Case Summary
| Citation | Santosh Kumar v. Bhai Mool Singh AIR 1958 SC 321 |
| Keywords | Summary Procedure (Order XXXVII, Rules 1-4) |
| Facts | The plaintiff (the appellant herein) filed a summary suit on the basis of a cheque for Rs. 60,000 drawn by the defendants in favour of the plaintiff and which, on presentation to the Bank, was dishonoured. The defendants filed the application to defend themselves under Rule 2 of Order XXXVII of CPC but they were refused leave (permission) to defend. It was held by the trial judge that the defence raised by the defendants raises a triable issue, but he went on to hold that the defendants have not placed anything on the file to show that the defence was a bona fide one. The appellants applied under Article 227 of the Constitution of India, 1959 to the Delhi Circuit Bench of the Punjab High Court, but the case was dismissed. The appellants herein approached the Supreme Court by way of a Special Leave Petition (SLP) under Article 136 of the Constitution of India, 1950. |
| Issues | Whether the defendant raised a real issue and not a sham one for asking the leave of the court? |
| Contentions | |
| Law Points | Order XXXVII Rule 2 of CPC- Institution of summary suits A suit, to which this Order applies, may if the plaintiff desires to proceed hereunder, be instituted by presenting a plaint which shall contain, -a specific averment to the effect that the suit is filed under this Order; that no relief, which does not fall within the ambit of this rule, has been claimed in the plaint; the following inscription, immediately below the number of the suit in the title of the suit, namely: – Under Order 37 of the CPC: 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. 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 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 by the High Court from time to time by rules made in that behalf and such decree may be executed forthwith. Order XXXVIII, Rule 3 of CPC- Procedure for the appearance of defendant 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. 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. 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 pre-said letter directed to the address of the plaintiff’s pleader or of the plaintiff, as the case may be. If the defendant enters an appearance, the plaintiff shall thereafter serve on the defendant a summons for judgment in Form No. 4A in Appendix B for such other Form as may be prescribed from time to time, returnable not less than ten days from the date of service supported by an affidavit verifying the cause of action and the amount claimed and stating that in his belief there is no defense to the suit. The defendant may, at any time within ten days from 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 defense intended to be put up by the defendant is frivolous or vexatious: Provided further that, where a part of the amount claimed by the 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. At the hearing of such summons for judgment,-if the defendant has not applied for leave to defend, or if such application has been made and is refused, the plaintiff shall be entitled to judgment forthwith; or 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 with 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 judgment forthwith. The Court or Judge may, for sufficient cause shown by the defendant, execute the delay of the defendant in entering an appearance or in applying for leave to defend the suit. |
| Judgement | The SC granted permission to set aside the orders of the HC and the learned trial judge and remand the case to the first court for trial of the issues raised by the defendants. Hence, the appeal was allowed. |
| Ratio Decidendi & Case Authority | The Court noted that though the rigidness of Order XXXVII Rule 2 CPC restricts court to grant leave to the defendants to defend themselves but the rigor of that is softened by Rule 3(1) of Order XXXVII CPC which makes it obligatory on the Court to grant leave when the conditions set out there are fulfilled. And it further said that though the Court is given a discretion it must be exercised along judicial lines, and that in turn means, in consonance with the principles of natural justice, that form the foundations of our laws. The court noted that it is undesirable and often not possible to set strict rules in matters involving discretion. However, it is important to know why a specific procedure is in place so that discretion can be used correctly. The only ground given for concluding that the defence is not bona fide is that the defendant did not prove his assertions before he was allowed to put in his defence; and there is an obvious failure of justice if judgment is entered against a man who, if he is allowed to prove his case, cannot but succeed. |
Full Case Details
VIVIAN BOSE, J. – [The defendants, Santosh Kumar and the Northern General Agencies, were granted special leave to appeal. The plaintiff filed the suit out of which the appeal arises on the basis of a cheque for Rs. 60,000 drawn by the defendants in favour of the plaintiff and which, on presentation to the Bank, was dishonoured.
The suit was filed in the Court of the Commercial Subordinate Judge, Delhi, under O. 37 of the Code of Civil Procedure. The defendant applied for leave to defend the suit under R. 3 of that Order. The learned trial Judge held that “the defence raised by the defendants raises a triable issue,” but he went on to hold that the defendants “have not placed anything on the file to show that the defence was a bona fide one.” Accordingly, he permitted the defendants “to appear and defend the suit on the condition of their giving security to the extent of the suit amount and the costs of the suit.” The defendants applied for a review but failed. They then applied under Art. 227 of the Constitution to the Delhi Circuit Bench of the Punjab High Court and failed again. As a result, they applied here under Art. 136 and were granted special leave. At first blush, O. 37, R. 2(2) appears drastically to curtail a litigant’s normal rights in a Court of justice, namely to appear and defend himself as of right, if and when sued, because it says that when a suit is instituted on a bill of exchange, hundi or a promissory note under the provisions of sub-r. (1) “[T]he defendant shall not appear or defend the suit unless he obtains leave from a Judge as hereinafter provided so as to appear and defend.” But the rigour of that is softened by R. 3(1) which makes it obligatory on the Court to grant leave when the conditions set out there are fulfilled. Clause (1) runs: “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 the application.” But no sooner is the wide discretion given to the Court in R. 2(2) narrowed down by R. 3(1) than it is again enlarged in another direction by R. 3(2) which says that: “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”].
