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Fateh Lal Vs. Sunder Lal - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtRajasthan High Court
Decided On
Case NumberCivil Revn. Petn. No. 197 of 1979
Judge
Reported inAIR1980Raj220; 1980()WLN188
ActsCode of Civil Procedure (CPC) , 1908 - Sections 115 - Order 37, Rule 3, 3(2), 3(3), 3(4) and 3(5); Code of Civil Procedure (CPC) (Amendment) Act, 1976
AppellantFateh Lal
RespondentSunder Lal
Appellant Advocate N.N. Mathur, Adv.
Respondent Advocate L.R. Bhansali, Adv.
DispositionPetition allowed
Cases ReferredSantosh Kumar v. Bhai Mool Singh
Excerpt:
civil procedure code - order 37 rules 2 and 3 and interpretation of statutes--construction of provisions--provision made as earlier construed judicially--held, legislature intended to give same meaning as given by supreme court.;it is settled rule of statutory construction that where the legislature makes a provision in the same terms as an earlier legislation which his been construed judicially it must be assumed that the legislation intended the said provision in the sense in which it has been judicially interpreted unless a contrary intention appears it should therefore, be assumed that the parliament in enacting rule 3 of order 37 by the amended act, intended the said provisions to have the same meaning as was given to the provisions of rule 3, as were applicable in bombay, by the.....orders.c. agrawal, j. 1. this revision petition has been filed by the defendant fatehlal, against the order dated 11th july, 1979, passed by the district judge, udaipur, in civil suit no. 129/1978, filed by respondent sunderlal, against the petitioner for the recovery of rs. 21,080/- (rs. 15,500/-by way of principal amount and rs. 5580/-on account of interest thereon), on the basis of certain cheques and promissory notes executed by the petitioner in favour of the respondent during the period from 7th october 1973, to 26th may, 1975. the said suit was filed on 16th of october 1978 under order 37, of civil p.c. in the suit aforesaid, the respondent has stated that after the execution of the aforesaid cheques and promisory note the petitioner had entered into an agreement on 26th october.....
Judgment:
ORDER

S.C. Agrawal, J.

1. This revision petition has been filed by the defendant Fatehlal, against the order dated 11th July, 1979, passed by the District Judge, Udaipur, in Civil Suit No. 129/1978, filed by respondent Sunderlal, against the petitioner for the recovery of Rs. 21,080/- (Rs. 15,500/-by way of principal amount and Rs. 5580/-on account of interest thereon), on the basis of certain cheques and promissory notes executed by the petitioner in favour of the respondent during the period from 7th October 1973, to 26th May, 1975. The said suit was filed on 16th of October 1978 under Order 37, of Civil P.C. In the suit aforesaid, the respondent has stated that after the execution of the aforesaid cheques and promisory note the petitioner had entered into an agreement on 26th October 1975, whereby he acknowledged the debt payable by him and agreed to pay the said amount in instalments. After the receipt of the notice in the said suit, the petitioner moved an application under Order 37 Rule 3 (5) C.P.C., for the grant of leave to defend the suit. The said application was accompanied by the affidavit of the petitioner. In the said application as well as in the affidavit in support thereof, the petitioner has stated that the agreement dated 29th October, 1975, on the basis of which the suit has been filed, is a forged document and that it does not bear his signatures and that on the date of the execution of the said agreement, i.e. 29th October, 1975, the petitioner was not in Udaipur but was at Vishakhapatnam and that if the agreement dated 29th October, 1975, is held to be a forged document, the suit of the plaintiff non-petitioner would be barred by limitation. The said application of the petitioner for grant of leave to defend the suit was disposed of by the District Judge, Udaipur by his order dated 12th July, 1979, whereby he granted leave to the petitioner to defend the suit on condition that the petitioner either deposits in court the amount claimed in the suit along with the written statement or furnishes bank guarantee for the said amount. Being aggrieved by the aforesaid order dated 12th July, 1979, passedby the District Judge, the petitioner has filed this revision petition.

