Order XXXVII, Rule 3 Of CPC- Grant Of Leave To Defend Is The Ordinary Rule; Denial Of Leave Is An Exception: Supreme Court

In the present case, the challenge before the Apex Court was against the impugned judgment of the Delhi High Court which had dismissed an appeal filed against the impugned judgment and decree of the Additional District Judge, Tis Hazari Court, in a money recovery summary suit which was filed by the Respondent No.1-Plaintiff. The Trial Court had held that due to no triable issues being raised by the Defendants, they were not entitled to the leave to defend. The Delhi High Court had affirmed the decree subsequently. 

Counsel Apoorva Bhumesh appeared for the Plaintiff while Senior Counsel Rameshwar Prasad Goyal appeared for the Respondents before the Apex Court.

The primary issues that were for consideration were -

i) Whether Plaintiff was entitled to maintain a summary suit under Order XXXVII of the CPC?

ii) Whether the Appellant had rightly been declined the leave to defend?

It was contended by the Plaintiff that an amount of Rs. 89,50,244/- remained due against the supplies of steel which were so made and invoices so raised. Moreover, they stated that due to the failure of the Appellant - Defendant No. 2  to make the requisite payment, the Plaintiff had filed the subject suit under Order XXXVII CPC, while asserting joint and several liability of the Appellant-Defendant No. 2. It was further argued that the suit was based on the written contract inasmuch as written purchase orders were issued by the Plaintiff on the instructions, and on behalf of, the Defendants. The prayer of the Appellant- Defendant No. 2 for leave to defend was opposed by Plaintiff on the grounds that Defendant No. 2 had failed to raise any substantial defence and he was rather trying to confuse the issue. It was pleaded that the goods were supplied on the purchase orders raised by Defendant No. 2 while acting as an agent and it was agreed between the parties that Defendant No. 1 would make payment for the goods which were supplied.

Defendant No. 1 on the other hand claimed that it had no privity of contract with the Plaintiff because the purchase orders were issued only by the other Defendant No. 2. Additionally, the invoices in question were raised by Plaintiff in the name of the other Defendant No. 2,  and neither the purchase orders nor the invoices were bearing the signatures of Defendant No.1. Moreover, all the dealings were between Plaintiff and Defendant No. 1, where no legal liability was to be discharged by the Respondent. It was thus, contended that the Respondent was rather a stranger to the contract in question.

On the first issue, the Supreme Court stated the summary suit under Order XXXVII of the CPC to be maintainable for the simple reason that as per the plaint averment, the matter is based on written contract arising out of written purchase orders issued by the Appellant on the instructions and on behalf of Defendant No. 1; and the Plaintiff had raised the invoices against such supplies under the purchase orders. The defence of being an agent as compared to the contention of joint and severe liability, could not take away the entitlement of Plaintiff-Respondent No. 1 to maintain the summary suit in terms of Order XXXVII CPC. Hence, the Court found the summary suit to be maintainable and refused to interfere with the impugned judgment of the High Court to this extent.

Proceeding on the second issue, the Supreme Court referred to the judgments of IDBI Trusteeship Services Ltd. v. Hubtown Ltd. and Mechelec Engineers and Manufacturers v. Basic Equipment Corporation and held  – "It is at once clear that even though in the case of IDBI Trusteeship, this Court has observed that the principles stated in paragraph 8 of Mechelen Engineers' case shall stand superseded in the wake of amendment of Rule 3 of Order XXXVII but, on the core theme, the principles remain the same that grant of leave to defend (with or without conditions) is the ordinary rule; and denial of leave to defend is an exception. Putting it in other words, generally, the prayer for leave to defend is to be denied in such cases where the defendant has practically no defence and is unable to give out even a semblance of triable issues before the Court".

It was additionally observed by Apex Court, "It could be seen that in the case of substantial defence, the defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the defendant is ordinarily entitled to unconditional leave to defend. In case of doubts about the intent of the defendant or genuineness of the triable issues as also the probability of defence, the leave could yet be granted but while imposing conditions as to the time or mode of trial or payment or furnishing security. Thus, even in such cases of doubts or reservations, denial of leave to defend is not the rule; but appropriate conditions may be imposed while granting the leave. It is only in the case where the defendant is found to be having no substantial defence and/or raising no genuine triable issues coupled with the Court's view that the defence is frivolous or vexatious that the leave to defend is to be refused and the plaintiff is entitled to judgment forthwith. Of course, in the case where any part of the amount claimed by the plaintiff is admitted by the defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the defendant in the Court."

The Supreme Court further held that – "Therefore, while dealing with an application seeking leave to defend, it would not be a correct approach to proceed as if denying the leave is the rule or that the leave to defend is to be granted only in exceptional cases or only in cases where the defence would appear to be a meritorious one. Even in the case of raising of triable issues, with the defendant indicating his having a fair or reasonable defence, he is ordinarily entitled to unconditional leave to defend unless there be any strong reason to deny the leave. It gets perforce reiterated that even if there remains a reasonable doubt about the probability of defence, sterner or higher conditions as stated above could be imposed while granting leave but, denying the leave would be ordinarily countenanced only in such cases where the defendant fails to show any genuine triable issue and the Court finds the defence to be frivolous or vexatious."

Thus, the Supreme Court allowed the appeal against the impugned judgment and order of the High Court and set aside the impugned order and decree of the Trial Court. The Appellant was allowed the leave to defend.

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