The learned counsel for the plaintiff argues that the discretion so conferred by R. 3(2) is unfettered and that as the discretion has been exercised by the learned trial Judge, no appeal can lie against it unless there is a “grave miscarriage of justice or flagrant violation of law” and he quotes D.N. Banerji v. P.R. Mukherjee [AIR 1953 SC 58, 59] and Waryam Singh v. Amarnath [AIR 1954 SC 215].
1. Now what we are examining here are laws of procedure. The spirit in which questions about procedure are to be approached and the manner in which rules relating to them are to be interpreted are laid down in Sangram Singh v. Election Tribunal, Kotah [AIR 1955 SC 425, 429]:
Now a code of procedure must be regarded as such. It is procedure, something designed to facilitate justice and further its ends; not a penal enactment for punishment and penalties; not a thing designed to trip people up. Too technical a construction of sections that leaves no room for reasonable elasticity of interpretation should therefore be guarded against (provided always that justice is done to both sides) lest the very means designed for the furtherance of justice be used to frustrate it.
Next, there must be ever present to the mind the fact that our laws of procedure are grounded on a principle of natural justice which requires that men should not be condemned unheard, that decisions should not be reached behind their backs, that proceedings that affect their lives and property should not continue in their absence and that they should not be precluded from participating in them. Of course, there must be exceptions and where they are clearly defined they must be given effect to. But taken by and large, and subject to that proviso, our laws of procedure should be construed, wherever that is reasonably possible, in the light of that principle.
Applied to the present case, these observations mean that though the Court is given a discretion it must be exercised along judicial lines, and that in turn means, in consonance with the principles of natural justice that form the foundations of our laws. Those principles, so far as they touch the present matter, are well known and have been laid down and followed in numerous cases.
2. The decision most frequently referred to is a decision of the House of Lords in England where a similar rule prevails. It is Jacobs v. Booth’s Distillery Co. [(1901) 85 LT 262]. Judgment was delivered in 1901. Their Lordships said that whenever the defence raises a “triable issue”, leave must be given, and later cases say that when that is the case it must be given unconditionally; otherwise the leave may be illusory.
3. The learned counsel for the plaintiff-respondent 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 to 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. It is unnecessary to examine the facts of those cases because they are not in appeal before us. We are only concerned with the principle.
4. It is always undesirable, and indeed impossible, to lay down hard and fast rules in matters that affect discretion. But it is necessary to understand the reason for a special procedure of this kind in order that the discretion may be properly exercised. The object is explained in Kesavan v. South India Bank Ltd. [AIR 1950 Mad. 226], and is examined in greater detail in Sundaram Chettiar v. Valli Ammal. Taken by and large, the object is to see that the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining an early decree by raising untenable and frivolous defences in a class of cases where speedy decisions are desirable in the interests of trade and commerce. In general, therefore, 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.
5. Now, what is the position here? The defendants admitted execution of the cheque but pleaded that it was only given as collateral security for the price of goods which the plaintiff supplied to the defendants. They said that those goods were paid for by cash payments made from time to time and by other cheques and that therefore the cheque in suit had served its end and should now be returned. They set out the exact dates on which, according to them, the payments had been made and gave the numbers of the cheques.
6. This at once raised an issue of fact, the truth and good faith of which could only be tested by going into the evidence and, as we have pointed out, the learned trial Judge held that this defence did raise a triable issue. But he held that it was not enough for the defendants to back up their assertions with an affidavit; they should also have produced writings and documents which they said were in their possession and which they asserted would prove that the cheques and payments referred to in their defence were given in payment of the cheque in suit; and he said:
“In the absence of those documents, the defence of the defendants seems to be vague consisting of indefinite assertions…….”
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.
7. 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 it. 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.
8. The learned High Court Judge is also in 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.
9. We do not wish to throw doubt on those decisions which decide that ordinarily an appeal will not be entertained against an exercise of discretion that has been exercised along sound judicial lines. But if the discretion is exercised arbitrarily, or is based on a misunderstanding of the principles that govern its exercise, then interference is called for if there has been a resultant failure of justice. As we have said, the only ground given for concluding that the defence is not bona fide is that the defendant did not prove his assertions before he was allowed to put in his
defence; and there is an obvious failure of justice if judgment is entered against a man who, if he is allowed to prove his case, cannot but succeed. Accordingly, interference is called for here.
10. The appeal is allowed. We set aside the orders of the High Court and the learned trial Judge and remand the case to the first Court for trial of the issues raised by the defendants. The costs of the appellants in this Court will be paid by the respondent who has failed here.
