2008 (10) TMI 696 - SC - Indian Laws

SC Affirms HC's Requirement for Deposit Before Defense Leave in Order 37 Suit; Emphasizes Amended Rule Importance.

Southern Sales & Services & Ors. Versus Sauermilch Design & Handels GMBH

The SC upheld the HC's decision requiring the petitioner to deposit a substantial portion of the admitted amount before granting leave to defend a suit ... Interpretation of statute - Rule 3, Sub-rule (5) of Order 37 of the Code of Civil Procedure - Jurisdiction - Summary trial - Recovery for payment - correctness of directing appellant to deposit 55% of the admitted amount as a condition precedent for grant of leave to defend the suit - HELD THAT:- It is now well established as a principle of law that even if a wrong order is passed by a Court having jurisdiction to pass an order in such cases, the revisional Court will not interfere with such an order unless a jurisdictional error is pointed out and established by the person who questions such order. In the instant case, the High Court did not lack jurisdiction to pass an order with regard to the subject matter of dispute, though the order itself may be incorrect. There is, therefore, little scope for this Court to interfere with the directions given to the appellant herein to deposit in Court 55% of the admitted dues as a pre-condition to grant of leave to defend a suit. The judgment of the High Court impugned in this appeal does not warrant any interference since the trial Court had exercised its jurisdiction under the second proviso to Sub-rule (5) of Rule 3 of Order 37 of the Code. The earlier concept of granting unconditional leave when a triable issue is raised on behalf of the defendant, has been supplemented by the addition of a mandate, which has been imposed on the defendant, to deposit any amount as admitted before leave to defend the suit can be granted. The question as to whether leave to defend a suit can be granted or not is within the discretionary powers of the High Court and it does not appear to us that such discretion has been exercised erroneously or with any irregularity which warrants interference by this Court. Appeal is, therefore, dismissed. Issues:Interpretation of Rule 3, Sub-rule (5) of Order 37 of the Code of Civil Procedure in a proceeding under Order 37 of the Code.Analysis:The judgment of the Supreme Court pertains to an appeal against an order passed by the Karnataka High Court regarding the interpretation of Rule 3, Sub-rule (5) of Order 37 of the Code of Civil Procedure. The key issue raised in this case is the application of the said rule in granting leave to defend a suit filed under Order 37. The rule in question was introduced by way of an amendment in 1977, replacing the previous Rule 3. The amended rule includes provisions such as Sub-rules (4) and (5) which outline the procedure for granting leave to defend based on the defendant's application and disclosures made. The judgment delves into the significance of these amendments and the conditions set forth for granting leave to defend.The respondent had filed a suit under Order 37 for recovery of a specific amount, and the petitioner sought leave to defend the suit after being served with Summons for Judgment. The trial court granted conditional leave to the petitioner based on the triable issues raised in the affidavit submitted by the petitioner. Subsequently, the High Court, upon revision, acknowledged the triable issue raised but directed the petitioner to deposit a substantial portion of the admitted amount claimed by the respondent. This condition was imposed despite the existence of a triable issue, leading to the appellant challenging the High Court's order in the Supreme Court.The appellant argued that based on previous decisions, unconditional leave should be granted when a triable issue is raised, without any direction to deposit an amount as security. The appellant cited various cases to support this argument, emphasizing that the discretion to grant leave should not be conditioned on a deposit requirement unless the defense is patently dishonest. Additionally, the appellant contended that the High Court exceeded its jurisdiction by imposing such a condition.In response, the respondent's counsel highlighted the amendments to Rule 3 of Order 37, particularly Sub-rule (5), which distinguishes between disputed and admitted claims. The counsel argued that under the second proviso of Sub-rule (5), if any amount is admitted by the defendant, it must be deposited before granting leave to defend the suit. The respondent justified the High Court's decision to require a deposit based on the admitted dues, in accordance with the amended provisions of the Code.The Supreme Court, after considering the arguments presented by both parties and the legal framework post the 1976 amendment, upheld the High Court's decision. The Court emphasized the importance of the amended provisions, especially the requirement to deposit any admitted amount before granting leave to defend a suit under Order 37. The judgment affirmed that the High Court's exercise of discretion in imposing the deposit condition was within the scope of the law and did not warrant interference. Consequently, the appeal was dismissed, and no costs were awarded.In conclusion, the judgment provides a detailed analysis of the interpretation and application of Rule 3, Sub-rule (5) of Order 37 of the Code of Civil Procedure, emphasizing the significance of the 1976 amendment and the conditions set forth for granting leave to defend a suit under Order 37.