Gujarat High Court
Anand Sons Overseas Trading Pvt Ltd vs Trivedi Industries on 27 June, 2018
Equivalent citations: AIR 2019 (NOC) 231 (GUJ.)
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
C/SA/397/2017 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SECOND APPEAL NO. 397 of 2017
With
CIVIL APPLICATION NO. 1 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/-
==========================================================
1 Whether Reporters of Local Papers may be allowed to YES
see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy of the NO
judgment ?
4 Whether this case involves a substantial question of law NO
as to the interpretation of the Constitution of India or any
order made thereunder ?
Circulate this Judgment in the Subordinate Judiciary.
==========================================================
ANAND SONS OVERSEAS TRADING PVT LTD
Versus
TRIVEDI INDUSTRIES
==========================================================
Appearance:
MR GM AMIN(124) for the PETITIONER(s) No. 1,2,3
==========================================================
CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 27/06/2018
ORAL JUDGMENT
1. This Second Appeal under Section 100 of the Civil Procedure Code is at the instance of the original defendants and is directed against the judgment and order dated 6th October 2017 passed by the Principal District Judge, Gandhinagar, in the Regular Civil Appeal No.16 of 2016, by which the the appeal came to be dismissed, thereby affirming the judgment and Page 1 of 35 C/SA/397/2017 JUDGMENT decree dated 30th October 2015 passed by the 3rd Additional Senior Civil Judge, Gandhinagar, in the Special Summary Suit No.17 of 2013.
2. The appellants herein are the original defendants. The respondent herein is the original plaintiff. The respondent - plaintiff filed a Special Summary Suit No.17 of 2013 in the court of the 3rd Additional Senior Civil Judge, Gandhinagar, for recovery of Rs.5,39,500=00 from the appellants herein on the basis of the bills raised towards the purchase of goods by the appellants herein from the plaintiff.
3. It appears from the materials on record that the plaintiff and the defendants entered into an agreement for supply of copper rods. The appellants herein - original defendants purchased copper rods and agreed to make the payment towards such transaction.
4. The case of the plaintiff is that the defendants failed to make the payment of Rs.5,39,500=00 due and payable for the purchase of copper rods. The amount was raised by the plaintiff in accordance with Bill No.92.
5. The defendants appeared and filed an application for leave to defend vide Exh.18. The trial Court, by judgment and order dated 30th October 2015 passed below Exh.18 in the Special Summary Suit No.17 of 2013, granted conditional leave to defend on deposit of Rs.5,39,500=00.
6. The appellants herein - original defendants did not comply with the conditional order of leave to defend. In such Page 2 of 35 C/SA/397/2017 JUDGMENT circumstances, the trial Court proceeded to draw a decree in favour of the respondent herein - original plaintiff.
7. The appellants herein, being dissatisfied with the judgment and decree, preferred the Regular Civil Appeal No.16 of 2016 in the court of the Principal District Judge at Gandhinagar.
8. The First Appeal filed by the appellants herein under Section 96 of the CPC came to be dismissed vide judgment and order dated 6th October 2017.
9. It is pertinent to note that the appeal came to be dismissed by the first appellate court only on the ground that the defendants failed to comply with the conditional order and, therefore, the merits of the case of the defendants cannot be looked into in an appeal from an ex-parte decree. To put it in other words, the first appellate court took the view that an appeal preferred by a defendant from an ex-parte decree passed in a summary suit is liable to be dismissed on the ground that the defendant could be said to have admitted the claim of the plaintiff.
10. The first appellate court, in taking the aforesaid view while dismissing the appeal, placed strong reliance on a Division Bench decision of the Bombay High Court in the case of D.Shanalal v. Bank of Maharashtra, AIR 1989 Bom 150.
11. Being dissatisfied with the judgment and order passed by the first appellate court, the appellants - original defendants are here before this Court with the present Second Appeal under Section 100 of the CPC.
Page 3 of 35C/SA/397/2017 JUDGMENT
12. The appellants have formulated the following substantial questions of law in the memo of their Second Appeal :
"(i) Whether the suit filed by respondent is falling under Order 37 of Code of Civil Procedure ?
(ii) Whether both the courts below have failed to consider the defence raised by the appellants that there are triable issues indicating that there is a fair and bonafide or reasonable defence set out by the appellants-defendant and therefore the appellants were entitled to leave to defend.
(iii) Whether both the courts below have failed to consider that as per pleading there are triable issues and there was reasonable defence and therefore defendants are entitled to unconditional leave to defend.
(iv) In the facts and circumstances of the case the judgment and decree passed by both the courts are contrary to the evidence on record and pleadings of the parties.
(v) In the facts and circumstances of the case whether the court has jurisdiction to entertain the suit under Sec.20 of the Code of Civil Procedure as there was no written agreement or contract was made or the goods were supplied at Mumbai, payment was also made at Mumbai defendants are residing and carrying on business at Mumbai whether the suit is time barred and therefore under Sec.3 of the Limitation Act court ought not to have entertained suit.Page 4 of 35
C/SA/397/2017 JUDGMENT
(vi) Whether the courts have failed to raise preliminary issue about maintainability of the suit in view of the law of limitation and in view of the territorial jurisdiction of the court and it has resulted into miscarriage of the justice.
(vii) In the facts and circumstances of the case, the application submitted by appellants under Order 7 Rule 11 was not considered before passing the decree by trial court and that has resulted into miscarriage of justice and therefore judgment and decree passed by both the courts below deserves to be quashed and set aside."
