Directing Deposit Of 75% Suit Claim To Condone Delay & Set Aside Exparte Decree Unwarranted & Disproportionate: Supreme Court

The Supreme Court bench led by CJI DY Chandrachud and Justices JB Pardiwala and Manoj Misra, in its order, observed that such a condition was not only disproportionate but also unwarranted. The bench was sitting in appeal against the division bench order of the Madras High Court which had directed for the deposit condition in question. 

“Imposing a requirement of a deposit of 75% of the suit claim is disproportionate and would have to be set aside.”

As per facts, the issue commenced when the respondent filed a draft plaint in 2020, seeking to recover Rs 3.42 crores from the appellant. Following this, a Judge's Summons was filed under relevant legal provisions.

The High Court granted the respondent leave to sue on January 24, 2020, leading to the registration of the plaint as CS No 87 of 2020. Trouble ensued when, on March 9, 2022, an advocate for the respondent issued a communication to the appellant. Despite the appellant's prior appearance during the leave stage, no formal summons, as per the Original Side Rules, was issued by the Registry of the High Court.

The situation escalated when, on August 2, 2022, the appellant was proceeded against ex parte, culminating in an ex parte decree on August 30, 2022. Subsequently, on June 21, 2023, the appellant received notice of the respondent commencing execution proceedings in Hong Kong.

Seeking redress, the appellant filed a Judge's Summons under Order XIV Rule 8 of the OS Rules and Order IX Rule 13 of the CPC on July 15, 2023, to set aside the ex parte decree, accompanied by an application for condonation of delay.

However, on September 14 2023, the Single Judge directed that the ex parte decree could be set aside upon the condition of appellant depositing 75% of the suit claim within four weeks.

The appellant's appeal against this order was dismissed by the Division Bench, deeming it not maintainable. The matter then traversed before the Apex Court.

Critical Lapse on The Issuance Of Summons

The Supreme Court observed that while the appellant had previously appeared before the High Court when granted permission to sue, a critical lapse occurred regarding the issuance of summons. The High Court's Original Side Rules, designed for such situations, specify a formal process for summons delivery. However, in a revelation during the proceedings, it was acknowledged that, besides a notice from the respondent's advocate on March 9, 2022, the High Court Registry failed to issue any formal summons. This omission particularly pertains to the regulations related to serving summons to a defendant located outside the court's jurisdiction.

As per the Madras High Court Orginal Side Rules (OS Rules) , Rule 5 provides that unless directed differently or specified otherwise in these rules, each summons mandates the defendant to enter an appearance and submit a written statement within six weeks from receiving the summons, provided they intend to contest the lawsuit.

Rule 6 allows the Registrar to modify the summons format by replacing the standard fourteen-day response period with extended periods, not exceeding the specified limits. Under Rule 6(a), if the defendant resides outside the local jurisdiction but within the state of Tamil Nadu, the response time can be extended to six weeks.

The Court further drew attention to the provisions of Order V Rule 25 of CPC.

Put simply, Order V Rule 25 CPC outlines the process for serving summons when the defendant resides outside of India without any appointed agent. In such cases, the summons is directed to the defendant at their place of residence and sent through various means approved by the High Court, such as post, courier service, fax, electronic mail, or other methods specified in the High Court rules. If the defendant is in Bangladesh or Pakistan, the summons and a copy can be sent to any court in that country with jurisdiction where the defendant resides. Additionally, if the defendant in those countries is a public officer or servant of a railway company or local authority, the summons and copy can be sent to the specified officer or authority as notified by the Central Government.

The Court concluded that the appellant had initially appeared before the High Court when the respondent sought permission to sue. The court granted this permission on January 24, 2020. However, it was only on March 9, 2022, that an advocate's notice was sent to the appellant, which is over two years later. Upon reviewing the advocate's notice, it was clear that the High Court's OS Rules were not followed.

“The Advocate's notice contained no annexures or documents. It is not evident from the suit number referred to in the notice whether it was the same plaint in respect of which leave to sue had been granted two years earlier.”

Thus, in response to the High Court's order requiring a 75% deposit of the suit claim as a condition for setting aside an ex parte decree, the Supreme Court deemed it unwarranted and disproportionate. Instead, the Court suggested that imposing a cost on the appellant would have sufficed for justice.

“In this backdrop, the order of the High Court directing a deposit of 75% of the suit claim as a condition precedent for condoning the delay and for setting aside the ex parte decree was unwarranted. The ends of justice would have been met if an order of costs was imposed on the appellant as a condition precedent for condoning the delay and for setting aside the ex parte decree. Imposing a requirement of a deposit of 75% of the suit claim is disproportionate and would have to be set aside.”

Consequently, the Supreme Court directed the appellant to deposit Rs two lakhs in the Registry of the High Court of Judicature at Madras as costs payable to the respondent by March 31, 2024. Upon fulfilling this condition, the delay in the appellant's application to set aside the ex parte decree would be condoned, and the decree passed by the Single Judge of the High Court would be set aside. However, any default by the appellant in meeting this condition would lead to the loss of the benefits outlined in the order. Additionally, when the suit is reinstated, the written statement filed by the appellant will be accepted into the record.

Case Details : M/s Trois Corporation HK Ltd v. M/s National Ventures Pvt Limited SLP (C) Nos 4012-4013 of 2024

Citation : 2024 LiveLaw (SC) 217