Citation Codes

Equivalent Citations

citation codes

Case Number

Civil Revision NO. 65 of 1985

Judges

S.N KAPOOR, J.

Acts

provisions of Section 115, C.P C.,
Cl.(2) of Order 37, Rule 2, C.P.C

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

This revision petition challenges a composite order in which the trial Court (i) rejected the defendant's application for leave to defend a suit filed under Order 37, Code of Civil Procedure, and (ii) passed a decree for recovery in favour of the plaintiff-bank. The plaintiff/respondent, Laxmi Commercial Bank Ltd., filed a suit for recovery of Rs. 17,000 under Order 37 after asserting that a cash credit facility of Rs. 12,000 given to the defendant on 27 February 1980 had grown to a liability of Rs. 17,000 as on 30 November 1991 and remained unpaid despite notice.

The defendant applied for leave to defend, asserting that pledged goods provided as security (initially worth Rs. 18,515 in 1980 and alleged to be worth about Rs. 30,880 at the time of the application) should have been sold by the Bank on the defendant's request to adjust the account, but the Bank did not do so. Those pledged goods were subsequently burnt in a fire while in the Bank's godown; the Bank lodged an insurance claim and realized Rs. 9,720. The trial Court, relying on admitted parts of the plaintiff's case, rejected the application for leave to defend and decreed recovery of Rs. 17,000 with costs and pendente lite and future interest at 17% per annum.

The defendant filed this revision petition contending inter alia that the pledged goods were destroyed while in the Bank's custody, insurance proceeds were realized without informing the defendant, and therefore the plaintiff's claim should have been adjusted by the insurance amount or the defendant should have been given leave to defend.

Legal Issues Presented

Whether the defendant who claimed set-off/adjustment by requesting sale of pledged goods and who claimed adjustment for the value of goods pledged, insured and kept in the Bank's custody which were thereafter burnt, is entitled to leave to defend the suit under Order 37, C.P.C.?
Whether the revision petition itself is maintainable in view of the composite order refusing leave to defend and simultaneously passing a decree, given that an appeal could be filed against the decree?

Arguments of the Parties

Defendant / Revision Petitioner

Claimed that a cash credit limit of Rs. 12,000 existed in 1980 and that goods worth Rs. 18,515 were pledged in February 1980.
Alleged that the defendant requested the Bank to sell the pledged goods to clear the account but the Bank failed to take that action.
Asserted that by the time of the application the pledged goods' value would have been about Rs. 30,880 and that these goods were subsequently destroyed by fire (April 1983/1993 as per the record), entitling the defendant to that amount or adjustment thereof.
Expressed willingness to pay Rs. 12,000 if the defendant got back the pledged goods or their price.
Contended that the insurance claim was settled without notice to the defendant and that instead of making good the loss the Bank proceeded with a recovery suit.