13. Mr.Amin, the learned counsel appearing for the appellants, vehemently submitted that the first appellate court committed a serious error of law in dismissing the first appeal without going into the merits of the grounds raised in the memo of the first appeal. Mr.Amin submits that his clients might not have been able to comply with the conditional order of leave to defend, but that by itself, would not preclude his clients to question the decree on the ground that the trial Court ought to have granted unconditional leave to defend. Mr.Amin would submit that many important grounds were raised in the memo of the first appeal and such grounds should have been taken into consideration by the first appellate court before upholding the judgment and decree passed by the trial Court in a summary suit. According to Mr.Amin, on this ground alone, the judgment and decree passed by the first appellate court deserves to be quashed and set-aside and the matter may be remanded to the first appellate court with appropriate directions.
14. Having heard the learned counsel appearing for the appellants - original defendants and having gone through the Page 5 of 35 C/SA/397/2017 JUDGMENT materials on record, I propose to address myself on the following substantial question of law for the purpose of deciding this Second Appeal :
"Whether the first appellate court committed an error in taking the view that although an appeal lies from an ex-parte decree passed under Order 47 Rule 3, yet the finality of a conditional order precludes the defendant - appellant from assailing the decree on merits ?"
15. Let me first look into the conditional order of leave to defend passed by the 3rd Additional Senior Civil Judge, Gandhinagar. The operative part of the order reads as under :
"O R D E R The application below Exh.18 of the defendant for leave to defend is allowed on condition of depositing of Rs.5,39,500=00 (Rupees Five Lac Thirty-Nine Thousand Five-Hundred Only) in this court within a period of one month from the date of this order as per the Invoice No.92 dated 19.9.10 of the plaintiff.
In addition, it is ordered that the above amount of Rs.5,39,500=00 (Rupees Five Lac Thirty-Nine Thousand Five-Hundred Only) is to be invested for a term period of five years in the nationalized bank in the name of the Nazir.
In addition, it is ordered to the registry to register the said summary suit as the Special Civil Suit on deposit of the said amount.Page 6 of 35
C/SA/397/2017 JUDGMENT It is ordered that if the defendant fail to deposit the above amount within the time stipulated, then decree for 12% interest on the principal amount from the date of the suit be passed and it is to be recovered from the properties of the defendant."
16. Let me now look into the grounds raised by the appellants herein in the memo of the First Appeal filed under Section 96 of the CPC, which read thus :
"(B) The appellants have controverted the facts that it is not admitted debts or Bill of Exchange or a cheque allegations made by respondent-Plaintiff were controverted by the appellants by filing cogent evidence as goods supplied by respondent-Plaintiff was of inferior quality and rejected by purchaser at Dubai, therefore the learned Judge ought not to have granted the conditional leave and therefore judgment and order passed by trial court deserves to be quashed and set aside.
(C) It is submitted that when plaintiff has suppressed material facts as he has not come out with clean hands he has stated two transactions whereas 3 three transactions;
whereas the appellants have to recover Rs.2 lakhs and odd from the plaintiff and it was stated in their written statement that all evidence on record, the learned Judge not discussed any of the evidence produced by appellants and therefore it has resulted into miscarriage of justice and therefore the Judgment and order passed by the trial court deserves to be quashed and set aside.
Page 7 of 35C/SA/397/2017 JUDGMENT (D) The appellants state the appellant have raised issue about territorial jurisdiction, the learned Judge ought not to have entered into the legality or propriety of the allegations made in the plaint and ought to have raised preliminary issue and returned the plaint to the plaintiff and therefore the judgment and order passed by learned Judge deserves to be quashed and set aside.
(E) It is submitted that even if the transaction is time barred suit was filed after 3 years and therefore under the law of limitation suit deserves to be dismissed and under sec.3 of the Limitation Act even if limitation is not set up or as a defence it is duty of the trial court to dismiss time barred suit and therefore judgment and order passed by learned Judge deserves to be quashed and set aside.
(H) It is submitted that plaintiff has not produced any public documents or has not even produced accounts, has merely produced some of the emails which requires to be tested on examination of the parties and therefore the appellants have produced emails and other correspondence to controvert the case of the plaintiff. The learned Judge has proceeded as if all the emails produced by the Plaintiff are true and correct. There is a triable issue requires to be adjudicated and it can be adjudicated by leading of the evidence merely by making allegations in the Plaint, cannot give rise about debts and therefore the Judgment and order passed by learned Judge deserves to be quashed and set aside.
(S) The learned Judge ought to have granted unconditional leave to the appellants as there was triable issues requires Page 8 of 35 C/SA/397/2017 JUDGMENT to be entertained and issued can be decided after leading of evidence. The trial court cannot jump on the averments and allegations made in the plaint. It is not case of the plaintiff that the defence is sham, bogus or dishonest. It is further submitted that there is no debts and therefore order passed Exh.18 is bad and illegal, arbitrary and deserves to be quashed and set aside.
(T) It is submitted that under provisions of Order 37 Rule 1 the suit is summary suit is to be entertained upon Bill of Exchange, Hundi or Promissory Note. In this case there is no Hundi, Bill of Exchange or Promissory Note and therefore the suit cannot be treated as a summary suit. It is further submitted that as per sub-section (2)(b) when the plaintiff seeks to recover debts or liquidity demand of money on the written contract. There is no recovery of debt and there is no cogent written contract between parties and therefore none of the ingredients of Order 37 Rule 2 are satisfied. Therefore suit ought not to have accorded as summary suit and therefore order passed by learned Judge at Exh.18 dated 1.12.2015 deserves to be quashed and set aside."
