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United Industries v. Dalwadi And Co.

Gujarat High Court

Nov 15, 1967

Judgment

Subsequent
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Structured Summary of the Opinion

Factual and Procedural Background

Plaintiffs instituted a summary suit in the City Civil Court, Ahmedabad, seeking recovery of Rs. 6,377.66 (balance of price) for bricks sold and delivered, together with interest at nine percent per annum. The plaintiffs maintained an account in the name of the first defendant reflecting debits for bricks supplied and credits for payments; at the date of suit a balance of approximately Rs. 6,377 was claimed due. Defendants Nos. 2 to 5 were admittedly partners of defendant No. 1 at the relevant time, though defendants alleged in affidavits in reply that the first defendant had been dissolved prior to institution of the suit.

After filing appearances, plaintiffs took out a summons for judgment under the summary procedure. The defendants filed affidavits in reply (one by defendants Nos. 2, 3 & 4; another by defendant No. 5). The learned Judge hearing the summons, after considering the plaint and affidavits, made an order granting conditional leave to defend on the condition that the defendants deposit Rs. 4,000 on or before 25 March 1965. Defendants Nos. 1 to 4 challenged that order by preferring the present revision application to this Court.

Procedural context also involved questions about the validity and scope of High Court rule-making power under Section 122 of the Civil Procedure Code and the propriety of the City Civil Court judge's conditional order.

Legal Issues Presented

Whether Section 122 of the Civil Procedure Code, insofar as it empowers the High Court to annul, alter or add to rules in the First Schedule, is inconsistent with the proviso to Article 227 of the Constitution and therefore unconstitutional under Article 372.
Whether an order by a court granting conditional leave to defend a summary suit must disclose the reasons on which it is based (i.e., whether the absence of reasons vitiates the order).
Whether the learned Judge's exercise of discretion in granting conditional leave (subject to deposit of Rs. 4,000) was open to interference in revision under Section 115 of the Civil Procedure Code — in other words, whether the merits warranted revisional interference.

Arguments of the Parties

Petitioners / Defendants (Nos. 1 to 4) — principal arguments

Contended that the impugned part of Section 122 (empowering High Courts to make rules annulling, altering or adding to rules in the First Schedule) is inconsistent with the proviso to Article 227 and therefore ultra vires (relying on a prior decision by Raju J.).
Argued that the order granting conditional leave to defend was invalid because it did not disclose the reasons on which the learned Judge based the order; since it was a judicial exercise of discretion, the order should state reasons so that revisional scrutiny could test the basis of the discretion.
Challenged the merits of the learned Judge's conclusion and contended that the revisional Court should interfere with the conditional leave granted (i.e., that there was a case for interference under Section 115 of the Civil P.C.).

Plaintiffs — position reflected in the record

Plaintiffs asserted that diverse quantities of bricks were sold and delivered between Samvat years 2017 to 2019, that an account in the name of the first defendant showed a balance due of Rs. 6,377, and that the defendants failed to pay that amount.
Plaintiffs proceeded by summary procedure and sought judgment for the claimed amount; they opposed defendants' affidavits in reply and obtained conditional leave to defend subject to deposit as security.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Civil Revision Application No. 1116 of 1963 (Guj) — decision by Raju J. (dated 23 Aug 1967)	Held that Section 122 C.P.C., insofar as it empowered the High Court to annul, alter or add to rules in the First Schedule, was inconsistent with the proviso to Article 227 and therefore unconstitutional under Article 372.	The Court reviewed this decision and expressed disagreement with it, noting it did not appear to have had the Division Bench decision (Civil Revn. Appln. No. 1089 of 1966) pointed out to it; the present Court rejected Raju J.'s conclusion that Section 122 was ultra vires.
Civil Revision Application No. 1089 of 1966 — Division Bench (dated 2 Feb 1967) = AIR 1968 Guj 223	Held that the proviso to Article 227 applies only to rules made under Article 227 Clause (2) and does not limit the rule-making power under Section 122 of the Code; therefore there is no inconsistency between Article 227 proviso and Section 122.	The Court relied on and followed this Division Bench decision to conclude that Section 122 remains in force and is not unconstitutional; this decision was treated as directly conflicting with Raju J.'s prior view and was preferred.
Civil Revision Application No. 1196 of 1966 — Vijay Kumar K. Shah v. Firm of Pari Nareshchandra Jayantilal = AIR 1968 Guj 247 (Division Bench, 8 Feb 1967)	Held that an order granting or refusing leave to defend under the summary procedure need not contain reasons and the absence of reasons does not vitiate the order; no provision in the Code or Rules requires disclosure of reasons for such orders.	The Court relied on this Division Bench decision to reject the contention that the conditional leave order was invalid for lack of stated reasons, and held that such orders need not be accompanied by reasons under the Code of Civil Procedure.
Bhagat Raja v. Union of India & Others, AIR 1967 SC 1606 (Supreme Court)	Held that the Central Government acting as a tribunal in a specified statutory context ought to give reasons when rejecting a revision application; the decision was concerned with a tribunal (Central Government) and not courts of law.	The Court considered this Supreme Court decision but held it did not overrule or apply to the Division Bench's view in Civil Revn. Appln. No. 1196 of 1966. The Court distinguished Bhagat Raja on the ground that it dealt with tribunals/quasi-judicial executive action, not orders of courts under the Code of Civil Procedure.

