1988 (12) TMI 341 - HC - Indian Laws

Summary

Issues:
1. Defendants seeking leave to defend on various contentions including lack of proper index for claiming interest, non-proceedings against the Company, and deprivation of benefits under specific sections of the Indian Contract Act.
2. Disagreement between the parties regarding the necessity of a deposit as a condition for granting leave to defend.
3. Interpretation of Order 37, Rule 3, sub-rule 3 of the Code of Civil Procedure regarding the terms for granting conditional leave to defend.
4. Determining appropriate terms for granting conditional leave to defend in a case where the debt is fully secured.

Analysis:
1. The defendants sought leave to defend the suit on multiple grounds, including the absence of a proper index for claiming interest, the plaintiffs not proceeding against the Company, deprivation of benefits under certain sections of the Indian Contract Act, and the alleged acceleration of payment installments by the Company detrimental to the defendants. The defendants argued that the debt was fully secured by a mortgage of the Company's properties, which should be considered in granting leave to defend.

2. The parties disagreed on the necessity of a deposit as a condition for granting leave to defend. While the plaintiffs argued for a deposit due to the lack of personal security from the defendants, the defendants contended that the debt being fully secured should negate the need for a deposit. The court considered the arguments and the nature of the defenses raised by the defendants in determining the necessity of a deposit.

3. The court interpreted Order 37, Rule 3, sub-rule 3 of the Code of Civil Procedure, which allows the court to grant leave to defend upon terms deemed just. The court noted that while a deposit is a common condition for granting leave to defend, it is not mandatory, and other terms can be devised to enable a party to defend the suit effectively. The court highlighted that the purpose of any condition should be to secure the decretal amount.

4. Considering the fully secured nature of the debt and the adequacy of the defendants' defense, the court decided not to order a deposit as a condition for granting leave to defend. Instead, the court imposed a time-bound schedule for defending the suit, emphasizing the importance of expediting the proceedings. The court granted conditional leave to defend, requiring the defendants to file their written statements within a specified timeframe and setting deadlines for further procedural steps leading to the final disposal of the suit.