In a recent landmark judgment, the Supreme Court of India ruled in favor of the commercial defendant, allowing unconditional leave to defend in a case regarding a summary suit for recovery of outstanding dues. The court found the defense to be genuine and not frivolous, leading to the setting aside of previous orders granting conditional leave. Stay tuned for more details on this significant decision in commercial dispute resolution.
Facts
- The respondent filed a summary suit against the appellant under Order XXXVII of the Code of Civil Procedure for recovery of outstanding dues
- The appellant contested the suit claiming all legitimate dues have been paid
- The respondent claimed outstanding dues of Rs.34,24,633 and Rs.1,88,377 for different time periods
- The appellant relied on the withdrawal of prosecution under the Act to argue no dues were payable
- The appellant failed to provide documentary evidence in their reply to the summons for judgment
- The summary suit was initiated even though a criminal prosecution under the Act had been previously withdrawn
- The appellant needs to prove during trial that payment for goods claimed by respondent was made
- The respondent relied on account extracts to support claim for unpaid dues
- Defective goods on consignment were returned and Rs.5,00,000/- was paid
- Civil Judge granted conditional leave to defend based on commercial relationship
- High Court upheld the conditional leave to defend due to acknowledgment of a commercial relationship
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Analysis
- Order XXXVII, Rule 3 of the Code outlines the procedure for appearance of the defendant in a summary suit.
- If the defendant enters an appearance, the plaintiff must serve a summons for judgment supported by an affidavit verifying the cause of action and the amount claimed.
- The defendant, within ten days from the service of the summons for judgment, may apply for leave to defend the suit by disclosing facts supporting a defense.
- Leave to defend may be granted unconditionally or on terms deemed just by the court, provided that the defense disclosed is not frivolous or vexatious.
- If a part of the amount claimed by the plaintiff is admitted by the defendant, leave to defend will only be granted if the admitted amount is deposited in court.
- Discretion to grant leave to defend in a summary suit must be judiciously exercised.
- If defendant admits any part of the amount claimed, leave to defend may not be granted unless the admitted amount is deposited in court.
- In cases where no triable issues are raised, conditions for deposit or security can extend to the entire principal sum with interest.
- If defendant discloses a prima facie fair and reasonable defense in a summary suit, unconditional leave to defend may be granted.
- Court may impose conditions regarding time, mode of trial, payment into court, or furnishing security based on doubts about defendant’s good faith or genuineness of triable issues.
- Granting unconditional leave to defend is justified if defendant returns defective goods and pays outstanding dues.
- In cases where defendant has no substantial defense or raises vexatious issues, leave to defend may be refused and plaintiff is entitled to judgment.
- In instances of plausible or probable defense, the court may grant conditional leave to defend, exercising discretion.
- Maintaining balance between respective rights and contentions is crucial for expeditious disposal of commercial disputes in a summary suit.
- If the defendant can prove a substantial defense likely to succeed, plaintiff not entitled to sign judgment
- Defendant entitled to unconditional leave to defend if defense is plausible but improbable
- The appellant had raised a substantial defence and genuine triable issues.
- The failure of the Trial Judge and the High Court to notice and consider the raised issues led to the conclusion that there was no justification to grant conditional leave to defend.
- The existence of commercial relations between the parties, which was the basis for the summary suit, was not sufficient on its own to warrant conditional leave without proper consideration of the defense presented in the record.
- The defense raised by the appellant was deemed to be genuine and not frivolous, vexatious, or improbable.
Decision
- The appellant is granted unconditional leave to defend.
- The impugned orders granting conditional leave to defend are held to be unsustainable and are set aside.
- The appeal is allowed.
Also Read: Dispensation with Personal Appearance in Criminal Case: Landmark Judgement by Supreme Court of India
Case Title: SUDIN DILIP TALAULIKAR Vs. POLYCAP WIRES PVT LTD
Case Number: C.A. No.-005528-005528 / 2019