Court's Reasoning and Analysis

The Court conducted a step-by-step legal analysis addressing each principal issue raised:

On the constitutional challenge to Section 122 C.P.C.: The Court began by explaining Article 372's operation (laws in force prior to the Constitution continue unless inconsistent). It examined the earlier view of Raju J. (Civil Revn. Appln. No. 1116/1963) that Section 122's wide rule-making power was inconsistent with the proviso to Article 227 and therefore unconstitutional.
The Court contrasted Raju J.'s view with the Division Bench decision in Civil Revn. Appln. No. 1089 of 1966 (AIR 1968 Guj 223), which held that the proviso to Article 227 applies only to rules made under Article 227 Clause (2) and does not act as a limitation on rule-making power exercised under Section 122 of the Code. The Division Bench reasoned that Article 227 Clause (2) and Section 122 are two distinct sources of rule-making power and the proviso cannot be imported to restrict Section 122.
Applying that Division Bench authority, the Court concluded there was no inconsistency between Section 122 and the proviso to Article 227, and therefore Article 372 did not render any part of Section 122 inoperative. The Court expressly disagreed with Raju J.'s earlier conclusion and held that Section 122 in its entirety continues in force.
On the requirement to state reasons for an order granting/denying leave to defend: The Court relied on the Division Bench decision in Civil Revn. Appln. No. 1196 of 1966 (Vijay Kumar K. Shah), which held that neither the Code nor the applicable rules require that an order under the summary procedure must disclose reasons or be accompanied by a judgment. The Court considered the Supreme Court decision in Bhagat Raja (AIR 1967 SC 1606) but concluded that decision concerned executive tribunals and did not establish a rule requiring courts to give reasons for orders of the kind before the City Civil Court judge. Therefore Bhagat Raja did not overrule or disturb the Division Bench view.
On the merits and revisional interference: The Court noted the learned Judge, on a consideration of the plaint and affidavits, was not satisfied that a bona fide triable issue had been raised and harbored doubt as to the genuineness of the defence. Consequently, the Judge granted conditional leave to defend subject to deposit of Rs. 4,000. The Court observed that whether that view was right or wrong was a matter not ordinarily open to revisional interference under Section 115 C.P.C. The Court itself, on consideration of the materials, was satisfied that the learned Judge was right to grant conditional leave on deposit and found no ground to interfere.

Holding and Implications

Holding: The revision application fails and the rule is discharged with costs. The Court upheld the City Civil Court's order granting conditional leave to defend subject to a deposit of Rs. 4,000, and extended the time for making the deposit up to 14 December 1967.

Implications (direct consequences articulated in the opinion):

The Court held that Section 122 of the Civil Procedure Code remains in force in its entirety and is not unconstitutional or ultra vires by reason of the proviso to Article 227 (thus High Courts retain the statutory rule-making power under Section 122).
The Court reaffirmed the Division Bench holding that an order granting or refusing leave to defend a summary suit need not be accompanied by reasons, since neither the Code nor the relevant rules require disclosure of reasons for such orders; a Supreme Court decision concerning tribunals (Bhagat Raja) was distinguished and held inapplicable to orders of courts under the Code.
The Court indicated that revisional interference under Section 115 is not the appropriate forum to re-evaluate the learned trial Judge's discretionary assessment of whether a bona fide triable issue was raised; absent established grounds, the conditional leave decision was to be left intact.

