Case at a Glance
A finance company obtained an ex parte decree for about ₹21.88 crore with interest against a partnership firm and its partners. One partner applied, after a delay of 423 days, to set aside the decree under Order IX Rule 13 CPC, saying he had never been served. The Madras High Court’s Division Bench condoned the delay on condition that he pay ₹75 lakh to the plaintiff. The Supreme Court upheld the condonation but changed the condition: the ₹75 lakh must be deposited with the High Court in an interest-bearing deposit, subject to the final outcome, because paying it to the plaintiff while the decree itself is under challenge was “unwarranted”.
The plaintiff company had entered into hire-purchase and lease agreements with a partnership firm run by defendants 2 to 4. It filed C.S. No. 530 of 2011 on 19 March 2010 claiming about ₹21,88,11,451.96 due as on 18 March 2010, with future interest at 36%. Defendants 1, 2 and 4 were set ex parte on 27 August 2021 (defendant 3 having died), and the learned Single Judge of the Madras High Court decreed the suit on 15 November 2021.
On 15 February 2023 the fourth defendant applied to set aside the ex parte decree, with an application to condone a 423-day delay, claiming that summons was never served on him and that he learnt only on 10 February 2023 that someone else had received it on 10 December 2011. The Single Judge dismissed the condonation application on 17 March 2023 for want of bona fides. On 14 August 2024, in O.S.A. No. 112 of 2023, the Division Bench condoned the delay on terms, directing him to pay ₹75,00,000 to the plaintiff within four weeks for disbursement to its depositors. On 10 September 2024 the Supreme Court stayed execution of the decree on condition of a ₹75 lakh deposit with the High Court, which was later made, albeit after some delay.
The Key Question Before the Court
Was the Division Bench right to condone the 423-day delay in seeking to set aside the ex parte decree, and was it justified in requiring the defendant to pay ₹75 lakh directly to the plaintiff?
Discretion Upheld, Condition Corrected
The defendant argued the delay should have been condoned unconditionally and, in any case, that money should not go to the plaintiff since the claim is disputed. The plaintiff argued that the grounds lacked bona fides, that new grounds were raised in appeal, and that ₹75 lakh was too low. The Supreme Court held that the Division Bench’s exercise of discretion in condoning the delay “cannot be said to be so arbitrary or irrational” as to warrant interference under Article 136.
On the condition, the Court found that requiring a deposit was reasonable, but directing payment to the plaintiff “appears to be unwarranted”, particularly because the defendant is seeking to have the very decree set aside. It saw no basis to hold ₹75 lakh too low. It left the plaintiff free to seek appropriate conditions when the stay of execution is considered, with the defendant free to oppose, and clarified that the Division Bench’s observations should not influence the Single Judge in deciding the Order IX Rule 13 application on merits. No precedent is cited in the judgment.
What the Court Actually Held
- The Division Bench’s condonation of the 423-day delay in the Order IX Rule 13 CPC application was a permissible exercise of discretion and was not interfered with.
- Imposing a monetary condition was reasonable, but directing that the money be paid to the plaintiff was unwarranted when the decree itself is under challenge.
- The ₹75 lakh shall remain deposited with the High Court in an interest-bearing deposit, subject to the final outcome; the interim order of 10 September 2024 was made absolute to that extent.
- The plaintiff may seek suitable conditions when the stay of execution is considered, and the Single Judge will decide the application uninfluenced by the Division Bench’s observations; both appeals were disposed of with no order as to costs.
Why This Judgment Matters
- It clarifies that conditions attached to condonation of delay should secure the decree-holder, not hand over disputed money in advance.
- It reaffirms the limited scope of Article 136 interference with discretionary condonation orders.
- It is useful for defendants who learn of ex parte money decrees years later and plead non-service.
What Should Advocates Take Away From the Judgment?
For Litigants
- If you learn of an ex parte decree late, move quickly under Order IX Rule 13 CPC with a delay-condonation application explaining the date of knowledge.
- Courts may require a deposit as a condition; it should ordinarily be held by the court, not paid to the other side.
- Decree-holders can still seek protective conditions when stay of execution is considered.
For Counsel
- Challenge conditions that require direct payment to the decree-holder while the decree is under challenge.
- Article 136 interference with discretionary condonation is limited to arbitrary or irrational exercises.
- Ask that appellate observations not bind the court deciding the setting-aside application on merits.
Key Takeaways
- The 423-day delay in seeking to set aside the ₹21.88 crore ex parte decree stays condoned.
- ₹75 lakh condition upheld in amount but converted into a court deposit.
- Money to be kept in an interest-bearing deposit, subject to the final outcome.
- Single Judge to decide the Order IX Rule 13 application on its own merits.
Frequently Asked Questions
What is Order IX Rule 13 CPC?
It allows a defendant against whom an ex parte decree has been passed to apply to set it aside, by showing that summons was not duly served or that he was prevented by sufficient cause from appearing.
Can a court impose conditions while condoning delay?
Yes. The Supreme Court upheld the requirement of a ₹75 lakh deposit, but held it should be deposited with the High Court rather than paid to the plaintiff.
Has the ex parte decree been set aside?
Not yet. Only the delay was condoned; the High Court must now decide the application to set aside the decree on its merits.
Conclusion
The judgment draws a practical line: a defendant who gets a second chance against an ex parte decree can be asked to put money on the table, but that money should sit with the court until the dispute is decided, not be handed to the decree-holder in advance.
Practical takeaway: When condonation of delay is granted on terms in an Order IX Rule 13 application, argue that any monetary condition be secured by a court deposit, subject to the final outcome.
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