Wada Arun Asbestos
(P) Ltd. Vs. Gujarat Water Supply & Sewerage Board  INSC 2164 (12
IN TH SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 7314 OF 2008 (Arising
out of SLP (C) No.10870 of 2006) Wada Arun Asbestos (P) Ltd. ...
Gujarat Water Supply & Sewerage Board ...
S.B. Sinha, J.
appeal is directed against a judgment and order dated 31.8.2005 passed by the
High Court of Judicature at Gujarat whereby and whereunder a first appeal filed
by the respondent herein was allowed setting aside a 2 decree passed in favour
of the appellant herein under Order 37 Rule 3(6)(b) of the Code of Civil
Procedure and remitting the suit to the trial court with the direction that the
amount already deposited with the respondent by them in terms of the directions
of the High Court shall be deemed to be the amount deposited under the lease
granted by the trial court.
basic fact of the matter is not in dispute.
AC pressure pipes to the respondents. A sum of Rs.1,57,488/- became due. On the
premise that as a small scale industrial unit, it cannot afford to block such a
huge amount, plaintiff requested the defendants to release the said payment.
The defendants having not released the outstanding payment, plaintiff became
entitled to interest at the rate of 23% per annum being 5% higher than the bank
rate per annum thereupon.
Plaintiff filed a
Summary Civil Suit in the court of Civil Judge (SD), Gandhinagar. Respondent
filed an application for grant of leave to defend the suit. By reason of an
order dated 27.11.2002, conditional leave was granted, directing :
for leave to defend is hereby granted with a condition that the defendant may
give security of 50% amount of the suit claim."
the said amount was not deposited and, thus, the said condition was not
complied with. On the premise that the defendants- respondents having not
complied with the said directions, the conditional leave granted by the court
would be deemed to have been refused, a decree as prayed for in paragraph 17 of
the plaint was passed in the following terms:
suit of the plaintiff is hereby allowed.
The decree as prayed
for in para 17 of the suit as per Order XXXVII, Rule 3(6)(b) of the CPC is
hereby passed accordingly and the defendants are hereby directed to pay the sum
of Rs.21,18,335.65 ps. Jointly and Severally to the Plaintiff along with
interest @ 23% per annum."
appeal was preferred there against. By an Order dated 3.3.2004, the High Court
directed as under :
suggestion of the Court, learned counsel for the parties pray for time to
explore possibility of an amicable settlement. Hence S.O. to 16.3.2004.
In the meantime, the
cheque for the amount of Rs.15,50,000/- deposited by the appellant - Gujarat
Water Supply and Sewerage Board (original defendants) may be encashed by the
Court of the learned Civil Judge (S.D.), 4 Gandhinagar, but the amount shall
not be permitted to be withdrawn by the decree holder till further orders. Till
further orders there shall also be further ad-interim stay of further execution
the said order has been complied with. By reason of the impugned judgment, the
High Court allowed First Appeal, opining :
"True it is that
details of such defence were not given by the defendant, but non-supply of the
material would not deter the defendant from raising a defence that the
plaintiff did not perform his part of the agreement in supplying the material.
True it is that the
Court had granted the conditional leave in favour of the defendant and the
defendant did not comply with the order but according to Mr. Munshaw, a big
amount of Rs.10,59,168/- was to be deposited and before the amount could be
arranged after due negotiation, the plaintiff applied for grant of a decree in
his favour. It is submitted by Mr. Munshaw, that present is the case where this
Court should condone lapses in making deposit and remit matter back to the
trial court with a direction to decide matter on merits.
Though learned cousel
for the plaintiff opposed the prayer but taking into consideration the totality
of the circumstances and the fact that under the directions and orders of this
Court 50 per cent of the suit amount has already been deposited and further
that the defendant is raising certain defences which if are allowed then same
may non- suit the plaintiff, we are of the opinion that the decree granted in
favour of the plaintiff under Order 37 Rule 3(6)(b) of the Civil Procedure
Code 5 deserves to be set aside. The matter is remitted to the trial court
with the direction that the amount already deposited by the defendant under the
directions of this Court shall be deemed to be amount deposited under the leave
granted by that Court. The defendant would be allowed proper opportunity to
submit his written statement. The appeal is allowed. No order as to
Shridhar Chitale, learned counsel appearing on behalf of the appellant, in
support of this appeal, would submit :
(1) Respondent having
been granted conditional leave to defend the suit and as a Revision Application
was maintainable thereagainst which having not been availed of, their
contention before the High Court that unconditional leave should not have been
granted was liable to be rejected.
(2) The decree passed
in a summary suit by the Trial Judge should not have been overturned without
Pritesh Kapoor, learned counsel appearing on behalf of the respondent, on the
other hand, would contend :
6 (1) That the
appeal having been preferred against the decree under Section 96 of the Code of
Civil Procedure, the appellate Court could exercise its jurisdiction in the
manner as has been done.