17. Let me now look into the judgment and order passed by the first appellate court. The first appellate court, as noted above, placed reliance on a Division Bench decision of the Bombay High Court in the case of D.Shanalal (supra) and dismissed the first appeal, holding as under :
"9. It would be fruitful to refer the judgement of Division Bench of Honourable Bombay High Court in a case of M/s. D. Shanalal and etc. Vs. Bank of Page 9 of 35 C/SA/397/2017 JUDGMENT Maharashtra reported in AIR 1989 BOMBAY 150, wherein it is held that :
"In a summary suit when leave is not obtained by the defendant or leave is refused to him or where the Defendant fails to comply with a conditional order, the Defendant is precluded from further contesting the plaintiff's claim. By reason of the wordings of O.XXXVII, Rr.2 and 3 there is further disability upon the Defendant. The facts stated in the plaint must be considered to have been admitted by the Defendant and the Plaintiff becomes entitled to judgment. Order XXXVII not only provides for abridgment of the procedure of suits covered by the said provisions but also the said provisions restrict and/or curtail the rights of the Defendants in these suits to contest the Plaintiff's claims. When the matter is carried in Appeal, the Defendant who did not obtain leave or had failed to comply with the conditional order continues to suffer under the same disability. It could never be said that by reason of presenting an Appeal from the Ex parte decree the Defendant would have any greater right to contest the Plaintiff's claim. The appeals preferred from such ex pare decrees passed in summary suits must proceed on the basis that such Defendants had admitted the Plaintiff's case as stated in the plaint and that the Plaintiffs were entitled to judgment. Therefore, although there are undoubtedly similarities between Page 10 of 35 C/SA/397/2017 JUDGMENT an ex parte decree and a decree passed under O.XXXVII, R.3 the analogy cannot be carried too far in view of the basic differences between the two kinds of decrees. Therefore, even in law although an Appeal lies from the ex parte decree passed under O.XXXVII, R.3, the consistent judicial view has been that the finality of a conditional order practically precludes the Defendant Appellant from assailing the decree on merits. In an appeal against an ex parte decree passed in a summary suit for recovery of money payable upon bills of exchange, it would not be open for the appellant -
judgment debtor to urge that the bills of
exchange viz. the negotiable instruments upon
which the Plaintiff founded its claim were
insufficiently stamped and, therefore, under the proviso to S.35 of the Stamp Act the said negotiable instruments could not have been acted upon by the lower court. Such a submission is no longer open to the Appellants to make. The submission really amount to raising defences by the Appellants even after they had failed to comply with the conditional orders granting leave to defend. The question of proof of admissibility of documents in a contested suit could have been raised by a party against whom such documents are attempted to be brought on record and used. But in view of defendants' failure to furnish the security, the Defendants who had failed to obtain leave to contest must be deemed to have admitted Page 11 of 35 C/SA/397/2017 JUDGMENT the contents of the plaints filed by the Plaintiff. So also the defendant is not entitled to urge in Appeals the questions which were not open to them to raise in the Trial Court."
10. Under the circumstances, the appellants have not complied with the conditional order and therefore they are not entitled to challenge the decree on the ground which they have taken in leave to defend and the appellants are not entitled to raise such question in this forum. Under the circumstances, the order of the Trial Court cannot be interfered in this appeal. The only point which can be raised by the appellants is whether the Trial Court has erred in passing a decree after the appellants had not complied with the conditional order ? That fact is neither pleaded nor argued by the learned advocate for the appellants. Thus, issue no. 1 is not within the scope of this appeal and issue no. 2 is decided in the Negative."
18. The position of law so far as the summary suit and grant of leave to defend is concerned, has been very succinctly explained by the Supreme Court in one of its recent pronouncements in the case of State of Bank of Hyderabad v. Rabo Bank, (2015)10 SCC 521. I may quote the relevant observations thus :
"15. As regards the entitlement of a defendant to the grant of leave to defend, the law is well settled long back in the year 1949 in Sm. Kiranmoyee Dassi v. Dr. J. Chatterjee, AIR 1949 Cal 479, in the form of the following propositions:Page 12 of 35
C/SA/397/2017 JUDGMENT "(1) 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 the judgment and the defendant is entitled to unconditional leave to defend.
(2) If the defendant raised 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.
(3) 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 made it clear that he has a defence, yet, shows such a stage of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff`s 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.
(4) 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.Page 13 of 35
C/SA/397/2017 JUDGMENT (5) 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. It is also noticed that the law as enunciated above, has been followed by the Courts in several cases [See also :
Santosh Kumar v. Bhai Mool Singh, AIR 1958 SC 321; Milkhiram (India) (P) Ltd. v. Chamanlal Bros, AIR 1965 SC 1698; Mechelec Engineers and Manufacturers v. Basic Equipment Corpn. (1976) 4 SCC 687 : (AIR 1977 SC 577) and Sunil Enterprises and Anr. v. SBI Commercial and International Bank Ltd.(1998) 5 SCC 354 : (AIR 1998 SC 2317)].
17. An analysis of the above principles makes it clear that in cases where the defendant has raised a triable issue or a reasonable defence, the defendant is entitled to unconditional leave to defend. Leave is granted to defend even in cases where the defendant upon disclosing a fact, though lacks the defence but makes a positive impression that at the trial the defence would be established to the plaintiff's claim. Only in the cases where the defence set up is illusory or sham or practically moonshine, the plaintiff is entitled to leave to sign judgment.