2. Shri N.N. Mathur, the learned counsel for the petitioner, has submitted that the District Judge, while granting leave to the petitioner to defend the suit, has erred in imposing the condition requiring the petitioner to deposit in the court the amount claimed in the suit or to furnish the bank guarantee in respect of the same. The submission of the learned counsel for the petitioner is that the petitioner has raised bona fide triable issues and that in view of the principles laid down by the Supreme Court in M/s. Mechalec Engineers and Manufacturers v. M/s. Basic Equipment Corporation, AIR 1977 SC 577, the petitioner was entitled to an unconditional leave to defend the suit. Shri L.R. Bhansali and learned counsel for the respondent, on the other hand, has submitted that the principles laid down by the Supreme Court in M/s. Mechalec Engineers & Manufacturers v. M/s. Basic Equipment Corporation were in relation to the provisions of Order 37, Rule 3 C.P.C. as they stood prior to the enactment of the Code of Civil Procedure (Amendment) Act, 1976 hereinafter referred to as the Amendment Act, and that by the Amendment Act, the provisions of Rule 3 of Order 37 have been completely changed and that the principles laid down by the Supreme Court are not applicable to the amended provisions of Order 37, Rule 3 C.P.C. According to Shri Bhansali, the District Judge had rightly imposed the condition with regard to the deposit of the amount claimed in the suit or furnishing the bank guarantee for the said amount while granting leave to the petitioner to defend the suit.

3. The rival contentions urged by the counsel for the parties necessitate an examination of the provisions of Rule 3 of Order 37 of the Civil P.C. as it stood prior to the enactment of the Amendment Act, and the effect of the amendments introduced in the said provisions by the Amendment Act.

4. Rule 3 of Order 37 of the Civil P.C. as it stood prior to the enactment of the Amendment Act provided as under:--

'Rule 3 (1) The Court shall, upon application by the defendant, give leave to appear and to defend the suit, upon affidavits which disclose such facts as would make it incumbent on the holder to prove consideration, or such other facts as the Court may deem sufficient to support the application.

(2) Leave to defend may be given un-conditionally or subject to such terms as to payment into court, giving security, framing and recording issues or otherwise as the Court thinks fit'.

5. As laid down by the Supreme Court in Santosh Kumar v. Bhai Mool Singh, AIR 1958 SC 321, the object of the said provisions was 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 Santosh Kumar v. Bhai Mool Singh the Supreme Court has taken note of the rule laid down by the House of Lords in England in Jacobs v. Booth's Distillery Co., (1901) 85 LT 262, that whenever the defence raises a triable issue leave must be given and after referring to the decisions of the various High Courts, the Supreme Court has laid down :

'All that we need say about them is that 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 defend'.

'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 are established, there would be a good, or even a plausible, defence on those facts'.

In the said case, the Supreme Court has also emphasised that the court cannot reach the conclusion that the defence is not bona fide arbitrarily, and that it is as much bound by judicial rules and judicial procedure in reaching a conclusion of this kind as in any other matter.

6. In M/s. Mechalec Engineers & Manufacturers v. M/s. Basic Equipment Corporation, AIR 1977 SC 577, the Supreme Court has referred to the decision in Santosh Kumar v. Bhai Moot Singh, AIR 1958 SC 321, and has quoted with approval the following principles laid down by Das, J., (as he then was) in Smt. Kiranmoyee Dassi v. Dr. J. Chatterjee, (1945) 49 Cal WN 246: (AIR 1949 Cal 479):

'(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 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 had a defence, yet, shows such a state of facts as leads to 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 in to 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 conditions, and thereby show mercy to the defendant by enabling him to try to prove a defence'.

7. The provisions of Rule 2 and 3 of Order 37 of the Civil P.C. had been am-mended by the Bombay High Court in so far as they were applicable to civil Courts subordinate to the said High Court, Rule 3 of Order 37, as it was applicable in Bombay, read as under:--

'3. Service of the writ of summons on defendant and appearance by defendant:--

(1) The plaintiff shall together with the writ of summons under Rule 2 serve on the defendant a copy of the plaint and exhibits thereto, and the defendant may, at any time within 10 days of such service, enter an appearance. The defendant may enter an appearance either in person or by pleader. In either case an address for service shall be given in the memorandum of appearance, and, un-less otherwise ordered, all summonses, notices or other judicial processes required to be served on the defendant shall be deemed to have been duly served on him, if left at his address for service On the day of entering the appearance notice of the appearance shall be given to the plaintiff's pleader (or, if the plaintiff sues in person, to the plaintiff himself) either by notice delivered at or sent by prepaid letter directed to the address of the plaintiff's pleader or of the plaintiff, as the case may be.

