B. L. KASHYAP AND SONS LTD versus M/S JMS STEELS AND POWER CORPORATION & ANR. on 18 January 2022

SUPREME COURT REPORTS

[2022] 1 S.C.R.

B. L. KASHYAP AND SONS LTD.

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v.

M/S JMS STEELS AND POWER CORPORATION & ANR.

(Civil Appeal No. 379 of 2022)

BJANUARY 18, 2022

[VINEET SARAN AND DINESH MAHESHWARI, JJ.]

Code of Civil Procedure, 1908 – Or. XXXVII – Summary Suits– Leave to defend – Plaintiff-respondent no.1 is registeredpartnership firm, manufacturer and supplier of iron and steelCproducts – It had supplied 200 tons of steel to defendant no.1which was a real estate firm – Supply was made in terms of twopurchase orders as raised by appellant-defendant No.2, who wascontractor working with defendant no. 1 – On failure to makerequisite payment, plaintiff filed summary suit by making theDdefendants jointly and severally liable – Trial Court declined togrant “leave to defend” to both the defendants – Appellant-defendant no.2 challenged the judgment of trial court – High Courtobserved that appellant- defendant no.2 was not entitled to “leaveto defend” because the defenses raised were frivolous andvexatious and did not give rise to genuine triable issue – HighECourt further observed that there was no such requirement thatthe cheque ought to be dishonored for filing summary suit andheld the suit to be maintainable – On appeal, Held: As per theplaint averment , the matter is based on written contract arisingout of written purchase orders issued by the appellant on theFinstruction and on behalf of defendant No. 1 – Contention againstmaintainability of the summary suit in terms of Or. XXXVII cannotbe accepted – There is no reason to consider any interference inthe decision of the High Court – Grant of leave to defend (with orwithout conditions) is the ordinary rule; and denial of leave todefend is an exception – Even in the case of raising of triableGissues, with the defendant indicating his having a fair orreasonable defence, he is ordinarily entitled to unconditional leaveto defend unless there be any strong reason to deny the leave –On facts, no reason as to why and how the defence of the appellant(defendant No. 2) was treated as frivolous or vexatious – AppellantHhad indeed raised triable issues, particularly concerning its liability and the defence of the appellant cannot be said to befrivolous or vexatious altogether – Appellant-defendant No. 2ought to have been granted the leave to defend the claim made inthe suit concerning its liability.

Allowing the appeal, the Court

HELD: 1. Two principal points call for determination in thisappeal: one, as to whether the plaintiff was entitled to maintain asummary suit under Order XXXVII CPC for the claim in question;and second, as to whether the appellant-defendant No. 2 hasrightly been declined the leave to defend? [Para 13][1036-C-D]

2. As per the plaint averment, the matter is based on writtencontract arising out of written purchase orders issued by theappellant on the instructions and on behalf of defendant No. 1;and the plaintiff had raised the invoices against such suppliesunder the purchase orders. In the overall facts and circumstancesof the case, the contention against maintainability of the summarysuit in terms of Order XXXVII CPC cannot be accepted and tothat extent, there is no reason to consider any interference inthe decision of the High Court. [Paras 14 and 14.2][1036-E;1037-B]

3. Grant of leave to defend (with or without conditions) isthe ordinary rule; and denial of leave to defend is an exception.The prayer for leave to defend is to be denied in such cases wherethe defendant has practically no defence and is unable to give outeven a semblance of triable issues before the Court. In the caseof substantial defence, the defendant is entitled to unconditionalleave; and even in the case of a triable issue on a fair andreasonable defence, the defendant is ordinarily entitled tounconditional leave to defend. In case of doubts about the intentof the defendant or genuineness of the triable issues as also theprobability of defence, the leave could yet be granted but whileimposing conditions as to the time or mode of trial or payment orfurnishing security. Thus, even in such cases of doubts orreservations, denial of leave to defend is not the rule; butappropriate conditions may be imposed while granting the leave.It is only in the case where the defendant is found to be having A

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Ano substantial defence and/or raising no genuine triable issuescoupled with the Court’s view that the defence is frivolous orvexatious that the leave to defend is to be refused and theplaintiff is entitled to judgment forthwith. While dealing with anapplication seeking leave to defend, it would not be a correctapproach to proceed as if denying the leave is the rule or thatBthe leave to defend is to be granted only in exceptional cases oronly in cases where the defence would appear to be a meritoriousone. Even in the case of raising of triable issues, with thedefendant indicating his having a fair or reasonable defence, heis ordinarily entitled to unconditional leave to defend unlessCthere be any strong reason to deny the leave. [Paras 17, 17.2and 17.3][1039-H; 1040-A-B, E-G; 1041-A-B]