Plaintiff / Respondent Bank

Admitted that the pledged goods were burnt but asserted that the Bank had taken due care and the fire occurred due to circumstances beyond its control.
Stated that a claim had been lodged with the Insurance Company and that the Bank had realized an insurance amount (Rs. 9,720).
Relied on a prior demand notice (August 1981) seeking Rs. 15,860 to which the defendant had replied admitting liability and promising monthly instalments.
Maintained that the defendant was at liberty to redeem the pledged goods after paying the amount claimed by the Bank.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
1986 Bank J 726 (Madh Pra)	Principle that when valuable property belonging to the defendant is already in possession of the plaintiff Bank, it is not proper for the Court to ask for security.	The Court referred to this decision to support the view that the defendant's plea (regarding pledged goods in the Bank's possession) was just and that imposing security or rejecting leave on such grounds would be improper.
Pran Nath v. Sudarshan, 1980 Rajdhani LR (Note) 67	Held (in that case) that revision would not be maintainable against a composite order refusing leave and passing a decree, on account of the decree being available for appeal and risk of inconsistent decrees.	The Court noted this authority as representing a contrary view but explained that doubts expressed in Pran Nath related to that particular case and that other authority addressed the maintainability issue more directly.
Siri Krishan Bhardwaj v. Manohar Lal Gupta & Another, AIR 1977 Delhi 226	Holds that a revision petition is maintainable against a composite order refusing leave to defend and simultaneously passing a decree for recovery.	The Court treated this Division Bench judgment as a controlling authority supporting maintainability of the revision petition and relied upon it to hold the present revision maintainable.
S.S. Khanna's case, AIR 1964 SC 497	Interprets the phrase "any case which has been decided" to include a part of a case; supports revisional jurisdiction irrespective of the existence of an appeal from the ultimate decree.	The Court invoked the principle to conclude that an order refusing leave to defend (which has consequential effect of admitting plaint allegations and leading to a decree) falls within "any case which has been decided" under Section 115, C.P.C., and is therefore amenable to revision.
Rangiah v. Peddireddi, AIR 1957 Andh Pra 330	Reiterates the principle (following Privy Council authority) that subordinate or consequential orders depend on earlier orders and, if the earlier order is reversed, the consequential orders cannot remain in force.	The Court relied on this to reason that a decree which is consequential to an earlier order refusing leave to defend must fall if the earlier order is reversed in revision.
Shama purshad Ray Chowdry v. Hurro Purshad Ray Chowdhry, (1863-66) 10 Moo Ind App 203 (PC)	Authority for the legal principle that subordinate orders dependent on earlier orders remain valid only so long as the earlier orders stand.	Applied (through Rangiah) to support the proposition that consequential decrees fall with reversal of the primary order refusing leave to defend.

Court's Reasoning and Analysis

The Court examined the trial Court record and focused on facts admitted by the parties. It observed that:

It was admitted that in February 1980 the defendant had requested the Bank to sell the pledged goods to clear the account, but the Bank did not take such action; the Bank did not dispute that position.
It was also admitted that the pledged goods were burnt in a fire while in the Bank's godown (the opinion records the fire as in April 1983 in the trial record, though earlier references show April 1993).

On these admissions the Court concluded that the defendant's plea — that the claim should be adjusted by reference to the value or insurance proceeds of the pledged goods — was "just and plausible" and not a sham or bogus defence. Given that, the refusal to grant leave to defend could not properly have been made; the application did raise a triable issue requiring investigation.

The Court analysed the maintainability of revision under Section 115, C.P.C. It set out the statutory conditions for invoking revisional jurisdiction (whether the order is a "case which has been decided", whether no appeal lies, whether the order was passed exercising no jurisdiction or with illegality/material irregularity, and whether allowing the order to stand would occasion failure of justice or irreparable injury). Applying these criteria to the admitted facts, the Court found:

The impugned order refusing leave to defend was a "case which has been decided" because it had the direct effect (by deeming provision in Order 37, Rule 2(2)) of causing the allegations in the plaint to be taken as admitted and thereby leading to the decree.
The impugned order was passed illegally and with material irregularity because the defendant could not recover the pledged goods or their price after they were burnt in the Bank's custody, and the plaintiff had realized insurance proceeds without adjustment or notice to the defendant; allowing the order to stand would produce a double advantage to the Bank (a money decree plus retention of insurance money), and would cause irreparable loss to the defendant.
On the question whether revision is maintainable despite the availability of an appeal from the decree, the Court reviewed conflicting authorities. It accepted the Division Bench judgment in Siri Krishan Bhardwaj (AIR 1977 Delhi 226) and the principle from S.S. Khanna's case (AIR 1964 SC 497) that the revisional jurisdiction can be exercised in respect of a part of a case which has been decided and that a revision may be competent irrespective of an appeal lying from the ultimate decree.
The Court further relied on authorities (Rangiah and the Privy Council decision) to hold that where a decree is consequential upon an earlier order, reversal of the earlier order will require the consequential decree to be set aside or modified.

