 115--Jurisdiction of
High Court to interfere with the Trial Court's discretionary order, when
The appellant issued the respondent a cheque
which was dishonoured. The respondent alleged that the cheque was the
consideration for goods supplied. The appellant admitted issuing the cheque but
denied by privity of contract. The respondent filed a suit under order 37
C.P.C., and the appellant applied for the required leave to defend, which was
granted by the trial Court unconditionally. On revision under section 115
C.P.C., the High Court held that triable issues arose for adjudication., but,
it considered the defence to be dishonest. If allowed the revision petition and
gave conditional leave to defend on the ground that the defences were not bona
Allowing the appeal, the Court
HELD: It is only in cases where the defence
is patently dishonest or so unreasonable that it could not reasonably be
expected to succeed that the exercise of discretion by the Trial Court to grant
leave unconditionally may be questioned. In other cases, it is not fair to
pronounce a categorical opinion on such a matter before the evidence of the
parties is taken so that its effects could be examined.
High Court's interference under sec. 115
C.P.C. with the correct exercise of its discretion by the trial Court was
patently erroneous. 11062 Santosh Kumar v. Bhai Mool Singh  S.C.R. 1211
at 1215, Jacobs v. Booth's Distillery Co.  85 L.T. 262 followed.
Smt. Kiranmoyee Dassi and another v. Dr. J.
Chatterjee (49 C.W.N. 246 ,at 253) distinguished.
M.L. Sethi v.R.P. Kapur  (1) S.C.R.
697: The Managing Director (MIG) Hindustan Aeronautics Ltd. Bulanagar,
Hyderabad & A nr. v. A Ajit Prasad Tarway, Manager (Purchase and Stores).
Hindustan Aeronautics Ltd. Balanagar, Hyderabad (AIR 1973 SC 76); D.L.F.
Housing & Construction Co. Pvt. Ltd., New Delhi v. Sarup Singh & Ors.
S.C.R. 368; and Milkhiram (India) (P) Ltd.
and Ors. v. Chamanlal Bros. (AIR 1965 SC 1998) referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 508 of 1976.
(Appeal by Special Leave from the Judgment
and Order dated 27-10-1975 of the Delhi High Court in Civil Revision No.
S.N. Andley, Urea Dutta and T.C. Sharma, for
K.C. Agarwala and M.M.L. Srivastava, for the
The Judgment of the Court was delivered by
BEG. J. The plaintiff-respondent ,alleged to be a registered partnership firm
filed a suit on 25th April, 1974, through Smt. Pushpa Mittal, shown as one of
its partners, for the recovery of Rs. 21,265.28 as principal and Rs.
7655/-, as interest at 12% per annum.
according to law and Mercantile usage, on the strength of a cheque drawn by the
defendant on 12th May, 1971, on the State Bank of India, which, on
presentation, was dishonoured. The plaintiff alleged that the cheque 1061 was
given as price of goods supplied. The defendant-appellant firm admitted the
issue of the cheque by its Managing partner, but, it denied any privity of
contract with the plaintiff firm. The defendant-appellant had its own version
as to the reasons and purposes for which the cheque was drawn.
The suit was instituted under the provisions
of Order 37 Civil Procedure Code so that the defendant-appellant had to apply
for leave under Order 37, Rule 2, of the Code to defend. This leave was granted
unconditionally by the Trial Court after a perusal of the cases of the two
sides. Order 37, Rule 3, Civil Procedure Code lays down:
"( 1 ) The Court shall, upon application
by the defendant give leave to appear and to defend the suit, upon affidavits
which disclose such facts as would make it incumbent on the holder to prove
consideration, or such other facts as the Court may deem sufficient to support
(2) Leave to defend may be given unconditionally
or subject to such terms as to payment into Court, giving security, framing and
recording issues or otherwise as the Court thinks fit".
A learned Judge of the High Court of Delhi
had on a revision application under Section 115 Civil Procedure Code interfered
with the order of the Additional District Judge of Delhi granting unconditional
leave, after setting out not less than seven questions on which the parties
were at issue. The learned Judge had, after discussing the cases of the two sides
and holding that triable issues arose for adjudication, nevertheless, concluded
that the defences were not bona fide. He, therefore, ordered:
"For these reasons I would allow the
revision petition and set aside the order of the trial Court. Instead I would
grant leave to the defendant on their paying into Court the amount of Rs.