Page 14 of 35C/SA/397/2017 JUDGMENT
18. Insofar as the question of maintainability of the suit in question under Order 37, CPC is concerned, this Court has in Neebha Kapoori v. Jayantilal Khandwala, 2008 (3) SCC 770 : (AIR 2008 SC 1117) observed that where the applicability of Order 37 itself is in question, grant of leave to defend may be permissible. The Court before passing a decree is entitled to take into consideration the consequences therefor. The Courts dealing with summary trials should act very carefully taking note of the interests of both the parties. Merely on the ground that the defendant may resort to prolonged litigation by putting forth untenable and frivolous defences, grant of leave to defend cannot be declined. At the same time, the Court must ensure that the defendant raises a real issue and not a sham one. The Court cannot reject the defence on the ground of implausibility or inconsistency. Before recording a finding of granting leave to defend, the Court should assess the facts and come to the conclusion that if the facts alleged by the defendant in the affidavit are established, there would be a good or even a plausible defence on those facts.
19. Although the affidavit does not positively and immediately make it clear that he had a defence, yet, it shows such a state of facts leading to the inference that at the trial of the action, the defendant may be able to establish a defence to the plaintiff`s 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 [See : T. Sukhender Reddy v. M. Surender Reddy, 1998 (3) ALD 659 :
Page 15 of 35 C/SA/397/2017 JUDGMENT
(AIR 1998 AP 399)].
20. We are in total agreement with the view taken by this Court in Raj Duggal v. Ramesh Kumar Bansal , 1991 Suppl (1) SCC 191 : (AIR 1990 SC 2218) that leave to defend the Summons for judgment shall always be granted to the defendant when there is a triable issue as to the meaning or correctness of the documents on which the claim is based or the alleged facts are of such nature which entitle the defendant to interrogate or cross-examine the plaintiff or his witnesses."
ANALYSIS :
19. I have no doubt in my mind that the first appellate court committed a serious error in dismissing the first appeal without considering the merits of the grounds raised in the memo of the appeal and solely on the count that as the defendants failed to comply with the conditional order of leave to defend they are not entitled to challenge the decree on the grounds which they had raised while seeking unconditional leave to defend before the trial Court.
20. It appears that this error on account of the mechanical reliance on a Division Bench decision of the Bombay High Court in the case of D.Shanalal (supra).
21. Let me explain the position of law in my own way. The Civil Procedure Code is divided into two parts. The first part of the Code contains the substantive provisions of law and the second Page 16 of 35 C/SA/397/2017 JUDGMENT part contains the procedural provisions of law. To illustrate, the substantive provisions of law with regard to the first appeal is Section 96 CPC, whereas the procedural provisions of law are in the form of Order 41 CPC. In the same manner, the substantive provisions of law with regard to the second appeal is Section 100 CPC, whereas the connected procedural provisions of law are in the form of Order 42 CPC. One more illustration of Section 104 CPC, which relates to orders from which an appeal lies and the connected procedural provisions of law, is Order 43 CPC. In the same manner, so far as Section 105 CPC is concerned, the procedural provision is Order 43 Rule 1-A CPC. Section 105 CPC is extracted hereunder :
"105. Other orders.- (1) Save as otherwise expressly provided, no appeal shall lie from any order made by a court in the exercise of its original or appellate jurisdiction; but, where a decree is appealed from, any error, defect or irregularity in any order, affecting the decision of the case, may be set forth as a ground of objection in the memorandum of appeal.
(2) Notwithstanding anything contained in sub-section (1), where any party aggrieved by an order of remand from which an appeal lies does not appeal therefrom, he shall thereafter be precluded from disputing its correctness."
22. At this stage, let me look into a very important provision which the first appellate court seems to have overlooked. I am referring to Order 43 Rule 1-A CPC. Order 43 Rule1-A CPC reads as under :
Page 17 of 35C/SA/397/2017 JUDGMENT "1A. Right to challenge non-appealable orders in appeal against decrees.- (1) Where any order is made under this Code against a party and thereupon any judgment is pronounced against such party and a decree is drawn up, such party may, in art appeal against the decree, contend that such order should not have been made and the judgment should not have been pronounced.
(2) In an appeal against a decree passed in a suit after recording a compromise or refusing to record a compromise, it shall be open to the appellant to contest the decree on the ground that the compromise should, or should not, have been recorded."
23. A perusal of the above provisions show that where a decree is appealed from, any error, defect or irregularity in any order, affecting the decision of the case, may be set forth as a ground of objection in the memorandum of appeal; besides, where any order is made under the Civil Procedure Code, against a party and thereupon any judgment is pronounced against such party and a decree is drawn up, such party may, in an appeal against the decree, contend that such order should not have been made and the judgment should not have been pronounced.
24. Order 43 Rule 1-A(2) talks about an appeal against a decree passed in a suit after recording a compromise or refusing to record a compromise. Sub-rule (2) provides that it shall be open to the appellant to contest the decree on the ground that the compromise should or should not have been recorded. We Page 18 of 35 C/SA/397/2017 JUDGMENT are not concerned, in the present case, with any compromise recorded in a suit and a decree passed on the basis of such compromise. I am only referring to this particular provision to explain the true purport of Order 43 Rule 1-A CPC.
25. Order 43 Rule 1 which deals with appeals against non- appealable orders did contain a provision providing for appeal against an order passed on a compromise petition in Rule 1(m). The same came to be deleted by Act 104 of 1976 with effect from 1.2.1977. A new provision under Rule 1-A came to be added to Order 43 CPC, which has been reproduced above. A reading of Rule 1-A of Order 43 CPC shows that a right is recognized in favour of the appellant to challenge non-appealable orders in an appeal filed against a decree. Rule 1-A does not make a non- appealable order appealable. The party aggrieved by an order which is not appealable can make his grievance against such an order when an appeal is preferred against a decree passed in a suit. Sub-Rule (2) of Rule 1-A of Order 43 CPC (although not relevant for the present purpose) states that in case where a compromise is recorded and based on the compromise a decree is passed or after refusing to record the compromise a decree is passed by the court below, it shall be open to the appellant to contest the decree on the ground that the compromise should or should not have been recorded. It is thus clear that the order recording the compromise is not appealable, but where a decree is passed based on the compromise, when that decree is assailed, it is open to the appellant to challenge the decree on the ground that the compromise should not have been recorded.