The direct effect on the parties: the conditional leave to defend stands; defendants' revision fails; defendants were permitted additional time to make the deposit (until 14 December 1967). The opinion applied and followed earlier Division Bench authorities on the two principal legal questions considered.

Show all summary ...

1. This revision application is directed against an order passed by the City Civil Court, Ahmedabad, granting leave to defend the suit on condition of depositing Rs. 4000 on or before 25th March, 1965. The suit was filed by the plaintiffs against the defendants to recover a sum of Rs. 6,377.66 p, being the balance of the price in respect of bricks sold and delivered by the plaintiffs to the defendants together with interest at nine per cent per annum. Defendants Nos. 2 to 5 were admittedly partners of the first defendant at the relevant time when the bricks are alleged to have been sold and delivered by the plaintiffs but it was the case of the defendants in the affidavits in reply that the first defendant was dissolved prior to the filing of the suit. The plaintiffs alleged that diverse quantities of bricks were sold and delivered by the plaintiffs to the defendants from time to time between Samvat years 2017 to 2019 and in respect of the said transactions, an account was maintained in the name of the first defendant in the books of account of the plaintiffs. The price in respect of the bricks supplied by the plaintiffs to the defendants was debited in this account and the various amounts paid by the defendants to the plaintiffs in part payment of the price of the bricks were credited in this account. According to the plaintiffs, a sum of Rs. 6,377 was due and payable by the defendants to the plaintiffs at the foot of this account at the date of the filing of the suit and since the defendants failed to pay the said amount, the suit was filed by the plaintiffs to recover the same from the defendants. The plaintiffs filed the suit as a summary suit and after the defendants filed their respective appearances, the plaintiffs took out a summons for judgment for a decree for the amount claimed in the suit. The defendants resisted the summons for judgment by filing two affidavits in reply, one by defendants Nos. 2, 3 & 4 and the other by defendant No. 5. The learned Judge hearing the summons for judgment, after taking into account the plaint and the affidavits, made an order granting conditional leave to the defendants to defend the suit on their depositing a sum of Rs. 4000 on or before 25th March 1965. Defendants Nos. 1 to 4 thereupon preferred the present revision application in this Court challenging the validity of the said order.

2. The revision application originally came up for hearing before A. D. Desai J. on 29th September 1967. Before that date a decision was given by Raju J. on 23rd August 1967 in Civil Revn. Appln. No. 1116 of 1963 (Guj) holding that Section 122 of the Civil Procedure Code in so far as it empowered the High Court by rules to annul, alter or add to all or any of the rules in the First Schedule was inconsistent with the Proviso to Article 227 and was, therefore, unconstitutional and ultra vires Article 372 of the Constitution. If this decision was correct, rules 142 to 148A of the Ahmedabad City Civil Court Rules would be ultra vires since they were made under Section 122 and were admittedly inconsistent with the amended Rules of Order 37 though to a limited extent and it would not be competent to the learned Judge of the City Civil Court to impose a condition while granting leave to the defendants to defend the suit. A. D. Desai J., however, found difficulty in agreeing with the view taken in this decision particularly since, in his opinion, this decision was directly in conflict with a decision given by a Division Bench of this Court on 2nd February 1967 in Civil Revn. Appln. No. 1089 of 1966: AIR 1963 Guj 223). He, therefore, referred the revision application to a Division Bench and that is how the revision application comes before us. It may be pointed out that it does not appear from the record of Civil Revn. Appln. No. 1116 of 1963 (Guj), that notice to the Attorney General was issued by Raju J. before declaring a part of Section 122 of the Civil Procedure Code unconstitutional and ultra vires. But since the question of vires of a part of Section 122 of the Civil Procedure Code was involved in this revision application, A. D. Desai J. while referring the revision application to a Division Bench, ordered notice to issue to the Attorney General. No one, however, appears on behalf of the Attorney General.