4. The Trial Court had observed that the defendants failedto raise any triable issues. It appears that while recording suchconclusions, the Trial Court as also the High Court totally omittedDto consider that the appellant-defendant No. 2 has been contestingits liability with the assertion that it had only been the contractorexecuting the work of defendant No. 1. Even as per the plaintaverments and plaintiff’s assertions, the defendant No. 1 had madevarious payments from time to time against the supplies of thebuilding material. The cheques, allegedly towards part paymentEagainst the supplies made by the plaintiff, had been issued by thedefendant No. 1. In the given set of circumstances, the conclusionof the High Court that the defence raised by the appellant wasfrivolous or vexatious could only be treated as an assumptiveone and lacking in requisite foundation. No reason has beenFassigned as to why and how the defence of the present appellantwas treated as frivolous or vexatious. The effect and impact of anadmitted position of the plaintiff, that payments were indeed madefrom time to time by the defendant No. 1, seems not to havegone into consideration of the Trial Court and the High Courtwhile denying leave to the appellant. The appellant has indeedGraised triable issues, particularly concerning its liability and thedefence of the appellant cannot be said to be frivolous or vexatiousaltogether. [Paras 18,19.1 and 20][1041-D-F; 1042-C-D, E]

Mechelec Engineers and Manufacturers v. BasicEquipment Corporation AIR 1977 SC 577:[1977] 1SCR 1060; IDBI Trusteeship 9 Services Ltd. v. HubtownLtd.(2017) 1 SCC 568:[2016] 11 SCR 660 ; Prem NathMotors Limited v. Anurag Mittal (2009) 16 SCC274:[2008] 16 SCR 45 ; V.K. Enterprises v. Shiva Steels(2010) 9 SCC 256: [2010] 9 SCR 647- referred to.

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Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 379 of2022.

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From the Judgment and Order dated 11.05.2018 of the High Courtof Delhi at New Delhi in RFA No.402 of 2018.

Jayant K. Mehta, Sr. Adv., Abhimanyu Mahajan, ApoorvaBhumesh, Ms. Madhavi Khare, Ms. Anubha Goel, Advs. for theAppellant.

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Sachin Dutta, Sr. Adv., Dr. Farrukh Khan, Ms. Ridhima Goyal,Abdul Aziz Chaus, Rameshwar Prasad Goyal, Lokesh Bhola, ManishKumar Gupta, Karan Grover, Deepak Kumar Singh, A. Ushi Reddy,Pawan Kumar, Sudhir Kumar Ojha, Debopriyo Pal, Amit Kumar Bhati,Sriram P., Advs. for the Respondents F

The Judgment of the Court was delivered by DINESH MAHESHWARI, J.

Preliminary

1. Leave granted.

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2. This appeal is directed against the judgment and order dated11.05.2018 in Regular First Appeal No. 402 of 2018, whereby the HighCourt of Delhi at New Delhi has dismissed the appeal filed by the presentappellant and has affirmed the judgment and decree dated 18.09.2017passed by the Additional District Judge-05: West, Tis Hazari Court, New H

ADelhi, in the money recovery summary suit, being CivDj/611333/2016,filed by the plaintiff-respondent No. 1, wherein the present appellantwas arrayed as defendant No. 2 and the present respondent No. 2 wasarrayed as defendant No. 1.

2.1. It may be noticed at the outset that the Trial Court had passedBthe judgment and decree dated 18.09.2017 with its finding that no triableissues had been raised by the defendants and hence, they were notentitled to the leave to defend. In the impugned judgment and orderdated 11.05.2018, the High Court has affirmed the decree in relation tothe appellant-defendant No. 2. Hence, the questions involved in thepresent appeal are confined to the prayer for leave to defend sought forCby the appellant. However, it is also relevant to notice that the otherdefendant (who is respondent No. 2 herein) had also filed an appealagainst the said judgment and decree dated 18.09.2017 (being RFA No.743 of 2018), which was dismissed by the High Court by its separatejudgment and order dated 05.09.2018. The said judgment and order datedD05.09.2018 is not under challenge before us but, we shall refer to thesame at the relevant juncture and in relation to the implications of thefindings therein.

2.2. For the purpose of continuity of narration and discussion, theparties shall also be referred herein with reference to their status in theEsuit.

Relevant factual and background aspects

3. The relevant factual and background aspects of the matter areas follows:F3.1. The plaintiff-respondent No. 1 filed the subject suit in termsof Order XXXVII of the Code of Civil Procedure, 1908 (‘CPC’) whilestating itself to be a registered partnership firm manufacturing andsupplying a wide variety of iron and steel products. According to theplaintiff, the defendant No. 1 represented itself as a real estate andinfrastructure development firm while the defendant No. 2 (appellantGherein) represented itself as a contractor working with the defendantNo. 1 for the construction work of its project namely ‘MIST’, beingdeveloped at Plot No.1, Sector 143-B, Noida.

3.2. The plaintiff asserted that in relation to the said constructionwork, it had supplied 200 tons of steel at the site address of the defendantHNo. 1; and this supply was made in terms of two purchase orders dated

06.02.2015 and 20.03.2015, as raised by the appellant-defendant No. 2.The plaintiff further asserted that payment for the goods so suppliedwas to be made by the defendant No. 1 and in that regard, variousinvoices were raised, as detailed in paragraph 7 of the plaint. It was alsosubmitted that an amount of Rs. 89,50,244/- remained due against thesupplies so made and invoices so raised.

