Order XXXVII suits only for liquidated amounts from written instruments, not complex account examinations

The Delhi HC allowed leave to defend applications and held that the suit was not maintainable under Order XXXVII CPC. The court ruled that Order XXXVII suits are only for liquidated amounts flowing directly from written instruments, not for claims requiring examination of multiple documents and accounts over years. The claimed amount of Rs. 1,06,89,531.40 lacked specific written contract support and no statement of account showed this balance. The court distinguished the case from precedents where defendants had admitted the statement of account. The suit was directed to be treated as an ordinary suit instead.

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The core legal questions considered by the Court in this judgment are:

1. Whether the suit filed under Order XXXVII of the Code of Civil Procedure, 1908 (CPC), is maintainable when the amount claimed is a balance due at the foot of an account rather than a liquidated amount arising directly from a written instrument.

2. What is the scope and intent of Order XXXVII CPC, and what types of suits are permissible under itRs.

3. Whether the plaintiff's insistence on filing and pursuing the suit under Order XXXVII CPC despite the suit amount not arising from a liquidated demand in a written contract amounts to abuse of process of law.

4. Whether leave to defend applications filed by the defendants should be allowed in such a suit.

5. The appropriate consequences, including costs, for the plaintiff's conduct in pursuing the suit under an improper procedural provision.

Issue-wise Detailed Analysis

Issue 1: Maintainability of Suit under Order XXXVII CPC when the amount claimed is a balance due at the foot of an account

The Court began by elaborating the legislative intent and scope of Order XXXVII CPC. This provision was enacted as an exception to the normal civil procedure, allowing summary suits to be filed only when the plaintiff's claim arises from a written instrument which on its face admits liability, such as dishonoured cheques, promissory notes, or contracts containing liquidated demands.

The Court emphasized that Order XXXVII suits are not intended for claims where the amount due has to be calculated after considering multiple transactions, repayments, or adjustments over a period of time, i.e., claims based on balances at the foot of accounts. Such claims require examination of various documents and factual issues, which mandate filing a regular suit under the ordinary procedure.

Supporting this interpretation, the Court relied on its earlier judgments, notably:

• M/s Associates India Financial Services (P) Ltd. Vs. M/s Atwal and Associates & Ors. - The Court held that a suit claiming a balance due at the foot of account after adjusting repayments is not maintainable under Order XXXVII CPC because the amount is not a liquidated sum admitted in a written agreement.
• M/s K&K Health Care Pvt. Ltd. Vs. M/s Pehachan Advertising - The Court observed that suits based on invoices and subsequent payments leading to a balance due cannot be treated as suits under Order XXXVII CPC.
• GE Capital Services India Vs. May Flower Healthcare Pvt Ltd & Ors. - The Court reiterated that the amount claimed must arise directly from the written instrument and not from a running account balance.

In these precedents, the Court underscored that statements of account and ledger balances require proof under Section 34 of the Evidence Act, 1872, and thus are unsuitable for summary suits under Order XXXVII CPC.

Application of these principles to the present case revealed that the plaintiff's claim of Rs. 1,06,89,531.40 was not supported by any written contract containing this specific liquidated amount. Instead, the claim was based on a balance due after various adjustments and repayments over multiple years. The plaint did not disclose how this amount arose from the original loan agreements or the subsequent compromise deed, nor was there a statement of account filed with the plaint reflecting this figure.

Hence, the Court concluded that the suit was not maintainable under Order XXXVII CPC as the claim was essentially a balance at the foot of the account and not a liquidated sum arising from a written instrument.

Issue 2: The object and legislative intent of Order XXXVII CPC

The Court provided a detailed exposition of the object behind Order XXXVII CPC. It was enacted as a special procedure to enable swift recovery of liquidated debts admitted in writing, dispensing with the usual procedural safeguards such as automatic right to defend and extensive evidence on factual issues.

