2006 (8) TMI 656 - SC - Indian Laws

Supreme Court sets aside excessive deposit orders, directs expeditious trial.

Defiance Knitting Industries Pvt. Ltd Versus Jay Arts

The Supreme Court allowed the appeal, setting aside the trial court's and the High Court's orders that required a deposit exceeding Rs. 20,00,000/-. The ... - Issues Involved:1. Denial of unconditional leave to defend under Order XXXVII Rule 2 of the CPC.2. Quantum of deposit required for leave to defend.3. Disputed questions of fact requiring trial.4. Compliance with earlier High Court order regarding deposit amount.Issue-wise Detailed Analysis:1. Denial of Unconditional Leave to Defend under Order XXXVII Rule 2 of the CPC:The appellant challenged the Bombay High Court's judgment which upheld the trial court's decision denying unconditional leave to defend in Summary Suit No. 10 of 2001. The trial court had rejected the appellant's application for unconditional leave to defend under Order XXXVII Rule 3(5) of the CPC. The High Court noted that the defendant had not filed its written statement and disputed the plaintiff's claim, indicating that the work was completed as per the tender in March 1999 and certified by the Architect on 19.04.1999. The High Court observed that the trial court should have provided proper reasoning for its decision but concluded that the discretion exercised by the trial court in granting conditional leave to defend was not perverse or erroneous.2. Quantum of Deposit Required for Leave to Defend:The trial court initially allowed the appellant's application for leave to defend on the condition of depositing an additional Rs. 50,00,000/- in two installments, in addition to the earlier deposited amount of Rs. 20,00,000/-. The appellant argued that the trial court and the High Court overlooked the earlier High Court order which capped the deposit at Rs. 20,00,000/-. The respondent contended that the admitted amount was more than Rs. 90,00,000/-, justifying the additional deposit. The Supreme Court noted that the earlier High Court order implied a maximum deposit of Rs. 20,00,000/- and did not provide for any higher amount, thus supporting the appellant's stance.3. Disputed Questions of Fact Requiring Trial:The appellant highlighted that the summary suit involved several disputed questions needing trial, evidenced by extensive correspondence between the parties from 05.11.1997 onwards. The appellant had not accepted the plaintiff's claims and had referred the bills to its Architect, indicating unresolved issues regarding payments and defective work. The High Court acknowledged the existence of some disputes but found no substantial evidence that the appellant's Architect had finalized a payment figure less than the certified amount on 19.04.1999.4. Compliance with Earlier High Court Order Regarding Deposit Amount:The Supreme Court emphasized the importance of the earlier High Court order in Civil Revision No. 659 of 2002, which stipulated a deposit of Rs. 20,00,000/- to demonstrate the appellant's bona fides, with the possibility of refund if unconditional leave to defend was granted. The Supreme Court found that the trial court and the High Court failed to adhere to this order, which intended to limit the deposit to Rs. 20,00,000/-. Consequently, the Supreme Court held that the trial court's and the High Court's orders directing a higher deposit were unsustainable.Conclusion:The Supreme Court allowed the appeal, setting aside the trial court's and the High Court's orders that required a deposit exceeding Rs. 20,00,000/-. The Court directed the trial court to proceed with the matter expeditiously, noting that the deposit made pursuant to the Supreme Court's interim order need not be refunded. The appeal was allowed without any order as to costs.