21,265.28 together with interest at the rate of 6 per cent per annum from the
date of. suit till payment and costs of the suit (Only court fee amount at this
stage and not the lawyer's fee). The amount will be deposited within two
There will be no order as to costs of this
The only question which arises before us in
this appeal by special leave: Could the High Court interfere, in exercise of
its powers under section 115, Civil Procedure Code, with the discretion of the
Additional District Judge, in granting unconditional leave to defence to the
defendant-appellant upon grounds which even a perusal of the order of the High
Court shows to be reasonable ? Santosh Kumar v. Bhai Mool Singh(1), was a case
where a cheque, the execution of which was admitted by the defendant, had been
dishonoured. The defendant had set up his defences for refusal to pay.
(1) SCR 1211-1215.
1062 This Court noticed the case of Jacobs v.
Booth's Distillery Company(1), where it was held that, whenever a defence
raises a really triable issue, leave must be given. Other cases too were
noticed there to show that this leave must be given unconditionally where the
defence could not be shown to be dishonest in limine. This Court observed there
(at p. 1215):
"The learned Counsel for the plaintiffrespondent
relied on Gopala Rao v. Subba Rao (AIR 1936 Mad. 246, Manohar Lal v. Nanhe Mal
(AIR 1938 Lah. 548), and Shib Karan Das v.
Mohammed Sadiq (AIR 1936 Lah. 584). All that
we need say, about them is that if the Court is of opinion that the defence is
not bona fide, then it can impose conditions and is not tied down to refusing
leave to. defend. We agree with Varadachariar J. in the Madras case that the
Court has this third course open to it in a suitable case. But, it cannot reach
the conclusion that the defence is not bona fide arbitrarily. It is as much
bound by judicial rules and judicial procedure in reaching a conclusion of this
kind as in any other matter", On general principles, relating to the
exercise of jurisdiction of High Courts under section 115, Civil Procedure
Code, several cases were cited before us by Mr. Andley:
M.L. Sethi v.R.P. Kapur(2); The Managing
Director (MIG) Hindustan Aeronautics Ltd. Balanagar, Hyderabad & lint. v. Ajit
Prasad Tarway, Manager, (Purchase & Stores), Hindustan Aeronautics Ltd.,
Balanagar, Hyderabad(3); D.L.F. Housing & Construction Co. Pvt. Ltd. New
Delhi v. Sarup Singh & Ors.
(4); Milkhiram (India) Pvt. Ltd. & Ors.
v. Chamanlal Bros.(5) We need not dilate on the well established principles
repeatedly laid down by this Court which govern jurisdiction of the High Courtís
under section 115 C.P.C. We think that these principles were ignored by the
learned Judge of the High Court in interfering with the discretionary order
after a very detailed discussion of the facts of the case by the learned Judge
of the High Court who had differred on a pure question of fact--whether the
defences could be honest and bona fide. Any decision on such a question, even
before evidence has been led by the two sides, is generally hazardous. We do
not think that it is fair to pronounce a categorical opinion on such a matter
before the evidence of the parties is taken so that its effects could be
examined. In the case before us, the defendant had denied, inter alia,
liability to pay anything to the plaintiff for an alleged supply of goods. It
is only in cases where the defence is patently dishonest or so unreasonable that
it could not reasonably be expected to succeed that the exercise of discretion
by the Trial Court to grant leave unconditionally may be, (1)  85 L.T.
262. (2)  1 S.C.R. 697.
(3) AIR 1973. SC 76. (4)  (2) SCR 368.
(5) AIR 1965 SC 1698.
1063 questioned. In the judgment of the High
Court we are unable to find aground of interference covered by Section 115
In Smt. Kiranmoyee Dassi & Anr. v. Dr. J.
Chatterjee(1), Das. J., after a comprehensive review of authorities on the
subject, stated the principles applicable to cases covered by order 17 C.P.C.
in the form of the following propositions (at p. 253):
"(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 he has a
defence, yet, shews 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's
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
(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".
The case before us certainly does not fall
within the class (e) set out above. It is only in that class of case that an
imposition of the condition to deposit an amount in Court before proceeding
further is justifiable.
49 C.W.N. 246, 253.
1064 Consequently, we set aside the judgment
and order of the High Court and restore that of the Additional District Judge.
The parties will bear their own costs.
M.R . Appeal allowed.