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2022 (1) TMI 1311 - SC - Indian LawsSeeking leave to defend - case of the appellant had been that it had no liability towards the plaintiff - whether the plaintiff was entitled to maintain a summary suit under Order XXXVII CPC for the claim in question? - HELD THAT - The question as to whether the appellant was acting only as an agent of defendant No. 1 in relation to the supplies in question and had no monetary liability, as sought to be raised by the appellant, could be a matter of his defence. This aspect, relating to the nature of defence shall be examined in the next question but, such a proposition of defence by the appellant cannot take away the entitlement of the plaintiff-respondent No. 1 to maintain the summary suit in terms of Order XXXVII CPC. This is apart from the fact that while asserting joint and several liability of the defendants, the plaintiff has also relied upon the cheques said to have been issued by defendant No. 1, which were allegedly not presented as per the request of the said defendant No. 1. The contention against maintainability of the summary suit in terms of Order XXXVII CPC cannot be accepted and to that extent, we find no reason to consider any interference in the decision of the High Court. Leave to defend - HELD THAT - The High Court has observed that the appellant would not be entitled to such leave because no triable issues were arising out of the defence sought to be taken by the appellant. The High Court has also observed that the defences were frivolous and vexatious; and were raised only in order to deny the just dues of seller of the goods, i.e., the plaintiff. According to the High Court, while applying the principles for grant of leave to defend, as delineated in the case of IDBI Trusteeship (supra), the appellant was not entitled to the leave to defend. Thus, it could be seen that in the case of substantial defence, the defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the defendant is ordinarily entitled to unconditional leave to defend. In case of doubts about the intent of the defendant or genuineness of the triable issues as also the probability of defence, the leave could yet be granted but while imposing conditions as to the time or mode of trial or payment or furnishing security. Thus, even in such cases of doubts or reservations, denial of leave to defend is not the rule; but appropriate conditions may be imposed while granting the leave - while dealing with an application seeking leave to defend, it would not be a correct approach to proceed as if denying the leave is the rule or that the leave to defend is to be granted only in exceptional cases or only in cases where the defence would appear to be a meritorious one. Even in the case of raising of triable issues, with the defendant indicating his having a fair or reasonable defence, he is ordinarily entitled to unconditional leave to defend unless there be any strong reason to deny the leave. The appellant-defendant No. 2 ought to have been granted the leave to defend the claim made in the suit concerning its liability; and to this extent, the impugned decree deserves to be set aside - Appeal allowed.
Issues Involved:
1. Maintainability of the summary suit under Order XXXVII CPC. 2. Entitlement of the appellant-defendant No. 2 to leave to defend. Issue-wise Detailed Analysis: 1. Maintainability of the Summary Suit under Order XXXVII CPC: Relevant Factual and Background Aspects: The plaintiff-respondent No. 1 filed a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 (CPC), claiming joint and several liability of the defendants for the unpaid amount of Rs. 89,50,244/- for the supply of steel. The plaintiff asserted that the defendant No. 2 (appellant) issued purchase orders on behalf of defendant No. 1, who was the ultimate beneficiary of the goods supplied. The defendant No. 1 had issued cheques towards part payment, but no intimation was received to present them, leading to the filing of the suit. Trial Court’s Findings: The Trial Court rejected the defendants' applications for leave to defend, holding that the defendants were merely shifting the burden upon each other. It observed that the defendant No. 2 acted as an agent of defendant No. 1, and both were under obligation to make payments for the goods supplied. The suit was decreed in favor of the plaintiff. High Court’s Findings: The High Court upheld the Trial Court's decision, stating that the summary suit was maintainable under Order XXXVII CPC. It noted that the invoices constituted written contracts, and the cheques issued by defendant No. 1 supported the plaintiff's claim of joint and several liability. The High Court dismissed the appeal filed by appellant-defendant No. 2. Supreme Court’s Analysis: The Supreme Court affirmed the maintainability of the summary suit. It held that the plaintiff was entitled to maintain the suit based on written purchase orders and invoices. The assertion of joint and several liability and the issuance of cheques by defendant No. 1 further supported the plaintiff's claim. The Court found no reason to interfere with the High Court's decision on this issue. 2. Entitlement of the Appellant-Defendant No. 2 to Leave to Defend:Trial Court’s Findings: The Trial Court denied leave to defend to both defendants, concluding that no triable issues were raised. It held that the defendant No. 2 acted as an agent of defendant No. 1, and both were liable for the payment. High Court’s Findings: The High Court also denied leave to defend to the appellant-defendant No. 2, finding the defences frivolous and vexatious. It applied the principles from the case of IDBI Trusteeship Services Ltd. v. Hubtown Ltd., concluding that the appellant did not raise any genuine triable issues. Supreme Court’s Analysis: The Supreme Court examined the principles for granting leave to defend as laid down in Mechelec Engineers & Manufacturers v. Basic Equipment Corporation and IDBI Trusteeship Services Ltd. v. Hubtown Ltd. It emphasized that denial of leave to defend is an exception and should be applied only when the defendant has no substantial defence or raises no genuine triable issues. The Court found that the appellant-defendant No. 2 had raised triable issues concerning its liability, asserting that it acted only as a contractor for defendant No. 1. The appellant argued that the payments made by defendant No. 1 indicated its liability. The Supreme Court noted that the High Court's conclusion that the defences were frivolous or vexatious lacked foundation and was assumptive. The Court highlighted the significant feature that the High Court, in a separate judgment, had dismissed the appeal of defendant No. 1, finding its defence frivolous or vexatious based on the regular payments made to the plaintiff. This reasoning could not be applied to the appellant-defendant No. 2, who had raised genuine triable issues. Conclusion: The Supreme Court allowed the appeal, set aside the impugned judgments of the High Court and the Trial Court concerning the appellant-defendant No. 2, and granted leave to defend. The amount of Rs. 40,00,000/- deposited by the appellant was treated as a condition for leave to defend, and the Trial Court was directed to proceed with the trial concerning the appellant-defendant No. 2 in accordance with law. No order as to costs of the present appeal.
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