3.3. The plaintiff further averred that for payment against thesaid invoices, the defendant No. 1 issued two cheques drawn on AxisBank, Sector-44 Noida Branch, being cheque No. 037274 dated04.05.2015 for a sum of Rs.14,72,269/- and cheque No. 037272 dated09.05.2015 for a sum of Rs. 13,34,319/- while asking the plaintiff topresent the cheques only after receiving intimation but no such intimationwas received. Later on, the plaintiff issued a legal notice dated 28.01.2016to the defendants demanding the dues and, upon their failure to makethe requisite payment, filed the subject suit under Order XXXVII CPC,while asserting joint and several liability of the defendants. The plaintiff,inter alia, averred that the suit was based on written contract inasmuchas written purchase orders were issued by the appellant-defendant No.2 on the instructions, and on behalf of, defendant No. 1.

3.4. In the summary suit so filed, the defendant No. 1 soughtleave to defend with the contentions, inter alia, that it had no privity ofcontract with the plaintiff because the purchase orders were issued onlyby the defendant No. 2; that the invoices in question were raised by theplaintiff in the name of the defendant No. 2; that neither the purchaseorders nor the invoices were bearing the signatures of the defendantNo. 1; and that all the dealings were between plaintiff and defendantNo. 2, where no legal liability was to be discharged by defendant No. 1.It was contended that the defendant No. 1 was rather a stranger to thecontract in question.

3.5. In opposition to the contentions sought to be urged by thedefendant No. 1, the plaintiff contended, inter alia, that the applicationfiled by defendant No. 1 was an attempt to shy away from its responsibilityby shifting the same on the defendant No. 2. In support of this contention,the plaintiff placed its ledger account as also the statement of account ofdefendant No. 1 which, according to the plaintiff, demonstrated that thepayment of goods delivered to the defendant No. 2 had been made bythe defendant No. 1. It was contended by the plaintiff that if there wasno agreement between the plaintiff and the defendant No. 1, there was A

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Ano reason for the defendant No. 1 to issue the cheques in the name ofplaintiff. It was also submitted that though the invoices were addressedto the defendant No. 2 but, they also mentioned “C/o Mist”, whichsubstantiated the stand of the plaintiff.

3.6. The appellant-defendant No. 2 moved a separate applicationBseeking leave to defend. It was contended in this application that theappellant had been working as civil contractor under the defendant No.1; that the purchase orders were issued only on behalf of the defendantNo. 1; and that the material supplied by the plaintiff was for theconstruction of project undertaken by defendant No. 1, who was thebeneficiary of the said project. The appellant submitted that under theCcontract, it was the duty of owner, i.e., defendant No. 1, to supply thematerial for construction and defendant No. 2 was to be paid for thequantities supplied by it. Further, the copies of statements of accountsshowing the purchase orders placed by defendant No. 2 at the instanceof defendant No. 1 were placed on record; and it was submitted that theDbills for such supplies were liquidated in due course. In substance, caseof the appellant had been that it had no liability towards the plaintiff.

3.7. The plaintiff also opposed the prayer of the appellant forleave to defend with the submissions that the appellant-defendant No. 2had failed to raise any substantial defence and he was rather trying toEconfuse the issue. It was asserted that the goods were supplied on thepurchase orders raised by the defendant No. 2 while acting as an agentfor the defendant No. 1; and it was agreed between the parties that thedefendant No. 1 would make payment for the goods supplied to thedefendant No. 2. It was also submitted that the role of the appellant-defendant No. 2 was “important” in the present suit as the transactionFof goods indeed involved this defendant.

Trial Court declined leave to defend to both the defendants

4. In its impugned judgement dated 18.09.2017, the Trial Courtconsidered both the applications moved by the respective defendantsGseeking leave to defend together; and rejected the same while observingthat the defendants were merely attempting to shift the burden uponeach other.

4.1. The Trial Court observed that the defendant No. 2 was acontractor working under defendant No. 1 by virtue of the constructionagreement; and as per Clause 10 of this agreement, defendant No. 1H

was liable to pay the costs of goods, material or articles procured andarranged for by the contractor. The Trial Court further observed that thepurchase orders had been placed by defendant No. 2 on plaintiff at theinstance of defendant No. 1 and the goods were indisputably supplied atthe site address of defendant No. 1, who was the ultimate beneficiary ofthe transaction. It was also noted that the bills raised for such supplieshad been liquidated by the defendant No. 1. The contention urged onbehalf of the defendant No. 1 that there was no privity of contract wasrejected with reference to the facts that the defendant No. 1 had beenmaking payments to the plaintiff; and reference was made to variouspayments made through cheques and demand drafts from time to time.The Trial Court observed that the transactions clearly indicated that thematerials were being supplied by the plaintiff to the site address ofdefendant No.1 and the defendant No. 1 had been making paymentsdirectly to the plaintiff. Hence, the Trial Court held that the defencesought to be raised by the defendant No. 1, of want of privity of contract,was without any substance and was not giving rise to any triable issue.The Trial Court also rejected the contention that the summary suit underOrder XXXVII CPC was not maintainable as the plaintiff did not presentthe aforementioned cheques for encashment while observing that thesuit was not merely based on the two cheques issued by the defendantNo. 1, but was also based on the purchase orders and invoices raised forsupply of materials; and the invoices were a complete contract, ascontemplated by Order XXXVII CPC.

