The object underlying the summary procedure is to prevent unreasonable obstruction by the defendant who has no defence and to assist expeditious disposal of cases.
The Order XXXVII provides for procedure in suits based on negotiable instruments or where the plaintiff seeks to recover debt or liquidated amount. The essence of summary suit is that the defendant is not, as in ordinary suit, entitled as of right to defend the suit. He must apply for leave to defend within the prescribed period (stipulated) of ten days. Such leave will be granted only if the affidavit filed by the defendant discloses such facts as will make it incumbent upon the plaintiff to prove consideration or such other facts as the court may deem fit. The provisions of the Order XXXVII are merely rules of procedure. They do not alter the nature of the suit or jurisdiction of the Court(s).
Q.
The provisions of Order XXXVII apply to High Courts, City Civil Courts, Courts of Small Causes and other courts to:
(a) suits upon bills of exchange, humdies and promissory notes, and
(b) suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest, arising,--
(i) on a written contract; or
(ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty, or
(iii) on a guarantee, where the claim against the principle in respect of debt or liquidated demand only.
In an ordinary suit, the defendant has a right to defend the suit, while in a summary suit he is not entitled so except with the prior leave of the Court.
Secondly, in the ordinary suit, decree cannot be set aside by the committing court (Trial Court) except on review but in a summary suit the trial court can set aside so under special circumstances existing therein.
Rules 2 and 3 of Order XXXVII provides the procedure for summary suits. Rule 2 provides that after the summons of the suit having been issued to the defendant, the defendant must appear and the plaintiff will serve a summons for judgment on the defendant. The defendant has no right to defend the suit unless he enters an appearance and gets leave from the court to defend the suit. In default of this, the plaintiff will be entitled to a decree, as prayed for, which will be executed forthwith.
Rule 3 provides the mode of service of summons and leave to defend by the defendant. The defendant must apply for leave within 10 days from the date of service of summons upon him and such leave will be granted only if the affidavit filed by the defendant discloses such facts as may be deemed sufficient to entitle him to defend. But if a part of amount claimed by the plaintiff, is admitted by the defendant to be due from him, leave to defend should not be granted unless such admitted amount is deposited by him to the Court.
In Southern Sales and Services v. Sauernilch Design and Handles Gmbh, MANU/SC/4488/2008 : AIR 2009 SC 320, it is observed that in the unamended provisions of rule 3, there was no compulsion for making any deposit as a condition precedent to grant of leave to defend a suit by virtue of the second proviso to sub-rule (5), the said provision was altered to the extent that the deposit of any admitted amount is now a condition precedent for grant of leave to defend a suit filed under Order XXXVII of the Code. The earlier concept of granting unconditional leave when a triable issue is raised on behalf of the defendant, has been supplemented by the addition of a mandate, which has been imposed on the defendant, to deposit any amount as admitted before leave to defend the suit can be granted.
In case of Raj Duggal v. Ramesh Kumar, MANU/SC/0393/1990 : AIR 1990 SC 2218: 1991 Supp (1) SCC 191, it was found that--
"the test whether leave to defend should be granted or not is to see whether the defence raises a real, honest and bona fide dispute and raises a triable issue or not. If the Court is satisfied that the defence has raised a triable issue for or a fair dispute has arisen, leave to defend should not be refused."
At the hearing of such summons for judgment, if the defendant does not apply for leave to defend or such leave is refused, the plaintiff is entitled to a decree forthwith. The court or judge may for sufficient cause shown by the defendant, excuse the delay in entering an appearance or in applying to leave to defend the suit.
In Wada Arun Asbestors (P.) Ltd. v. Gujarat Water Supply and Sewerage Board, MANU/SC/8462/2008 : AIR 2009 SC 1027, it is held that an order imposing a condition of leave to defend the suit was a jurisdictional question and, thus, a revision application would be maintainable.
In case of Ram Karandas v. Bhagwandas, MANU/SC/0286/1964 : AIR 1965 SC 1144: (1965) 67 Bom LR 779: (1965) 2 SCR 186, it was held that--
"Under special circumstances, the court can set aside the decree and stay the execution and may grant leave to the defendant to appear and defend the suit. However, inherent power under section 151 of the Code of Civil Procedure cannot be exercised for setting aside such decree.
The courts dealing with summary procedure are not straight away at discretion whether to grant leave to defend or not. Each case must be decided on its own merits and facts and circumstances occurring therein.
In case of Punjab & Sindh Bank v. M/s. Ram Prakash Jagdish Chandler, (1992) BC 471. The Delhi High Court has held that where a defence has never been taken by the defendants before the filing of the suit, such defendant does not raise a "triable issue" before the Court, leave to defend cannot be granted.
