Case: B.L. KASHYAP AND SONS LTD Vs. M/S JMS STEELS AND POWER CORPORATION &amp; ANR

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 Courts 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. 17.3. 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. 18. When we apply the principles aforesaid to the facts of the present case and to the impugned orders, it is at once clear that after finding the suit to be maintainable under Order XXXVII CPC because of assertion of the plaintiff about joint and several liability of the defendants, the High Court concluded that the defences were frivolous and vexatious. The Trial Court had observed that the defendants failed to raise any triable issues. It appears that while recording such conclusions, the Trial Court as also the High Court totally omitted to consider that the appellant-defendant No. 2 has been contesting its liability with the assertion that it had only been the contractor executing the work of defendant No. 1. Even as per the plaint averments and plaintiffs assertions, the defendant No. 1 had made various payments from time to time against the supplies of the building material. The cheques, allegedly towards part payment against the supplies made by the plaintiff, had been issued by the defendant No. 1. In the given set of circumstances, the conclusion of the High Court that the defence raised by the appellant was frivolous or vexatious could only be treated as an assumptive one and lacking in requisite foundation. 19. At this juncture, we may also refer to a significant feature of the case that the defendant No. 1 (respondent No. 2 herein) had questioned the same judgment and decree of the Trial Court dated 18.09.2017 by way of a separate appeal, being RFA No. 743 of 2018, that was considered and dismissed by the High Court by the judgment and order dated 05.09.2018. Interestingly, the High Court dismissed the said appeal with the finding that the defence raised by defendant No. 1 was frivolous or vexatious and, in support of this finding, the High Court specifically gave the reason in the form of a query that if at all there was no liability of the defendant No. 1, where was the question of making payments regularly by the defendant No. 1 to the plaintiff? 19.1. It is at once noticeable that in contradistinction to the reasons stated qua the defendant No. 1 in the judgment and order dated 05.09.2018, the High Court has merely observed in the impugned judgment and order dated 11.05.2018 concerning the present appellant, i.e., defendant No. 2, that the defences were frivolous or vexatious and were raised only to deny the just dues of the seller of goods. No reason has been assigned as to why and how the defence of the present appellant (defendant No. 2) was treated as frivolous or vexatious. The effect and impact of an admitted position of the plaintiff, that payments were indeed made from time to time by the defendant No. 1, seems not to have gone into consideration of the Trial Court and the High Court while denying leave to the appellant. The same considerations, which weighed with the Courts to deny the leave to defend to the defendant No. 1, could not have been applied ipso facto to the case of the appellant; rather those considerations, in our view, make out a case of triable issues qua the appellant. 20. In the totality of the circumstances of this case, we are clearly of the view that the appellant has indeed raised triable issues, particularly concerning its liability and the defence of the appellant cannot be said to be frivolous or vexatious altogether. 20.1. In the aforesaid view of the matter, we are inclined to hold that the appellant-defendant No. 2 ought to have been granted the leave to defend the claim made in the suit concerning its liability; and to this extent, the impugned decree deserves to be set aside. 21. For what has been observed hereinabove, we would have considered granting unconditional leave to defend to the appellant but then, it is noticed that by the order dated 17.08.2018, this Court granted stay over execution of the decree on the condition of the appellant depositing a sum of Rs. 40,00,000/- (Forty Lakhs). Thereafter, by the order dated 24.09.2018, this Court noticed the fact of such deposit and condoned the delay of four days in making the deposit.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]14. The question concerning maintainability of the suit filed by the plaintiff as a summary suit under Order XXXVII CPC need not detain us much longer. This is 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 plaintiff has further pointed out that two cheques were issued by the defendant No. 1 towards part payment against the invoices, being cheque No. 037274 dated 04.05.2015 in the sum of Rs. 14,72,269/- and No. 037272 dated 09.05.2015 in the sum of Rs. 13,34,319/-.14.1. The assertion of plaintiff had been of joint and several liability of the defendants. The question as to whether the appellant was acting only as an agent of defendant No. 1 in relation to the supplies in question and had no monetary liability, as sought to be raised by the appellant, could be a matter of his defence. This aspect, relating to the nature of defence shall be examined in the next question but, such a proposition of defence by the appellant cannot take away the entitlement of the plaintiff- respondent No. 1 to maintain the summary suit in terms of Order XXXVII CPC. This is apart from the fact that while asserting joint and several liability of the defendants, the plaintiff has also relied upon the cheques said to have been issued by defendant No. 1, which were allegedly not presented as per the request of the said defendant No. 1.14.2. In the overall facts and circumstances of the case, the contention against maintainability of the summary suit in terms of Order XXXVII CPC cannot be accepted and to that