Login
  • Bookmark
  • PDF
  • Share
  • CaseIQ

Somalal Nathalal Mistri v. Vasant Investment Corporation Ltd.

Bombay High Court
Aug 7, 1953
Important Paras
Please sign up to view Important Paras.
Smart Summary (Beta)

Judgment Summary: Order Setting Aside Ex Parte Decree — Dixit, J.

Factual and Procedural Background

The first respondent filed a suit on or about October 2, 1946 against the appellant and the second respondent to recover Rs. 2,44,702-8-6 based on a promissory note dated about December 21, 1944 for Rs. 3,00,000. The suit was set down for hearing on December 14, 1951 (five years after filing). The appellant was absent on that date; the second respondent contested. On December 27, 1951 the trial Court passed a decree in favour of the first respondent — an ex parte decree as against the appellant and a decree after contest as against the second respondent.

On January 15, 1952 the appellant applied to set aside the ex parte decree. The trial Court allowed the application on September 9, 1952, setting aside the ex parte decree subject to conditions: in particular, the appellant was required to furnish security for Rs. 3,00,000 within two months. The trial Court also set aside the decree as against the second respondent. The appellant (first defendant) appealed against that order.

A preliminary objection was raised by the first respondent that no appeal lay from the order because the application to set aside had been granted (citing O. XLIII, r. 1(d) contrast). The appellant conceded that no appeal lay and sought conversion of the appeal into a revisional application; the Court allowed conversion on payment of appropriate court-fees and proceeded to decide the matter as a revisional application.

Legal Issues Presented

  1. Whether an appeal lies from the trial Court's order setting aside an ex parte decree under Order IX, Rule 13 of the Code of Civil Procedure (given the appeal provisions of Order XLIII, Rule 1(d)).
  2. Whether under Order IX, Rule 13 the Court has power to impose as a term for setting aside an ex parte decree the payment of the decretal amount (in whole or in part), or whether the Court's power is restricted to imposing costs only.
  3. Whether the particular condition imposed by the trial Court — requiring the defendant to furnish security for Rs. 3,00,000 — was a reasonable and judicial exercise of discretion under Order IX, Rule 13 or whether it was excessive and unsupported by evidence.

Arguments of the Parties

First respondent (Mr. S.M. Shah)

  • Preliminary objection: no appeal lies because the trial Court granted the application under Order IX, Rule 13; Order XLIII, Rule 1(d) permits appeal only from an order rejecting an application to set aside an ex parte decree, not from an order granting it.
  • On revision: argued that under Section 115 the revisional Court should not go into the learned Judge's reasons if they were based on the evidence; implied that if the trial Judge's reasons were supported by evidence, revision would not be appropriate.

Appellant (Mr. N.C. Shah)

  • Conceded that no appeal lay and sought conversion of the appeal into a revisional application (with payment of court-fees).
  • Substantive contention on interpretation of Order IX, Rule 13: argued that the Rule permits imposition of terms only as to costs; relied on a punctuation-based reading that the phrase "payment into Court or otherwise" was referable to costs and not to payment of the decretal amount.
  • Contended that the trial Court was wrong to require the appellant to furnish security for the entire decretal amount (Rs. 3,00,000) and that such a condition was not justified by the evidence in the trial Court proceedings.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Surayya v. Thayaramma The head-note states: "The wording 'upon such terms as to' in the Rule should be read as applying not only to costs but to 'payment into Court or otherwise as it thinks fit' as well. The Rule does not restrict the power of the Court to impose conditions for setting aside an ex parte decree to payment of costs only. The wording of the Rule is comprehensive enough to include conditions as to payment into Court or decretal amount or such other conditions as the Court thinks fit." The Court relied on this authority to reject the appellant's punctuation argument and to hold that Order IX, Rule 13 empowers a Court to impose conditions including those relating to payment of the decretal amount (in whole or in part).
Shyam Lal Sahai v. Ram Narayan Lal Seth The opinion indicates that the present view "is also in accordance with the principle of the ruling" in that case (the text does not further specify the exact wording). The Court referred to this case as additional support for the interpretation that Order IX, Rule 13 includes power to impose conditions relating to payment of the decretal amount.

