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Ramanlal Shantilal & Co. v. Chimanlal Damodardas
Structured Summary of the Opinion (Beaumont, C.J.; Rangnekar, J.)
Factual and Procedural Background
This appeal arises from an order made by a learned Chamber Judge on a chamber summons filed by the defendants in a summary suit seeking leave to defend. The Chamber Judge directed that if the defendants deposited Rs. 5,000 in Court by a specified date they would have leave to defend and that the suit would then be transferred to the list of commercial causes. If the defendants failed to deposit the sum within the time fixed, the chamber summons would be dismissed and the defendants would pay the costs of that summons. The respondents (plaintiffs) contested the appeal, and a preliminary objection was raised that no appeal lay under clause 15 of the Letters Patent. The Court considered that preliminary point and then heard the appeal on the merits.
Legal Issues Presented
- Whether an order made under the procedure for summary suits (specifically an order refusing or conditioning leave to defend under Order XXXVII, rule 2) is a "judgment" within the meaning of clause 15 of the Letters Patent and therefore appealable.
- How Order XXXVII, rule 2 (including its amended sub-rule (1) and sub-rule (2)) and the High Court's Original Side rules operate together in determining the legal effect of an order refusing leave to defend in a summary suit (i.e., whether such refusal effectively results in the plaint being treated as admitted and a decree following).
- Whether the learned Chamber Judge abused his discretion in conditioning leave to defend on the defendants depositing Rs. 5,000 in Court.
Arguments of the Parties
Appellants' Arguments (represented by Mr. Coltman)
- The court should read the impugned order in connection with Order XXXVII, rule 2 of the Civil Procedure Code to determine its true effect; when so read the order affects the parties' rights and thus is a judgment within clause 15 of the Letters Patent.
- By placing the matter in the context of Order XXXVII, rule 2 (as amended), an order refusing or conditioning leave to defend amounts in substance to adjudication of rights between the parties.
Respondents' Arguments (represented by Mr. Desai)
- The impugned order is a procedural interlocutory order regulating procedure and not a final judgment within clause 15 of the Letters Patent, so no appeal lies directly from it.
- Order XXXVII, rule 2, in its original form applied to negotiable instruments (bills, hundis, promissory notes), and sub-rule (2) has not been amended to correspond with the High Court's extension of sub-rule (1); therefore the present suit (to recover price of goods sold and delivered) does not necessarily attract the same result on refusal of leave to defend.
- Under the High Court rules applicable on the Original Side the wording and effect of sub-rule (2) may differ; accordingly, the refusal of leave in cases within the extended definition may not automatically lead to a decree without further procedure.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Miya Mahomed v. Zorabi | Establishes the view that any order affecting the merits by determining some right or liability is a judgment within clause 15 of the Letters Patent; interlocutory procedural orders that do not affect substantive rights are not. | The court relied on this decision to support the proposition that the substance of an order must be examined to decide whether it is appealable under clause 15; it informed the court's approach in overruling the preliminary objection. |
| Madanlal v. Kedarnath | In that case two appeals were presented: one from an interlocutory order granting conditional leave (deposit terms) and one from the final order; the Court held appeal lay against the final order and the interlocutory order could be challenged on that appeal. | The opinion describes Madanlal as demonstrating that challenging an interlocutory order through an appeal from a final decree is possible but inconvenient; the Court used it to illustrate practical difficulties and to justify permitting a direct appeal from the interlocutory order here. |
| Chattu Lal Misser v. The Marwari Commercial Bank, Ltd. | One of the Calcutta cases referred to in the argument; relates to the approach in Calcutta concerning appeals from orders in summary suits. | The Court noted these Calcutta cases but declined to rely on them because their rules of procedure differ and the Court doubted whether the Calcutta Court of Appeal's views were consistent; the Court therefore did not adopt them as authoritative for this decision. |
| Sukhlal Chundermull v. Eastern Bank, Ltd. | A Calcutta case referred to in the argument on appeals from interlocutory orders in summary suits. | The opinion observed uncertainty whether the Calcutta Court in Chattu Lal agreed with the view in Sukhlal Chundermull; the Court did not apply these decisions because they depend on Calcutta High Court rules not before this Court. |
| The Justices of the Peace for Calcutta v. The Oriental Gas Company | Used as a test (per the Calcutta High Court) for whether an order or decree is a "judgment" within clause 15 — focusing on whether the order determines a material right between the parties. | Rangnekar, J. cited this case (and the High Court's adoption in Miya Mahomed) as the proper test and applied it to conclude that an order refusing leave (or conditioning leave) determines a material right and hence amounts to a judgment within clause 15. |
Court's Reasoning and Analysis
The court first considered the preliminary objection that no appeal lies under clause 15 of the Letters Patent. Applying the established approach (as exemplified in Miya Mahomed v. Zorabi), the court emphasised that not every interlocutory order is a "judgment" for purposes of clause 15; the proper test is to look at the substance and whether the order adjudicates a material right between the parties.
