Case: Milkhiram (India) Private Ltd. &amp; Others Vs. Chamanlal Bros

The other appellants are sought to be made liable upon an indenture of guarantee dated2 with respect to the amounts advanced to the appellant No. 1. The procedure followed in the case was that set out in Order 37, Civil Procedure Code. Rules 2 and 3 of this Order have been amended by the Bombay High Court.e (1) of R. 2 provides that suits of certain kinds specified therein may be instituted by presenting a plaint in the form prescribed but the summons shall be in Form 4 in Appendix III or in such other Form as may from time to time be prescribed. Suits upon bills of exchange, hundis or promissory notes or for liquidated amounts are some of the kinds of suits which can be instituted under this provision.. 2 provides that in suits of this kind the defendant shall not defend the suit unless he enters an appearance and obtains leave from the judge as provided in O. 37 so to defend. It further provides that in default of entering an appearance and of his obtaining such leave to defend the allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree as prayed for in the plaint.. 2 and 3 of R. 3 of O. 37 as amended by the High Court run thus :"(2) If the defendant enters an appearance, the plaintiff shall thereafter serve on the defendant a summons for judgment returnable not less than ten clear 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 defence to the suit(3) The defendant may at any time within ten days from the 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 the suit. Leave to defend may be granted to him unconditionally or upon such terms as to the Judge appear just."The appellants filed an affidavit as required bysubr.3 purporting to disclose facts sufficient to entitle them to defend the suit. Upon a perusal of the plaint and the affidavits of parties and documents filed along with the plaint the learned Judge thought it fit to grant only conditional leave to the appellants to defend the suit. The amount for which thes have claimed relief in the suit is Rs. 4,05,434.38. As against this claim the Court has ordered the appellants to deposit security for Rs. 70,000 only. The appellants considering themselves aggrieved by the order preferred an appeal under Letters Patent which was summarily dismissed by the appeal Court. They have now come up by special leave to this Court.

Reasoning:
On the basis of these averments in the plaint the appellants contend that the only claim which the respondents had or could have against them is on the basis of the agreement that that claim would be for an unliquidated amount and that consequently the suit could not be brought under O. 37, Rr. 2 and 3 of the Code. It seems to us, however, to be clear from the perusal of the plaint as well as the affidavits of the appellants that the cause of action for respondents claim as laid in the suit is prima facie independent of the aforesaido doubt they advanced the money by way of financing the export business of the company but the right to repayment was absolute and unconditional. This is made clear by the subsequent agreement executed by the appellants 2 to 4. No doubt the respondents contend that they are also entitled to recover damages from the appellants under the agreement but according to them this claim is in addition to and not in substitution of that based upon the promissory notes and the indenture of guaranteeWithout expressing any view as to the correctness of the decision it is sufficient to say that what the High Court was dealing with there was a suit in which upon the same facts the plaintiff was, according to the High Court, not only entitled to sue but bound to seek two reliefs but sued only for one of them. In the case before us the reliefs claimed in the suit are distinct from the relief claimable on the basis of the agreement between partiesThe short answer to the question is that the respondent did make an application to the Court under O. 2, R. 2,, C.P.C., for leave to reserve their claim under the agreement for being adjudicated in another suit. The Court granted leave to them and, therefore, no further question arises. Moreover what we are concerned with is the claim made by the respondents in the present suit. Here they have sought relief only on the basis of the promissory notes and the indenture of guarantee. Even assuming that they were also entitled to other relief on the same cause of action it was certainly open to them even to relinquish their claims for other reliefs. The mere fact that they did so to avail themselves of the summary procedure provided in O. 37, could not affect their suit adversely. However, in this case the respondents obtained leave to reserve their claim based upon the agreement before they took out summons against the appellants under O. 37, R. 2,subr.2. That order was not challenged by the appellants and has become final between the parties so far as the present suit is concernedThat case is however distinguishable. There what was challenged was the order of the City Civil Court which granted leave to the defendant to defend that suit for recovery of a sum of Rs. 18725/upon the condition of depositing Rs. 7500/as security. It was urged before the High Court that where a subordinate court makes an order which is open to appeal or revision it should give some reasons in support of that order. No reasons having been given the order was set aside and the matter was remitted to the City Civil Court for passing a fresh order in accordance with law. While laying down the normal rule it does not appear to have been intended to make it inflexible. Nor again it appears to have been contemplated that elaborate reasons to support the imposition of conditions must be given. In the case before us the order made is by the High Court itself and not by the subordinate court. No doubt an appeal lay against it under the Letters Patent but that is merely an internal appeal in a High Court, which cannot be likened to an appeal under S. 96 or a revision application under S. 115 of the Code. Moreover O. 49, R. 3) provides that nothing contained in Rr. 1 to 8 of O. 20 will apply to any Chartered High Court in exercise of its ordinary or extraordinary civil jurisdiction. The provision relating to the giving of reasons in support of a decision are to be found in R. 4 of O. 20. Since these provisions do not apply to Chartered High Courts, like the High Court at Bombay the decision relied upon cannot be pressed in aidIt is indeed not easy to say in many cases whether the defence is a genuine one or not and, therfore, it should be left to the discretion of the trial Judge who has experience of such matters both at the bar and the bench to form his own tentative conclusion about the quality or nature of the defence and determine the conditions upon which leave to defend may be granted. If the Judge is of opinion that the case raises a triable issue, then leave should ordinarily be granted unconditionally. On the other hand, if he is of opinion that the defence raised is frivolous, or false, or sham, he should refuse leave to defend altogether. Unfortunately however, the majority of cases cannot be dealt with in a clear cut way like this and the judge may entertain a genuine doubt on the question as to whether the defence is genuine or sham or in other words whether it raises a triable issue or not. It is to meet such cases that the amendment to O. 37, R. 2 made by the Bombay High Court contemplates that even in cases where an apparently triable issue is raised the Judge may impose conditions in granting leave to defend. Thus this is a matter in the discretion of the trial Judge and in dealing with it, he ought to exercise his discretion judiciously. 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 to deposit. In a matter of this kind, it would be undesirable and inexpedient to lay down any rule of general application.