1. C. R. P. No. 3867 of 1983 has been filed by defendants 1, 3 and 4 in O. S. No. 129 of 1983 on the file of the Principal Civil Judge, Mangalore. They have challenged the order dated 25-10-1983 passed on I. A. S. Nos. IV and V. C. R. P. No. 598 of 1984 has been filed by defendant 2 in the said suit challenging the very order. The Principal Civil Judge has, by the impugned order, granted leave to the defendants to defendants the suit but on terms, namely, the defendants furnishing security for due performance of the decree that may be passed if the plaintiff succeeds in the suit. He has further directed the defendants to file their written statement within a period of one month from the date of the order.
2. C. R. P. No. 3867 of 1983 has been admitted and the impugned order has been stayed. C.R.P. No. 598 of 1984 has come up for admission. Respondent-1 plaintiff has filed I.A. No. 11 in C.R.P. No. 3867 of 083 requesting the Court to vacate the interim order of stay. The Counsel appearing on both sides in C.R.P. No. 3867 of 1983 submitted that the C.R.P. be heard and disposed of on merits. The Counsel for the petitioner in C.R.P. No. 598 of 1984 submitted, in my opinion rightly, that the fate of this petition depends on the result of C.R.P. No. 3867 of 1983.
3. Respondent- 1-plaintiff filed the said suit for recovery of certain amounts. The suit was filed under 0. 37 Civil PC as a summary suit. The procedure duly prescribed in 0. 37 R. 3, CPC, was undisputably complied with by the trial Court. The defendants entered appearance in accordance with 0. 37 R. 3(3) Civil PC. The plaintiff took steps as per the provisions in sub-r. (4) of R. 3 of 0. 37, C.P.C. Summons for judgment in Form No. 4A in Appendix B was duly served. The defendants took necessary steps 18 under sub-r. (5) of the said provision and thereupon the matter was heard in the course of which elaborate arguments were advanced and the learned Civil Judge passed the impugned order.
4. Prior to the coming into force of Act 104 of 1976 0. 37 R. 3 C. P.C., consisted of sub-r. (1) and sub-r. (2) only. These two sub-rules have been split into sub-rules (1) to (7) by the amending Act. Reading of the unamended provisions and the amended provisions side by side leaves no doubt in the mind of anyone that the object behind the provisions as it was unamended has remained unchanged even by the amended provisions. Different stages regarding procedure particularly pertaining to issue of notices and judicial processes, entering of appearance by defendants, taking of step by the plaintiff to serve summons for judgment in Form No. 4A in Appendix B and thereafter the defendants applying for leave to defend have been provided. What should be considered at the aforementioned different stages have also been provided particularly in sub-rr. (5) and (6). By introducing sub-r. (7) power has been granted to the Court or Judge to excuse the delay of the defendant in entering appearance or in applying for leave to defendants the suit when sufficient cause is shown, evidently to the satisfaction of the Court or Judge.
5. The principles underlying grant or refusing to grant leave to defendants have obviously remained unchanged. These principles have been settled by the Supreme Court in Santosh Kumar v. Mool Singh : 1SCR1211 . The Supreme Court has laid, down as follows -
'Though the Court is given a discretion by 0. 37 R. 3(2) it must be exercised along judicial lines, and that in turn means, in consonance with the principles of natural justice that form the foundations of our laws. Those principles so far as they touch the, matter, are well known. Wherever the defence raises a 'triable issue', leave must be given and when that is the case it must be given unconditionally, otherwise the leave may be illusory. If the Court is of opinion that the defence is not bona fide, then it can impose conditions and is not tied down to refusing leave to defendants.
But it cannot reach the conclusion that the defence is not bona fide arbitrary. It is as much bound by judicial rules and judicial procedure in reaching a conclusion of this kind as in any other matter.
Where the defence is a good and valid one, conditions cannot be imposed. The power to impose conditions is only there to ensure that there be a speedy trial. If there is reason to believe that the defendant is trying to prolong the litigation and evade a speedy trial, then conditions can be imposed. But that conclusion cannot be reached simply because the defendant does not adduce his evidence even before he is told that he may defendants the action.
It is always undesirable and indeed impossible, to lay down hard and fast rules in matters that affect discretion. But it is necessary to understand the reason for a special procedure of this kind in order that the discretion may be properly exercised. Taken by and large, the object is to see that the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining an early decree by raising untenable and frivolous defences in a class of cases where speedy decisions are desirable in the interests of trade and commerce. In general, therefore, the test is to see whether the defence raises a real issue and not a sham one, in the sense that, if the facts alleged by the defendant were established, there would be a good or even a plausible, defence on those facts.
Ordinarily an appeal will not be entertained against an exercise of discretion that has been exercised along sound judicial lines. But if the discretion is exercised arbitrarily, or is based on a misunderstanding of the principles that govern its exercise, then interference is called for if there has been a resultant failure of justice. Where the only ground given for concluding that the defence is not bona fide is that the defendant did not prove his assertions before he was allowed to put in his defence, there is an obvious failure 6f justice if judgment is entered against a man who, if he is allowed to prove his case, cannot but succeed. Accordingly in such a case interference is called for.