(2) Summons for judgment:-- If the defendant enters an appearance, the plaintiff shall thereafter serve on the defendant, a summon for judgment in Form No 4A in Appendix B or such other form as may be prescribed from time to time returnable not less than ten 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) Defendant to apply for leave to defend.-- The defendant may, at any time within ten days from the service of such summons for judgment by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit. Leave to defend may be granted to him unconditionally or upon such terms as to the Court or Judge appear just.

(4) Hearing and judgment.-- All the hearing of such summons for judgment (a) if the defendant has not applied for leave to defend or if such application has been made and is refused, the plaintiff shall be entitled to judgment forwith, or

(b) if the defendant be permitted to defend as to the whole or any part of the claim, the court or the judge shall direct that on failure to complete the security (if any), or to carry out such other directions as the Court or the Judge may have given within the time limited in the order, the plaintiff shall be entitled to judgment forthwith,

(5) Delay in entering appearance or in applying for leave to defend may be condoned:-- The Court may for sufficient cause excuse the delay in entering the appearance under Sub-rule (1) or in applying for leave to defend the suit under sub-rule (3) of this rule'.

8. A comparison of the aforesaid provisions of Rule 3, as applicable in Bombay, with the provisions of Rule 3, whichwas applicable in other State, would show that Rule 3, as applicable in Bombay, contained more elaborate provisions with regard to the service of the writ of summons on the defendant and the appearance by the defendant and for grant of leave to the defendant to defend the suit. But in the matter of grant of leave to defend it appears that whereas in Sub-rule (2) of Rule 3, which was applicable in other States, court was empowered to give leave to defendant unconditionally or subject to such terms as to payment into court, giving security, framing and recording issues or otherwise as the court thought fit, in Sub-rule (3) of Rule 3, as applicable in Bombay, the court was empowered to grant leave to defend unconditionally or upon such terms as may appear just to the court. The provisions of Sub-rules (2) and (3) of Rule 3 of Order 37 of the Civil P.C., as applicable in Bombay, came up for consideration before the Supreme Court in Milkhiram (India) Pvt. Ltd. v. Chamanlal Bros., AIR 1965 SC 1698, where in a suit for the recovery of Rs. 4,05,434.38 p. based upon promissory notes, the Bombay High Court, while granting leave to the defendant to defend the suit had imposed the condition that the defendant would deposit security to the extent of Rs. 70,000/- and the said order of the Bombay High Court was affirmed by the Supreme Court. In the said case the Supreme Court has explained its observations in the earlier judgment in Santosh Kumar v. Bhai Mool Singh, (AIR 1958 SC 321) (supra) to the effect that 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 are established there would be a good or even a plausible defence on those facts and has observed, --

'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 the parties and it is not open to it to call for the evidence at that stage. If upon consideration of material placed before it, the Court comes to the conclusion that the defence is a sham one or is fantastic or highly improbable, it would be justified in putting the defendant upon terms before granting leave to defend. Even when a defence is plausible, but is improbable, the Court would be justified in coming to the conclusion that issue is not a triable issue and put the defendant on terms by granting leave to defend. To hold otherwise would make it impossible to give effect to the provisions of Order 37 which have been enacted as rightly pointed out by Bose, J. to ensure speedy decisions in cases of certain types.'