26. So far as the case in hand is concerned, the order passed by the trial Court granting the conditional leave to defend is not Page 19 of 35 C/SA/397/2017 JUDGMENT appealable. This order could have been challenged by the defendants by filing a Special Civil Application before this Court under Article 227 of the Constitution of India. However, the defendants did not deem fit to challenge such order passed by the trial Court granting conditional leave to defend, and at the same time, also failed to comply with such conditional order. This led to passing of the decree, and this decree is appealable under Section 96 of the CPC on the basis of the provisions of Order 43 Rule 1-A(1). This decree, although could be strictly termed as an ex-parte decree passed on account of failure to comply with the conditional order of leave to defend, yet can be challenged in an appeal like any other decree which is appealable. In my view, the first appellate court is not right in taking the view that the grounds raised in the first appeal could not have been looked into on their own merits because of non- compliance of the conditional order of leave to defend.
27. In the aforesaid context, let me refer to and rely upon two decisions of the Supreme Court. In Ajay Bansal v. Anup Mehta, AIR 2007 SC 909, the Supreme Court made few observations although in a different context, yet very much relevant for the purpose of the present matter. The matter before the Supreme Court was one arising from a summary suit filed in terms of Order 37 CPC. The respondent therein filed an application purported to have been under Order 37 Rule 3(5) CPC praying for grant of leave to defend the said suit. The Civil Judge found the defence to be sham and illusory and declined to grant leave to defend. On the same date itself, a final judgment and decree was passed. It appears that an application was filed under Article 227 of the Constitution of India challenging the order of the Civil Judge declining to grant leave to defend. The same Page 20 of 35 C/SA/397/2017 JUDGMENT came to be allowed by the High Court. Before the Supreme Court, it was argued on behalf of the appellant that as an appeal was maintainable under Section 96 of the Code against the judgment and decree passed by the Civil Judge, the application under Section 227 of the Constitution of India was not maintainable. On the other hand, it was argued on behalf of the respondents that a petition under Article 227 was maintainable as the respondents could not have been put to undue hardship of depositing the entire decretal amount in terms of Order 41 Rule1 CPC although it had made out a good case for obtaining the leave to defend the suit. While dismissing the appeal, the Supreme Court held as under :
"12. A decree passed in a summary suit where leave to defend the suit has been refused is almost automatic. The consequence of passing a decree cannot be avoided.
13. Ordinarily, an application under Article 227 of the Constitution of India would not be maintainable where an appeal lies. An appeal lay from the decree under Section 96 of the Code. When an appeal could be filed, ordinarily, an application under Article 227 of the Constitution of India would not be entertained.
14. A decree passed subsequent to the refusal of leave to defend could either be under Order XXXVII, Rule 3(6) of the Code or it could be based on the affidavit evidence on the side of the plaintiff and the documents produced or even based on oral evidence formally proving, say, the execution of a promissory note by the defendant. It may not be proper or necessary to apply the theory of "dependent order" in Page 21 of 35 C/SA/397/2017 JUDGMENT such circumstances. For one, the theory may not apply. Even if this Court were to set aside the order of the Court below and give the defendant leave to defend the suit, the decree that is passed may not go automatically. It may have to be set aside. Secondly, the defendant can always go to the Court which passed the decree and move under Rule 4 of Order XXXVII of the Code to reopen the decree.
15. The theory of "dependent order" may not apply in a case of this nature because even if this Court were to set aside the order refusing leave to defend, the decree subsequently passed may not fall by itself. It has still to be set aside either by resort to Order XXXVII, Rule 4 or by way of an appeal, or by some other mode known to law. In a given case like the present one as it may not be proper to interfere with the decree merely because in an appeal against an order refusing leave to defend, this Court is inclined to take a different view. [See V. S. Saini and Anr. v. D.C.M. Ltd., AIR 2004 Delhi 219.]
16. The defendant in such a case can also be left to appeal against the decree and therein challenge the order refusing leave to defend in terms of Section 105(1) of the Code."
28. Thus, para 16 referred to above makes it abundantly clear that the defendant can file an appeal against the decree and challenge the order refusing the leave to defend in terms of Section 105(1) of the Code. Once it is permissible to challenge, then all grounds raised are to be looked into by the first appellate court on merits.
Page 22 of 35C/SA/397/2017 JUDGMENT
29. In Wada Arun Asbestos Private Limited v. Gujarat Water Supply and Sewerage Board, AIR 2009 SC 1027, the Supreme Court observed as under :
"15. Where a conditional leave is granted and the conditions therefor are not complied with, a judgment in favour of the plaintiff can be passed. It is not in dispute that the first appeal was maintainable. Where a decree is appealed from, any error, defect or irregularity in any order affecting the decision of the case may be set forth as a ground of objection in the Memorandum of Appeal as envisaged under Section 105 of the Code of Civil Procedure.
16. It is in the aforementioned backdrop, the question as to whether a revision petition was maintainable against an order granting conditional leave must be considered. We will proceed on the basis that an order imposing a conditional leave to defend the suit was a jurisdictional question and, thus, a revision application would be maintainable as has been held by various High Courts, notable amongst them are The New Ashapuri Co-operative Housing Society Ltd. and Anr. v. Arvindkumar Manilal Patel [AIR 1975 Gujarat 76]; Fateh Lal v. Sunder Lal [AIR 1980 Rajasthan 220]; Modi Ram and Anr. v. Smt. Sugan Bai [AIR 2005 Rajasthan 12]; and A.K. Velan v. M/s. Narnyanan and Co. (P) Ltd. [AIR 1972 Madras 118].