The court then examined Order XXXVII, rule 2 of the Civil Procedure Code. It noted that sub-rule (1) had been amended to extend the scope of summary suits beyond negotiable instruments to include suits to recover debts or liquidated demands under contract. Sub-rule (2) provides that where the plaint and summons are in the prescribed form the defendant shall not appear and defend except with leave, and if leave is not obtained the allegations in the plaint shall be deemed admitted and the plaintiff entitled to a decree. The court recognised some textual uncertainty about whether the precise form of the decree in sub-rule (2) applies outside suits on negotiable instruments, but held that the operative effect of the rule — namely that refusal of leave or leave on terms impracticable for the defendant results in the plaint being taken as admitted and the plaintiff being entitled to an order — must be read into the amended context.
Counsel for the respondents argued that the impugned order was merely interlocutory and procedural and therefore non-appealable. The court considered the practical consequences of that position (citing Madanlal v. Kedarnath): if the defendant could only challenge the interlocutory order by way of an appeal from a final decree, the plaintiff might execute that decree before the defendant could obtain effective relief, making the remedy illusory. Looking at substance rather than form, the court concluded that an order refusing leave (or granting leave on conditions the defendant cannot meet) effectively determines the rights between the parties because it deprives the defendant of the ability to contest the merits.
Rangnekar, J., in a concurring analysis, reiterated the substance-over-form test. He emphasised that the effect of refusal (or conditioning) under Order XXXVII, rule 2 is to deprive the defendant of his right to defend, thereby practically determining the whole cause as to the defendant. He also observed that the High Court's Original Side Rules (notably rule 205(2)) produce a practically identical outcome where an application for leave to defend is refused — the plaintiff may put the suit down for hearing — reinforcing the conclusion that such an interlocutory order adjudicates a material right and is therefore a "judgment" within clause 15.
On the merits, the court considered whether the learned Chamber Judge had erred in ordering the defendants to deposit Rs. 5,000 as a condition of leave to defend. Beaumont, C.J. held that the learned Judge had a discretion to impose terms given the defendant's own case that he did not understand the indent he had signed; the Judge was entitled to require security before granting leave. The court found Rs. 5,000 not to be unreasonable in the circumstances and refused to interfere with the exercise of that discretion.
Holding and Implications
Holding: The Court held that the preliminary objection was overruled: the order conditioning leave to defend (by requiring a deposit of Rs. 5,000) is a "judgment" within the meaning of clause 15 of the Letters Patent and is appealable. On the merits, the appeal was dismissed and the order of the learned Chamber Judge was upheld.
Direct consequences for the parties:
- The appeal is dismissed with costs.
- Notice of motion for stay is dismissed with costs.
- Time to make the deposit (Rs. 5,000) was extended by fourteen days from the date of the judgment.
The opinion does not announce that it establishes a new rule of general application beyond the Court's application of existing tests and rules; it treats the result as an application of the substance-over-form principle to the operation of Order XXXVII and the High Court's Original Side Rules.
Other Case Information
Attorneys for appellants: Messrs Khandwala & Chotalal.
Attorneys for respondents: Messrs Natvarlal & Co.
Appeal dismissed.
Reported in the opinion: B.K.D
Beaumont, C.J:—
This is an appeal from an order made by the learned Chamber Judge on a summons taken out by the defendants in a summary suit for leave to defend, in which the learned Judge directed that the defendants on depositing in Court a sum of Rs. 5,000 by a date named therein should have leave to defend and that the suit should thereupon be transferred to the list of commercial causes, and in default of the defendants depositing the said sum of Rs. 5,000 within the time aforesaid the chamber summons should be dismissed, and in that event the defendants should pay the costs of the chamber summons.