Court's Reasoning and Analysis

The Court proceeded in stages.

1) Jurisdictional/procedural point: The Court accepted the first respondent's preliminary objection that an appeal did not lie from an order granting an application under Order IX, Rule 13, since Order XLIII, Rule 1(d) provides for appeal only from an order rejecting such an application. The appellant's conceded position was to convert the appeal into a revisional application, which the Court permitted subject to payment of proper court-fees.

2) Whether the appellant established "sufficient cause" under Order IX, Rule 13: The Rule requires that the defendant must show he was prevented by sufficient cause from appearing when the suit was called on for hearing. The Court accepted uncontradicted evidence that on December 14, 1951 the appellant was prevented from appearing because he was taken ill and was then residing in Bombay. The Court thus found the statutory requirement of sufficient cause satisfied.

3) Interpretation of Order IX, Rule 13: The Court rejected the appellant's punctuation-based argument that the Court's power under Rule 13 is limited to imposing costs. Relying on the comprehensive wording of the Rule and the cited authority (Surayya v. Thayaramma and Shyam Lal Sahai v. Ram Narayan Lal Seth), the Court held that the Court has power to impose terms that relate to payment into Court or to payment of the decretal amount either in whole or in part, or other conditions as it thinks fit. The Court described the Rule's language as "very comprehensive."

4) Discretion must be judicial and reasonable: The Court emphasized that although the Rule confers discretionary power to impose conditions, that discretion must be exercised judicially. Conditions must be reasonable, not oppressive, and must not be such as effectively prevent the defendant from defending the suit. The precise condition to impose depends on the facts of each case — sometimes full payment may be required, sometimes a portion, and sometimes costs only.

5) Application to the facts — reasonableness of Rs. 3,00,000 security: The Court examined the reasons given by the trial Judge for imposing security of Rs. 3,00,000: (a) the appellant's monetary condition was deteriorating; (b) the appellant had adopted delaying tactics; and (c) because of the nature of his contentions it was necessary to require security for the entire decretal amount.

The revisional Court scrutinized the evidentiary foundation for those reasons. It observed that:

  • The appellant, when cross-examined, was not questioned about his monetary condition;
  • The first respondent's affidavit alleged the appellant had no tangible immovable property and was liable for heavy income-tax dues, but those allegations were not pursued in cross-examination of the appellant and thus were unsupported in the evidence;
  • The only material cross-examination addressed the question whether the appellant had sufficient cause to be absent on the hearing date.
On that basis the revisional Court concluded the trial Judge's reasons were not substantiated by the evidence produced at the inquiry. The Court distinguished between considerations that could justify a full-security requirement (for example, proof that the defendant had no assets or was in default on large tax liabilities) and general observations (monetary condition declining; delaying tactics) which, without evidentiary support, did not justify ordering security to the full decretal amount.

6) Scope of revision: The Court acknowledged the limited scope of revision under Section 115 of the Code of Civil Procedure — namely, interference where the subordinate Court has no jurisdiction, has illegally assumed jurisdiction, or has exercised jurisdiction illegally or with material irregularity. The Court found a material irregularity in that the trial Judge imposed a condition of full security unsupported by the evidence; accordingly interference in revision was appropriate.

7) Disposition on quantum of security: Applying the principle that the condition must be reasonable in the facts of the case, and having regard to the age of the liability (origination in 1944; decree in 1951) and the magnitude of the total claimed amount (in the neighbourhood of Rs. 3,10,000 according to advocates' calculations), the Court held the requirement of Rs. 3,00,000 was not supportable on the material before the trial Judge. The Court substituted a reduced security amount of Rs. 1,50,000 as a reasonable condition to set aside the ex parte decree and allowed two months for furnishing that security.