9. In Milkhiram's case (AIR 1965 SC 1698) (supra) the Supreme Court has noticed the development of the law in England after the decision of the House of Lords in Jacobs v. Booth's Distillary Co., ((1901) 85 LT 262) (supra) and has noticed that 'the condition of payment into Court, or giving security, is nowadays more often imposed, than formerly and not only where the defendant consents but also where there is a good ground in the evidence for believing that the defence set-up is a sham defence'. Taking into consideration the development of the law in England the Supreme Court, in Milkhiram's case (supra) has laid down, --

'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 both at the bar and the bench to form his own tentative conclusion about the quality or nature of the defence and determine the conditions upon which leave to defend 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 defend altogether. Unfortunately, however, the majority of cases cannot be dealt with in a clear cut way like this and the Judge may entertain a genuine doubt on the question as to whether the defence is genuine or sham or in other words whether it raises a triable issue or not. It is to meet such cases that the amendment to Order 37, Rule 2 made by the Bombay High Court contemplates that even in cases where an apparently triable issue is raised the Judge may impose conditions in granting leave to defend. Thus this is a matter in the discretion of the trial Judge and in dealing with it, he ought to exercise his discretion judiciously. Care must be taken to see that the object of the rule to assist the expeditious disposal of commercial causes, to which the order applies, is not defeated. Care must also be taken to see that real and genuine triable issues are not shut out by unduly severe orders as to deposit. In a matter of this kind, it would be undesirable and inexpedient to lay down any rule of general application'.

10. The provisions of Rule 3 of Order 37 of the Civil P.C. have been substituted by the Amendment Act by the following provisions, --

3. Procedure for the appearance of defendant --

(1) In a suit to which this Order applies, the plaintiff shall, together with the summons under Rule 2, serve on the defendant a copy of the plaint and an-nexures thereto and the defendant may, at any time within ten days of such service, enter an appearance either in person or by pleader and, in either case, he shall file in Court an address for service of notice on him.

(2) Unless otherwise ordered, all summonses notices and other judicial processes, required to be served on the defendant, shall be deemed to have been duly served on him if they are left at the address given by him for such service,

(3) On the day of entering the appearance, notice of such appearance shall be given by the defendant to the plaintiff's pleader, or, if the plaintiff sues in person, to the plaintiff himself, either by notice delivered at or sent by a paid letter directed to the address of the plaintiff's pleader or of the plaintiff, as the case may be.

(4) If the defendant enters an appearance the plaintiff shall thereafter serve on the defendant a summons for judgment in Form No. 4A in Appendix B or such other Form as may be prescribed from time to time, returnable not less than ten days from the date of service supported by an affidavit verifying the cause of action and the amount claimed (sic) stating that in his belief there is no defence to the suit.

(5) The defendant may, at any time within ten days from the service of such summons for judgment, by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit and leave to defend may be granted to him unconditionally or upon such terms as may appear to the Court or 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 Course.

(6) At the hearing of such summons for judgment, --

(a) In the defendant has not applied for leave to defend, or if such application has been made and is refused, the plaintiff shall be entitled to judgment forthwith; or

(b) if the defendant is permitted to defend as to the whole or any part of the claim, the Court or Judge may direct him to give such security and within such time as may be fixed by the Court or Judge and that, on failure to give such security within the time specified by the Court or Judge or to carry out such other directions as may have been given by the Court or Judge, the plaintiff shall be entitled to judgment forthwith;

(7) The Court or Judge may, for sufficient cause shown by the defendant, excuse the delay of the defendant in entering an apparance or in applying for leave to defend the suit.