4.2. Having rejected the case of the defendant No. 1, the TrialCourt also proceeded to deny the prayer of the appellant-defendant No.2 for leave to defend while observing that the goods were received bythe defendant No. 2 as an agent of the defendant No. 1 and, therefore,both the defendants were under obligation to make payment. The TrialCourt said,- “15. The invoices issued by the plaintiff have been addressed tothe site address of defendant no.- 1 and the goods have beenreceived by defendant no.- 2 acting as an agent of defendant no.-1. Therefore, both the defendants are under an obligation to makepayments of the goods supplied by the plaintiff.”

5. Thus, the Trial Court concluded that no triable issues wereraised by the defendants and declined their applications seeking leave todefend. Consequently, the suit was decreed in favour of the plaintiff for AB

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Aa sum of Rs. 89,50,244/- together with interest at the rate of 10% perannum with joint and several liability of the defendants to pay the decreetalamount.

High Court dismissed the appeal filed by appellant

6. The appellant-defendant No. 2 challenged the judgement andBdecree so passed by the Trial Court by way of regular first appeal, beingRFA No. 402 of 2018. The High Court, however, rejected the contentionsurged on behalf of the appellant and dismissed the appeal.

6.1. The High Court, inter alia, observed that merely for thedelivery address of the goods in question having been that of the site ofCdefendant No. 1, it would not mean that the purchase orders were thoseof the defendant No. 1, when it was ex facie evident that the purchaseorders had been issued only by defendant No. 2; the invoices were raisedby the plaintiff upon defendant No. 2 and not upon defendant No. 1; andthe defendant No. 2 was specifically mentioned as the buyer in thoseinvoices.D

6.2. The High Court further observed that the appellant-defendantNo. 2 was liable and the suit was maintainable under Order XXXVIICPC because the invoices for their total value were written contracts,containing specified amount of liability of the appellant-defendant No. 2Efor payment to the plaintiff-respondent No. 1. As regards the cheques inquestion, the High Court observed that though the cheques were issuedby the defendant No. 1, yet a suit under Order XXXVII of CPC wouldlie against the defendant No. 2 because there was no such requirementin Order XXXVII CPC that the cheques which are issued for paymentsought to be of the person against whom the liability is claimed. The HighFCourt further observed that as per Section 2 (d) of Indian Contract Act,1872 consideration under a contract need not flow/pass only betweenthe parties to a contract. The High Court also observed that even if thecheques were not presented, the suit would be maintainable under OrderXXXVII CPC because there was no such requirement that the chequeGought to be dishonored for filing a summary suit. The High Court furtherobserved on the maintainability of the summary suit even when there wasa joint and several liability of the defendants in the following words: - “9. The fact that there is a joint and several liability of the appellant/defendant no.2 with the respondent no.2/defendant no.1 will notmean that to enforce this joint and several liability, the subject suit H

could not have been filed both against the appellant/defendantno.2 and the respondent no.2 herein. Once liability is joint andseveral of the appellant/defendant no.2 with the respondent no.2/defendant no.1, and as stated above Section 2(d) of the IndianContract Act permits passing/payment of consideration by a personwho is not a party to the contract, therefore merely becauserespondent no.2/defendant no.1 had agreed to be liable to makethe payment of the goods purchased by the appellant/defendantno.2, this would not mean that the appellant/defendant no.2 wouldno longer be liable and liability will only be of the respondent no.2/defendant no.1.”

6.3. The High Court further observed that the principles governingthe issue were not those of the decision of this Court in the case ofMechelec Engineers and Manufacturers v. Basic EquipmentCorporation: AIR 1977 SC 577,as referred to by the Trial Court; butthe applicable principles were contained in the later decision of this Courtin IDBI Trusteeship Services Ltd. v. Hubtown Ltd.: (2017) 1 SCC568. While reproducing the principles so laid down by this Court, theHigh Court held that the appellant-defendant No. 2 was not entitled toleave to defend because the defences raised by it do not give rise togenuine triable issues; and the defences were frivolous and vexatious,raised only in order to deny the just dues of the seller of goods, being theplaintiff.

High Court also dismissed the appeal filed by defendant No. 1

7. Before proceeding further, we may take note of the fact thatthe defendant No. 1 had also filed an appeal, being RFA No. 743 of2018, in challenge to the judgment and decree of the Trial Court dated18.09.2017. The appeal so filed by the defendant No. 1 (respondent No.2 herein) was considered and decided by the High Court by its separate(and later) judgment and order dated 05.09.2018 with the finding thatthe defence sought to be raised by the defendant No.1 was frivolous orvexatious and, in support of this finding, the High Court specifically gavethe reason in following words: - “The defence of the appellant/defendant no. 1 was clearly frivolousor vexatious, and it did not raise a genuine triable issue, because ifthere was no liability of the appellant/defendant no. 1 then, wherewas the question of making payments regularly by the appellant/defendant no.1 to the respondent no.1/plaintiff.”