17. But if a right of appeal from the decree is conceded to a defendant, in our opinion, he cannot be denied a right to challenge an order which was subject to revision in his Page 23 of 35 C/SA/397/2017 JUDGMENT memorandum of appeal filed from the decree ultimately passed.
21. We fail to persuade ourselves to agree with the contention of Mr. Chitale that although a revision from an order granting conditional leave was maintainable, the same could not have been a subject matter of challenge in an appeal from a decree as envisaged under Section 105 of the Code of Civil Procedure.
22. A statutory right conferred on a litigant cannot ordinarily be taken away. A civil revision application might have been maintainable as against the order dated 27.11.2002 granting conditional leave. The said remedy was also available where leave to defend a suit is refused. Leave to defend a suit, as noticed herein before, should ordinarily be granted. It was, therefore, permissible for the defendant to raise the said contention in the appeal although it had asked for time to comply with the conditions."
30. I could also lay my hands on one very interesting judgment delivered by a Division Bench of the Calcutta High Court in the case of Bonwari Lal Roy v. Sohan Lal Daga, 1955(1) ILR (Cal)
299. The case before the Division Bench of the Calcutta High Court was also one under Order 37 Rule 1 CPC. The summary suit was based on hundies.. The execution of the hundies was not denied by the defendant but the defence for leave to defend was that a sum of Rs.15,800=00 had been paid towards the amount due under the hundies, for which, no credit had been given. The learned Judge trying the suit took the view that the defence proposed was not a bonafide defence. However, the court Page 24 of 35 C/SA/397/2017 JUDGMENT showed its inclination to grant leave to defend on certain terms, but as the defendant was not prepared to be put on terms, the application for leave to defend was dismissed. Later, a decree was passed. It was argued before the High Court that no effective relief could be given in the appeal as if an appeal would be allowed, leave would have to be given to the defendant to defend the suit; but inasmuch as the suit had already been disposed of by a decree, which stood unchallenged. On behalf of the appellant-defendant, it was pointed out that a decree in favour of the plaintiff would follow as a matter of course and, therefore, the effect of the order would be to bar out the defendant's defence and to declare him liable to the plaintiff for the amount claimed. In the course of the hearing of the matter, one Bombay High Court decision in the case of Ramanlal Shantilal and Company v. Chimanlal Damodardas, 58 ILR (Bom) 268, fell for the consideration of the court. In the said case, Beaumont, C.J.. had made certain observations with regard to the appealability of an order refusing leave to defend or giving leave on terms under Rule 3 Order 37 CPC. It was observed by His Lordship Beaumont, C.J. that in an appeal from the decree refusing leave to defend there would not be any other question that could be canvassed because the merits would not have been gone into at all and the only matter which could be considered would be the propriety or otherwise of the order made under Rule 3 of Order 37 CPC. Besides, His Lordship observed that as an order refusing leave to defend or granting leave on terms which could not be complied with, entitled the plaintiff to a decree in terms of his plaint and an order refusing leave or granting leave on conditions appear to His Lordship to be an order virtually determining the rights of the parties as regards the claim in the suit.
Page 25 of 35C/SA/397/2017 JUDGMENT
31. In the case of Ramanlal v. Chunilal, reported in 34 Bom.L.R. 252, Beaumont, C.J., at page 254 of his judgment, had observed thus :
"But, however, that may be, it seems to me to be clear that the effect of O.XXXVII, R.2, is that if the Judge refuses leave to defend, or gives leave to defend on terms which the defendant is not able to comply with, the result is that the plaint is taken to be admitted, and the plaintiff is entitled to an order on that basis. Rule 206 of the rules of this High Court provides how the plaintiff is to obtain his order. He is to set the case down for hearing before the Chamber Judge, but having done that it seems to me that the making of the order will automatically follow in view of the provision of R.2 of O.XXXVII, that all the allegations in the plaint are to be taken as admitted."
32. In his concurring judgment, Rangnekar, J., in the case of Ramanlal v. Chunilal (supra), had observed that if the defendant is refused leave then he cannot appear and defend the suit and he would be deemed to have admitted the allegations contained in the plaint and the plaintiff will be entitled to a decree as a matter of course. The result, therefor, of a refusal of an application for leave to defend is to deprive the defendant of the right to defend the suit and so far as the defendant is concerned, the order practically determines the whole cause. While preferring an appeal against the ex-parte decree passed under O.XXXVII R.3 of the Code, the defendant continues under the same disability.