6. In Milkhiram (India) P. Ltd. v. Chamanlal Bros. : AIR1965SC1698 the Supreme Court has again laid down as follows :
'It is indeed not easy to say in many cases whether the defence is a genuine one or not and therefore it should be left to the discretion of the trial Judge who has experience of such matters to form his own tentative conclusion about the quality or nature of the defence and determine the conditions upon which leave to defendants 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 defendants altogether. The majority of cases, however, cannot be dealt with in a clear cut way. The Jud may entertain a genuine doubt whether the defence is genuine or sham or in other words whether it raises a triable issue or not. To meet such cases, by the amendment made by the Bombay High Court to 0.37 R. 2, even in cases where an apparently triable issue is raised the Judge may impose conditions in granting leave to defendants. The matter is in the discretion of the trial Judge which discretion has to be exercised judiciously. Care has, however, to be taken that the object of the rule to assist the expeditious disposal o commercial causes is not defeated and at the same time real and genuine triable issues are not shut out by unduly sever orders as to deposit. It would be undesirable and inexpedient to lay down any rule of general application. Whether the defence raises a triable issue or not has to be ascertained by the Court from the pleadings before it and the affidavits of parties and it is not open to the Court to call for evidence at the stage. If upon, consideration of material placed before the Court, it comes to the conclusion that the defence is a sham one or is fantastic or highly improbable, an order - putting the defendantsant . upon terms before granting leave to defend would be justified. Even in cases where a defence is plausible but is improbable the Court would be justified in concluding that the issue is not a triable issue and put the defendant on terms while granting leave to defend.' (underlining is mine)
It May be stated here with advantage that the Bombay Amendment reads as follows:
'(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 grated to him unconditionally or upon such terms as to the Judge appear just.'
As this provision is similar to sub-rules (4) and (5) of 0. 37 R. 3 as it, stands, the learned Civil Judge has, after having expressed so in the impugned order, proceeded to pass the impugned order namely, 'granting leave unconditionally but on terms'. It is necessary to state here that as per the facts in the said case leave had not been granted unconditionally but on terms by a single Judge of the Bombay High Court. The complaint was that no acceptable reasons had been put forth in support of that order. The Supreme Court dismissed the appeal and affirmed the order impugned.
7. In Mechalec Engineers & Manufacturers, v. Basic Equipment Corporation : 1SCR1060 the Supreme Court has enumerated the principles to be followed while considering the question of grant of leave to the defendant, as follows:
' (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 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.
(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. The decisions of the Supreme Court already referred have-been followed in this decision. One more principle that has been laid down in Mechalec Engineers & .'s case : AIR1965SC1698 , 1 have no hesitation in holding that the discretion to decide whether the defence is a genuine one or not is to be left to the trial Judge. It is for the trial Judge to form an opinion whether the allegation made raises a triable issue or whether the defence raised is frivolous, false or sham. In view of this principle, it will be for the trial Judge to form an opinion as to whether the defendant has no defence or the defence set up is illusory, sham or practically moonshine. As to how such an opinion is to be formed by the trial Judge has been also laid down by the Supreme Court in the said decision.
8. It is not the complaint before me that the Civil Judge has based his conclusion on any material contrary to what has been laid down by the Supreme Court in the said decision. On the other hand, it is seen from para15 onwards that the Civil Judge has adverted to the material, which ought to be taken into consideration to form such an opinion. At the end of para16 of the impugned order th6 Civil Judge has concluded as follows:
'But, at present it cannot be said that the defense of defendants 3 and 4 is sham or colorable.'
It is in Para 17 that the Civil Judge has dealt with the defense of defendant 2 as per IA No. V filed by him. It may be remembered that this defendant 2 is the petitioner in C.R.P. No. 598 of 1984. He has ultimately concluded as follows
'So, therefore, it can be seen that all these allegations of the second defendant would also certainly give rise to triable issues in the suit. There is nothing in the pleas of the second defendant also that these pleas are in any way sham or colourable.'
In the end of para17 he has expressed his opinion as follows:
'But, all the same they cannot be pressed into service to condemn the defendants and to hold that the pleas that they have raised now in I. A. Nos. 4 and 5 are in any way sham or colourable.'
Thereafter he has concluded in para18 as follows:
'Hence, for all the reasons discussed above, I am of the opinion that the defendants will have to be given an opportunity to defend the suit unconditionally but on terms, keeping in view the object of 0. 37, C.P.C., which is meant to provide summary trial and disposal of disputes relating to commercial transactions based on negotiable instruments, the intention being that the money involved in commercial transaction should not be allowed to be staggered or its payment delayed on frivolous grounds.'
It is on this basis that he has passed the impugned order.
9. From this stage onwards the Court would be dealing with C.R.P. No. 3867 of 1983. Sri K. Shivashankar Bhat, learned. Advocate appearing on behalf of the petitioners, urged that the trial Court has acted in excess of its jurisdiction in imposing terms while granting leave unconditionally. He adumbrated his contention with reference to sub-r. (5) and sub-r. (6) of 0. 37 R. 3. He argued that reading of sub-r. (5) and sub-r. (6) shows that the trial Court has to hear the application made by the defendant in response to the summons for judgment served on him and praying for leave to defend and then proceed to pass orders. He argued that after passing such orders the stage for hearing of such summons for judgment as per sub-r. (6) would be reached and at that stage the trial Court has to proceed to consider whether or not terms should also be imposed. According to him, the trial Court has proceeded in violation of these provisions in passing the impugned order.
10. Reference to Form No. 4A in Appendix B clearly, negatives this contention. The form may conveniently be reproduced.