Case BriefsHigh Courts

Delhi High Court: In a matter with regard to the grant of leave to defend, Subramonium Prasad, J., expressed that, the tenant cannot merely make allegations that the landlord has other premises without producing some material to substantiate the same.

On being aggrieved by the order of the Additional Rent Controller rejecting the leave to defend application filed by the petitioner and resultantly allowing the eviction petition filed by the respondent (landlord), the tenant approached this, Court.

Analysis, Law and Decision

High Court expressed that, it is a well-settled position that a tenant may take all kinds of pleas in its application for leave to defend but the Rent Controller has to ensure that the purpose of Chapter III of the Rent Control Act is not defeated by granting leave to defend in every frivolous plea raised by the tenant which may result in protracting the case.

“Where the tenant seeks leave to contest the application for eviction, he must file an affidavit under sub-section (4) of Section 25-B raising his defence and this defence must be clear, specific and positive. Defences of negative character which are intended to put the landlord to proof or are vague or are raised mala fide only to gain time and protract the proceedings, must not be taken into account by the Rent Controller and such applications must be rejected.”

It was noted that, in the present case the tenant had itself produced the Will under which the landlord had claimed rent and the tenant had started paying rent and after having started paying rent to the landlord, it was not open for the tenant to turn around and challenge the title of the landlord.

“…Section 116 of the Indian Evidence Act as an estoppel on the Tenant to challenge the title of the Landlord during the continuation of the tenancy.”

Further, it was also settled that mere assertions made by tenant with respect to landlord’s ownership of other buildings and with respect to alternate accommodations were not to be considered sufficient for grant of leave to defend.

Supreme Court’s decision in, Abid-ul-Islam v. Inder Sain Dua, 2022 SCC OnLine SC 419 was referred.

Observing further, the Court stated that it is well settled that at the time of filing an eviction petition the landlord need not have a degree in the trade he/she wants to embark upon.

“…this Court does not deem it prudent, in consonance with settled law, to displace the needs of the Landlord with its own Judgment of how the Landlord should conduct its business or utilise their premises.”

In Court’s opinion, the order of Rent Controller did not suffer from legal infirmities, hence the present petition was dismissed. [Department of Posts v. Surinder Babu Jain, 2022 SCC OnLine Del 1565, decided on 25-5-2022]


Advocates before the Court:

For the Petitioners:

Ms. Anju Gupta, Mr. Roshan Lal Goel, Advocates

For the Respondent:

Mr. Ajay Gupta, Ms. Surbhi Gupta, Mr. Aishwary Jain, Mr. Anant Gupta, Advocates

Case BriefsSupreme Court

Supreme Court: While clarifying the law on leave to defend, the Division Bench of Vineet Saran and Dinesh Maheshwari*, JJ., held that even if there remains a reasonable doubt about the probability of defence, sterner or higher conditions could be imposed while granting leave to defend but, denying the leave would be ordinarily countenanced only in such cases where the defendant fails to show any genuine triable issue and the Court finds the defence to be frivolous or vexatious.

The plaintiff-respondent 1 filed the subject suit in terms of Order XXXVII of the CPC while stating itself to be a registered partnership firm manufacturing and supplying a wide variety of iron and steel products. The plaintiff contended that the defendant 1 represented itself as a real estate and infrastructure development firm while the defendant 2 represented itself as a contractor working with the defendant 1 for the construction work of its project namely ‘MIST’. The defendant 1 issued two cheques drawn on Axis Bank for a sum of Rs.14,72,269 and Rs. 13,34,319 while asking the plaintiff to present the cheques only after receiving intimation but no such intimation was received. Later on, the plaintiff issued a legal notice dated 28-01-2016 to the defendants demanding the dues and, upon their failure to make the requisite payment, filed the summary suit under Order XXXVII CPC.

Joint and Several Liability or a Blame Game?

The defendant 1 sought leave to defend with the contentions that it had no privity of contract and the purchase orders were issued only by the defendant 2; that the invoices in question were raised in the name of the defendant 2; that neither the purchase orders nor the invoices were bearing the signatures of the defendant 1; and that all the dealings were between plaintiff and defendant 2. On the contrary, the appellant-defendant 2 moved a separate application seeking leave to defend on the ground that the purchase orders were issued by him only on behalf of the defendant 1; and that the material supplied by the plaintiff was for the construction of project undertaken by defendant 1, who was the beneficiary of the said project.

