Summary suit on cancellation deed, TDS-based limitation, and absence of express compound interest; substantial defence secured leave to defend.

A summary suit under Order XXXVII can proceed on a written Cancellation Deed acknowledging liability to refund principal with interest, and a ledger entry does not alter that contractual basis. Deduction and deposit of TDS may count as payment on account of debt for limitation purposes under Section 19 of the Limitation Act, with a fresh limitation period running from that date. Compound interest at 24% was not shown to arise because the deed contained no express stipulation for compounding. The defendant's plea of adjustment and set-off, supported by surrounding conduct and related proceedings, raised a substantial defence and triable issues, so unconditional leave to defend was granted.

---

---

Issues: (i) whether the suit was maintainable under Order XXXVII of the Code of Civil Procedure, 1908; (ii) whether the suit was barred by limitation in view of the alleged payment and TDS deduction; (iii) whether compound interest at 24% per annum was payable under the Cancellation Deed; and (iv) whether the defendant had raised a substantial defence and triable issues entitling it to unconditional leave to defend.

Issue (i): whether the suit was maintainable under Order XXXVII of the Code of Civil Procedure, 1908.

Analysis: The claim was founded on the written Cancellation Deed, under which the defendant acknowledged liability to refund the principal sum with interest. The ledger account only reflected part-payments made towards that liability and did not change the true foundation of the claim. A suit for recovery of a debt with interest arising from a written contract falls within Order XXXVII.

Conclusion: The suit was maintainable under Order XXXVII of the Code of Civil Procedure, 1908.

Issue (ii): whether the suit was barred by limitation in view of the alleged payment and TDS deduction.

Analysis: The Court treated the deposit of TDS as a payment on account of the debt for the purposes of Section 19 of the Limitation Act, 1963, read with Sections 194A and 198 of the Income-tax Act, 1961. Since the TDS was deducted and deposited against the plaintiff's entitlement under the Cancellation Deed, a fresh period of limitation was computed from that payment date.

Conclusion: The suit was not barred by limitation.

Issue (iii): whether compound interest at 24% per annum was payable under the Cancellation Deed.

Analysis: The Cancellation Deed did not expressly provide for compounding of interest. Compound interest can be awarded only where there is a specific contractual stipulation or statutory authority. Reliance on TDS deduction, silence in reply to notice, or unproved conduct was insufficient to establish an enforceable right to compound interest at the leave-to-defend stage.

Conclusion: Compound interest was not established under the Cancellation Deed.

Issue (iv): whether the defendant had raised a substantial defence and triable issues entitling it to unconditional leave to defend.

Analysis: The defendant raised a triable defence on adjustment and set-off, supported by surrounding conduct, the timing of the suit, and material from related proceedings. Applying the principles governing leave to defend under Order XXXVII, the Court held that the defence was substantial enough to warrant trial rather than summary decree.

Conclusion: The defendant was entitled to unconditional leave to defend.

Final Conclusion: The application for leave to defend succeeded, and the suit was directed to proceed on written statement and further pleadings.

Ratio Decidendi: In a summary suit based on a written contract, maintainability is not defeated by a mere ledger reference; a TDS deposit may amount to payment on account of debt for limitation purposes; compound interest requires an express basis; and where a substantial defence or triable issue is shown, unconditional leave to defend must ordinarily follow.

---