The Court stressed that the provision was never intended to cover suits where the amount claimed is arrived at by examining multiple documents, transactions, and statements over time. Such suits require full trial procedures to resolve factual disputes.

The Court criticized the plaintiff's conduct for misusing Order XXXVII CPC to file a suit that clearly did not fall within its ambit, resulting in wastage of judicial time over several years and numerous hearings.

Issue 3: Whether the plaintiff's conduct amounted to abuse of process of law

The Court observed that despite earlier judgments by the same Court holding that suits like the present are not maintainable under Order XXXVII CPC, the plaintiff persisted in filing and pursuing the suit under this provision. This obstinacy was described as contumacious and an abuse of the legal process.

The Court noted that the plaintiff's counsel failed to point out any written agreement containing the specific liquidated amount claimed, and the plaint was deficient in correlating the various amounts mentioned.

Given the history of the case and the plaintiff's repeated insistence on an untenable procedural route, the Court imposed heavy costs on the plaintiff to send a strong message against such misuse of judicial resources.

Issue 4: Whether leave to defend applications should be allowed

Leave to defend applications under Order XXXVII Rule 3(5) CPC require the defendant to show a triable issue. However, if the suit itself is not maintainable under Order XXXVII CPC, the question of leave to defend does not arise.

The Court held that since the suit was not maintainable under Order XXXVII CPC, the defendants should be granted unconditional leave to defend, converting the suit into an ordinary suit where the defendants have the right to contest the claim fully.

This approach was consistent with the Court's earlier rulings and the legislative intent that defendants should not be deprived of their natural justice rights unless the suit falls squarely within Order XXXVII.

Issue 5: Consequences and costs

The Court imposed costs of Rs. 5 lacs on the plaintiff for wasting judicial time and resources. Out of this, Rs. 4 lacs were directed to be deposited with the Delhi High Court Legal Aid Services Committee, and Rs. 1 lac was to be divided equally among the three defendants to compensate for their expenses incurred in contesting the leave to defend applications.

The Court also directed the filing of written statements and replication within specified time frames and listed the matter for further proceedings as an ordinary suit.

Significant Holdings

"The object of Order XXXVII CPC never was to allow filing of the suit under Order XXXVII CPC if the amount which is claimed is the balance due at the foot of the account."

"Suits which are to be filed under Order XXXVII CPC, were as per the legislative intent, only those where the amount claimed in the suit is the same liquidated amount which arises as emerging/flowing directly from the written instrument which is the subject matter of the Order XXXVII suit."

"The plaint in the present suit when it refers to the amount which is claimed in the suit of Rs. 1,06,89,531.40 does not make averments and refer to any specific document being the written contract between the parties containing this specific liquidated amount as due and payable by the defendants to the plaintiff."

"Merely because a plaintiff/respondent feels it has a strong case on merits cannot mean that the suit can be filed under Order XXXVII unless the mandatory requirement of basing the suit on one of the four requirements of Order XXXVII Rule 1 sub Rule 2 is complied with."

"If the suit is not maintainable under Order XXXVII, there does not arise an issue of any conditional leave to defend as was granted by the trial Court."

"I allow the application for leave to defend with costs of Rs. 25,000/-. The defendants are granted unconditional leave to defend."

"In view of the above, the leave to defend applications are allowed inasmuch as the suit itself is not maintainable under Order XXXVII CPC. The suit is therefore directed to be treated as an ordinary suit."

"Costs of Rs. 5 lacs are imposed upon the plaintiff... to send a strong message to those litigants who do not exercise discretion in accordance with law."

The Court's final determination was that the suit was not maintainable under Order XXXVII CPC as the amount claimed was a balance due at the foot of an account and not a liquidated sum arising from a written instrument. Consequently, the defendants were granted unconditional leave to defend, and the suit was to proceed as an ordinary suit. The plaintiff was penalized with heavy costs for abusing the procedural provisions and wasting judicial time.

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