📘 CIVIL PROCEDURE CODE : SUPREME COURT JUDGMENT

Order XXXVII Rule 3

Mechalec Engrs & Manufacturers v. Basic Equipment Corpn [1977 SC]

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⚖️ JUDGMENT

Case Law on Order 37 Rule 3

Mechalec Engrs & Manufacturers v. Basic Equipment Corpn [1977 SC]

The plaintiff-respondent alleged to be a registered partnership firm filed a suit on 25th April, 1974, through one of its partners, for the recovery of Rs. 21,265 as principal and Rs. 7655 as interest at 12% per annum, according to law and Mercantile usage, on the strength of a cheque drawn by the defendant on 12th May, 1971, on State Bank of India, which, on presentation, was dishonoured.

The plaintiff alleged that the cheque was given as price of goods supplied. The defendant-appellant firm admitted the issue of the cheque by its Managing partner, but, it denied any privity of contract with the plaintiff firm. The defendant-appellant had its own version as to the reasons and purposes for which the cheque was drawn.

The suit was instituted under the provisions of Order 37, Civil Procedure Code so that the defendant-appellant had to apply for leave under Order 37, Rule 2 of the Code to defend. This leave was granted unconditionally by the trial Court after a perusal of the cases of the two sides.

The learned Judge of the High Court of Delhi had, on a revision application under Section 115, concluded that the defences were not bona fide. He, therefore, ordered:

For these reasons I would allow the revision petition and set aside the order of the trial court. Instead I would grant leave to the defendant on their paying into Court the amount of Rs. 21,265.28 together with interest at the rate of 6 per cent per annum from the date of suit till payment and costs of the suit (only court-fee amount at this stage and not the lawyer’s fee). The amount will be deposited within two months.

The only question which arises before us in this appeal by special leave is:

Could the High Court interfere in exercise of its powers under Section 115, Civil Procedure Code, with the discretion of the Additional District Judge, in granting unconditional leave to defend to the defendant-appellant upon grounds which even a perusal of the order of the High Court shows to be reasonable?

We need not dilate on the well-established principles repeatedly laid down by this Court which govern jurisdiction of the High Courts under Section 115, C.P.C. We think that these principles were ignored by the learned Judge of the High Court in interfering with the discretionary order after a very detailed discussion of the facts of the case by the learned Judge of the High Court who had differed in a pure question of fact – whether the defences could be honest and bona fide.

Any decision on such a question, even before evidence has been led by the two sides, is generally hazardous.

We do not think that it is fair to pronounce a categorical opinion on such a matter before the evidence of the parties is taken so that its effects could be examined.

In the case before us, the defendant had denied, inter alia, liability to pay anything to the plaintiff for an alleged supply of goods. It is only in cases where the defence is patently dishonest or so unreasonable that it could not reasonably be expected to succeed that the exercise of discretion by the trial Court to grant leave unconditionally may be questioned.

In the judgment of the High Court we are unable to find a ground of interference covered by Section 115, C.P.C.

In Smt. Kiranmoyee Dassi v. Dr. J. Chatterjee [1945 CWN], Das, J. after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by Order 37 in the form of the following propositions:

(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence.

The case before us certainly does not fall within the class (e) set out above. It is only in that class of cases that an imposition of the condition to deposit an amount in Court before proceeding further is justifiable.

Consequently, we set aside the judgment and order of the High Court and restore that of the Additional District Judge.

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