Findings of the Courts below

The Trial Court held that no triable issues were raised by the defendants and declined their applications seeking leave to defend. Consequently, the suit was decreed in favour of the plaintiff for a sum of Rs. 89,50,244/- together with interest at the rate of 10% per annum with joint and several liability of the defendants to pay the decreetal amount.

The High Court held that the defendants were not entitled to leave to defend because the defences raised by them did not give rise to genuine triable issues; and the defences were frivolous and vexatious, raised only in order to deny the just dues of the seller of goods. Noticeably, the High Court made the following observations:

  • Though the cheques were issued by defendant 1, yet a suit would lie against defendant 2 as there was no such requirement in Order XXXVII CPC that the cheques which are issued for payments ought to be of the person against whom the liability is claimed. The High Court further observed that as per Section 2 (d) of Contract Act, 1872 consideration under a contract need not flow/pass only between the parties to a contract.
  • The High Court also observed that even if the cheques were not presented, the suit would be maintainable under Order XXXVII CPC because there was no such requirement that the cheque ought to be dishonored for filing a summary suit.

Maintainability of the Summary Suit

Considering the factual background of the case, the Bench held that the contention against maintainability of the summary suit in terms of Order XXXVII CPC could not be accepted as the matter was based on written contract arising out of written purchase orders. The question as to whether the appellant was acting only as an agent of defendant 1 in relation to the supplies could only be a matter of his defence and could not take away the entitlement of the plaintiff to file a summary suit.

Law on Leave to Defend

The Bench opined that 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. Precisely, the Bench framed the following rules:

  1. If the defendant satisfies the Court that he has substantial defence, i.e., a defence which is likely to succeed, he is entitled to unconditional leave to defend.
  2. Where the defendant raises triable issues indicating a fair or bonafide defence, albeit not a positively good defence, he would be ordinarily entitled to unconditional leave to defend.
  3. Where the defendant raises triable issues, but it remains doubtful if the defendant is raising the same in good faith or about genuineness of the issues, the Trial Court may impose conditions both as to time or mode of trial as well as payment into the Court or furnishing security to balance the requirements of expeditious disposal of commercial causes and of not shutting out triable issues.
  4. Where the proposed defence appear to be plausible but improbable, heightened conditions may be imposed as to the time or mode of trial as also of payment into the Court or furnishing security or both, which may extend to the entire principal sum together with just and requisite interest.
  5. In the case where any part of the amount claimed by the plaintiff is admitted by the defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the defendant in the Court.

Conclusion

In the backdrop of above, the Bench concluded the following:

  1. The Trial Court as also the High Court totally omitted to consider that the appellant-defendant 2 had been contesting its liability with the assertion that it had only been the contractor executing the work of defendant 1.
  2. The conclusion that the defence raised by the appellant was frivolous or vexatious could only be treated as an assumptive one and lacking in requisite foundation.
  3. The effect and impact of an admitted position of the plaintiff, that payments were indeed made from time to time by the defendant 1, seems not to have gone into consideration of the Trial Court and the High Court while denying leave to the appellant.
  4. The same considerations, which weighed with the Courts to deny the leave to defend to the defendant 1, could not have been applied ipso facto to the case of the appellant; rather those considerations make out a case of triable issues qua the appellant.
  5. The view that the appellant has indeed raised triable issues, particularly concerning its liability and the defence of the appellant could not be said to be frivolous or vexatious altogether.

Accordingly, the appeal was allowed and the impugned judgments and orders of the High Court as well as of the Trial Court, insofar relating to the appellant were quashed and set. The appellant was granted leave to defend; and the amount of Rs. 40,00,000/- deposited by the appellant was directed to be treated as a deposit towards the condition for leave to defend. The Trial Court was directed to pass appropriate orders for treatment of the said amount and then proceed with trial of the suit only qua the appellant-defendant 2 in accordance with law.

[B.L. Kashyap & Sons Ltd. v. JMS Steels & Power Corpn., C.A. No. 379 of 2022,


*Judgment by: Justice Dinesh Maheshwari


Appearance by:

Advocate for the Appellant: Apoorva Bhumesh


Kamini Sharma, Editorial Assistant has put this report together

Case BriefsSupreme Court

Supreme Court: The bench of Vineet Saran and Dinesh Maheshwari*, JJ has explained the law relating to grant of unconditional leave to defend and held that 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.