Page 26 of 35C/SA/397/2017 JUDGMENT
33. The Division Bench of the Calcutta High Court was not able to agree with the views of the Bombay High Court. Few relevant observations are extracted hereunder :
"[13] With great respect, it appears to me that the ground upon which the learned Judges of the Bombay High Court proceeded cannot be accepted as sound. It may be that their actual decision was right under the Rules of the Bombay High Court which required a decree to be immediately passed in terms of the plaint, if leave to defend was not given or having been given on conditions, was not availed of. But in so far as the construction they put on Order XXXVII, Rules 2 and 3, is concerned, it appears to me that they were creating by judicial decision a right of appeal on equitable considerations and considerations of convenience and not construing the provisions of the Code, as they were. I have already pointed out that if the matter be looked at purely from the point of view of the Code, it cannot possibly be contended that an appeal lies. If it be looked at from the point of view of Clause 15 of the Letters Patent, even then it cannot, in my view, be contended that an appeal lies because unlike an order made under Chapter XIIIA of the Rules of the Original Side, an order made under Rule 3 of Order XXXVII, refusing leave to defend or giving such leave on conditions, neither involves, nor is automatically followed by, a decree. As a matter of practice, the decree is passed on a subsequent date when the Judge has to make a further declaration. If nothing else requires to be proved, the service of summons, I presume, must at least be proved and if any bar of limitation appears on the surface of the plaint, that Page 27 of 35 C/SA/397/2017 JUDGMENT also, I presume, must be given effect to. If an order refusing leave to defend is made under any provision of law in such terms that it in itself contains the final decree, then in such a case it can, in my view, be said that the order contains an adjudication of the claim and is therefore appealable but under the scheme contained in Order XXXVII of the Code of Civil Procedure, an order under Rule 3 is not an order of that kind. It does not itself contain or involve a decree, nor is it automatically and invariably followed by a decree in terms of the plaint, notwithstanding anything contained in any other law.
[14] That appears to me to have been the view taken in two decisions of this Court on which reliance was placed on behalf of the Plaintiff-Respondent. The first of those decisions is Sukhlal Chundermull v. Eastern Bank Ltd., (1915)42 ILR(Cal) 735. It was held in that case that an order made by a single Judge, sitting on the Original Side, under Order XXXVII, Rule 2, of the Code of Civil Procedure, directing a Defendant to give security as a term on which leave to defend should be given was not a judgment within the meaning of Clause 15 of the Letters Patent and was not appealable. The actual order passed in that case by the trial Judge, Chitty, J., was that upon the Defendant within a fortnight from the date hereof; giving security to the satisfaction of the Registrar of this Court to the extent of the Plaintiff bank's claim in this suit, he be at liberty to appear in and defend this suit.
[15] It was thus an order giving leave on conditions. Dealing Page 28 of 35 C/SA/397/2017 JUDGMENT with that order, Jenkins, C.J., who delivered the judgment of the Court, observed that the order complained of was nut a judgment from which an appeal lay under the Letters Patent. For what a 'judgment' meant, the learned Chief Justice referred to the decision to which reference is always made, namely, the decision of Sir Richard Couch in the well-known case of The Justices of the Peace for Calcutta v. The Oriental Gas Company,1872 8 BLR 433. That decision, it will be recalled, defines a 'judgment' as: a decision which affects the merits of the question between the parties by determining some right or liability.
[16] It is interesting to note that Jenkins, C.J., referred to the fact that there was no provision for appeal in the Code itself and added that if the case had arisen in Bombay, that circumstance would possibly have been regarded as decisive of the question against (he Appellant, but it was not very material in Bengal The meaning of that observation obviously was that, in 1915, when the decision was given, Clause (cc) had not been added by this Court to Rule 1 of Order XXXVII, and, therefore, so far as this Province was concerned, Order XXXVII was limited only to the High Court. In Bombay, the position, appears to have been otherwise and that probably was the reason which led to the observation made by the learned Chief Justice.
[17] The other decision on which the Respondent relied was the decision in Chattu Lal Misser v. The Marwari Commercial Bank, Ltd., 1925 30 CalWN 298. There, the order dealt with was one passed under Chapter XIIIA of the Original Side Page 29 of 35 C/SA/397/2017 JUDGMENT Rules, but their Lordships had occasion to explain more fully what the decision in Sukhlal Chundermull v. Eastern Bank, Ltd., really meant and how it was to be distinguished as not applying to cases where leave to defend was refused under Chapter XIIIA or such leave was given on conditions under that chapter. The order made in that case was one giving leave to defend on condition that the Defendants furnished security to the extent of eight lacs of rupees to the satisfaction of the Registrar by a particular date and it was added that in default of the Defendants furnishing such security within the time fixed or within such further time as the Registrar might allow, a decree shall be drawn up in this suit against the Defendants for the sum of rupees sixty-four lacs ninety thousand and nine hundred annas seven and pies eleven with the costs of this suit.
[18] Both Sanderson, C J., and Buckland, J'., pointed out that an order in those terms not only gave leave to defend on conditions, but also contained the final decree itself which would come to be passed by a mere ministerial process in case the conditions were not complied with by the Defendants. It was on that ground that they distinguished an order made under Chapter XIIIA from an order made under Rule 3 of Order XXXVII. In fact, Buckland, J., said that but for the fact that an order under Chapter XIIIA involved an adjudication on the claim and made the order a final judgment, he did not know that he should have taken the view that he was actually taking.
[19] Both these decisions, therefore, proceeded on the footing Page 30 of 35 C/SA/397/2017 JUDGMENT that an order under Rule 3 of Order XXXVII, refusing leave to defend or giving leave on conditions decided no rights, but was merely an order regulating procedure which could not be said to be a judgment within the meaning of Clause 15 of the Letters Patent. No good reason was shown before us by the Appellant why we should not follow those decisions.