11. A perusal of the aforesaid provisions shows that in introducing the said provisions Parliament has chosen to adept, with certain modifications, the provisions of Rule 3, as were applicable in Bombay. A comparison of the provisions of Rule 3, as substituted by the Amendment Act, with the provisions of Rule 3, as were applicable in Bombay, shows that Sub-rules (1), (2) and (3) of Rule 3, as substituted by the Amendment Act, are in pari materia with Sub-rules (i) of Rule 3, as applicable in Bombay. Similarly sub-rules (4), (6) and (7) of Rule 3, as substituted by the Amendment Act, are in pan materia with Sub-rules (2), (4) ana (5) of Rule 3, as applicable in Bombay. In so far as Sub- rules (5) of Rule 3, as substituted by the Amendment Act, is concerned, I find that the main part of that sub-rule is in pari materia with sub-rule (3) of Rule 3, as applicable in Bombay. In sub-rule (5) of Rule 3, as substituted by the Amendment Act, there are, however, two provisions which were not contained in Rule 3, as applicable in Bombay. In the first proviso it is laid down 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. In the second proviso it is laid down 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 un-less the amount so admitted to be due is deposited by the defendant in Court. In other words the first proviso gives certain protection to the defendant by fettering the discretion of the court in the matter of refusal of leave to defend the suit by restricting the power of the court to refuse the leave to defend the suit to only those cases where the defendant does not have a substantial defence to raise and the defence intended to be put by him is frivolous or vexatious. The second proviso, on the other hand, gives some protection to the plaintiff by requiring the defendant to deposit in court the amount admitted by him to be out from him before leave to defend the suit is granted to him.

12. It is settled rule of stautory construction that where the legislature makes a provision in the same terms as an earlier legislation which has been construed judicially, it must be assumed that the legislation intended the said provision in the sense in which it has been judicially interpreted unless a contrary intention appears. It should therefore, be assumed that Parliament in enacting Rule 3 of Order 37 by the Amendment Act, intended the said provisions to have the same meaning as was given to the provisions of Rule 3, as were applicable in Bombay, by the Supreme Court in Milkhiram's case (AIR 1965 SC 1698) (supra). Sub-rule (4) and the main part of sub-rule (5) of Rule 3, as substituted by the Amendment Act, must, therefore, bear the same meaning as was given to the provisions of Sub-rules (2) and (3) of Rule 3, as applicable in Bombay, by the Supreme Court in Milkhi Ram's case (supra). The question which next arises for consideration is whether the insertion of the two provisos in sub-rule (5) of Rule 3, as substituted by the Amendment Act, indicates a contrary intention as to alter the law laid down in Milkhi Ram's case (supra). As noticed earlier, the first proviso to Sub-rule (5) of Rule 3, as substituted by the Amendment, fetters the discretion of the court in the matter of refusal of leave to defend the suit, by restricting the power of the court to refuse the leave to defend the suit to only those cases where the respondent does not have a substantial defence to raise and the defence intended to be put up by him is frivolous or vexatious and the second proviso enjoins upon the court to impose the condition with regard to deposit in court of the amount admitted by the defendant to be due from him while granting him leave to defend the suit. It has already been pointed out that in Milkhi Ram's case (supra) a)so it is Jaid down by the Supreme Court that leave to defend should be refused altogether if the Court is of opinion that the defence raised is frivoious or false or sham. In other words, the first proviso to Sub-rule (5) of Rule 3, as substituted by the Amendment Act, does not go contrary to the law laid down by the Supreme Court in Milkhi Ram's case (supra). The second proviso to Sub-rule (5) of Rule 3, as sub-stituted by the Amendment Act, by imposing a mandatory obligation on the Court, while granting leave to defend the suit to impose the condition requiring the defendant to deposit in the Court the amount which is Emitted by him to be due from him, however, alters the law laid down in Milkhi Ram's case (supra) to the extent. In my opinion the provisions of Sub-rule (5) of Rule 3 of Order 37, as substituted by the Amendment Act, construed in the light of the decision of the Supreme Court in Milkhi Ram's case (supra) postulate that while giving leave to defend the suit the court shall observe the following principles :--

(a) If the Court is of opinion that the case raises a triable issue then leave to defend should ordinarily be granted unconditionally. The question whether the defence raises a triable issue or not has to be ascertained by Court from the pleadings before it and the affidavits of parties.

(b) If 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 put by the defendant is frivolous or vexatious it may refuse leave to defend altogether.

(c) In cases where the Court entertains a genuine doubt on the question as to whether the defence is genuine or sham or whether it raises a triable issue or not, the Court may impose conditions in granting leave to defend. The Court would be justified in coming to the conclusion that the issue is not a triable issue when the defence is plausible but is improbable and in such cases it can put the defendant on terms while granting leave to defend.