Holding and Implications

Holding (core ruling): The Court varied the order of the trial Court: the requirement that the appellant furnish security for Rs. 3,00,000 was reduced to Rs. 1,50,000; otherwise the trial Court's order setting aside the ex parte decree was confirmed.

Consequences and practical implications:

  • Direct effect on the parties: The appellant's application to set aside the ex parte decree was upheld, but the condition originally imposed (security of Rs. 3,00,000) was found to be excessive and was reduced to security of Rs. 1,50,000 to be furnished within two months from the date of the judgment. The remainder of the trial Court's order (as varied) was confirmed and the revisional rule discharged with costs.
  • On broader precedent: The Court applied and relied upon existing authorities to interpret Order IX, Rule 13 as empowering Courts to impose conditions that may include payment of the decretal amount (in whole or in part). The opinion does not purport to create a new precedent beyond applying those principles to the facts before it; the immediate legal consequence is the reaffirmation of the principle that conditions must be reasonable and supported by evidence when imposed under O. IX, r. 13.

Order varied. Security to be furnished within two months.

Show all summary ...

Dixit, J.:—

This is an appeal from an order made by the Civil Judge, Senior Division, Ahmedabad, setting aside an ex parte decree on certain conditions set out in the order.

On or about October 2, 1946, the first respondent filed against the appellant and the second respondent a suit to recover a sum of Rs. 2,44,702-8-6. The suit was based upon a promissory note executed by the appellant in favour of the first respondent on or about December 21, 1944, for a sum of Rs. 3 lakhs. The suit was fixed for hearing on December 14, 1951. It is a remarkable circumstance that a suit filed on October 2, 1946, should have come up for hearing before the lower Court on December 14, 1951, that is to say, after an interval of a period of five years. On that date the appellant was absent. The second respondent contested the suit and on December 27, 1951, the trial Court passed in favour of the first respondent a decree for the amount claimed with interest and costs. Against the appellant the decree was an ex-parte decree and against the second respondent the decree was after contest.

On January 15, 1952, the appellant, that is to say, the original first defendant, field this application to have the ex parte decree set aside and the Court below made in his favour an order setting aside the ex parte decree on the appellant furnishing security for Rs. 3 lakhs and requiring the appellant to furnish the said security within a period of two months. Incidentally, the lower Court also set aside the decree as against the second respondent. Feeling aggrieved by the order the first defendant has come up in appeal.

Mr. S.M Shah appearing for the first respondent has taken a preliminary objection which is that no appeal lies in this case. The order made in favour of the appellant is an order under O. IX, r. 13 of the Code of Civil Procedure. Under O. XLIII, r. 1(d) an appeal is provided from an order under r. 13 of O. IX rejecting an application (in a case open to appeal) for an order to set aside a decree passed ex parte. In this case the application has been granted. Therefore, clearly, no appeal lies under O. XLIII, r. 1(d). The preliminary objection is, therefore, well founded and must prevail.

But Mr. N.C Shah for the appellant says that this appeal should be converted into a revisional application. It is now conceded that no appeal lies and I accordingly allow this appeal to be converted into a revisional application, subject of course to payment of adequate court-fees which Mr. N.C Shah for the appellant has undertaken to pay. I will, therefore, dispose of this matter on the basis of a revisional application.

The question to be decided is whether the order complained of is in accordance with O. IX, r. 13 of the Code of Civil Procedure. So far as material O. IX, r. 13 provides:

“…and if he (the defendant) satisfies the Court that the summons was not duly served, or that he was prevented by any sufficient cause from appearing when the suit was called on for hearing, the Court shall make an order setting aside the decree as against him upon such terms as to costs, payment into Court or otherwise as it thinks fit…”

