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Issues Involved:
1. Maintainability of an appeal from an order granting conditional leave to defend under Order 37 of the Code of Civil Procedure. 2. Merits of the order under appeal, contingent on the decision of the first issue. Issue-Wise Detailed Analysis: 1. Maintainability of an Appeal from an Order Granting Conditional Leave to Defend under Order 37 of the Code of Civil Procedure: - Earlier Division Bench Judgment: A Division Bench in M/s Merchants of Traders (P) Ltd. v. M/s Sarmon Put. Ltd. held that such an order was not maintainable as a judgment under Clause 15 of the Letters Patent. This decision followed earlier judgments in Hiralal Deb Gupta v. Salil Kumar Paul and Bonwarilal Roy v. Sohanlal Daga, which stated that the order was not appealable because it did not necessarily mean that the plaintiff would succeed in the suit. - Post-1976 Amendment: The court noted that the 1976 amendment to Order 37 changed the procedural context significantly. The amended Order 37 now envisages a decree being passed immediately upon the defendant's failure to obtain leave to defend or comply with the conditions of the leave granted. This change aligns with Chapter XIIIA of the Original Side Rules of the court, which consistently held that an order granting conditional leave to defend is appealable as a 'Judgment' under Clause 15 of the Letters Patent. - Bombay High Court Amendment: The Bombay High Court had previously amended Order 37, and the 1976 Amendment of the Code largely incorporated this amendment. The Bombay High Court held that an order granting conditional leave to defend was a judgment under Clause 15 and thus appealable. This stance was also recognized by the Supreme Court in Milkiram (India) Pvt. Ltd. v. Chamanlal. - Supreme Court's View: In Shah Babulal Khimji v. Jayaben D. Kama, the Supreme Court emphasized that an order refusing the defendant leave to defend the suit directly affects the defendant's valuable right to defend and should be treated as a judgment within the meaning of the Letters Patent, making it appealable. - Conclusion: Given the changes post-1976 and the alignment with the Bombay High Court's interpretation, the court concluded that an order refusing leave to defend or granting such leave conditionally is appealable under Clause 15 of the Letters Patent. However, due to a contrary view by a co-ordinate jurisdiction, the issue should be referred to a larger Bench. 2. Merits of the Order Under Appeal: - Conditional Leave to Defend: The appellant was granted conditional leave to defend the suit, subject to furnishing security for five lakhs, failing which a decree for that sum would be directed. - Appellant's Defense: The appellant claimed that payments made to the plaintiff and Unique Traders (a concern of the plaintiff's brother) exceeded the amounts claimed in the plaint. However, Unique Traders was not a party to the suit, and separate accounts were maintained for payments to Unique Traders and the plaintiff. - Admissions by Appellant: The appellant admitted in several letters to its banker that a sum of Rs. 65,580 was payable to the plaintiff after adjusting an amount of Rs. 4,60,576 on account of monies paid in excess to Unique Traders. Without this adjustment, the admitted dues to the plaintiff would be over Rs. 5 lakhs. - Court's View: The court found that the learned Judge did not exercise discretion arbitrarily in granting conditional leave to defend. The reference to Unique Traders was deemed irrelevant as no proceedings were filed against Unique Traders by the appellant, and separate accounts were maintained. Separate Judgment by B. Panigrahi, J.: - Order Under Appeal: The order directed the appellant to furnish a Bank Guarantee for Rs. 5,00,000 or security by way of immovable property for the same amount, failing which a decree for Rs. 5,00,000 would be passed. - Appellant's Argument: The appellant argued that the cheques were handed over as collateral security and payments were made in cash. The appellant also claimed payments were made to Unique Traders, a sister concern of the plaintiff. - Court's Decision: The court found that the trial Judge had appropriately imposed a conditional direction to the defendant to furnish security. The appellant's defense was considered not bona fide, and the trial court's discretion was upheld. - Appealability: The court acknowledged divergent opinions on the appealability of such orders and suggested that the matter be resolved by a larger Bench. Conclusion: The appeal was allowed, and the Hon'ble Chief Justice was requested to constitute a larger Bench to decide the issue of appealability of orders granting conditional leave to defend under Order 37 of the Code of Civil Procedure.
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