3. The first question which arises for consideration is whether Section 122 of the Civil Procedure Code in so far as it empowers the High Court by rules to annul, alter or add to all or any of the rules in the First Schedule is inconsistent with the Proviso to Article 227 and is, therefore, unconstitutional by reason of Article 372. Now Article 372 provides that notwithstanding the repeal by the Constitution of the enactments referred to in Article 395 but subject to the other provisions of the Constitution, all the law in force in the territory of India immediately before the commencement of the Constitution shall continue in force therein until altered or repealed or amended by a competent Legislature or other competent authority. It can, therefore, hardly be disputed that if any part of Section 122 of the Civil Procedure Code is inconsistent with any provision of the Constitution, it would cease to be in force by virtue of Article 372. The view taken by Raju J. in Civil Revn. Appln. No. 1116 of 1963 (Guj) was --and that is the view relied upon by Mr. S.K. Jhaveri, learned advocate appearing on behalf of defendants Nos. 1 to 4 in support of the revision application -- that the impugned part of Section 122 empowering the High Court to make rules annulling, altering or adding to all or any of the rules in the First Schedule was inconsistent with the Proviso to Article 227. The learned Judge observed;

"Section 122, C.P.C. gives powers to the High Court to make rules. This power is very wide. It gives powers to the High Court to make rules, which have the effect even to amend the Civil Procedure Code, First Schedule of the C.P.Code being part of the Civil Procedure Code. But the power to make rules inconsistent with any law is not given by Article 227 of the Constitution. In fact, Article 227 of the Constitution takes away the power to make rules inconsistent with any provision of any law. In other words, Section 122, C.P.Code, gives powers to the High Court, which are far wider than those given by Article 227 of the Constitution, To that extent, there is an inconsistency as contemplated in Article 372 of the Constitution."

This view taken by the learned Judge is directly in conflict with what a Division Bench of this Court said in Civil Revn. Appln. No. 1089 of 1966, D/- 2-2-1967 = (AIR 1968 Guj 223). That revision application was also directed against a judgment of Raju J. where the learned Judge had held Rules 142 to 148A ultra vires inter alia on the ground that the proviso to Article 227 prevented the High Court from making any rules under Section 122 inconsistent with any law and the High Court had, therefore, no power to make Rules 142 to 148A which were inconsistent with the amended Rules of Order 37, Overruling this view, a Division Bench of this Court to which I was a party pointed out:

"The proviso to Article 227 declares that any rules made by the High Court in exercise of its rule-making power under Article 227 Clause (2) shall not be inconsistent with the provisions of any law for the time being in force. This limitation imposed by the proviso to Article 227 which requires that the rules must not be inconsistent with the provisions of any law for the time being in force is, therefore, by the clear and specific language of the proviso applicable only where rules are made by the High Court in exercise of its rule-making power under Article 227, Clause (2) and has no application where rules are made by the High Court in exercise of rule-making power under some other statutory provision. The proviso to Article 227 also does not operate as a limitation on the exercise of the rule-making power belonging to the High Court under Section 122 of the Code. Article 227 Clause (2) and Section 122 of the Code are two distinct and different provisions conferring rule-making power on the High Court and the limitation imposed by the proviso to Article 227 is applicable only to the exercise of the rule-making power conferred under Article 227 Clause (2) and cannot be imported so as to restrict the scope and ambit of the rule-making power conferred under Section 122 of the Code."

We held in so many terms that there was no clash or conflict between the proviso to Article 227 and Section 122 and if there is no inconsistency between the Proviso to Article 227 and Section 122, it is difficult to see how Article 372 could be invoked for the purpose of coming to the conclusion that Section 122 ceased to be in force on the commencement of the Constitution. The applicability of Article 372 postulates that there is inconsistency between the Proviso to Article 227 and Section 122 and though Raju J. held in the earlier case that there was such inconsistency, a Division Bench of this Court pointed out while disposing of the revision application that there was no, such inconsistency and in view of that decision of the Division Bench, there was no scope at all for the applicability of Article 372. It does not appear from the judgment of Raju J. in Civil Revn. Appln. No. 1116 of 1963 (Guj) that this decision of the Division Bench was pointed out to him. We have no doubt that if this decision had been pointed out to him, he would not have taken the view which he has taken. With the greatest respect to the learned Judge, we express our dis-agreement with the view taken by him and hold that Section 122 in its entirety continues in force after the commencement of the Constitution and no part of it is unconstitutional or ultra vires.