The requirement of r. 13 of O. IX is that the defendant must show that he was prevented by a sufficient cause from appearing when the suit was called on for hearing. In this case there is evidence which has been accepted by the Court below and which is not disputed in this proceeding that on December 14, 1951, the appellant was prevented from appearing when the suit was called on for hearing because the first defendant was taken ill and was then living in Bombay. It is, therefore, established upon the evidence, and which is not disputed, that there was sufficient cause for the first defendant for not appearing when the suit was called on for hearing. So far the matter is simple. But Mr. N.C Shah appearing for the first defendant contends that in this case the Court below was wrong in directing the applicant to furnish security in the sum of Rs. 3 lakhs. The contention is that under O. IX, r. 13 the only power which the Court has is the power to direct the defendant to pay the costs and not to pay the amount of the decree. He relies upon what he calls the punctuation as occurring in the rule. His argument, if I understand it correctly, is like this. He says that the only terms which the Court can impose are the terms as regards costs and the expression “payment into Court or otherwise” is referable to costs and not to the payment of the decretal amount. For this interpretation Mr. N.C Shah is unable to produce any authority and it seems to me that there can be no authority in his favour. The language of O. IX, r. 13 is, I think, very comprehensive. The Court has power to impose upon the defendant certain terms and those terms have relation to the payment of costs or to the payment of the decretal amount—either in whole or in part or any other conditions which the Court may think fit to impose. The view which I take is supported by the decision of the Madras High Court reported in Surayya v. Thayaramma.(3) It is enough, I think, to quote the head-note in that case which is as follows:

“The wording “upon such terms as to” in the Rule should be read as applying not only to costs but to “payment into Court or otherwise as it thinks fit” as well. The Rule does not restrict the power of the Court to impose conditions for setting aside an ex parte decree to payment of costs only. The wording of the Rule is comprehensive enough to include conditions as to payment into Court or decretal amount or such other conditions as the Court thinks fit.”

This view is also in accordance with the principle of the ruling in the case of Shyam Lal Sahai v. Ram Narayan Lal Seth.(4) I accordingly hold that under O. IX, r. 13 the Court has power to impose upon the defendant the condition of the payment of the decretal amount either in whole or in part.

The next question is whether the condition which has been imposed by the Court below is a reasonable condition. The expression “such terms as to costs, payment into Court or otherwise as it thinks fit” suggests that the matter is one of discretion, but the discretion is to be exercised in a judicial manner. The condition to be imposed, therefore, upon a defendant should be reasonable and not oppressive. What condition should be imposed in a particular case must depend upon the facts of each case. In a particular case the Court may come to the conclusion that the defendant should pay into Court the entire amount. In another case the Court may come to the conclusion that it will suffice if the defendant is ordered to pay a portion of the decretal amount, and in a third case it is conceivable that the Court may come to the conclusion that the ends of justice will be met if the defendant is made to pay the amount of costs only. The true principle seems to me to be that while the Court has got power to impose conditions upon a defendant, including the condition of the payment of the entire amount of the decree, the conditions to be imposed should be reasonable and should not be oppressive or at least should not be conditions which will result in the defendant not being able to defend the suit.

The point to be decided, therefore, is whether in this case the condition imposed upon the applicant is a reasonable condition. The suit giving rise to the ex parte decree was based upon a promissory note of the year 1944. The suit was filed in 1946 and ended in a decree dated December 27, 1951. The application to set aside the ex parte decree was made on January 15, 1952, and the application was allowed on September 9, 1952. Bearing these dates in mind, the interval between the incurring of the liability and the decree which makes the defendant liable to pay the decretal amount is, roughly speaking, a period of eight years and it is a very large amount which, according to the calculations made by the learned Advocates appearing for the parties, is in the neighbourhood of a sum of Rs. 3 lakhs and a little more. The learned trial Judge gave certain reasons in support of the order which he made imposing the condition of the security of Rs. 3 lakhs. The reasons were these. He said first that the monetary condition of the applicant was going down. The second reason given by him was that the applicant had adopted delaying tactics. The third reason given by him was that looking to the nature of the contentions taken up by the applicant it was necessary to impose upon him the condition of the payment of the entire decretal amount by requiring the first defendant to furnish security for that amount. It is to be noted that when the applicant was put into the witness-box and was cross-examined by the advocate on behalf of the first respondent, no questions were put to the applicant about his monetary condition. In the affidavit filed by the first respondent in answer to the application made by the first defendant it was stated that the first defendant did not own any tangible immoveable property. No suggestion was made to the first defendant when he gave evidence. It was also suggested in the affidavit that the first respondent was reliably informed that the first defendant was liable to pay heavy income-tax dues to the Government of India. No suggestion was made in the evidence of the first defendant by the first respondent to that effect. In the absence of any effective cross-examination upon those points, it seems to me that the evidence of the first defendant stands and the only crose-examination was upon the point as to whether the first defendant had a sufficient cause for not being present when the suit was called on for hearing.

