KHALID IBRAHIM BEG Vs. STATE OF GUJARAT

JUDGEMENT

(1.) A short but interesting question arises in this revision application as to what are the correct principles which govern the grant or refusal of leave to defend summary suits in context of the amended provisions of Order 37 Rules 1 and 3 of the Civil Procedure Code. The question arises in the following circumstances: The plaintiff-Bank which is opponent No. 1 before me filed Summary Suit No. 2672 of 1977 on August 16 1977 against the petitioners and respondent Nos. 2 3 and 4 therein for recovery of Rs. 5 83 28 Ps. being the amount due and payable at the foot of the various accounts viz. Demand Cash Credits Factory Type); Demand Cash Credit (Machinery Type); Medium Term Loan A/c against machinery and Demand Cash Credit against book debts which accounts were opened in course of certain facilities provided by the plaintiff-Bank to petitioner No. 2 which was a firm at the relevant time of the suit transactions. The plaintiff-Bank has also prayed for interim injunction by taking out a Notice of Motion in the said suit at the time of filing the suit restraining the petitioners and respondents Nos. 2 to 4 herein from dealing with or disposing of the properties movable as well as immovable offered ky way of security to the Bank. The plaintiff-Bank has also taken out a Summons for judgment as the suit was a suit of summary nature. The petitioners and respondents Nos. 2 3 and therein altered follow accordance and sought leave of the Court to defined the sale. Broadly the leave was sought on three grounds. It was urged in the first instance that having regard to the nature of the transactions between the parties it was not competent for the plaintiFfBank to file summary slit under Order 37 Rule 1 of the Civil Procedure Code. Secondly in any case inasmuch as it was common ground between the parties that the petitioner No. 2-firm had for obtaining the facilities under the different accordance pledged and hypothecated moveables under different accounts and therefore the security hiving been furnished in a sum greater than the allow prayed for in the suit the leave should be granted by the Court un and tonally. Thirdly it was contended that since there was a dispute about the amount of interest and the rate thereof there was a triable issue and therefore the Court should permit the defendant to defend the suit unconditionally.

(2.) None of the above contentions impressed the Chamber Judge of the City Civil Court Ahmedabad before whom this Summary Suit No. 2672 of 1977 was cased out for hearing. The learned Judge by his order of 7th January 1978 therefore permitted the petitioners as well as respondents Nos. 2 3 and 4 tn defend the suit on the condition of their depositing Rs. 2 lacs within eight weeks of the date of the order. It is this order which has been challenged in this revision before me.

(3.) The principles which govern Courts in the matter of grant of leave to defend summary suit under Order 37 are well known and have been finally settled by the Supreme Court in Milkhiram (India) Pvt. Ltd. and others. Chamanlal Bros. AIR 1965 SC 1698 and M/s Mechalec Engineers & Manufacturers v. M/s Basic Equipment Corporation AIR 1977 SC 577. Shortly stated the principle is that if the case raises a triable issue -whether it does so or not it is always a matter of discretion of the trial Judge having experience to form his tentative conclusion about the quality or nature of defence leave should ordinarily be granted unconditionally. But if the defence is frivolous false or sham leave should be refused. And even in cases where triable issues are raised the Judge may impose conditions while granting leave to defend. This principle is reiterated of course in details by Beg J. as he then was speaking for the Court in Mechalec Engineers case (supra) when he enumerated about five principles which the Court should bear in mind for granting leave to defend They are: (i) The plaintiff would not be entitled to leave to sign judgment and the defendant is always entitled to leave to defend if there is good defence; (ii) The defendant is equally entitled to such leave if he raises a triable issue indicating a fair bona file and reasonable defence; (iii) Even if the facts stated in the affidavit do not disclose a clear defence but the facts are such as may lead to inference that in the course of trial he may be able to establish his defence leave may be granted subject to such conditions as the Court may think fit; (iv) The plaintiff is entitled to leave to sign judgment if the defence is illusory or sham or practically moonshine and (v) Even in such cases as stated in (iv) above the Court may grant leave to defend by directing deposit of the amount claimed in the Court or otherwise secured so as to protect the plaintiff. These are oft repeated principles which of course are difficult in application. The question which arises in this revision application is whether in the changed context of the amending provisions of Rules 1 and 3 of Order 37 of the Civil Procedure Code these principles still hold good ? It should be recalled that Order 37 originally envisaged a limited right of filing summary suits in respect of negotiable instruments only and the right was available originally in High Courts of three Presidency towns of Calcutta Madras and Bombay and was thereafter extended by Act 66 of 1959 to District Courts or other Court specially empowered by the State Government in that behalf. The High Court of Bombay had extended application of the provisions contained in Order 37 to the Bombay City Civil Courts. Sub-rules (1) and (2) of Rule 2 of Order 37 permit summary suits upon bills of exchange Hindus or promissory notes. The Bombay High Court has substituted sub-rules (1) and (2) of Rule 2 and has provided that summary suits can be filed not only in respect of dues under the negotiable instruments but also in respect of suits in which the plaintiff seeks to recover debt or a liquidated sum of amount arising under a contract or as enactment which is not in the nature of penalty or in suits in which possession is sought by the landlord of immovable property with or without claim of rent or mesne profits against a tenant whose form of tenancy has been determined or aspired Original rule 3 of Order 37 has been substituted by the Bombay High Court and a provision his bee made as to how writ or summons together with the copy of plaint and exhibits thereto are to be served on the defendant and within what time he has to file his appearance. Sub-rule (3) of Rule 3 further provided that on such an appearance being entered upon the plaintiff can take out a Summons for judgment and the defendant may within ten days from the Service of such Summons by affidavit or otherwise disclose such facts as may be deemed sufficient be entitle him to defend and apply for leave to defend the suit which may be granted conditionally or unconditionally as may appear to be just to the Judge commended. After bifurcation of bilingual State of Bombay in 1960 and on the establishment of the City Civil Courts in Ahmedabad the Ahmedabad City Civil Court Rules 1961 were enacted. Chapter XI of the said Rules deals with summary suits and Rules 142 and 143 provide for the nature of claims in respect of which summary suits can be filed and principles which would entitle defendant the same. The nature of claims in respect of which such summary suits are permissible are claims under Negotiable Instrument Act or in nature of debt or liquidated amount of money arising under a contract or an enactment but not amounting to penalty. The Judge at the hearing of Summons for judgment if satisfied after considering affidavits and documents if any that the defendant has a good defence to the action on the merits or has disclosed such facts as may be deemed sufficient to entitle him to defend grant leave to defend for the whole or any part of the claim as he may deem fit unconditionally or on such terms and conditions as to security or otherwise as may appear to him to be just. The Civil Procedure Code 1900000000 was extensively amended with effect from 1 May 1977 by Act 105 of 1976. Rules 1 2 and 3 of Order 37 have been substituted and relevant part so far as malarial for our purposes provides as under: "ORDER XXXVII