B.K. Mehta, J.
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 herein for recovery of Rs. 5,83,028-42 Ps. being the amount due and payable at the foot of the various accounts, viz. Demand Cash Credit (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 by 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 4 herein entered the appearance and sought leave of the Court to defend the same. 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 plaintiff-Bank to file summary suit 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 accounts, pledged and hypothecated moveables under different accounts and, therefore, the security having been furnished in a sum greater than the amount prayed for in the suit, the leave should be granted by the Court unconditionally. Thirdly, it was contended that since there was a dispute about the amount of interest and the rate thereof, there was a triable issue arid, therefore, the Court should permit the defendndants 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 called 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 to 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. ami Ors. v. Chamanlal Bras. AIR 1965 SC 1698 and Mechalec Engineers & Manufacturers v. Basic Equipment Corporation 0043/1976 : 1SCR1060 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 attending 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, hundies 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 an 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 term of tenancy has been determined or expired. Original Rule 3 of Order 37 has been substituted by the Bombay High Court and a provision has 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 provide 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 to 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 concerned. 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, 1908 was extensively amended with effect from 1st May 1977 by Act 101 of 1976. Rules 1, 2 and 3 of Order 37 have been substituted and relevant part so far as material for our purposes provides as under:
1.(1) This Order shall apply to the following Courts, namely:
(a) High Courts, City Civil Courts and Courts of Small Causes; and
(b) other Courts: xxxxxxxxx
(2) Subject to the provisions of Sub-rule (1), the Order applies to the following classes of suits, namely:
(a) suits upon bills of exchange, hundies and promissory notes;
(b) suits in which the plaintiff seeks only to recover a debt or liquidated de mand in money payable by the defendant, with or without interest, arising,-
(i) on a written contract; or
(ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty; or
(iii) on a guarantee, where the claim against the principal is in respect of a debt or liquidated demand, only.
2. x x x x3.(1) x x x x(2) x x x x(3) x x x x(4) x x x x(5) The defendant may, at any time within ten days from the service of such sum mons 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 Judge 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 in Court.(6) x x x x x x x
It is the context of these amended provisions that a question is posed before me, whether the principles which have been enunciated by the Supreme Court in the aforesaid two decisions will still hold die field in the matter of grant or refusal of leave to defend. It must be admitted at the out set that the discretion which Court enjoyed under the original provisions of Order 37, Rules 1, 2 and 3 before the amendment in 1976, is now sought to be delineated by the presents. Two provisos are pointer in that direction though under the main enactment contained in Sub-rule (5) extracted above, the Court still enjoys the discretion in the matter, whether leave should be granted with or without conditions. In order to find out what would be the relevant provisions which govern such discretion one has got to consider what is excepted by the two provisions. The second proviso now makes it obligatory on the Court not to grant leave to defend suit unless the amount admitted by the defendant as due to the plaintiff is deposited by him in the Court. It is the first proviso which really causes some anxiety, whether it has got any bearing on the main enactment contained in Sub-rule (5). It is patent on the face of the proviso that it is coached in double negative. The said proviso prescribes that leave to defend shall not be refused unless the Court is satisfied about the absence of substantial defence or defence being frivolous or vexatious. It is no doubt true that this proviso appears to be mandatory on the fact of it, but reading Sub-rule (5) as a whole together with the two provisos, it appears that the first proviso tries to circumscribe the discretion of the Court in the matter of refusal of leave. The first proviso obliges the Court that before refusing to grant leave it shall satisfy that the facts disclosed by the defendant do not indicate that there is substantial defence or the Court is satisfied that the defence is frivolous or vexatious. The satisfaction of the Court bsfore refusing to grant leave about the want of substantial defend complicates the situation since the absence of substantial defence may induce the Court in a given case to refuse grant of leave. Notwithstanding this complication, on the well known principle of interpretation of statute, one has to construe the different provisions of an enactment in a harmonious manner so that no part of it is rendered redundant or otiose. Three situations may conceivably arise in such suits. The defence may be of a substantial nature; it may as well be frivolous or vexatious, and thirdly, there may be a defence which is triable, and given an opportunity, the defendant may be able to make his case good. Reading the main enactment together with the first proviso, I am of the opinion that so far as the first two situations are concerned, the job of the Court is not difficult. In a case where there is a substantial or a good defence the Court must grant, as a matter of course, leave to defend the suit. In a case where the defence is patently frivolous or vexatious and the Court is satisfied about it, it would refuse to grant leave. The role of the Court becomes difficult only in those cases where there is a disclosure of probable defence which may be made good if an opportunity is given to the defendant to substantiate his case. It is in this gray area that the discretion of the Court is to be regulated by known and recognised principles. I am of the opinion that having regard to the principles which were governing the discretion of the Court till the relevant provisions of Order 37 of the Civil Procedure Code were amended in 1976 should continue to govern the discretion of the Court in this gray area where there is a probable defence which may be made good provided an opportunity is given. It is here, where the Court has to apply its experience and common sense and decide for itself, whether leave should be granted conditionally or unconditionally. In this connection it would be advantageous to refer to Rule 3 as amended by the High Court of Bombay in Order 37. Sub-rule (3) of the said uaameaded Rule 3 provided that 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, and leave to defend may be granted to him unconditionally or upon such terms as may appear to be just. Rule 143 of the Ahmedabad City Civil Courts Rules 1961 provides in Clause (c) as to when the Court will grant leave to defend the summary suit. Clause (c) of Rule 143 provides as under:
(c) At the hearing of the summons for judgment, the Judge may after considering the affidavits and declaration (if any) if he is satisfied 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 terras and conditions as to security or otherwise as to the Judge may appear just.