Taking the factual admissions together with these legal principles, the Court concluded that the trial Court's refusal to grant leave to defend was illegal or materially irregular and that permitting the impugned order and consequent decree to stand would occasion failure of justice. Accordingly, revisional relief was warranted and maintainable.

Holding and Implications

Holding:

The revision petition is allowed; the impugned order refusing leave to defend and the consequential decree are set aside.

Immediate implications and directions:

The defendant is entitled to unconditional leave to defend the suit.
The matter is remitted to the trial Court: a copy of this order along with the trial Court record is to be sent to the trial Court with directions to proceed further in accordance with law after giving due notice to the counsel for parties.
The Court's decision is remedial as between the parties — it removes the consequence that the defendant's pleas be treated as admitted and restores the defendant's right to contest the suit. The opinion does not purport to establish a new binding precedent beyond application of existing authorities discussed in the judgment; the direct effect is the setting aside of the impugned composite order and permitting the defendant to defend the suit.

Petition allowed.

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M/S. Skylark Motors (India) And Others v. Lakshmi Commercial Bank Ltd. .

In this revision petition directed against a composite order rejecting application for leave to defend and decreeing the suit under 0.37 Code of Civil Procedure, two following questions arise for decision :

(a) Whether the defendant (i) who claimed set off/adjustment before filing the suit by making a request to sell goods pledged with the plaintiff — respondent; and (iii) who claimed adjustment of the amount of the value of the goods pledged, insured and kept under lock and key of the plaintiff-bank, which were subsequently burnt, is entitled to get leave to defend the suit.?

(b) Whether revision petition itself is not maintainable in view of the composite order of rejection of application for leave to defend, followed by passing of decree, as an appeal could be filed ?

2. Relevant facts are as under :

Laxmi Commercial Bank Ltd., plaintiff/respondent filed a suit for recovery of Rs. 17,000/- under Order 37, C. P.C According to the Bank's case, on the request of defendant/revision petitioner, cash credit facility to the limit of Rs. 12,000/- (bearing interest @ 9% above the RBI's rate of interest with a minimum of 17% per annum) was given, on execution of various documents, by the defendant/revision petitioner on 27th February, 1980. A sum of Rs. 17,000/- was found due against the petitioner on 30th November, 1991. As the defendant/petitioner failed to pay the same despite notice, a suit under Order 37, C.P C was filed by the plaintiff-respondent Bank.

3. The defendant filed an application for leave to defend the suit. It was contended that in February,— 1980 only a sum of Rs. 12,000.was due. Five cases containing goods worth Rs. 18,515/-were pledged in February, 1980. The defendant requested that these pledged goods should be sold by the Bank to clear the account. But the Bank failed to sell the goods. As such, the defendant/petitioner was not liable to pay any interest after February, 1980. At the time of filing of the application for leave to defend the value of the pledged goods would have been about Rs. 30,880/-. These pledged goods were allegedly destroyed by fire in April 1993. Accordingly, the defendant/petitioner claimed that he was entitled to get Rs. 30,880/- as the price of the aforesaid goods. The defendant/petitioner expressed his willingness to pay a sum of Rs. 12,000/- in case he got back their pledged goods or price thereof amounting to Rs. 30,880/-.

4. The respondent-Bank in their reply to the application for leave to defend admitted burning of the pledged goods. But they claimed that the Bank could not be blamed for it as they had taken all due care and fire was on account of acts beyond their power and control. Claim had been lodged with the Insurance Company. The Bank further claimed that a notice of demand demanding Rs. 15,860/- was sent in August, 1981 through Baxi Vikram Singh Sahni, Advocate. In reply to the said notice, petitioner/defendant admitted the claim of the Bank regarding a sum of Rs. 15,860/- and promised to pay the same in monthly instalments. The respondent-Bank also contended that the defendant was at liberty to have the pledged goods redeemed after paying the amount claimed by the plaintiff/respondent.

