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Advocate, Supreme Court of India
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Order 37, CPC (Summary Suits): A neutral analysis
Civil litigation, especially recovery suits generally termed to be a long drawn battle and regarded as something best avoided, is not so. The general belief that by filing a recovery Suit against a Debtor will go on for years at large, is not so, if one knows the real scope of Order 37 of the Civil Procedure Code, 1908.
Order 37 CPC is one of the best provisions in the hands of a proposed Plaintiff, wanting to institute a Civil Suit. Broadly it states as under:
Rule 1, Sub-Rule 2 makes it applicable to all suits upon bills of exchange, hundies and promissory notes or the ones in which a Plaintiff seeks only to recover a debt or liquidated demand in money payable on a written contract, an enactment, where the sum to be recovered is a fixed sum of money or in nature of any debt except penalty, a guarantee - in respect of a debt or liquidated demand.
Rule 2 requires an Order 37 Suit to contain among others, a specific averment that the Suit is filed under this Order and no relief which does not fall within the ambit of this Rule is claimed.
Under Order 37, there are two stages of getting the Suit decreed. One is at the stage of Rule 2(3) and the other is at the stage of Rule 2(6).
Rule 2(3) states the procedure for appearance of Defendant which is within 10 days from the service of the summons on him. After entering appearance, the Plaintiff serves on the Defendant summons for judgment within ten days from the date of service supported by an Affidavit; verifying the cause of action, amount claimed and that in his belief there is no defence to the suit.
Rule 2(6) states that in case the Defendant does not apply for a leave to defend, (a) the Plaintiff shall be entitled to judgment immediately or (b) the Court may direct the Defendant to give such security as it may deem fit. Sub-clause 7 states that in case sufficient cause is shown, the delay in entering an appearance or in applying for leave to defend the Suit may also be excused.
Rule 2(5) further states that the Defendant may within 10 days from service of such summons for judgment by Affidavit or otherwise disclose such facts as may be deemed sufficient to entitle him to defend, apply for leave to defend and it may be granted to him unconditionally or upon such terms as may appear to the Court to be just. Further, the proviso indicates that leave to defend shall not be refused unless the Court is satisfied that the facts disclosed do not indicate a substantial defence or that the defence is frivolous or vexatious.
A boon in the hands of the Plaintiff
The real benefit of an Order 37 Suit is that unless the Defendant is able to demonstrate that he has a substantial defence in his case, the Plaintiff is entitled to a judgment immediately. This in layman’s language means that the stages of filing a WS within 30 days and not later than 90 days, a rejoinder thereafter, admission/denial of documents, framing of issues by Court, leading evidence, cross-examination by parties, final arguments and then finally the judgment/decree, in an ordinary Civil Suit gets eliminated. So all that a Plaintiff has to show is that it is a case which falls within the ambit of Order 37. Once summons is issued, the ball is in the Court of the Defendant to show that he is entitled to a leave to defend, on grant of which the Order 37 Suit becomes an ordinary Civil Suit and the Defendant is then directed to file his WS within 30 days.
Lets analyze the law laid down by the Supreme Court on the issue.
The crux of the various judgments on Order 37 has been summarized in Sunil Enterprises and Anr. v. SBI Commercial and International Bank Ltd. wherein the position was summarized as under:
(a) If the defendant satisfied the Court that he has a good defence to the claim on merits, the defendant is entitled to unconditional leave to defend.
(b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence, although not a possibly good defence, the defendant is entitled to unconditional leave to defend.
(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defence to the plaintiff's claim, the Court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or made of trial but not as to payment into Court or furnishing security.
(d) If the defendant has no defence, or if the defence is sham or illusory or practically moonshine, the defendant is not entitled to leave defend.
(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine, the Court may show mercy to the defendant by enabling him to try to prove a defence but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into Court or otherwise secured.
A three judge bench said in Precision Steel & Engg. Works vs Prem Deva Niranjan Deva Tayal said that mere disclosure of facts, not a substantial defence is the sine qua non.
What is a substantial defence depends upon facts and circumstances of each case.
In Southern Sales and Services and Ors. v. Sauermilch Design and Handels GMBH , it has been held that "Unconditional leave to defend a suit shall not be granted unless the amount as admitted to be due by the Defendant is deposited in Court."
Generally, the Courts are usually reluctant to grant leave to defend especially an unconditional one. This is perhaps because in an Order 37 suit, balance of convenience is usually in favor of Plaintiff and the Courts are also aware of the delay caused in deciding a Civil Suit which takes about three to four years, to be finally decided with an option of Appeal to a higher fora still open.
