Order XXXVII Rule 4 requires both special circumstances and a disclosed defence, while excessive interest may be reduced under Section 34.

Order XXXVII Rule 4 requires a defendant seeking to set aside an ex parte decree to show both special circumstances for non-appearance and facts, by affidavit or otherwise, sufficient to justify leave to defend; special circumstances alone are insufficient where no defence is disclosed, so refusal to set aside the decree was upheld. Under Section 34 CPC, the interest component may be moderated where the liability does not arise from a commercial transaction and the rate is found excessive on the facts; the decree was therefore modified by reducing interest to a reasonable rate.

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Issues: (i) Whether an ex parte decree passed in a suit under Order XXXVII of the Code of Civil Procedure could be set aside under Rule 4 on showing special circumstances alone, or whether the defendant was also required to disclose facts sufficient to entitle him to defend the suit. (ii) Whether the rate of interest awarded in the decree was liable to be reduced under Section 34 of the Code of Civil Procedure.

Issue (i): Whether an ex parte decree passed in a suit under Order XXXVII of the Code of Civil Procedure could be set aside under Rule 4 on showing special circumstances alone, or whether the defendant was also required to disclose facts sufficient to entitle him to defend the suit.

Analysis: Rule 4 of Order XXXVII empowers the court, in special circumstances, to set aside the decree and also to grant leave to the defendant to appear and defend the suit if it seems reasonable to do so. The provision is wider than Order IX Rule 13 and, in a summary suit, the defendant is not entitled to defend as of right. An applicant must therefore show both special circumstances for non-appearance and facts, by affidavit or otherwise, which would justify leave to defend. Special circumstances alone are not enough where no defence to the claim is disclosed.

Conclusion: The appellant failed to disclose facts entitling him to defend the suit, so the refusal to set aside the decree or grant leave to defend was upheld.

Issue (ii): Whether the rate of interest awarded in the decree was liable to be reduced under Section 34 of the Code of Civil Procedure.

Analysis: The liability did not arise out of a commercial transaction, and the grievance regarding the rate of interest was found to be justified on the facts of the case. The decree was therefore modified to bring the interest within a reasonable rate under Section 34.

Conclusion: The rate of interest was reduced from 18% to 6% per annum.

Final Conclusion: The decree rejecting the application under Order XXXVII Rule 4 was maintained, but the monetary relief was modified by reducing the interest component.

Ratio Decidendi: In an application under Order XXXVII Rule 4, the defendant must establish special circumstances for non-appearance and also disclose facts sufficient to justify leave to defend; special circumstances by themselves do not warrant setting aside the decree with permission to defend.

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