Case: Southern Sales &amp; Services  Vs. Sauermilch Design &amp; Handels Gmbh

3. Rule 3, as it now reads, was introduced in Order 37 of the Code by way of amendment with effect from 1st February, 1977. Prior to such amendment, Rule 3 of Order 37 was as3. (1) The Court shall, upon an 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.(2) 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 thinksvirtue of the Code of Civil Procedure (Amendment) Act, 1976, Rule (3) of Order 37 was substituted by Rule 3 as it now exists and introduced various changes of which one of the more significant changes was the introduction of Sub-rules (4) and (5) which read as(4) 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 or 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 defence to the suit.(5) 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 such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the Court or Judges 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 defence intended to be put up by the defendant is frivolous or vexatious:Provided further that, where a part of the amount claimed by 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 inmay also be profitable to refer to Sub-rule (6) which provides asAt the hearing of such summons for judgment, -(a) 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(b) 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 within 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.In the instant case, the respondent filed a suit under Order 37 of the Code of Civil Procedure, hereinafter referred to as "the Code", for recovery of a sum of Euro 757,885.42 equivalent to Rs.3,86,52,156.42 in Indian currency. On being served with Summons for Judgment in terms of Rule 3, Sub-rule (4), of Order 37 of the Code, the petitioner filed an affidavit providing various details which made out triable issues in the suit. On the basis of the said affidavit the learned XXXI Additional City Civil Judge, Bangalore, granted conditional leave to the petitioner to defend the suit.5. Being aggrieved by the said order, the respondent company moved in revision before the High Court which after considering the submissions made and the defence taken by the defendant/appellant came to the conclusion that a triable issue had been raised in the suit which would have to be decided in a full-fledged trial. However, the High Court also came to a finding that though the defendant/appellant had raised a triable issue, the defence taken did not exonerate them from payment of the entire amount claimed by the respondent herein.6. The High Court held that despite the admission of the defendant regarding the amount claimed by the respondent in the suit, since the same had not been paid to the plaintiff/respondent, it would be in the fitness of things to direct the defendant/appellant to deposit a substantial portion of the amount which had been admitted to be due and payable even if the defence set up by the defendant/appellant was not sham, moonshine or illusory. The High Court accordingly modified the unconditional leave granted to the defendant/appellant to defend the suit and restricted the same to the claim of the plaintiff-company to the amount excluding the total demand of Euro 3,20,967.51 covered under the documents Annexures G-1 and G-2. The High Court directed that leave to defend the suit in respect of the claim of the plaintiff-company for the said amount of Euro 3,20,967.51 would be subject to the condition that the defendant/appellant firm would deposit in the trial court 55% of the said amount within eight weeks from the date of the orders of the High Court.7. The defendant/appellant has come up to this Court challenging the said order of the High Court.

Court's reasoning:
the High Court did not lack jurisdiction to pass an order with regard to the subject matter of dispute, though the order itself may be incorrect. There is, therefore, little scope for this Court to interfere with the directions given to the appellant herein to deposit in Court 55% of the admitted dues as a pre-condition to grant of leave to defend a suit. The judgment of the High Court impugned in this appeal does not warrant any interference since the trial Court had exercised its jurisdiction under the second proviso to Sub-rule (5) of Rule 3 of Order 37 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. The question as to whether leave to defend a suit can be granted or not is within the discretionary powers of the High Court and it does not appear to us that such discretion has been exercised erroneously or with any irregularity which warrants interference by this Court.