extent, we find no reason to consider any interference in the decision of the High Court.16.1. In the case of Mechelec Engineers (supra), the principles for consideration of a prayer for leave to defend in a summary suit were laid down by this Court in the following terms: -8. In Kiranmoyee Dassi Smt v. Dr J. Chatterjee [AIR 1949 Cal 479 :49 CWN 246, 253 : ILR (1945) 2  Cal 145.] Das, J., after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by Order 17 CPC 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 be 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 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 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.16.2. In the case of IDBI Trusteeship (supra), this Court modulated the aforementioned principles and laid down as follows: -17. Accordingly, the principles stated in para 8 of Mechelec case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687]  will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case [Milkhiram (India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1698  : (1966) 68 Bom LR 36] , as follows:17.1. If the defendant satisfies the court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit.17.2. If the defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend.17.3. Even if the defendant raises triable issues, if a doubt is left with the trial Judge about the defendants good faith, or the genuineness of the triable issues, the trial Judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.17.4. If the defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.17.5. If the defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith.17.6. If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court.17. 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 Mechelec 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.18. When we apply the principles aforesaid to the facts of the present case and to the impugned orders, it is at once clear that after finding the suit to be maintainable under Order XXXVII CPC because of assertion of the plaintiff about joint and several liability of the defendants, the High Court concluded that the defences were frivolous and vexatious. The Trial Court had observed that the defendants failed to raise any triable issues. It appears that while recording such conclusions, the Trial Court as also the High Court totally omitted to consider that the appellant-defendant No. 2 has been contesting its liability with the assertion that it had only been the contractor executing the work of defendant No. 1. Even as per the plaint averments and plaintiffs assertions, the defendant No. 1 had made various payments from time to time against the supplies of the building material. The cheques, allegedly towards part payment against the supplies made by the plaintiff, had been issued by the defendant No. 1. In the given set of circumstances, the conclusion of the High Court that the defence raised by the appellant was frivolous or vexatious could only be treated as an assumptive one and lacking in requisite foundation.19. At this juncture, we may also refer to a significant feature of the case that the defendant No. 1 (respondent No. 2 herein) had questioned the same judgment and decree of the Trial Court dated 18.09.2017 by way of a separate appeal, being RFA No. 743 of 2018, that was considered and dismissed by the High Court by the judgment and order dated 05.09.2018. Interestingly, the High Court dismissed the said appeal with the finding that the defence raised by defendant No. 1 was frivolous or vexatious and, in support of this finding, the High Court specifically gave the reason in the form of a query that if at all there was no liability of the defendant No. 1, where was the question of making payments regularly by the defendant No. 1 to the plaintiff?19.1. It is at once noticeable that in contradistinction to the reasons stated qua the defendant No. 1 in the judgment and order dated 05.09.2018, the High Court has merely observed in the impugned judgment and order dated 11.05.2018 concerning the present appellant, i.e., defendant No. 2, that the defences were frivolous or vexatious and were raised only to deny the just dues of the seller of goods. No reason has been assigned as to why and how the defence of the present appellant (defendant No. 2) was treated as frivolous or vexatious. The effect and impact of an admitted position of the plaintiff, that payments were indeed made from time to time by the defendant No. 1, seems not to have gone into consideration of the Trial Court and the High Court while denying leave to the appellant. The same considerations, which weighed with the Courts to deny the leave to defend to the defendant No. 1, could not have been applied ipso facto to the case of the appellant; rather those considerations, in our view, make out a case of triable issues qua the appellant.20. In the totality of the circumstances of this case, we are clearly of the view that the appellant has indeed raised triable issues, particularly concerning its liability and the defence of the appellant cannot be said to be frivolous or vexatious altogether.20.1. In the aforesaid view of the matter, we are inclined to hold that the appellant-defendant No. 2 ought to have been granted the leave to defend the claim made in the suit concerning its liability; and to this extent, the impugned decree deserves to be set aside.21. For what has been observed hereinabove, we would have considered granting unconditional leave to defend to the appellant but then, it is noticed that by the order dated 17.08.2018, this Court granted stay over execution of the decree on the condition of the appellant depositing a sum of Rs. 40,00,000/- (Forty Lakhs). Thereafter, by the order dated 24.09.2018, this Court noticed the fact of such deposit and condoned the delay of four days in making the deposit.