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1034SUPREME COURT REPORTS

ARival Contentions

8. Reverting to the case at hand, which pertains to the appellant-defendant No. 2, we may briefly take note of the rival submissions inthis appeal.

B9. Learned senior counsel for the appellant-defendant No. 2 hascontended that liability for payment against the material supplied by theplaintiff was not that of the appellant-defendant No. 2 but had been ofthe defendant No. 1, which was evident from the fact that the plaintiffitself had pleaded that the liability to pay for the supplies made by it wasthat of the defendant No. 1. Thus, according to the learned counsel, theCimpugned decree proceeds rather contrary to the plaintiff’s own caseand cannot be sustained.

9.1. Learned counsel for the appellant has further submitted thatthe appellant was only acting as an agent of the defendant No. 1, as theagreement for supply of steel was between plaintiff and defendant No.D1; and the appellant, having issued the purchase orders only on behalf ofthe defendant No. 1, cannot be held liable for payment to the plaintiff, interms of Section 230 of the Indian Contract Act, 1872 which providesthat an agent cannot be held liable for the contract executed on behalf ofthe principal. The learned counsel has referred to the decision of thisECourt in the case of Prem Nath Motors Limited v. Anurag Mittal:(2009) 16 SCC 274. The learned counsel has yet further submittedthat the defendant No. 1 had issued two cheques bearing Nos. 037274and 037272 towards part payment to the plaintiff against the suppliesmade; and when the High Court has observed that a cheque is a writtenagreement containing a liquidated amount as per Order XXXVII RuleF1(2) of the CPC, the said cheques would only constitute a liability of thedefendant No. 1 and not that of the appellant-defendant No. 2.

9.2. Learned counsel would further submit that the plaintiff’ssummary suit was not maintainable against the appellant under OrderXXXVII CPC in the absence of a legally enforceable debt and, in supportGof this contention, would rely on the decision of this Court in case of V.K.Enterprises v. Shiva Steels: (2010) 9 SCC 256.

10. Per contra, learned counsel for the plaintiff-respondent No.1would submit that the present appeal, being only an attempt to avoid thelegal liability, deserves to be dismissed.H

10.1. The learned counsel has contended that both the appellant-defendant No. 2 and the defendant No. 1 are merely trying to evade theliability, by shifting the burden upon each other. As regards the liability ofthe appellant-defendant No. 2, learned counsel would submit that theappellant had raised purchase orders; that on the basis of the saidpurchase orders, goods were supplied and the invoices were raised inthe name of the appellant; and that the goods were received by theappellant. In this fact situation, according to the learned counsel, merelybecause delivery address of the goods was that of the site owned by thedefendant No. 1, the appellant cannot avoid its liability and, in fact, thedefendants had been standing in joint and several liability to liquidate theamount due against the said invoices.

10.2. The learned counsel would argue that the invoices for theirtotal value constituted written contracts and hence, the suit has rightlybeen filed in terms of Order XXXVII CPC where the defendants cannotget away by shifting the liability upon each other.

11. In different dimensions to the above, the learned counselappearing for the defendant No. 1 (respondent No. 2 herein) hascontended that under the construction agreement executed between thedefendant No. 2 and defendant No. 1, the payments toward supply ofmaterial by the plaintiff were to be made by the defendant No. 2. Thelearned counsel would submit that the appellant-defendant No. 2 hadplaced purchase orders with the plaintiff and invoices were raised bythe plaintiff in the name of defendant No. 2 and hence, there was noprivity of contract between the plaintiff and defendant No. 1. The merefact that the defendant No. 2 was carrying out the work of the defendantNo. 1 and the invoices mentioned the name of the project where thegoods were to be delivered would not make the defendant No. 1 liable tomake payment to the plaintiff. It has also been submitted that there wasno role of the defendant No. 1 because neither its consent was taken atthe time of execution of agreement for the supply of goods nor the ratesof steel were discussed; and the purchase orders and invoices also donot bear the name of the defendant No.1 or any signatures on its behalf.As regards the payments earlier made by the defendant No. 1, thesubmission has been that such payments were made on the request ofthe defendant No. 2 when it had shown deficiency in cash flow andrequested to make payment to the vendors including the plaintiff.

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A11.1. On behalf of the defendant No. 1, reference has also beenmade to the judgment dated 05.09.2018 passed by the High Court in itsappeal (RFA No. 743 of 2018) while contending that the said appealcame to be dismissed without adverting to the relevant facts. It has alsobeen pointed out that there were other disputes between the appellantand the defendant No. 1 for which, other litigation is pending in DelhiBHigh Court.

