Innovative Textiles Pvt. Ltd & Anr vs Hem Chand Sharma & Anr

Rajiv Sahai Endlaw, J

IA No.14463/2017 (for exemption)

Allowed, subject to just exceptions.

The application is disposed of.

IAs No.14462/2017 & 14464/2017 (both of D-2 and LR of D-1 u/O XXXVII R-4 CPC & for condonation of 520 days delay in applying

therefor)

The two plaintiffs namely M/s Innovative Textiles Pvt. Ltd. and M/s Grafax Cotton Pvt. Ltd. instituted the suit aforesaid, under Order XXXVII of

the Code of Civil Procedure, 1908 (CPC) for recovery of Rs.2,20,50,000/- jointly and severally from the two defendants namely Hem Chand Sharma

and Anmol Sharma. This suit was so entertained and summons for appearance and on the defendants entering appearance, summons for judgment

issued and the defendants applied for leave to defend. The leave to defend application of the defendants was found to raise triable issue and on the

counsel for the plaintiffs contending that the defendants, if at all entitled to leave to defend, should be granted leave on condition of deposit of suit

amount or on furnishing security, it was reasoned in the order dated 16th July, 2013 granting leave to defend that since there was already an interim

order in force in the suit restraining the defendants from dealing with certain properties, there was no need for any further condition to be imposed.

The suit, upon grant of leave to defend, proceeded as an ordinary suit.

The plaintiffs however filed an application averring violation of the interim order by the defendants by dealing with the immoveable property from

which they were restrained from dealing. It was factually also found so. The defendants having disposed of the security on the premise whereof the

contention of the counsel for the plaintiffs for grant of conditional leave to defend to the defendants was rejected, the defendants were directed to

furnish a bank guarantee.

The defendants, inspite of repeated opportunities and extensions, did not furnish the bank guarantee and resultantly the suit was decreed against

them.

Now, these applications under Order XXXVII Rule 4 of CPC and for condonation of delay in applying therefor have been filed.

I have enquired from the senior counsel for the defendants, whether Order XXXVII Rule 4 of CPC, which is as under, applies in the aforesaid

scenario:

“4. Power to set aside decree.â€"After decree the Court may, under special circumstances set aside the decree, and if necessary stay or

set aside execution, and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the Court

so to do, and on such terms as the Court thinks fit.â€​

The senior counsel for the defendants has very fairly referred to Rajni Kumar Vs. Suresh Kumar Malhotra (2003) 5 SCC 315 and in para 10

whereof, the Supreme Court has compared a suit under Order XXXVII and an ordinary suit and has thereafter in para 11 of the judgment inter alia

held as under:

“11. It is important to note here that the power under Rule 4 of Order 37 is not confined to setting aside the ex parte decree, it extends to

staying or setting aside the execution and giving leave to appear to the summons and to defend the suit. We may point out that as the very

purpose of Order 37 is to ensure an expeditious hearing and disposal of the suit filed thereunder, Rule 4 empowers the court to grant leave

to the defendant to appear to summons and defend the suit if the court considers it reasonable so to do, on such terms as the court thinks fit

in addition to setting aside the decree. Where on an application, more than one among the specified reliefs may be granted by the court, all

such reliefs must be claimed in one application. It is not permissible to claim such reliefs in successive petitions as it would be contrary to

the letter and spirit of the provision. That is why where an application under Rule 4 of Order 37 is filed to set aside a decree either because

the defendant did not appear in response to summons and limitation expired, or having appeared, did not apply for leave to defend the suit

in the prescribed period, the court is empowered to grant leave to the defendant to appear to the summons and to defend the suit in the same

application. It is, therefore, not enough for the defendant to show special circumstances which prevented him from appearing or applying

for leave to defend, he has also to show by affidavit or otherwise, facts which would entitle him leave to defend the suit. In this respect, Rule

4 of Order 37 is different from Rule 13 of Order 9.â€​

(emphasis added)

The aforesaid is also indicative of Rule 4 of Order XXXVII of CPC being available for setting aside of a decree, either because the defendant did

not appear in response to summons for appearance or summons for judgment and the limitation for appearance or filing leave to defend having expired

or where the defendant inspite of having appeared did not apply for leave to defend within the prescribed time. The present case does not fall in the

said genre. Here, the defendants, within time, entered appearance and filed leave to defend and which was considered on merits and granted. The suit

thus stood converted to an ordinary suit thereafter and a decree thereafter passed in the suit against the defendants for the reason of defaulting in

compliance with the subsequent order. To put it differently, the decree has been passed against the defendants for the reason of failure to comply with

the condition imposed on the defendants for the reason of the defendants having been found to be in violation of interim order in the suit. To such

eventuality, Rule 4 of Order XXXVII of CPC would not be applicable.

The suit, after the order of grant of leave to defend, per Rule 7 of Order XXXVII, is to be proceeded as an ordinary suit and Rule 4 cannot be

invoked with respect to a decree passed thereafter. This becomes clear from the language of Rule 4 which empowers the Court to, on finding

‘special circumstances’, give leave to the defendant to appear and to defend the suit. However when the suit has proceeded beyond the stage

of ‘giving leave to defendant to appear to the summons and to defend the suit’ the remedy for decree following thereafter is not under Rule 4.

I find Chandrachud J., in Ramaben Bhagubhai Patel Vs. The Hindustan Electric Company Ltd. AIR 1963 Bom 85, to have held that provisions of

Order XXXVII Rule 4 cannot apply to a case in which decree has been passed for failure to comply with the terms of a conditional order. A

subsequent Division Bench of the Bombay High Court however in Ramchandra Dhondu Dalvi Vs. Vithaldas Gokaldas AIR 1964 Bom 251 and the

High Court of Calcutta in Rahini Roy Vs. Jethmull Bhojraj AIR 1969 Cal 218 are however found to have held otherwise, though dismissed the

applications on merits.

I am, with respect, unable to agree. There can be plethora of reasons in which a decree may follow after leave to defend is granted. To hold that a

defendant in a suit, initially instituted under Order XXXVII, will continue to have a remedy under Rule 4, would vest in such a defendant an additional

remedy than available to a defendant in a suit not instituted under Order XXXVII. A decree may, for instance, follow even under Order VIII Rule 10

of CPC against a defendant granted leave to defend. Certainly such a defendant cannot be permitted to invoke Rule 4 of Order XXXVII. The reason,

in my opinion for insertion of Rule 4 in Order XXXVII is to provide remedy to defendant in a suit under Order XXXVII against defaults in meeting

timelines prescribed therein. Since the defendant, on such default is not proceeded ex-parte and a decree follows, the provision of Order IX Rule 7 or

Rule 13 would not be available. However, when the decree is not the result of such defaults but a result of future defaults, Rule 4 would not be

applicable. A judgment under Order XXXVII Rule 3(6)(b), for failure to give security, is not in the same category as follows on failure to enter

appearance to apply for leave to defend, within the time prescribed therefor, and for which two contingencies only, Rule 4 has been provided.

The application under Order XXXVII Rule of CPC is thus misconceived.

The counsel for the plaintiffs, though appears on advance notice but neither has anything to say nor has cited any case law on the aspect of

maintainability of the application under Rule 4 of Order XXXVII of CPC.

The application under Order XXXVII Rule 4 of CPC is thus dismissed as not maintainable.

The need for considering the application for condonation of delay thus does not arise.

Dismissed.

Needless to state, the defendants shall have their remedy available in law.

On request of the senior counsel for the defendants, it is directed that the original Death Certificate of the defendant No.2 stated to have been

filed with the applications be returned to the defendants/their counsel in accordance with rules.