The first point taken on appeal is a preliminary point that no appeal lies under clause 15 of the Letters Patent. We have recently considered that clause, and putting it shortly, the view which has always prevailed in this Court since the decision in Miya Mahomed v. Zorabi is that any order affecting the merits of the question between the parties by determining some right or liability is a judgment within clause 15 of the Letters Patent, but an order which merely regulates the procedure in a suit is not such a judgment. If one looks only to the form of the order under appeal, I think it may be said only to regulate the procedure in the suit; but Mr. Coltman, who appears for the appellants, says that we must read that order in connection with Order XXXVII, rule 2, of the Civil Procedure Code, and see what the actual effect of the order is. Order XXXVII, rule 2, sub-rule (1), before it was amended, provided in effect that all suits upon bills of exchange, hundis or promissory notes might be instituted as summary suits. That sub-rule has been amended by this Court under section 122 of the code by increasing the number of suits to which it applies, and for the present purpose it is enough to say that all suits in which the plaintiff seeks to recover a debt, or a liquidated demand under a contract express or implied are included in Order XXXVII, rule 2. Then sub-rule (2) of rule 2 of Order XXXVII provides that in any case in which the plaint and summons are in the forms referred to in sub-rule (1), the defendant shall not appear and defend the suit unless he obtains leave for defending the suit, and in default of his obtaining such leave or of his appearance and defence in pursuance thereof, the allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree. Then follows the form of the decree to which the plaintiff is to be entitled. Mr. Desai on behalf of the respondents in support of the preliminary objection points out that sub-rule (2) of rule 2 of Order XXXVII has not been amended to fit in with the amendment in sub-rule (1). That is so, but on the other hand, we must clearly read sub-rule (2) in the light of the amendment in sub-rule (1), and I think the provision in sub-rule (2) which provides that all the allegations in the plaint shall be deemed to be admitted by the defendant applies to all actions coming within the amended sub-rule (1). Whether the latter part of sub-rule (2) dealing with the decree to which the plaintiff is to be entitled applies to any action except one founded on a bill of exchange, hundi or promissory note may be doubtful. But, however that may be, it seems to me to be clear that the effect of Order XXXVII, rule 2, is that if the Judge refuses leave to defend, or gives leave to defend on terms which the defendant is not able to comply with, the result is that the plaint is taken to be admitted, and the plaintiff is entitled to an order on that basis. rule 206 of the rules of this High Court provides how the plaintiff is to obtain his order. He is to set the case down for hearing before the Chamber Judge, but having done that it seems to me that the making of the order will automatically follow in view of the provision of rule 2 of Order XXXVII, that all the allegations in the plaint are to be taken as admitted.
Mr. Desai, however, says that we must look at this matter as one of form and that the order refusing leave to defend is a mere interlocutory order regulating procedure, and that it is not the final order giving judgment for the plaintiff, and therefore no appeal lies. The point came before this Court in the case of Madanlal v. Kedarnath, where two appeals were presented, one from an interlocutory order giving leave to defend on the terms of the defendant making a deposit of Rs. 30,000 in Court, and the other from the final order passed in the suit, and this Court held that the appeal lay against the final order, and that on that appeal it was open to the defendant to challenge the interlocutory order; and in that view the Court held that it was not necessary to consider whether an appeal would lie from the interlocutory order. Now the result which must follow from the procedure adopted in that case seems to me to be somewhat unfortunate. If in a summary suit in which leave to defend is refused and in consequence decree follows as a matter of course in favour of the plaintiff and there is an appeal against the decree, it is obvious that the Court of Appeal cannot go into the merits of the suit, because the merits have not been tried, and all that the defendant can do in such a case is to challenge the interlocutory order. But in the meantime the plaintiff, having got his final decree, may have levied execution, and it may be too late for practical purposes for the defendant to challenge the interlocutory order. If in substance an appeal lies from an interlocutory order refusing leave to defend by the process of challenging the order on an appeal from the final order, it is obviously more convenient that there should be a right of appeal direct from the interlocutory order. I think we must look at the substance of this matter and consider what the real effect of the order is, having regard to the provisions of Order XXXVII, rule 2, and I think we ought to hold that the effect of the order is to determine the rights between the parties, since in substance it entitles the plaintiff to the order claimed in the plaint. That being so, I think such an order is technically a judgment within the meaning of clause 15 of the Letters Patent.