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12. We have given thoughtful consideration to the rival submissionsand have examined the record of the case with reference to the lawapplicable.CAnalysis

13. For what has been noticed hereinbefore, two principal pointscall for determination in this appeal: one, as to whether the plaintiff wasentitled to maintain a summary suit under Order XXXVII CPC for theclaim in question; and second, as to whether the appellant-defendantDNo. 2 has rightly been declined the leave to defend?

14. The question concerning maintainability of the suit filed by theplaintiff as a summary suit under Order XXXVII CPC need not detainus much longer. This is for the simple reason that as per the plaintaverment, the matter is based on written contract arising out of writtenEpurchase orders issued by the appellant on the instructions and on behalfof defendant No. 1; and the plaintiff had raised the invoices against suchsupplies under the purchase orders. The plaintiff has further pointed outthat two cheques were issued by the defendant No. 1 towards partpayment against the invoices, being cheque No. 037274 dated 04.05.2015in the sum of Rs. 14,72,269/- and No. 037272 dated 09.05.2015 in theFsum of Rs. 13,34,319/-.

14.1. The assertion of plaintiff had been of joint and severalliability of the defendants. The question as to whether the appellantwas acting only as an agent of defendant No. 1 in relation to the suppliesin question and had no monetary liability, as sought to be raised by theGappellant, could be a matter of his defence. This aspect, relating to thenature of defence shall be examined in the next question but, such aproposition of defence by the appellant cannot take away the entitlementof the plaintiff-respondent No. 1 to maintain the summary suit in termsof Order XXXVII CPC. This is apart from the fact that while assertingjoint and several liability of the defendants, the plaintiff has also reliedH

upon the cheques said to have been issued by defendant No. 1, whichwere allegedly not presented as per the request of the said defendantNo. 1.

14.2. In the overall facts and circumstances of the case, thecontention against maintainability of the summary suit in terms of OrderXXXVII CPC cannot be accepted and to that extent, we find no reasonto consider any interference in the decision of the High Court. However,the question still remains as to whether the appellant is not entitled toleave to defend?

15. In regard to the question of leave to defend, as noticed, theHigh Court has observed that the appellant would not be entitled to suchleave because no triable issues were arising out of the defence sought tobe taken by the appellant. The High Court has also observed that thedefences were frivolous and vexatious; and were raised only in order todeny the just dues of seller of the goods, i.e., the plaintiff. According tothe High Court, while applying the principles for grant of leave to defend,as delineated in the case of IDBI Trusteeship (supra), the appellantwas not entitled to the leave to defend.

16. The High Court took note of the fact that the Trial Courtrelied upon the decision in Mechelec Engineers (supra) and observedthat the applicable principles were those contained in the later decisionof this Court in IDBI Trusteeship (supra). Having regard to the questionat hand, it shall be worthwhile to read together the principles stated inthe said two decisions of this Court.

16.1. In the case of Mechelec Engineers(supra),the principlesfor consideration of a prayer for leave to defend in a summary suit werelaid down by this Court in the following terms: - “8. In Kiranmoyee Dassi Smt v. Dr J. Chatterjee [AIR 1949 Cal479 :49 CWN 246, 253 : ILR (1945) 2 Cal 145.] Das, J., after acomprehensive review of authorities on the subject, stated theprinciples applicable to cases covered by Order 17 CPC in theform of the following propositions (at p. 253):

“(a) If the defendant satisfies the court that he has a good defenceto the claim on its merits the plaintiff is not entitled to leave to signjudgment and the defendant is entitled to unconditional leave todefend.

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(b) If the defendant raises a triable issue indicating that he has afair or bona fide or reasonable defence although not a positivelygood defence the plaintiff is not entitled to sign judgment and thedefendant is entitled to unconditional leave to defend.

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(c) If the defendant discloses such facts as may be deemedBsufficient to entitle him to defend, that is to say, although theaffidavit does not positively and immediately make it clear that hehas a defence, yet, shews such a state of facts as leads to theinference that at the trial of the action be may be able to establisha defence to the plaintiff’s claim the plaintiff is not entitled tojudgment and the defendant is entitled to leave to defend but inCsuch a case the court may in its discretion impose conditions as tothe time or mode of trial but not as to payment into court orfurnishing security.

(d) If the defendant has no defence or the defence set-up is illusoryor sham or practically moonshine then ordinarily the plaintiff isDentitled to leave to sign judgment and the defendant is not entitledto leave to defend.

(e) If the defendant has no defence or the defence is illusory orsham or practically moonshine then although ordinarily the plaintiffis entitled to leave to sign judgment, the court may protect theEplaintiff by only allowing the defence to proceed if the amountclaimed is paid into court or otherwise secured and give leave tothe defendant on such condition, and thereby show mercy to thedefendant by enabling him to try to prove a defence.”