Once the Court comes to the conclusion that there is a triable issue i.e., plea which is at least plausible, it must grant leave to defend without inquiring the defendant either to pay the amount claimed for or so furnish required security thereof. In other words when a prima facie defence is made out, the Court as a general rule grants leave.
Again, whether the defence raises a triable issue or not has to be ascertained by the Court from the pleading before it and the affidavits of the parties and it is not open to it to call for evidence at that stage the leave to defend may be granted. But where the triable issue is not dependant on facts to be investigated, and is simply a question of law, no leave should be given to the defendant and the point may be decided at once.
In case of Santosh Kumar v. Bhai Mool Singh, (1958) 1 SCR 1211: MANU/SC/0013/1958 : AIR 1958 SC 321, on the issue of--"Triable issue" for defence, the Supreme Court held that--
"the true test is to see whether the defence raise 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 plausible defence on those facts. If the Court is satisfied about that, leave must be given unconditionally."
In case of Kiranmoyee Dassi v. Chatterjee, AIR 1949 Cal 479, the High Court of Calcutta has laid down in the following basic principles relating to the suits of summary nature:
(i) 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. (ii) if defendant raises a triable issue indicating that he has a fair or bona fide 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.
(iii) if the defendant discloses such facts as may he deemed to be 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 shows such a state of facts as leads to the interference that at the trial of the action he may be able to establish a defence to the plaintiffs claim. The plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in to the time, mode or trial but not as to payment into court or furnishing security.
(iv) if the defendant has no defence or defence setup is illusory or sham or practically moonshine then ordinarily plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.
(v) if the defendant has no defence or defence is illusory or sham or practically moonshine then although ordinarily 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 defence.
The Division Bench of the Delhi High Court in Hiralal & Sons v. Luxmi Commercial Bank, (1984) 25 DLT CSN 33 has reaffirmed the propositions of the above given case.
In a leading case of M/s Mechalec Engineers v. M/s Basic Equipment Corp., MANU/SC/0043/1976 : AIR 1977 SC 577: (1976) 4 SCC 687: (1977) 1 SLR 1060: 1976 (8) UJ 953 (SC) the Supreme Court had laid down the principles for leave to defend in an Order XXXVII suit.
In this case, the partnership firm filed a suit for the recovery of Rs. 21,26,568 as principal and Rs. 7655 as interest at 12% per annum, on the strength of cheque drawn by the defendant which, on presentation, was dishonoured. The plaintiff alleged that the cheque was given as price of goods supplied. The defendant admitted the issue of cheque by its managing partner but, it denied any priority of contract with the plaintiff firm. The defendant has its own version as to the reasons and purpose for which the cheque was drawn. The suit was instituted under the provisions of Order XXXVII of the Civil Procedure Code, 1908 so that the defendant had to apply for leave to defend. This leave was granted unconditionally by the Trial Court.
The High Court of Delhi, on a revision application under section 115 of the Code of Civil Procedure, 1908, found that defences were not bona fide and thus set aside the order of Trial Court.
The case come before the Supreme Court by special leave and the only-question arises is "could the High Court interfere in exercise of its powers under section 115 of the Civil Procedure Code, 1908 in granting unconditional leave to defend to the defendant appellant upon grounds which even a perusals of the order of the High Court shows to be reasonable?
The Court noticed the case of Jacob v. Booth Distillery Co., (1901) 85 LT 362 where it was held that whenever the defence raises triable issue, leave must be given. Other cases too were discussed to show that this leave must be given unconditionally where defences couldn't be shown to be dishonest in limine.
The Court in the present case taking note of Kiranmoyee Dassi v. Dr. J. Chattarjee, (1945) 49 Cal WN 246 (253) held that it is only in cases where the defence is patently dishonest or so unreasonable that it couldn't be reasonably expected to succeed that the exercise of discretion by the Trial Court to grant leave unconditionally may be questioned. The Supreme Court consequently, set aside, the Judgment and order of High Court and restored that of Additional District Judge.
Facts of the case: The respondent filed a suit against the appellants on the original side of Bombay High Court. The suit was based on promissory notes executed by the appellant. The respondents had agreed to finance the appellant's business of export of pulses for which the appellant had obtained permission from Government of India. It was agreed that the appellant company would act in consultation with the respondents who would be entitled to 5 per cent of the share in profits apart from their principal amount of loans advanced to appellant company. Because of change in circumstances, it was not found possible to continue to finance the business of the appellant and the respondents cancelled the agreement. Thereafter the appellant company was asked to repay the amounts advanced by the respondents together with interest @ 9 per cent as agreed. This gave rise to a suit under Order XXXVII of the Code of Civil Procedure, 1908.
