M/s. Mechalec Engrs. & Manufacturers v. M/s. Basic Equipment Corn. AIR 1977 SC 577

M/s. Mechalec Engrs. & Manufacturers v. M/s. Basic Equipment Corn. AIR 1977 SC 577

Case Summary

1. Appeal before the Supreme Court by way of Special Leave Petition under Article-136 of the Constitution. Leave granted.
2. Facts of the case:
   1. The plaintiff (respondent herein) filed a summary suit U/O-37, CPC, against the defendants (appellant herein) for recovery around 21,000 rupees with interest @ 12% p.a.
   1. The defendant applied for leave to defend U/O-37, R-3 and was granted unconditional leave.
   1. A revision petition was filed before the Delhi HC U/S-115, CPC by the plaintiff. The HC varied the decision of the trial court and granted conditional leave to defend on the deposit of the entire 21,000 rupees with interest @ 6% p.a. into the Court.
   1. SLP filed against the HC order before the SC. Leave granted.
3. Question of Law before the Supreme Court:
   1. 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?
4. Decision of the Supreme Court:
   1. The HC was in patent error and went beyond its powers of revision under S-115, CPC by varying the decision of the trial court. Consequently, the judgment and order of the High Court is set aside and the order of the Additional District Judge is restored.
5. Important paragraphs from the judgment:

In the case of Jacobs v. Booth’s Distillery Co. it was held that whenever a defence raises a really triable issue, leave must be given. In other cases also this leave must be given unconditionally where the defence could not be shown to be dishonest in limine. All that we need say is that if the Court is of opinion that the defence is not bona fide, then it can impose conditions and is not tied down to refusing leave to defend. This third course is open to the court in a suitable case. But, it cannot reach the conclusion that the defence is not bonafide arbitrarily. It is as much bound by judicial rules and judicial procedure in reaching a conclusion of this kind as in any other matter.

We think that the well established principles repeatedly laid down by this Court which govern jurisdiction of the High Courts under Section 115, C.P.C. were ignored by the learned Judge of the High Court in interfering with the discretionary order. The learned Judge of the High Court has differed on 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.

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, Das, J. after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by Order 37, C.P.C. in the form of the following propositions (at p. 253):

• If the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend.
• If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.
• If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he had a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff’s claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.
• If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to judgment and the defendant is not entitled to leave to defend.
• 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. Consequently, we set aside the judgment and order of the High Court and restore that of the Additional District Judge.