The Court observed that , generally, the prayer for leave to defend is to be denied in such cases where the defendant has practically no defence and is unable to give out even a semblance of triable issues before the Court. It, however, explained the four eventualities where leave to defend may be granted:

  1. if the defendant satisfies the Court that he has substantial defence, i.e., a defence which is likely to succeed, he is entitled to unconditional leave to defend
  2. where the defendant raises triable issues indicating a fair or bonafide or reasonable defence, albeit not a positively good defence, he would be ordinarily entitled to unconditional leave to defend.
  3. where the defendant raises triable issues, but it remains doubtful if the defendant is raising the same in good faith or about genuineness of the issues, the Trial Court is expected to balance the requirements of expeditious disposal of commercial causes on one hand and of not shutting out triable issues by unduly severe orders on the other. Therefore, the Trial Court may impose conditions both as to time or mode of trial as well as payment into the Court or furnishing security.
  4. where the proposed defence appear to be plausible but improbable, heightened conditions may be imposed as to the time or mode of trial as also of payment into the Court or furnishing security or both, which may extend to the entire principal sum together with just and requisite interest.

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.

Further, it is only in the case where the defendant is found to be having no substantial defence and/or raising no genuine triable issues coupled with the Court’s view that the defence is frivolous or vexatious that the leave to defend is to be refused and the plaintiff is entitled to judgment forthwith.

The Court, however, clarified that in the case where any part of the amount claimed by the plaintiff is admitted by the defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the defendant in the Court.

Therefore, it was held that 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.

“It gets perforce reiterated that even if there remains a reasonable doubt about the probability of defence, sterner or higher conditions as stated above could be imposed while granting leave but, denying the leave would be ordinarily countenanced only in such cases where the defendant fails to show any genuine triable issue and the Court finds the defence to be frivolous or vexatious.”

[BL Kashyap v. JMS Steels and Power Corporation, 2022 SCC OnLine SC 59, decided on 18.01.2022]

*Judgment by: Justice Dinesh Maheshwari

Case BriefsHigh Courts

Delhi High court: Vibhu Bhkaru, J. dismissed a revision petition filed under Section 115 CPC impugning an order passed by the Additional District Judge in the subject summary suit whereby the respondents were granted unconditional Leave to Defend.

The respondents had defaulted in repaying the loan extended to them by the petitioner. Thereafter, the petitioner filed a suit for recovery of the loan under Order 37 CPC. The respondents, in response to the aforesaid summary suit, filed a reply to the application filed by the plaintiff under Order 37 Rule 3(4) CPC for “summons for judgment”, instead of an application under Order 37 Rule 5 for “leave to defend”. By the impugned order the trial judge held that the said discrepancy could be ignored, and the reply filed on behalf of the respondents could be treated as leave to defend in the interest of justice. He accordingly granted the respondents an unconditional leave to defend. Aggrieved thereby, the petitioner filed the present revision.

Preeti Singh, Advocate for the petitioner contended that trial court grossly erred in treating the reply filed by the respondents as an application for leave to defend under Order 37 Rule 3(5).

The High Court, however, was of the view that the contentions of the petitioner were not persuasive. It was observed: It is relevant to bear in mind the object of prescribing the procedure for seeking leave to defend under Order 37 Rule 3(5) CPC. The rationale for evolving such a procedure, requiring the defendant to file a leave to defend, is to enable the Court to evaluate whether there exist any triable issue warranting the suit to be set down for trial. In the present case, the reply filed by the respondents had clearly set out the grounds of defence.” It was reiterated that the rules of procedure are meant to aid the delivery of justice and a minor infraction of such rules of procedure ought not to visit the concerned party with consequences which substantially defeat the ends of justice.

Also, the petitioner did not contest the trial court’s conclusion that the respondents had a reasonable defence. In such view of the matter, the Court dismissed the revision petition.[Netrapal Singh v. Ravinder Kumar Kalyanai, 2019 SCC OnLine Del 9622, decided on 07-08-2019]

Case BriefsSupreme Court

Supreme Court: On the question relating to the power of the court to grant leave to defend in case of sham or moonshine defence in a commercial dispute, the bench of Ashok Bhushan and Navin Sinha, JJ said,

“if the court is satisfied of a plausible or probable defence and which defence is not considered a sham or moonshine, but yet leaving certain doubts in the mind of the court, it may grant conditional leave to defend.”