(d) In cases where the defendant admits that a part of the amount claimed by the plaintiff is due from him, the Court shall not grant leave to defend the suit unless the amount so admitted to be due is deposited by the defendant in the Court.

(e) The Court while granting leave to defend must take care to see that the object of the Rule to assist the expeditious disposal of criminal cases to which the order applies is not defeated.

(f) The Court should further take care to see that real and genuine triable issues are not shut out by unduly severe orders as to deposit.

13. Now coming to the facts of the present case I find that while passing the order dated 12th July, 1979, the District Judge, has failed to note that the principles laid down by the Supreme Court in Mechalec Engineers & Manufacturers v. Basic Equipment Corporation (AIR 1977 SC 577) (supra) had been laid down with reference to the provisions of Rule 3 of Order 37 as they stood prior to the enactment of the Amendment Act. The District Judge has also failed to take note of the decision of the Supreme Court in Milkhi Ram's case, (AIR 1965 SC 1698) (supra). Even while applying the principles laid down by the Supreme Court in M/s. Mechalec Engineers & Manufacturers v. M/s. Basic Equipment Corporation, (AIR 1977 SC 577) (supra), the District Judge has committed an error inasmuch as according to said principles condition with regard to the payment of the amount claimed could be imposed while granting leave to defend only in cases falling under Clause (e), viz., where the defendant has no defence or the defence is illusory or sham or practically moonshine. The District Judge has nowhere stated in his order that according to him the defence which is sought to be raised by the petitioner in his application for leave to defend is illusory or sham or practically moonshine.

14. The question which then arises for consideration is whether this Court in exercise of its revisional jurisdiction, can interfere with the order passed by the District Judge in the present case. As pointed earlier in Santosh Kumar v. Bhai Mool Singh, (AIR 1958 SC 321) (supra), the Supreme Court has observed that the Court cannot reach the conclusion that the defence is not bona fide, arbitrarily and that it is as much bound by judicial rules and procedure in reaching the conclusion of this kind as in any other matter. In the said case the trial court had granted leave to the defendants to defend the suit on the condition of their giving security to the extent of the suit amount and the said order of the trial court was affirmed by the High Court. The Supreme Court set aside the order of the High Court as well as of the trial Court on the view that 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. A Division Bench of the Gujarat High Court in the New Ashapuri Cooperative Housing Society Ltd. v. Arvind Kumar Manilal Patel, (AIR 1975 Guj 76), has laid down that an order making leave to defend conditional on payment by way of security is revisable by the High Court under Section 115, C.P.C. inasmuch as such an order touches on the jurisdiction of the Court itself to adjudicate the dispute between the parties on merits. In the said case it has been observed that:--

'It must be realised that when a condition is imposed for granting leave to defend in such suits, the Court shuts the door of inquiry on the merits of the dispute depending on whether or not the condition is complied with. Compliance with the condition imposed would open the door to an enquiry on merits. And failure to comply with the condition would bar the door to enter into the enquiry on merit as regards the dispute. When, therefore, a condition is imposed it acts as a fetter and precludes the enquiry on merits unless the party concerned is in a position to comply with the conditions, the consequences of inability to comply with the condition would be that a decree would be passed against the defendant not because the defendant is bound to be liable to the plaintiff but because he does not have the resources to comply with the condition. It is misfortune of the defendant which gives rise to the decision and notthe want of merit in his defence. The Court pronounces in favour of the plaintiff not because his cause is found to be just but because his opponent is in economic distress. The Court does not pronounce against the defendant because he is legally or morally liable but because he does not possess sufficient ready cash to enable him to comply with the condition imposed by the Court. The machinery of Court will then operate as an engine of oppression and not as a vehicle of justice.'

'If therefore it clearly appears on the affidavits and materials brought before the High Court that the defence does raise a triable issue and there is nothing to justify an inference of lack of bona fides, the order passed by the trial Court must be set aside, inasmuch as the order touches the question of the jurisdiction of the trial Court to adjudicate on merits on the dispute between the parties. When leave is refused the Court closes its door in the face of litigant and does not enter into the merits of the dispute at all. By imposing a condition even though there is a triable issue and even though there is nothing to show lack of bona fides, the trial Court deprives itself of the jurisdiction to adjudicate the dispute on merits after a proper trial and hearing. Having regard to the consequences of imposing an unwarranted condition, the jurisdiction of the Court to decide the main dispute on merits comes to be sacrificed. It is, therefore, futile to contend that such an order has no relation to the question of jurisdiction or that it does not impinge on the question of jurisdiction.'

