ORDER XXXVII Rule 3 CPC- Grant Of Leave To Defend Is The Ordinary Rule; Denial An Exception: Supreme Court

The grant of leave to defend (with or without conditions) is the ordinary rule; and denial of leave to defend is an exception, the Supreme Court observed in a judgment in which it discussed the scope of Rule 3 of Order XXXVII of the Code of Civil Procedure 1908.

The bench comprising Justices Vineet Saran and Dinesh Maheshwari  observed that a 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.

ORDER XXXVII of the Code deals with Summary Procedure and Rule 3 thereof contains the procedure for the appearance of defendant. According to the said Rule, the defendants who enters appearance has to seek leave to defend such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the court or judge to be just. It also states that the leave to defend shall not be refused unless the court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defence to raise or that the defence intended to be put up by the defendant is frivolous or vexatious:

In this case, the plaintiff filed the subject (summary) suit in terms of Order XXXVII CPC while stating itself to be a registered partnership firm manufacturing and supplying a wide variety of iron and steel products. The defendant No. 1 sought leave to defend with the following contentions, inter alia, that it had no privity of contract with the plaintiff because the purchase orders were issued only by the defendant No. 2; that the invoices in question were raised by the plaintiff in the name of the defendant No. 2; that neither the purchase orders nor the invoices were bearing the signatures of the defendant No. 1; and that all the dealings were between plaintiff and defendant No. 2, where no legal liability was to be discharged by defendant No. 1 and that the defendant No. 1 was rather a stranger to the contract in question. The 2nd defendant also filed a similar application seeking leave to defend. The Trial Court declined leave to defend to both the defendants observing that no triable issues were raised by the defendants. The High Court dismissed the appeal filed against this order.

The issues thus raised before the Apex Court in this appeal were (1) whether the plaintiff was entitled to maintain a summary suit under Order XXXVII CPC for the claim in question; and (2) whether the appellant-defendant No. 2 has rightly been declined the leave to defend?

Regarding the first issue, the bench noted that as per the plaint averment, the matter is based on written contract arising out of written purchase orders issued by the appellant on the instructions and on behalf of defendant No. 1; and the plaintiff had raised the invoices against such supplies under the purchase orders. Therefore, the contention against maintainability of the summary suit in terms of Order XXXVII CPC was rejected.

Referring to the Rule and also the judgments in Mechelec Engineers and Manufacturers v. Basic Equipment Corporation: AIR 1977 SC 577 and IDBI Trusteeship Services Ltd. v. Hubtown Ltd.: (2017) 1 SCC 56, the court made the following observations:

Grant of leave to defend (with or without conditions) is the ordinary rule; and denial of leave to defend is an exception.

It is at once clear that even though in the case of IDBI Trusteeship, this Court has observed that the principles stated in paragraph 8 of Mechelec Engineers' case shall stand superseded in the wake of amendment of Rule 3 of Order XXXVII but, on the core theme, the principles remain the same that grant of leave to defend (with or without conditions) is the ordinary rule; and denial of leave to defend is an exception. Putting it in other words, 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.

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

As noticed, if the defendant satisfies the Court that he has substantial defence, i.e., a defence which is likely to succeed, he is 18 entitled to unconditional leave to defend. In the second eventuality, 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. In the third eventuality, 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. In the fourth eventuality, 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.

Even in such cases of doubts or reservations, denial of leave to defend is not the rule

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. 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. Of course, 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.

 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.

Therefore, 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.

Examining the factual aspects of the case, the bench found that that the appellant defendant raised triable issues, particularly  concerning its liability and thus the defence of the appellant cannot be said to be frivolous or vexatious altogether. Allowing the appeal, the court granted leave to defend to the appellant-defendant.

Click here to Read/Download Judgment