The Court also explained that in a summary suit, if the defendant discloses such facts of a prima facie fair and reasonable defence, the court may grant unconditional leave to defend. This naturally   concerns the subjective satisfaction of the court on basis of the materials that may be placed before it.

Explaining the distinction between both the above mentioned subjective satisfactions of the court, the bench said,

“in the latter case there is an element of discretion vested in the court. Such discretion is not absolute but has to be judiciously exercised tempered with what is just and proper in the facts of a particular case.”

The court said that the ultimate object of a summary suit is expeditious disposal of a commercial dispute. The discretion vested in the court therefore requires it to maintain the delicate balance between the respective rights and contentions by not passing an order which may ultimately end up impeding the speedy resolution of the dispute.

The Court also relied upon the decision in IDBI Trusteeship Services Limited vs. Hubtown Limited,  (2017) 1 SCC 568, wherein it was held,

“17.3 Even if the defendant raises triable issues, if a doubt is left with the trial Judge about the defendant’s good faith, or the genuineness of the triable issues, the trial Judge may impose conditions both as to time or mode of trial, as  well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.

17.4. If the defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.”

[Sudin Dilip Talaulikar v. Polycap Wires Pvt. Ltd, 2019 SCC OnLine SC 857, decided on 15.07.2019]

Case BriefsHigh Courts

Delhi High Court: Rekha Palli, J., without expressing any opinion on merits of the case, allowed an appeal filed by the appellant who was the defendant in a suit for recovery of money, against the order of the trial court whereby the suit was decreed against him without granting him leave to appeal.

The respondent alleged that the appellant borrowed Rs 12 lakhs from him for construction of a house. The money, he alleged, was paid in cash without any receipt. It was further alleged that the appellant issued a post dated cheque drawn on UTI Bank Ltd. for the repayment of the said amount. However, on presentation, the said cheques were returned by the Bank with remark “payment stopped by the drawer”. The respondent filed a complaint under Section 138 of the Negotiable Instrument Act, 1885 against the appellant. However, the said complaint was rejected by the Metropolitan Magistrate. Pursuant thereto, the respondent instituted the present suit under Order 37 CPC claiming recovery of the said Rs 12 lakhs along with interest. The appellant filed n application for leave to defend which was rejected by the Additional District Magistrate, and the suit was decreed against him.

C. Mohan Rao with Lokesh Kumar Sharma, Advocate appearing for the appellant contended that the trial court gravely erred in declining to grant leave to defend to the appellant even though the pleas raised by him clearly showed that his defence was fair and reasonable. Per contra, Rajshekhar Rao, Vinay Kumar and Raghav Kacker, Advocates representing the respondent supported the impugned order.

The High Court noted that the respondent claimed to have given the entire loan amount to the appellant in cash, without obtaining any receipt or acknowledgment reflecting such a  transaction. While the appellant did not dispute either the issuance of the cheque or his signature thereon, he specifically claimed that the cheque was never given to the respondent, but was given to his father in the year 2007 itself, as security for the chit fund amount which stood repaid. It also emerged from the record that the name of UTI Bank Ltd. stood changed to ‘Axis Bank Ltd.’ in 2007 itself, yet the cheque dated in the year 2013 — which the respondent claimed as having been issued by the appellant, was still drawn on a chequebook of UTI Bank Ltd. Coupled with this was the fact that respondent’s complaint filed under Section 138 NI Act was rejected. It was observed: “If the court finds that the defence is a wholly moonshine and sham, then leave to defend is liable to be rejected: but if the defence is found plausible, though not very probable, the Court would be justified in putting the defendant on terms while granting leave to defend.”