The appellants raised many objections one of which was that the claim of the respondents was based on the agreement and that the claim would be for an unliquidated amount, and that consequently the suit could not be brought under Order XXXVII, rules 2 and 3 of the Code of Civil Procedure, 1908. Another point raised by the appellant was that their affidavits disclosed a triable issue. The learned trial Judge on the original side of the High Court granted leave to the appellants to defend the suit subject to the condition that they deposit in the court security to the extent of Rs. 70,000, the suit being for the recovery of Rs. 4,05,434.38. The Letters Patent Appeal against this order of the trial Judge was dismissed in a summary manner by the High Court. The appellants came to the Supreme Court by special leave.
The learned Counsel of the appellants relied on Santosh Kumar v. Bhai Mool Singh, (1958) 1 SCR 1211: MANU/SC/0013/1958 : AIR 1958 SC 321: (1958) 36 Mys LJ (NULL), where their Lordships of the Supreme Court observed that the true 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 plausible defence on those facts. If the Court is satisfied about that, leave must be given unconditionally. The trial Judge being already satisfied that the defence raised a triable issue was not justified in imposing a condition to the effect that the defendants must deposit security just because they had not adduced any documentary evidence in support of the defence.
Order XXXVII, rule 2 was amended by Bombay High Court to meet certain circumstances where even when some apparently triable issue is raised, the Judge may impose conditions in granting leave to defend. Thus this is a matter in the direction of the trial judge and in dealing with it, he ought to exercise his discretion judicially. Care must be taken to see that the object of the rule to assist the expeditious disposal of commercial causes to which the Order applies is not defeated. Care must also be taken to see that real and genuine triable issues are not shut out by unduly severe orders as a deposit. In a matter of this kind, it would be undesirable and inexpedient to lay down any rule of general application.
In the end, the order of the trial judge was upheld, but the time of depositing security was extended for a period of two months.
Rajni Kumar v. Suresh Kumar Malhotra, MANU/SC/0255/2003 : (2003) 5 SCC 315: AIR 2003 SC 1322: 2003 (4) ALD 82 (SC): 2003 (2) AWC 1597 (SC): 2003 (2) CTC 59: 2003 (4) JCR 213 (SC): JT 2003 (3) SC 307: (2003) 134 PLR 249: RLW 2003 (2) SC 301: (2003) 3 SCALE 434: (2003) 3 SCR 66: 2003 (2) UJ 810 (SC), it was observed that, a careful reading of rule 4 shows that it empowers, under special circumstances, the court which passed an ex parte decree under Order XXXVII to set aside the decree and grant one or both to the following reliefs, if it seems reasonable to the court so to do and on such terms as the court thinks fit:
(i) to stay or set aside execution, and
(ii) to give leave to the defendant:
(a) to appear to the summons, and
(b) to defend the suit.
The expression "special circumstances" is not defined in the Civil Procedure Code, 1908 nor it is capable of any precise definition by the court because problems of human beings are so varied and complex. In its ordinary- dictionary meaning it connotes something exceptional in character, extraordinary, significant, uncommon. It is an antonym of common, ordinary and general. It is neither practicable nor advisable to enumerate such circumstances. Non-service of summons will undoubtedly be a special circumstance. In an application under Order XXXVII, rule 4, the Court has to determine the question, on the facts of each case, as to whether circumstances pleaded are so unusual or extraordinary as to justify putting the clock back by setting aside the decree; to grant further relief in regard to post-decree matters, namely, staying or setting aside the execution and also in regard to pre-decree matters viz. to give leave to the defendant to appear to the summons and to defend the suit.