5. The learned trial Court in view of the admitted part of the plaintiff's case rejected the application for leave to defend and took the view that the defendants had failed to raise any triable issue which needed investigation and decreed the suit for recovery of Rupees 17,000/- with cost and pendente lite and future interest @ Rs. 17% per annum till realisation.

6. The present revision petition has been filed on the ground that admittedly the pledged goods were destroyed in fire in the godown of the plaintiff and the plaintiff-Bank had not only lodged a claim with the Insurance Company but had also realised a claim of Rs. 9,720/-. According to the petitioner, in April, 1993 the value of pledged goods was Rs. 30,880/-. The insurance claim was settled without any notice to the petitioner. Thus, instead of making good the loss, the Bank filed a suit under Order 37, C.P.C against the petitioner.

7. I have gone through the record of the learned trial Court. From reply to para 5 of the application for leave to defend, it is apparent that in February 1980, the defendant/petitioner desired that the pledged goods should be sold to clear the account. But they failed to do so. The Bank did not dispute this position. As such, it is apparent that they did not take any action. Further, from the reply to para 10 of the application, it is apparent that in April, 1983 godown did catch fire and the pledged goods were burnt.

8. In view of these admitted facts, the plea put forward by the defendant/petitioner appeared to be just and plausible and it cannot be said to be sham or bogus or practically a moon-shine to justify even imposition of any condition, leave aside the question of rejecting the application for leave to defend. It may be added that High Court of Madhya Pradesh took the view that where the valuable property belonging to the defendant was already in possession of the plaintiff Bank, it was not proper for the Court to ask for security (see 1986 Bank J 726 (Madh Pra)).

9. So far as the question of maintainability of revision is concerned, for invoking the provisions of Section 115, C.P C., one has to see firstly whether it is a “case which has been decided” which includes “any order made or any order deciding an issue, in the course of a suit or other proceedings” secondly whether it is such a decided case “in which no appeal lies” “either to the High Court or any court subordinate thereto” for the High Court shall not “vary or reverse any such decree or order” thirdly whether impugned order was either passed in exercise of “a jurisdiction not vested in it by law” or a consequence of failure “to exercise its jurisdiction illegally or with material irregularity”; and fourthly (a) if the impugned order had been made in favour of the petitioner “would have finally disposed of the suit or other proceeding” or (b) if allowed to stand “would occasion a failure of justice or cause irreparable injury to the party against whom it was made”.

10. In the light of conditions and requirements of Sections 115 and the aforementioned facts in earlier part of this judgment, the impugned order is “a case decided” against the petitioner as refusal to grant leave has already led to the passing of a decree. The impugned order has been passed in exercise of its jurisdiction illegally as well as with material irregularity for the petitioner could not get the pledged goods burnt in fire released even after payment. As such, claim of the plaintiff could only be adjusted against the amount of insurance of the burnt goods. If it is allowed to stand, it would occasion a failure of justice by providing double advantage to the plaintiff-Bank by giving money under the decree and simultaneously to leave the insurance money for the burnt pledged goods in their hands. Besides, it amounts to causing irreparable loss to the petitioner by settling the amount of insurance, in his absence.

11. Now the only important question about filing an appeal instead of present revision petition remains to be seen. Madhya Pradesh High Court and our own High Court in Pran Nath v. Sudarshan, 1980 Rajdhani LR (Note) 67 have taken the view that the revision would not be maintainable as the decree would stand. But it appears that a revision petition is maintainable in view of the judgment delivered by a Division Bench of our own High Court in Siri Krishan Bhardwaj…Petitioner v. Manohar Lal Gupta & Another…S, AIR 1977 Delhi 226. Doubts expressed in Pran Nath's case (supra) related to that particular case especially on account of possibility of inconsistent decrees. Otherwise Shri Krishan Bhardwaj (AIR 1977 Delhi 226) (supra) is a complete answer about the maintainability of revision petition against a composite order refusing to grant leave to defend and simultaneously passing a decree for the recovery of the amount claimed. As such he had earned the leave to defend. The petitioner was not required to make out a case as should warrant a sure success in the end. As it is apparent from what has been said above that the petitioner had a good defence to the claim on its merit the plaintiff/respondent was not entitled to the judgment sought and given in this case. As such, in my considered view, the defendant was and is entitled to get unconditional leave to defend the suit.