F16.2. In the case of IDBI Trusteeship(supra), this Courtmodulated the aforementioned principles and laid down as follows: - “17. Accordingly, the principles stated in para 8 of Mecheleccase [Mechelec Engineers & Manufacturers v. BasicEquipment Corpn., (1976) 4 SCC 687] will now stand superseded,Ggiven the amendment of Order 37 Rule 3 and the binding decisionof four Judges in Milkhiram case [Milkhiram (India) (P)Ltd. v. Chamanlal Bros., AIR 1965 SC 1698 : (1966) 68 BomLR 36] , as follows:

17.1. If the defendant satisfies the court that he has a substantialdefence, that is, a defence that is likely to succeed, the plaintiff is H

not entitled to leave to sign judgment, and the defendant is entitledto unconditional leave to defend the suit.

17.2. If the defendant raises triable issues indicating that he hasa fair or reasonable defence, although not a positively good defence,the plaintiff is not entitled to sign judgment, and the defendantis ordinarily entitled to unconditional leave to defend.

17.3. Even if the defendant raises triable issues, if a doubt is leftwith the trial Judge about the defendant’s good faith, or thegenuineness of the triable issues, the trial Judge may imposeconditions both as to time or mode of trial, as well as payment intocourt or furnishing security. Care must be taken to see that theobject of the provisions to assist expeditious disposal of commercialcauses is not defeated. Care must also be taken to see that suchtriable issues are not shut out by unduly severe orders as to depositor security.

17.4. If the defendant raises a defence which is plausible butimprobable, the trial Judge may impose conditions as to time ormode of trial, as well as payment into court, or furnishing security.As such a defence does not raise triable issues, conditions as todeposit or security or both can extend to the entire principal sumtogether with such interest as the court feels the justice of thecase requires.

17.5. If the defendant has no substantial defence and/or raisesno genuine triable issues, and the court finds such defence to befrivolous or vexatious, then leave to defend the suit shall be refused,and the plaintiff is entitled to judgment forthwith.

17.6. If any part of the amount claimed by the plaintiff is admittedby the defendant to be due from him, leave to defend the suit,(even if triable issues or a substantial defence is raised), shall notbe granted unless the amount so admitted to be due is depositedby the defendant in court.”

17. It is at once clear that even though in the case of IDBITrusteeship, this Court has observed that the principles stated inparagraph 8 of Mechelec Engineers’ case shall stand superseded inthe wake of amendment of Rule 3 of Order XXXVII but, on the coretheme, the principles remain the same that grant of leave to defend(with or without conditions) is the ordinary rule; and denial of leave to A

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Adefend is an exception. Putting it in other words, generally, the prayerfor leave to defend is to be denied in such cases where the defendanthas practically no defence and is unable to give out even a semblance oftriable issues before the Court.

17.1. As noticed, if the defendant satisfies the Court that he hasBsubstantial defence, i.e., a defence which is likely to succeed, he is entitledto unconditional leave to defend. In the second eventuality, where thedefendant raises triable issues indicating a fair or bonafide or reasonabledefence, albeit not a positively good defence, he would be ordinarilyentitled to unconditional leave to defend. In the third eventuality, wherethe defendant raises triable issues, but it remains doubtful if the defendantCis raising the same in good faith or about genuineness of the issues, theTrial Court is expected to balance the requirements of expeditious disposalof commercial causes on one hand and of not shutting out triable issuesby unduly severe orders on the other. Therefore, the Trial Court mayimpose conditions both as to time or mode of trial as well as paymentDinto the Court or furnishing security. In the fourth eventuality, where theproposed defence appear to be plausible but improbable, heightenedconditions may be imposed as to the time or mode of trial as also ofpayment into the Court or furnishing security or both, which may extendto the entire principal sum together with just and requisite interest.

E17.2. Thus, it could be seen that in the case of substantial defence,the defendant is entitled to unconditional leave; and even in the case ofa triable issue on a fair and reasonable defence, the defendant is ordinarilyentitled to unconditional leave to defend. In case of doubts about theintent of the defendant or genuineness of the triable issues as also theprobability of defence, the leave could yet be granted but while imposingFconditions as to the time or mode of trial or payment or furnishing security.Thus, even in such cases of doubts or reservations, denial of leave todefend is not the rule; but appropriate conditions may be imposed whilegranting the leave. It is only in the case where the defendant is found tobe having no substantial defence and/or raising no genuine triable issuesGcoupled with the Court’s view that the defence is frivolous or vexatiousthat the leave to defend is to be refused and the plaintiff is entitled tojudgment forthwith. Of course, in the case where any part of the amountclaimed by the plaintiff is admitted by the defendant, leave to defend isnot to be granted unless the amount so admitted is deposited by thedefendant in the Court.H

17.3. Therefore, while dealing with an application seeking leaveto defend, it would not be a correct approach to proceed as if denyingthe leave is the rule or that the leave to defend is to be granted only inexceptional cases or only in cases where the defence would appear tobe a meritorious one. Even in the case of raising of triable issues, withthe defendant indicating his having a fair or reasonable defence, he isordinarily entitled to unconditional leave to defend unless there be anystrong reason to deny the leave. It gets perforce reiterated that even ifthere remains a reasonable doubt about the probability of defence, sterneror higher conditions as stated above could be imposed while grantingleave but, denying the leave would be ordinarily countenanced only insuch cases where the defendant fails to show any genuine triable issueand the Court finds the defence to be frivolous or vexatious.