In Neebha Kapoor v Jayantilal Khandwala, Supreme Court said the underlying public policy behind Order 37 is expeditious disposal of suits of commercial nature. It provides for such disposal as expeditiously as possible by prescribing time frame therefore. Where, however, applicability of Order 37 of the Code itself is in question which appears to be the principal reason behind the impugned judgment, in our opinion, grant of leave may be permissible. The court before passing a decree was entitled to take into consideration the consequences therefore.
Getting out of Order 37.
The idea behind a summary suit as stated in the Neebha Kapoor’s case is speedy remedy. But one must not forget - “justice hurried is justice buried”. A grant of leave to defend no doubt delays the trial but it will be a travesty of justice where a Plaintiff on basis of some photocopied documents, reproducing only the relevant extracts of an agreement and without the evidence and cross of key witnesses gets a decree solely on the basis that he has been able to make out a prima facie case, that too in most cases before a Trial Court. The concept of making out a prima facie case exists in Indian jurisprudence in certain limited cases only, under Article 136 before Supreme Court, under Article 226, 227 before High Courts, etc. This jurisdiction cannot and should not be entrusted upon a Trial Court which is a Court of First Record. A few years of Trial is better than a scenario where a decree has been passed without giving proper opportunity to Defendant to put forth its case. “Audi Alteram Partem” is one of the basic feature of our Constitution and a fair hearing should be given to all concerned. In any case, if the case of Plaintiff is genuine, along with the final judgment and decree he will also be entitled to not only to pendent elite interest but also the cost of the Suit, for causing delay and also for compensatory costs. Therefore no prejudice is caused to a Plaintiff as it is only a matter of time before he gets a decree in his favor.
However, even for a bonafide Defendant, sometimes it may become a horrifying experience to get even a conditional leave to defend granted.
In Neebha Kapoor’s case itself, the Supreme Court did not interfere with the order of the High Court granting unconditional leave to defend.
In Defiance Knitting Industries Pvt. Ltd. v. Jay Arts , the Supreme Court held that the order of the Trial Court and High Court of granting a conditional leave to defend is not sustainable but since as an interim measure the amount was deposited before the Court, Supreme Court said that the amount need not be refunded and Trial Court was directed to proceed with the matter.
Further, all that the Defendant has to show is a fair or bona fide or reasonable defence, although not a possibly good defence. That means prima facie it should appear that there is a good case on merits. Where there are disputed facts leave to defend, without doubt be granted.
Also what is a Triable issue has not been defined anywhere and depends on facts and circumstances of each case. Further, a Defendant has to disclose only such defence as will entitle him to a leave to defend. Hence the provision does not envisage disclosing the entire defence and the same is not a pre-requisite for grant of leave to defend.
While considering the scope of Rule 4 in Rajni Kumar vs Suresh Kumar Malhotra , the Supreme Court said that the expression 'special circumstances' is not defined in the C.P.C. nor is it capable of any precise definition. Non-service of summons will undoubtedly be a special circumstance. In an application under Order 37, Rule 4, the court has to determine the question, on the facts of each case, as to whether circumstances pleaded are so unusual or extra ordinary as to justify putting the clock back by setting aside the decree; to grant further relief in regard to post-decree matters, namely, staying or setting aside the execution and also in regard to pre decree matters viz., to give leave to the defendant to appear to the summons and to defend the suit. In considering an application to set aside ex parte decree, it is necessary to bear in mind the distinction between suits instituted in the ordinary manner and suits filed under Order 37 C.P.C.
Order 37 CPC is best suited for cases in which a Defendant does not have a case at all and the Suit is prolonged for years. Also cases in which loans are taken from Banks and borrowers disappear with no trace, Order 37 is useful as on the basis of loan documents, it is easier to get a decree from Court within a short time and then all that is left for a Bank to do is, to find the Defendant and get the decree executed. Infact, most borrowers, who otherwise are not scared of recovery agents, often offer settlement once they receive summons and are reprimanded by the Courts.
In Inderjeet Kaur vs Nirpal Singh , Supreme Court warned that cautious and judicious approach plus balanced view in respect of competing claims is necessary. It further stated that at a stage when leave to defend is sought, it is enough if he prima facie makes out a case by disclosing such facts as would disentitle the other side from claiming an order. It would not be a right approach to say that unless the Defendant at that stage itself establishes a strong case, he should be granted leave. It further cautioned that leave to defend sought for cannot also be granted for mere asking or in a routine manner which will defeat the very object of the special provisions contained in Chapter III-A of the Act.
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