Mr. S.M Shah who appears for the first respondent argues that this is a revisional application and under s. 115 of the Code of Civil Procedure I cannot go into the reasons which have been given by the learned Judge in support of the view which he has taken. If the reasons given by the learned Judge were based upon the evidence in the case, I should not have felt the slightest difficulty in accepting the contention of Mr. S.M Shah. But, in my opinion, the reasons given by the learned Judge are reasons which are not to be found in the evidence of the first defendant. If the first defendant does not own any immovable property and the amount due in the first respondent is a large amount of Rs. 3 lakhs, that is a good ground for requiring the first defendant to furnish security even for the entire amount. Again, if heavy income-tax dues were to be paid by the first defendant to the Government of India and that he was in default, that again would be a good ground for requiring the first defendant to pay a substantial portion of the decretal debt or to furnish security in respect of that amount. But to say that the monetary condition of the first defendant was going down and that he was adopting delaying tactics is not, in my opinion, a sufficient reason for requiring the first defendant to furnish security to the extent of Rs. 3 lakhs. In most cases the monetary condition of a defendant generally may go down. Equally in most cases a defendant generally adopts delaying tacties. But if the law of procedure allows him to adopt delaying tactics, that, I think, is no reason why the first defendant should be directed to furnish security for the entire amount of the decretal debt. These are undoubtedly adequate considerations in making a suitable order requiring the defendant to pay a substantial portion of the decretal amount or to furnish security. But, in my opinion, these cannot constitute valid reasons for holding that the defendant should, therefore, be ordered to pay the entire decretal amount. In my opinion, therefore, the order of the Court below in so far as it directs the applicant to furnish security to the extent of Rs. 3 lakhs cannot be supported, and if the order cannot be supported for the reason that there is no evidence in support of the order made, it would be open to me to interfere with the order in a revisional application. It is true that the jurisdiction of the High Court in a revisional application is of a limited character. The High Court can interfere with the order of the Court below, when it has no jurisdiction to make the order, or has illegally assumed jurisdiction or having jurisdiction has exercised the jurisdiction illegally or with a material irregularity. But if an order is made which cannot be supported, it seems to me that the High Court can interfere in revision because the case would be one when the Court below having jurisdiction has acted with a material irregularity. On this ground, I think, I must interfere with the order of the Court below in so far as the Court below has required the defendant-applicant to furnish security to the extent of Rs. 3 lakhs.

As I said in an earlier part of this judgment, the nature of the terms to be imposed upon a defendant must depend upon the facts of each case, and looking to the circumstances and the facts of the case as a whole, it seems to me that the first defendant-applicant should be required to furnish security to the extent of Rs. 1,50,000. It cannot be suggested that this order will be harsh because the liability has arisen as long ago as 1944. It cannot be suggested that this is unreasonable either because the total amount due to the first respondent would be in the neighbourhood of Rs. 3,10,000.

The order of the lower Court will, therefore, be varied and in place of the words “Rs. 3,00,000”, the words “Rs. 1,50,000” will be substituted. Subject to the aforesaid variation, the order sought to be revised against will be confirmed and the rule in this revisional application will be discharged with costs. The security should be furnished within two months from to-day.

Order varied.
M.W.P