15. I am in respectful agreement with the aforesaid observations and, in my opinion, a revision petition is maintainable against an order passed by the trial Court, refusing leave to defend the suit or granting leave to defend conditionally on payment by way of security. As noticed earlier the order dated 12th July, 1979, passed by the District Judge shows that the District Judge, while passing the said order, has ignored the amendment in the provisions of Order 37, Rule 3, C.P.C. introduced by the Amendment Act and has failed to consider whether the defence raised by the petitioner bona fide raises a triable issue or not and in passing the said order the District Judge has not correctly applied the principles laid down by the Supreme Court in M/s. Mechalec Engineers & Manufacturers v. M/s. Basic Equipment Corporation (AIR 1977 SC 577) (supra) inasmuch as the District Judge has nowhere recorded the finding that the defence which is sought to be raised by the petitioner in his application for leave to defend is illusory or sham or practicably moonshine. The showed that in passing the aforesaid order the District Judge has ignored material aspects and has acted arbitrarily. In other words in passing the said order the District Judge in the exercise of his jurisdiction, has acted illegally and with material irregularity and the said order is revisable by this Court in exercise of its revisional jurisdiction under Section 115, C.P.C.

16. Shri Bhansali, the learned counsel for respondent, has submitted that it was not necessary for the District Judge to give reasons in support of his order granting leave to defend on condition that the petitioner should deposit the amount claimed or furnish the bank guarantee for the same. In support of his aforesaid submission Shri Bhansali has placed reliance on the decision of the Gujarat High Court in Vijakumar K. Shah v. Firm of Pari Nareshchandra, AIR 1968 Guj 247 and the decision of the Bombay High Court in Bombay Enamel Works v. Purshottam S. Somaiya, AIR 1975 Bom 128, wherein it is laid down that the subordinate Court is not bound to give reasons for the order passed by it under Order 37, Rule 3, C.P.C. I regret my inability to agree with the aforesaid decisions. In the context of orders passed by administrative tribunals and authorities, the Supreme Court, in Siemens Engineering and . v. Union of India, AIR 1976 SC 1785 has observed:--

'It is now settled law that where an authority makes an order in exercise of a quasi-judicial function it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons.

The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not justify the requirement of law.'

17. The principles aforesaid are equally applicable to judicial orders. Moreover as regards orders passed under Order 37, Rule 3, C.P.C. the need for giving reasons is emphasised by the Supreme Court in its decision in Santosh Kumar v. Bhai Mool Singh, (AIR 1958 SC 321) (supra), wherein it is laid down that the Court cannot reach the conclusion that the defence is not bona fide arbitrarily and if the discretion is exercised arbitrarily it can be interfered with. The Bombay High Court, in its decision in Bombay Enamel Works v, Purshottam P. Somaiya (supra) on which reliance has been placed by Shri Bhansali, has also stressed that it would be indeed desirable and appropriate that the reasons for making the order be briefly stated so that the superior courts which may have occasion to deal with the matter may at least be informed as to what was in mind of the Judge when he made the order. In my opinion, therefore, while making an order under Order 37, Rule 3, C.P.C. refusing leave to defend the suit or granting the leave subject to conditions the trial Court should record the reasons for making the said order,

18. For the reasons aforesaid, I am of the opinion that the order passed by the District Judge, Udaipur, dated 12th July, 1979 in the present case cannot be sustained. The revision petition is therefore allowed and the order dated 12th July, 1979, passed by the District Judge, Udaipur is set aside. The District Judge is directed to consider and decide the application filed by the petitioner under Order 37, Rule 3, C.P.C. for leave to defend the suit in the light of the observations contained in this order. There will be no order as to costs in this revision petition.


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