18. When we apply the principles aforesaid to the facts of thepresent case and to the impugned orders, it is at once clear that afterfinding the suit to be maintainable under Order XXXVII CPC becauseof assertion of the plaintiff about joint and several liability of thedefendants, the High Court concluded that the defences were frivolousand vexatious. The Trial Court had observed that the defendants failedto raise any triable issues. It appears that while recording such conclusions,the Trial Court as also the High Court totally omitted to consider that theappellant-defendant No. 2 has been contesting its liability with the assertionthat it had only been the contractor executing the work of defendant No.1. Even as per the plaint averments and plaintiff’s assertions, thedefendant No. 1 had made various payments from time to time againstthe supplies of the building material. The cheques, allegedly towardspart payment against the supplies made by the plaintiff, had been issuedby the defendant No. 1. In the given set of circumstances, the conclusionof the High Court that the defence raised by the appellant was frivolousor vexatious could only be treated as an assumptive one and lacking inrequisite foundation.

19. At this juncture, we may also refer to a significant feature ofthe case that the defendant No. 1 (respondent No. 2 herein) had questionedthe same judgment and decree of the Trial Court dated 18.09.2017 byway of a separate appeal, being RFA No. 743 of 2018, that wasconsidered and dismissed by the High Court by the judgment and orderdated 05.09.2018. Interestingly, the High Court dismissed the said appealwith the finding that the defence raised by defendant No. 1 was frivolous AB

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Aor vexatious and, in support of this finding, the High Court specificallygave the reason in the form of a query that if at all there was no liabilityof the defendant No. 1, where was the question of making paymentsregularly by the defendant No. 1 to the plaintiff?

19.1. It is at once noticeable that in contradistinction to the reasonsBstated qua the defendant No. 1 in the judgment and order dated05.09.2018, the High Court has merely observed in the impugnedjudgment and order dated 11.05.2018 concerning the present appellant,i.e., defendant No. 2, that the defences were frivolous or vexatious andwere raised only to deny the just dues of the seller of goods. No reasonhas been assigned as to why and how the defence of the present appellantC(defendant No. 2) was treated as frivolous or vexatious. The effect andimpact of an admitted position of the plaintiff, that payments were indeedmade from time to time by the defendant No. 1, seems not to have goneinto consideration of the Trial Court and the High Court while denyingleave to the appellant. The same considerations, which weighed withDthe Courts to deny the leave to defend to the defendant No. 1, could nothave been applied ipso facto to the case of the appellant; rather thoseconsiderations, in our view, make out a case of triable issues qua theappellant.

20. In the totality of the circumstances of this case, we are clearlyEof the view that the appellant has indeed raised triable issues, particularlyconcerning its liability and the defence of the appellant cannot be said tobe frivolous or vexatious altogether.

20.1. In the aforesaid view of the matter, we are inclined to holdthat the appellant-defendant No. 2 ought to have been granted the leaveFto defend the claim made in the suit concerning its liability; and to thisextent, the impugned decree deserves to be set aside.

21. For what has been observed hereinabove, we would haveconsidered granting unconditional leave to defend to the appellant butthen, it is noticed that by the order dated 17.08.2018, this Court grantedGstay over execution of the decree on the condition of the appellantdepositing a sum of Rs. 40,00,000/- (Forty Lakhs). Thereafter, by theorder dated 24.09.2018, this Court noticed the fact of such deposit andcondoned the delay of four days in making the deposit. Taking thesefactors into account and, looking to the nature of claim and the nature ofdefence sought to be raised as also the fact that the appeal filed by theH

defendant No. 1 had been dismissed by the High Court, we find it justand proper to grant leave to defend to the appellant-defendant No. 2while leaving it open for the Trial Court to pass appropriate ordersregarding treatment of the said amount of Rs. 40,00,000/- deposited bythe appellant in terms of the order passed by this Court.

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21.1. As the appellant is being granted leave to defend, we arenot dealing with other contentions urged on behalf of the appellantconcerning its liability; and all the relevant aspects are left open forconsideration of the Trial Court.

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22. Accordingly, this appeal succeeds and is allowed in the mannerthat impugned judgment and order dated 11.05.2018 as passed by theCHigh Court and the impugned judgment and decree dated 18.09.2017 aspassed by the Trial Court, insofar relating to the present appellant(defendant No. 2), are set aside; the appellant is granted leave to defend;and the amount of Rs. 40,00,000/- deposited by the appellant shall betreated to be a deposit towards the condition for leave to defend. TheDTrial Court shall pass appropriate orders for treatment of the said amountof Rs. 40,00,000/- and then shall proceed with trial of the suit only quathe appellant-defendant No. 2 in accordance with law.

22.1. No order as to costs of the present appeal.

Bibhuti Bhushan Bose

(Assisted by : Shubhanshu Das, LCRA)

Appeal allowed.

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