This very phraseology as to the disclosure of such facts as may be deemed sufficient to entitle a defendant to defend has been employed by the Parliament in the main enactment of Sub-rule (5) of Rule 3 of Order 37 after its amendment. Rule 143(c) of the Ahmedabad City Civil Courts Rules, besides adopting the same criterion of satisfaction, also permits Court to grant leave on its satisfaction about the defence being good. What facts would be deemed sufficient, in the opinion of the Court, to entitle a defendant to defend a sum nary suit should not be a more matter of value judgment. Undoubtedly it is a matter within the discretion of the Court to decide whether leave should be granted or not on being satisfied about the suffijisacy of defence. None-the-less, it is the discretion which should be will regulated and exercised according to the correct legal principles. It is no doubt (sic) that it would not be possible for the Legislature or Parliimjat to iadicats exhaustively as to what facts should be deemed sufficient for entitling a defendant to leave to defend the suit as if it is a straight jacket formula since the facts may vary from case to case. But in order to appreciate the said provision in proper perspective, the objects and reasons for the said Clause given at the time of moving of the Bill in the Parliament have been looked into. By Clause 87, Order 37, Rules 1, 2 and 3 have been amended. The objects and reasons for the said Clause 87, inter alia, stated-.He must apply for leave to defend within ten days from the date of the service of the summons upon him and such leave will be granted only if the affidavit filed by the defendant discloses such facts?s will make it incumbent upon the plaintiff to prove consideration or such other facts as the court may deem sufficient for granting leave to the defendant to appear and defend the suit. If no leave to defend is granted, the plaintiff is entitled to a decree. The object underlying the summary procedure is to prevent unreasonable obstruction by a defendant who has no defence.
The aforesaid extracted statements from the objects and reasons give perspective of the amended provision of Order 37 in general and Rule 5 in particular. The main enactment contained in Sub-rule (5) will be attracted in those cases where the facts disclosed are deemed to be sufficient in the opinion of the Court as to constitute some defence. In other words, it should be a question of triable issue. It is no doubt true that the object of rational underlying Order 37 is to try those suits specified more particularly in Rule 1 in a summary manner, so that the trial of commercial causes may not be delayed or obstructed by such dishonest defendant trying to raise frivolous or vexatious defence or by offering virtually an apology of defence. The first proviso, therefore, circumscribes the discretion where the Court is satisfied that there is no defence whatsoever or the defence is false or frivolous. Where the Court finds that there is a substantial defence, it is obligatory on the court to grant leave unconditionally. When the court finds that there is a defence in the sense of a triable issue having been raised the Court shall exercise its discretion to grant leave conditionally or unconditionally. The concept of a triable issue is well known, recognized and clearly enunciated. The triable issue may be about want of consideration, execution, want of legality or formality of the execution of document or want of compliance of mandatory obligation of the statute etc. This list is not exhaustive and it will depend on the facts and circumstances of each case, whether the facts disclosed by affidavits or otherwise raise a triable issue, and the Court has to, in every given case before it, examine the facts so disclosed by the defendant with its large experience and robust common sense, whether a triable issue has been raised or not. If should, however, be borne in mind at that stage when the Court is considering whether there is a triable issue or not that the Legislature has by the first proviso circumscribed the power of the Court to refuse to grant leave only on being satisfied that there is a no substantial defence or it is frivolous or vexatious. In other words, till that satisfaction is reached, the Courts not entitled to refuse to grant leave. The Court has also to bear in mind the second proviso which prescribes that no leave shall be granted without the defendant depositing the admitted claim of the plaintiff. It is in this background, therefore, that I have to find out whether the discretion exercised by the trial Court was erroneous on matter of principles.