(2) It is not correct
to contend that the High Court accepted the respondent's contention that in a
case of this nature, the Trial Judge should have granted unconditional leave
but it proceeded on the basis that the direction to deposit the amount in terms
of the High Court's order dated 3.3.2004 having been complied with, the lapse
on the part of the respondents to comply with the Trial Judge's order should be
(3) In any event
unconditional leave ought to have been granted as was prayed for by the
(4) For grant of
interest at the rate of 23% per annum in terms of the Interest on the Late
Payment on Small Scale and Ancillary Industrial Undertakings Act, 1993,
appellant was bound to prove that the provisions of the said Act were
applicable in which event, respondents were entitled to take recourse to the
provision for taking recourse to arbitration as contained in sub-section (2) of
Section 6 thereof.
an appeal was preferred against the decree and not against the order dated
3.3.2004 granting conditional leave in favour of the respondent. Indisputably
again, the said condition was not complied with.
The question which,
therefore, arises for consideration is as to whether in the aforementioned
situation, the respondent could raise a contention that it was a fit case where
unconditional leave should have been granted.
XXXVII of the Code of Civil Procedure provides for a summary procedure. It is
not in dispute that having regard to the prayer made in the suit, Order XXXVII
of the Code was attracted. Rule 3 of Order XXXVII provides for the procedure
for appearance of the defendant. Rule 5 reads as under :
"5. Power to
order bill, etc. to be deposited with officer of Court--In any proceeding under
this Order the Court may order the bill, hundi or note on which the suit is
founded to be forthwith depositing with an officer of the Court, and may
further order that all proceedings shall be stayed until the plaintiff gives
security for the costs thereof.
leave is granted unconditionally or upon terms, in view of the aforementioned
provision in a case of this nature for all intent and purport, stand on the
same footing. However, it is well settled that the defence in the suit should
not be considered to be a mere `moonshine' ruse 8 or sham. Ordinarily, the
court shall grant leave to defend the suit in favour of the defendant in terms
of the first proviso appended thereto. Rule 3 of Order XXXVII provides for a
judgment at the hearing of such summons; clause 6(b) whereof reads as under :
"(6) At the
hearing of such summons for judgment-- (a) ...
(b) if the defendant
is permitted to defend as to the whole or any part of the claim, the Court or
Judge may direct him to give such security and within such time as may be fixed
by the Court or Judge and that, on failure to give such security within the
time specified by the Court or Judge or to carry out such other directions as
may have been given by the Court or Judge, the plaintiff shall be entitled to
a conditional leave is granted and the conditions therefor are not complied
with, a judgment in favour of the plaintiff can be passed. It is not in dispute
that the first appeal was maintainable. Where a decree is appealed from, any
error, defect or irregularity in any order affecting the decision of the case
may be set forth as a ground of objection in the 9 memorandum of appeal as
envisaged under Section 105 of the Code of Civil Procedure.
is in the aforementioned backdrop, the question as to whether a revision
petition was maintainable against an order granting conditional leave must be
considered. We will proceed on the basis that an order imposing a conditional
leave to defend the suit was a jurisdictional question and, thus, a revision
application would be maintainable as has been held by various High Courts,
notable amongst them are The New Ashapuri Co- operative Housing Society Ltd.
& Anr. v. Arvindkumar Manilal Patel [AIR 1975 Gujarat 76]; Fateh Lal v. Sunder
Lal [AIR 1980 Rajasthan 220]; Modi Ram & Anr. v. Smt. Sugan Bai [AIR 2005
Rajasthan 12]; and A.K. Velan v.
M/s. Narnyanan and
Co. (P) Ltd. [AIR 1972 Madras 118].
if a right of appeal from the decree is conceded to a defendant, in our
opinion, he cannot be denied a right to challenge an order which was subject to
revision in his memorandum of appeal filed from the decree ultimately passed.
Court in Santosh Kumar v. Bhai Mool Singh [1958 SCR 1211] noticing that a clear
defence to the suit having been made out, no condition could be imposed, stated
the law thus :
10 "This is a
surprising conclusion. The facts given in the affidavit are clear and precise,
the defence could hardly have been clearer. We find it difficult to see how a
defence that, on the face of it, is clear becomes vague simply because the
evidence by which it is to be proved is not brought on file at the time the
defence is put in.