In considering an application to set aside ex parte decree, it is necessary to bear in mind the distinction between suits instituted in the ordinary manner and suits filed under Order XXXVII of the Code of Civil Procedure, 1908. Rule 7 of Order XXXVII says that except as provided thereunder the procedure in suit under Order XXXVII shall be the same as the procedure in suits instituted in the ordinary manner. Rule 4 of Order XXXVII specifically provides for setting aside decree, therefore, provisions of rule 13 of Order IX will not apply to a suit filed under Order XXXVII. Nonetheless, defendant may be declared ex parte if he does not appear in response to summons, or after entering appearance before framing issues; or during or after trial. Though addressing arguments is part of trial, one can loosely say that a defendant who remains absent at the stage of argument, is declared ex parte after the trial. In an application under Order IX, rule 11, if a defendant is set ex parte and that order is set aside, he would be entitled to participate in the proceedings from the stage he was set ex parte. But an application under Order IX, rule 13 could be filed on any of the grounds mentioned thereunder only after a decree is passed ex parte against the defendant. If the Court is satisfied that (1) summons was not duty served, or (2) he was prevented by sufficient cause from appearing when the suit was called for hearing, it has to made an order setting aside the decree against him on such terms as to cost or payment into court or otherwise as it thinks fit and thereafter on the day fixed for hearing by court, the suit would proceed as if no ex parte decree had been passed. But in a suit under Order XXXVII, the procedure for appearance of the defendant is governed by provisions of rule 3 thereof. A defendant is not entitled to defend the suit unless he enters appearance within ten days of service of summons either in person or by a pleader and files in court at address for services of notices on him. In default of his entering an appearance, the plaintiff becomes 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 together with costs. The plaintiff will also be entitled to judgment in terms of sub-rule (6) of rule 3. If the defendant enters an appearance, the plaintiff is required to serve on the defendant a summons for judgment in the prescribed form. Within ten days from the service of such summons for judgment, the defendant may seek leave of the Court to defend the suit, which will be granted to him either unconditionally or on such terms as the Court may deem fit. Normally the Court will not refuse leave unless the court is satisfied that facts disclosed by the defendant do not indicate substantial defence or that defence intended to be put up is frivolous or vexatious. Where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, no leave to defend the suit can be granted unless the admitted amount is deposited by him in court. Inasmuch as Order XXXVII does not speak of the procedure when leave to defend the suit is granted, the procedure applicable to suits instituted in the ordinary manner, will apply.
It is important to note here that the power under rule 4 of Order XXXVII is not confined to setting aside the ex parte decree, it extends to staying or setting aside the execution and giving leave to appear to the summons and to defend the suit. We point out that as the very purpose of Order XXXVII is to ensure an expeditious hearing and disposal of the suit filed thereunder, rule 4 empowers the Court to grant leave to the defendant to appear to summons and defend the suit if the Court considers it reasonable so to do, on such terms as the Court thinks fit in addition to setting aside the decree.
Where on an application, more then one among the specified reliefs may be granted by the Court, all such reliefs must be claimed in one application. It is not permissible to claim such reliefs in successive petitions as it would be contrary to the letter and spirit of the provision. That is why where an application under rule 4 of Order XXXVII is filed to set aside a decree either because the defendant did not appear in response to summons and limitation expired, or having appeared, did not apply for leave to defend the suit in the prescribed period, the court is empowered to grant leave to the defendant to appear to the summons and to defend the suit in the same applications. It is, therefore, not enough for the defendant to show special circumstances which prevented him from appearing or applying for leave to defend, he has also to show by affidavit or otherwise, facts which would entitle him leave to defend the suit. In this respect, rule 4 of Order XXXVII is different from rule 13 of Order IX.
State Bank of Saurashtra v. M/s Ashit Shipping Services (P) Ltd., MANU/SC/0314/2002 : AIR 2002 SC 1993: 2002 (3) ALD 83 (SC): II (2002) BC 536 (SC): (2002) 3 Cal LT 1 (SC): (2002) 110 Comp Cas 329 (SC): (2002) 3 GLR 2401: JT 2002 (4) SC 85: (2002) 3 PLR 547: (2002) 3 SCALE 390: MANU/SC/0314/2002 : (2002) 4 SCC 736: (2002) 2 SCR 1074: 2002 (1) UJ 700 (SC), the dispute in the suit relates to whether the document is guarantee or merely an indemnity. The 1st respondent termed the document to be an indemnity/guarantee. The appellants denied that the document was a guarantee. In the application for leave to defend the appellant, inter alia, contended that the suit was suit for recovery of the price of goods and the interest on the said amount. They pointed out that in the plaint the 1st respondent had not averred that they had suffered any loss or damage.
The Trial Court by an order dated 30th October, 1996 refused leave to defend as the appellant (State Bank of Saurashtra) had not raised any triable issue.
Both appellants and the 2nd respondents then filed revisions before High Court of Gujarat. Both revisions were dismissed by the order of High Court. The High Court held no triable issue had been raised and the leave to defend was sought "nothing but a sham".
The matter came to disposal before Supreme Court which held:
The document appears to be an indemnity bond. In case of indemnities the question of making good the loss arises only when there is a proof that loss is suffered. It is to be seen that under sub-rule (2)(iii) of rule 1 of Order XXXVII a claim could be made on the basis of guarantee. Significantly Order XXXVII does not provide for a claim based on an indemnity bond. The reason is obvious. In case of claims on indemnity bonds the loss would first have to be proved. Thus a summary procedure cannot be adopted in such cases.
Thus the impugned order and judgment of High Court dated 18th April, 2001 and trial court dated 30th October, 1996 are set aside and the appellants are granted leave to defend.
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