4. Since the learned Judge has not dealt with this question from this perspective I have to find out what principles are applicable in the facts of the present case. I have, therefore, to remind myself as to what facts the affidavit in reply filed on behalf of the original defendants who are the petitioners and respondents Nos. 2, 3 and 4 before me, have disclosed before the trial Court. The learned Advocate for the defendants urged that it cannot be said, having regard to what is stated in paragraph 10 in the affidavit in reply of the original defendants, that no part of the suit claim has been admitted by them so as to attract the second proviso of Sub-rule (5) of Rule of Order 37. He urged that the defence of the defendants is neither frivolous nor vexatious. The case of the defendants, according to him, as disclosed in the affidavit in reply, is that having regard to the nature of the transactions between the parties and more particularly when they had a pledge account, summary suit was not competent. Secondly, they contested the amount of interest. The learned City Civil Judge was not impressed with any of these contentions and he, therefore, though fit to put the defendants to the condition for the grant of leave to defend that they should make a deposit of Rs. 2 lacs in the Court. He also restrained them by an order of injunction from transferring the property. It was pointed out to no on behalf of the defendants that in the course of the transactions between the parties, there were certain accounts which were pledge accounts creating a pledge in respect of machinery and spare parts thereof and the manufactured goods as also the book debts. According to the respondent-Bank as disclosed in the affidavit in rejoinder, the depreciated value of the machinery so pledged was Rs. 2,49,892/ while that of the manufactured goods was Rs. 1,63,800/ aggregating in all Rs. 4,13,692/-. The amount prayed for in the suit is Rs. 5,83,028-42 Ps. There is a dispute between the parties about the rate of interest in the sense that whether the plaintiff-Bank is entitled to charge a compound rate of interest. It should be stated that the defendants have not in their affidavit in reply averred as to what is the fair market value of the machinery and the manufactured goods according to them. None-the-less, the fact remain that even according to the Bank the depreciated value comes to Rs. 4,13,692/-. In other words, the original book value would be much more than the depreciated value which is by and large calculated for a period commencing from the date of the purchase till the date of the suit. The learned Advocate for the plaintiff urged that the nature of the transactions between the parties, which amongst others includes pledge account, cannot have any bearing on the question whether the defendants should be put to a condition of making cash deposit. It is a question which is to be determined on its own merits and without regard to the fact whether the plaintiff-Bank is secured creditor. He also urged that for all intents and purposes the defendants have admitted the principal amount and joined issue with the Bank on the question of the amount of interest only. He submitted that there is sufficiently no defence disclosed by the defendants and, therefore, the Court ought not to have granted leave to defend but in any case having regard to the fact that the amount claimed in the suit is more than the value of the secured properties, the Court was justified in putting the defendants to the condition of cash deposit. He also submitted that since the Central Bank of India has also obtained attachment before judgment on the machinery and the manufactured goods which are said to have been pledged with the plaintiff-Bank, the alleged security may not be worth its while and the parties must have an opportunity to put in affidavits in that behalf to show whether the State Bank of India alone is entitled to pledged goods or there is any other Bank or claimants which is entitled to have priority in the matter. In the circumstances, therefore, I am of the opinion that in order to appreciate these difficult aspects of the question, the matter should be sent back to that City Civil Court after setting aside the order in question.
5. Since one of the questions between the parties is the right of the Bank to charge interest at the compound rate of interest, in case of the default on the part of the defendants to pay installments due at the simple rate of interest, there arises an issue between the parties as to what would be the exactly amount of interest to which the plaintiff-Bank would be entitled to. It should be recalled that the entire machinery, the manufactured goods and the book debts, if any, are pledged with the Bank. There is also an order of injunction issued by the Court restraining the defendants from transferring the property. In that circumstances, therefore, the plaintiff-Bank, even on its admission about the depreciated value of the machinery and the manufactured goods, is substantially secured. The result is that this revision application is allowed and the rule is made absolute accordingly with the direction to the City Civil Court to dispose of this matter afresh in view of what is indicated in this judgment in the context of the amended provisions and the contentions which have been reproduced as well as well as those that may be advanced at the time of hearing before it and in light of the further affidavits that the parties may desire to file. There should be no order as to costs to this revision application.