Supreme Court Elucidates Principles Governing Grant Of Leave To Defend A Summary Suit [Read Judgment]

The Supreme Court in IDBI Trusteeship Services Ltd. Vs. Hubtown Ltd, has restated the principles governing the grant of leave to defend a Summary suit as per amended Order XXXVII Rule 3 of the Code of Civil Procedure.

A Bench comprising Justice Kurian Joseph and Justice RF Nariman said the principles stated in paragraph 8 of Mechelec Engineers & Manufacturers v. Basic Equipment Corporation will now stand superseded, post amendment of Order XXXVII Rule 3 of the Code of Civil Procedure and in view of a four-judge bench decision in Milkhiram (India) (P) Ltd. v. Chamanlal Bros. The court observed as follows:

1. 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;


2. 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;


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;


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.


5. 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;


6. 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.

In the facts of the instant case, the court observed that defence raised by the defendants appears to be in the realm of being ‘plausible but improbable’. Setting aside the Bombay High Court judgment refusing grant of leave to defend the suit, the court said the defendant would be granted leave to defend the suit only if it deposits in the Bombay High Court the principal sum of Rs 418 crore invested by the FMO or gives security for the said amount, to the satisfaction of the Prothonotary and Senior Master, Bombay High Court within three months from today.

Read the Judgment here.