In the present case, the Court was of the opinion that the issue raised by the appellant was a plausible one. Thus, despite the fact that the appellant did not raise these vital issues specifically in his affidavit for leave to defend, the Court held that interest of justice demands that he be granted an opportunity to lead evidence in support of his defence, though the same had to be subject to conditions. Accordingly, he was granted leave to defend, subject to his depositing 50% of the principal amount with the trial court. The appeal was allowed and the order impugned was set aside.[Kadhirvel v. Vinod Kumar, 2019 SCC OnLine Del 9057, decided on 08-07-2019]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Valmiki Mehta, J. dismissed an appeal filed under Section 96 CPC against the order of the trial court whereby appellant’s leave of defend application was dismissed.

The case pertains to a recovery suit filed by the respondent against the appellant. It was an admitted fact that the appellant had taken a loan of Rs 15 lakhs from the respondent. For repayment of the same, the appellant had issued 3 cheques. However, on presentation, the cheques were dishonoured with a remark fund insufficient. Consequently, the respondent filed the subject recovery suit. Thereafter, an application for leave to defend was filed by the appellant which was dismissed by the trial court. Aggrieved thus, the appellant filed the instant petition.

On perusal of the record, the High Court did not find any illegality, whatsoever, in the order of the trial court. In the Court’s opinion, case of the appellant was completely false besides being disjointed. The averments made by the appellant were totally unrelated to the instant matter. The evidence presented was irrelevant. The Court observed that the entire defence of the appellant in the leave to defend application was confusing, to say the least. Its objective was to create confusion and false defence. The Court held that the trial court rightly declined the application of the appellant. Holding thus, the appeal was dismissed. [Ashwani Kumar v. Kalimuddin, 2018 SCC OnLine Del 11003, dated 04-09-2018]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Valmiki Mehta, J. dismissed a regular first appeal filed under Section 96 CPC against the judgment of the trial court whereby the appellant’s application for leave to defend was dismissed.

Brief facts of the case are that the appellant-defendant took a loan of Rs 20 lakhs from the plaintiff and issued two cheques for the part-payment thereof. However, on presentation, the said cheques were dishonoured with remarks funds insufficient. After serving the legal notice, the petitioner filed a suit. The defendant filed an application for leave to defend. His basic defence was that the cheques in question were stolen from his car while he was driving from Rohtak to Delhi. However, the trial court dismissed the defendant’s application for leave to defend. Aggrieved thus, the defendant filed the instant appeal.

The High Court was of the view that judgment of the trial court did not warrant any interference. It was noted that indeed an FIR was filed by the defendant in regard to the said robbery. However, there was no mention of the said cheques being stolen. The defendant was using such fact to create a completely false defence to the suit. Referring to the Supreme Court decision in IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568, the High Court observed that once the defence is clearly frivolous and vexatious and there is no triable issue, leave to defend should not be granted. In the present case too, the Court completely disbelieved the story put forth by the defendant, and concluded that the defence was frivolous and vexatious. Thus, the trial court was right in dismissing the defendant’s application for leave to defend. The appeal was dismissed sans merit. [Mange Ram v. Raj Kumar Yadav,2018 SCC OnLine Del 10316, dated 03-08-2018]

Case BriefsSupreme Court

Supreme Court: With the intent to prevent the arbitrary exercise of judicial discretion under Order 37 CPC while refusing the leave to defend or granting conditional or unconditional leave to defend, the bench of Kurian Joseph and R. F. Nariman, JJ laid down broad guidelines to be kept into mind by the trial judge. The Guidelines are as follows:

  • If the defendant satisfies the Court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit;
  • If the defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend;
  • Even if the defendant raises triable issues, if a doubt is left with the trial judge about the defendant’s good faith, or the genuineness of the triable issues, the trial judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security;
  • If the Defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.
  • If the Defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith
  • If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court.

Stating that Order 37 CPC has suffered a change in 1976, and that change has made a difference in the law laid down, the Court said that the position in law now is that the trial Judge is vested with a discretion which has to result in justice being done on the facts of each case. The Court explained that at one end of the spectrum is unconditional leave to defend, granted in all cases which present a substantial defence. At the other end of the spectrum are frivolous or vexatious defences, leading to refusal of leave to defend. In between these two extremes are various kinds of defences raised which yield conditional leave to defend in most cases. It is these defences that have to be guided by broad principles which are ultimately applied by the trial Judge so that justice is done on the facts of each given case. [IDBI Trusteeship Services Ltd v. Hubtown Ltd, 2016 SCC OnLine SC 1274, decided on 15.11.2016]