[20] It was contended by Mr. Dutt that the order dealt with by the decision in Sukhlal Chundermull v. Eastern Bank, Ltd. was a conditional order in respect of which it might perhaps be said that by itself it determined no rights, but an order, refusing leave to defend altogether, could not be said to belong to that category. In support of that contention he referred to an observation of Page, C.J., made in the case of A.S. Chettiar Firm v. V.T. Veerappa Chettiar,1935 13 ILR(Ran) 239. The suit there was a suit under Order XXXVII of the Code of Civil Procedure and not under any special rules framed by the Court. The order passed was that the Defendants would have leave to defend, provided they paid into Court within a certain time a certain sum of money and furnished security for the balance of the claim to the satisfaction of the Court. The order said further that in the event of the Defendants failing to pay the amount in Court within the time stipulated or failing to furnish security, leave to defend would be withdrawn and the Plaintiff would be entitled to a decree for the full amount claimed. It will be noticed that this order went much further than the order passed by Chitty, J., in the case in Sukhlal Chundermull v. Eastern Bank, Ltd. because it contained, besides the conditions on which leave was granted, also a direction as Page 31 of 35 C/SA/397/2017 JUDGMENT regards the consequences of a failure to comply with the conditions. The order passed by Chitty, J., contained no such penalty clause or consequential direction. Nevertheless, the Rangoon High Court held that the order was not a judgment within Clause 13 of the Letters Patent of that Court, but was an order merely regulating the procedure in the suit and not determining any right or liability as between the parties. In the course of his judgment, however, Page, C.J., had occasion to refer to an observation of Rangnekar, J., in the Bombay case to which I have already referred that an order refusing leave and a conditional order granting leave stood on the same footing. The comment of Page, C.J., on that remark of Rangnekar, J., was that the two types of order referred to by the learned Bombay Judge differed toto coelo. In the opinion of the learned Chief Justice an order refusing absolutely an application for leave to defend was an order which finally disposed of the rights of the parties, whereas an order granting conditional leave did not do any such thing.
[21] I confess that I am unable to understand on what basis any distinction can be made between the two types of order which Page, C.J., had to consider. The question under Rule 3 of Order XXXVII is whether leave to defend shall or shall not be given or shall be given on conditions. The Plaintiff will insist that leave should not be given, whereas the Defendant will claim that it should be. If leave is refused, the Defendant's claim is negatived and if leave is granted on conditions and the conditions are not complied with, even then his claim is negatived, although its rejection may be Page 32 of 35 C/SA/397/2017 JUDGMENT postponed for a time. Whether or not an order under Rule 3 of Order XXXVII decides any rights as between the parties, it appears to me impossible to say that an order refusing leave determines certain rights, but an order granting leave on conditions does not. If in the latter case the conditions are not complied with, the same consequences will follow as would follow from an order refusing leave to appeal altogether."
34. The aforenoted Division Bench decision of the Calcutta High Court was taken notice of by a Division Bench of the Bombay High Court in the case of Bombay Enamel Works (supra). Their Lordships of the Bombay High Court observed as under :
"Now it is to be noticed that when the conditional order for granting leave to defend was passed on 6th February, 1969 the defendants accepted the order and did not seek to challenge it by filing a revision application in the High Court, a course which was clearly available to them. Mr. Khare, however, contends that as this is a first appeal he is entitled to take up this contention namely that the learned trial Judge ought to have granted defendants unconditional leave to defend. He referred to a Calcutta judgment which he said supported his contention but did not actually cite or read it out to us. It would appear that the Calcutta judgment referred to by Mr. Khare is a judgment reported in ILR (1955) 1 Cal 299 and although the authority is not before us it would appear that it is laid down in this judgment that although no appeal may lie from an order refusing leave to defend the propriety of the order can be canvassed in the appeal from the decree. Broadly speaking it would appear to Page 33 of 35 C/SA/397/2017 JUDGMENT us to be a correct proposition of law that in a first appeal the propriety of any interlocutory or interim order made during the proceedings in the trial court could be challenged."
35. I also take notice of the fact that in D.Shanalal (supra), which is later in point of time, the Division Bench of the Bombay High Court had no occasion to consider its earlier Division Bench decision in the case of Bombay Enamel Works (supra). With profound respect to the Division Bench decision of the Bombay High Court in the case of D.Shanalal (supra), I am unable to agree with the views expressed therein that, when the matter is carried in appeal, the defendant, who did not obtain leave or had failed to comply with the conditional order, will not have any greater right to contest the plaintiff's claim by presenting an appeal from an ex-parte decree. I am of the view that in an appeal filed from an ex-parte decree, it is open for the defendant to point out to the appellate court that conditional leave to defend ought not to have been granted and such order was erroneous in law. The appellate court is obliged to consider the case of the defendant in appeal on merits, i.e. it is obliged to consider the grounds raised in the memo of the appeal.
36. In view of the aforesaid discussion, I am of the view that ends of justice would be met if the matter is remanded to the first appellate court for fresh hearing of the Regular Civil Appeal No.16 of 2016.
37. This Second Appeal is, accordingly, allowed. The impugned judgment and order passed by the Principal District Judge at Gandhinagar in the Regular Civil Appeal No.16 of 2016 is hereby quashed and set-aside with a direction to the first appellate Page 34 of 35 C/SA/397/2017 JUDGMENT court to rehear the Regular Civil Appeal No.16 of 2016 afresh and decide the same on the basis of the merits of the grounds that may be urged by the appellants - original defendants in the course of the hearing of the appeal.
38. Let this exercise be undertaken at the earliest. The Regular Civil Appeal No.16 of 2016 shall be heard afresh and the same shall be disposed of with judgment within a period of two months from the date of receipt of this order.
39. Let me clarify that I have not gone into the merits of the case put up by the appellants. I have not expressed any opinion as regards the merits of the grounds raised in the memorandum of the first appeal. I have confined my adjudication on a very limited issue as regards the scope of the appeal filed by the defendants-appellants against the decree passed from an order of conditional leave to defend.
40. In view of the disposal of the Second Appeal, the Civil Application would not survive and the same is disposed of accordingly.
(J.B.PARDIWALA, J.) /MOINUDDIN Page 35 of 35