18. The learned Judge
has failed to see that the stage of proof can only come after the defendant has
been allowed to enter an appearance and defend the suit, and that the nature of
the defence has to be determined at the time when the affidavit is put in. At
that stage all that the Court has to determine is whether "if the facts
alleged by the defendant are duly proved" they will afford a good, or even
a plausible, answer to the plaintiff's claim. Once the Court is satisfied about
that, leave cannot be withheld and no question about imposing conditions can
arise; and once leave is granted, the normal procedure of a suit, so far as
evidence and proof go, obtains.
19. The learned High
Court Judge is also error in thinking that even when the defence is a good and
valid one, conditions can be imposed. As we have explained, the power to impose
conditions is only there to ensure that there will be a speedy trial. If there
is reason to believe that the defendant is trying to prolong the litigation and
evade a speedy trial, then conditions can be imposed. But that conclusion
cannot be reached simply because the defendant does not adduce his evidence
even before he is told that he may defend the action."
This Court again in
M/s. Mechalec Engineers & Manufacturers v.
M/s. Basic Equipment
Corporation [AIR 1977 SC 577] reiterated the 11 following principles laid down
in respect of grant of leave in a summary suit by Das J. in Sm. Kiranmoyee
Dassi v. Dr. J. Chatterjee [(1945) 49 CWN 249] :
"(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 be 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 furnishing security.
(d) If the defendant
has no defence or the defence set-up is illusory or sham or practically
moonshine then ordinarily the plaintiff is entitled to leave to sign judgment
and the defendant is not entitled to leave to defend.
(e) If the defendant
has no defence or the defence is illusory or sham or practically moonshine
then 12 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."
It was opined that
the case did not fall within clause (e) and unconditional leave should have
again in Raj Duggal v. Ramesh Kumar Bansal [1991 Supp.(1) SCC 191, this Court
"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 was a bona fide defence, he ought to have leave.
under Order 37 should not be 13 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."
fail to persuade ourselves to agree with the contention of Mr. Chitale that
although a revision from an order granting conditional leave was maintainable,
the same could not have been a subject matter of challenge in an appeal from a
decree as envisaged under Section 105 of the Code of Civil Procedure.
statutory right conferred on a litigant cannot ordinarily be taken away. A
civil revision application might have been maintainable as against the order
dated 27.11.2002 granting conditional leave. The said remedy was also available
where leave to defend a suit is refused. Leave to defend a suit, as noticed
hereinbefore, should ordinarily be granted. It was, therefore, permissible for
the defendant to raise the said contention in the appeal although it had asked
for time to comply with the conditions.
Kapoor, in our opinion, is right in his submission that keeping in view the
rate of interest prayed for by the petitioner in terms of the provisions of the
1993 Act, it was obligatory on the part of the plaintiff to show that he was
entitled to take recourse thereto.
Court in Assam Small Scale Industries Development Corporation Ltd. & Ors.
v. J.D. Pharmaceuticals & Anr. [(2005) 13 SCC 19], held :
therefore, are of the opinion that in relation to the transactions made prior
to coming into force of the said Act, simple interest at the rate of 9% per
annum, which was the bank rate at the relevant time, shall be payable both
prior to date of filing of the suit and pendente lite and as future interest in
terms of Section 34 of the Code of Civil Procedure. Interest, however, will be
payable in terms of the provisions of the 1993 Act (compound interest at the
rate of 23.5% per annum) in relation to the transactions made after coming into
force of the Act, both in respect of interest payable up to the date of
institution of the suit and pendente lite and till realisation. The judgment
and decree to that extent requires to be modified. It is directed
In Ajay Bansal v.
Anup Mehta & Ors. [(2007) 2 SC 275], this Court held as under :
"12. A decree
passed in a summary suit where leave to defend the suit has been refused is
almost automatic. The consequence of passing a decree cannot be avoided.
13. Ordinarily, an
application under Article 227 of the Constitution of India would not be
maintainable where an appeal lies. An appeal lay from the decree under Section
96 of the Code.
When an appeal could
be filed, ordinarily, an application under Article 227 of the Constitution of
India would not be entertained.
14. A decree passed
subsequent to the refusal of leave to defend could either be under Order 37
Rule 3(6) of the Code or it could be based on the affidavit evidence on the
side of the plaintiff and the documents produced or even based on oral evidence
formally proving, say, the execution of a promissory note by the defendant. It
may not be proper or necessary to apply the theory of "dependent
order" in such circumstances. For one, the theory may not apply. Even if
this Court were to set aside the order of the court below and give the
defendant leave to defend the suit, the decree that is passed may not go
automatically. It may have to be set aside. Secondly, the defendant can always
go to the court which passed the decree and move under Rule 4 of Order 37 of
the Code to reopen the decree."
in view the facts and circumstances of this case, we are of the opinion that it
is not a fit case where the impugned judgment of the High Court should be
interfered with. This appeal is dismissed accordingly.
However, in the facts
and circumstances of this case, there shall be no order as to costs.