4. That takes us to the second contention urged by Mr. S. K. Jhaveri on behalf of the petitioners. He contended that the order granting conditional leave to defend the suit was bad inasmuch as it did not disclose reasons on which it was based. The argument was that since the order was a judicial order made by the learned Judge in the exercise of his judicial discretion, it was necessary that it should set out the reasons so that the revisional Court could examine the validity of the reasons which prevailed with the learned Judge in exercising his discretion in the manner he did. But this argument stands concluded by a decision given by a Division Bench of this Court on 8th February 1967 in Civil Revn. Appln. No. 1196 of 1966, Vijay Kumar K. Shah v. Firm of Pari Nareshchandra Jayantilal, (AIR 1968 Guj 247). The Division Bench pointed out in this case that it is not necessary that an order granting or refusing leave to defend the suit filed under the summary procedure must contain reasons in support of the order and the absence of reasons does not vitiate the order. Mr. S. K. Jhaveri, however, pointed out that this decision can no longer be regarded as good law in view of a recent decision of the Supreme, Court in Bhagat Raja v. Union Of India & Others, AIR 1967 SC 1606. We have carefully gone through this decision of the Supreme Court but we do not think there is anything in it which overrules what the Division Bench said in Civil Revn. Appln. No. 1196 of 1966= (AIR 1968 Guj 247). The decision of the Supreme Court was concerned with a case where the Central Government was functioning as a tribunal hearing a revision application against the order of the State Government rejecting an application for a mining lease under Section 19 of the Mines and Minerals (Regulation and Development) Act, 1957 read with the amended rule 55 of the Mineral Concession Rules, 1960 and the question was whether the Central Govt. while making an order rejecting the revision application was bound to give reasons in support of the order. The Supreme Court held that the Central Government ought to have given reasons and since no reasons were given, the order was liable to be quashed and set aside. The decision of the Supreme Court was expressly and in so many terms confined only to tribunals exercising judicial or quasi-judicial powers and reference to Courts of law was deliberately avoided while stating or discussing the principles on which the decision was based. We cannot, therefore, read this decision of the Supreme Court as laying down that wherever an order is made by a Court of law it must necessarily be accompanied by a judgment giving reasons in support of it. The question whether an order made by a Court of law is required to be supported by a judgment setting out reasons would be governed by the Code of Civil Procedure. So far as an order granting or refusing leave to defend in a summary suit is concerned, there is no provision in the Code of Civil Procedure which requires that such an order must contain reasons for the making of the order. As pointed out by the Division Bench of this Court in Civil Revn. Appln. No. 1196 of 1966= (AIR 1968, Guj. 247);

"We do not find anything in Rules 142 to 148A which requires that the order must disclose the reasons in support of it or that it must be accompanied by a judgment giving the grounds in support of the order. There is also no provision in the body of the Code or in the rules in the First Schedule either as originally enacted or as amended by the High Court from time to time which requires that an order granting or refusing leave to defend a suit filed under the summary procedure must set out the reasons for the making of the order."

We are, therefore, unable to accede to the contention of Mr. S. K. Jhaveri that the decision of this (Court in Civil Revn. Appln. No. 1196 of 1966= ( AIR 1968 Guj 247) holding that an order granting or refusing leave to defend a suit filed under the summary procedure does not require to be accompanied by a judgment giving reasons in support of the order is overruled by the decision of the Supreme Court in Bhagat Raja's case, AIR 1967 SC 1606 (supra). The validity of the order impugned in the present revision application cannot, therefore, be challenged on this ground.

5. The last contention urged by Mr. S. K. Jhaveri on behalf of defendants Nos. 1 to 4 related to the merits of the order passed by the learned Judge. But so far as the merits are concerned we do not think there is any case made out on behalf of defendants Nos. 1 to 4 for interference under Section 115 of the Civil P. C. It appears clearly that the learned Judge of the City Civil Court on a consideration of the plaint and the affidavits, was not satisfied that a bona fide triable issue was raised by the affidavits in reply and entertained a doubt as to the genuineness of the defence and he, therefore, did not grant unconditional leave to defend the suit but granted leave to defend subject to the condition of depositing Rs. 4000 as security towards the plaintiffs' claim. This view taken by the learned Judge on a consideration of the plaint and affidavits may be correct or incorrect. It may even be wholly wrong. That is not a matter into which this Court acting in exercise of its revisional jurisdiction can enter, though we may point out that on a consideration of the plaint and the affidavits we are satisfied that the learned Judge was right in granting to the defendants leave to defend the suit on condition of depositing Rs. 4000. This last contention urged on behalf of defendants Nos. 1 to 4 must, therefore, be rejected.

6. These were the only grounds urged in support of the revision application and since there is no substance in them, the revision application fails and the rule is discharged with costs. On an application being made by Mr. S. K. Jhaveri on behalf of defendants Nos. 1 to 4, we extend the time for making the deposit upto 14th December, 1967.