12. In para 11 of the judgment, following observations were made :

“.....there is an independent right with a litigant to file an appeal but there is no right as such to file a revision petition. There is, however, a right to bring an illegality or material irregularity, to the notice of the High Court which in its turn would exercise the power conferred upon it, as warranted by the circumstances of the case.”

13. Further relevant observations for the present purpose are being reproduced from para 15 as under:

“In the present case the order refusing to grant leave to appear and defend did not finally dispose of the suit and an appeal is competent from the decree that has been passed, but it must be kept in view that the effect of the impugned order is as given in Cl.(2) of Order 37, Rule 2, C.P.C namely that in case leave to defend and appear is not granted, the allegations in the plaint shall be deemed to be admitted. Therefore, an order like the present one has far-reaching consequences and would clearly fall within the ambit of the phrase “ any case which has been decided” for as far as the defendant is concerned, the controversy has really come to an end. If that is the correct proposition and if the expression “case” includes a part of a case, then, as was observed in S.S Khanna's “case” includes a part of a case, then, as was observed in S.S Khanna's case, AIR 1964 SC 497 by the Supreme Court, “there is no escape from the conclusion that the revisional jurisdiction of the High Court may be exercised irrespective of the question whether an appeal lies from the ultimate decree or order passed in a suit”. In my view the only interpretation that one can give is that in the present case irrespective of the decree that has been passed, a revision is competent.

When leave is refused to the defendant to appear and defend a suit under O. 37, C. P.C, the effect of the refusal of leave to appear and defend is that the allegations in the plaint by a deeming provision stand admitted. The allegations in the plaint being admitted, a decree has to follow. This means that the decree follows as a consequence of the earlier order of refusal to grant leave to appear and defend. In my opinion, when a subsequent order, even if it be decree, is a consequential order to an earlier order and the earlier order is set aside the latter order must also fall and directions to that have to be given.

In Rangiah v. Peddireddi, AIR 1957 Andh Pra 330, Subba Rao, C.J (as his Lordship then was) following the dicta of the Privy Council Shama purshad Ray Chowdry v. Hurro Purshad Ray Chowdhry (1863-66) 10 Moo Ind App 203 (PC) observed : “It is a well-settled principle of law that certain orders and decrees which are subordinate and dependent upon earlier orders and decrees could only remain in force so long as the orders or decrees on which they were dependent or not reversed or superseded.”

14. On the basis of these authorities, the Division Bench took the view :

“I, therefore, hold that if the impugned order is reversed or modified, the consequential order or decree will also have to be modified or directions will have to be given that the same is of no effect”.

15. In para 17 and 18, the following further observations were made :

“, . . The amendment to S. 115 C.P.C therefore, does not detract from the principles enunciated above. Indeed, it will be worth noticing that the explanation to the newly added sub-section(2) of S.115, C.P.C makes it clear that the expression “ any case which has been decided “ is to be given the meaning which their Lordships of the Supreme Court had given to the phrase S.S Khanna's case, AIR 1964 SC 497.

16. As the judgment of a Division Bench of this Court in S.K Bhardwaj case (AIR 1977 226) is very clear, I am of the considered opinion that the revision petition is maintainable.

17. Accordingly, I allow the revision petition and the impunged order is set aside. A copy of this order be sent to the learned trial Court along with the trial Court record with the direction to proceed further in accordance with law after giving due notice to the counsel for parties.

Petition allowed.

M/S. Skylark Motors (India) And Others v. Lakshmi Commercial Bank Ltd. .

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Defendant / Revision Petitioner

Plaintiff / Respondent Bank

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

M/S. Skylark Motors (India) And Others v. Lakshmi Commercial Bank Ltd. .

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