I have not dealt with the Calcutta cases cited. For one reason I doubt if the Court of Appeal in Chattu Lal Misser v. The Marwari Commercial Bank, Ltd. really agreed with the view taken by the Court of Appeal in Sukhlal Chundermull v. Eastern Bank, Ltd.,(2) a and for another reason that these cases turn apparently on the rules of the Calcutta High Court which are not before us. I think, therefore, as far as this Court is concerned, the appeal does lie, and we, therefore, overrule the preliminary objection.
Rangnekar, J.:—This is an appeal from an order made by Mr. Justice Wadia on a chamber summons taken out by the defendants in a summary suit for leave to defend, by which the learned Judge granted leave to the defendants to appear and to defend the suit on their depositing Rs. 5,000 in Court.
Mr. Desai on behalf of the respondents has raised a preliminary point that the order made by Mr. Justice Wadia is not a judgment within the meaning of clause 15 of the Letters Patent, and therefore no appeal lies from the order. We have recently considered the meaning of the word “judgment” in clause 15 of the Letters Patent, and we have held that every interlocutory order is not a “judgment” and is not appealable, but that the Court has to look to the substance of the matter and consider the importance of the order in each case. Applying that test I have no doubt in my mind that in this case the order made by Mr. Justice Wadia is a “judgment” within the meaning of the Letters Patent.
This is a summary suit, and the procedure laid down in Order XXXVII, rule 2, would apply to such a suit. The effect of sub-rule (2) of rule 2 of Order XXXVII is that if the defendant is refused leave, then he cannot appear and defend the suit, and he will be deemed to have admitted the allegations contained in the plaint and the plaintiff would be entitled to a decree as a matter of course. The result, therefore, of a refusal of an application for leave to defend is to deprive the defendant of the right to defend the suit, and as far as the defendant is concerned the order practically determines the whole cause. I think, therefore, an order made under Order XXXVII, rule 2, satisfies the test laid down by the Calcutta High Court in The Justices of the Peace for Calcutta v. The Oriental Gas Company, for determining whether an order or a decree is a “judgment” within the meaning of clause 15 of the Letters Patent, and followed by our High Court in Miya Mahomed v. Zorabi. If this is the true effect of an order made refusing leave, then it is obvious that a conditional order would stand on the same footing.
Mr. Desai says that Order XXXVII, rule 2, applies to summary suits upon bills of exchange, hundis, etc., or, speaking generally, negotiable instruments coming under the Negotiable Instruments Act, and that the present case does not come in terms within Order XXXVII, rule 2, but is governed by the rules made by the High Court. Now the scope of Order XXXVII, rule 2, has been extended by a rule made by the High Court which is printed at page 1319 of the 9th Edition of Mulla's Civil Procedure Code. By this rule many suits which are not suits upon negotiable instruments can be filed on the Original Side of the High Court as summary suits under Order XXXVII of the Civil Procedure Code. The present suit is to recover price of goods sold and delivered, and Mr. Desai's point is that although sub-rule (1) of rule 2 of Order XXXVII was altered by the High Court, sub-rule (2) of rule 2 remains unaffected, and therefore in a case coming under the extended definition of a summary suit the result is not the same, that is to say, on the refusal of leave to defend, the allegations in the plaint cannot be deemed to be admitted, and the plaintiff will not be entitled to a decree as a matter of course. Speaking for myself, the argument is not without force, and the fact remains that when sub-rule (1) was extended so as to include within Order XXXVII suits of other description, the effect of the alteration on sub-rule (2) seems to have been lost sight of. But having regard to the rules of the High Court on the Original Side, the distinction emphasised by Mr. Desai is without a difference. For, under the Original Side Rules the result of a refusal of leave to defend is practically the same as under sub-rule (2) of rule 2 of Order XXXVII. I need only refer to rule 205(2) under which if leave to defend is refused, the plaintiff is at liberty to put the suit down for hearing forthwith before the sitting Judge in Chambers. So that whether the case is one under the extended definition of a summary suit under the High Court Rules or under the provisions of Order XXXVII, rule 2, as it stands, the result, in my opinion, of a refusal of leave to defend is practically the same, namely,—the defendant cannot then appear and defend the suit. It seems to me, therefore, that a material right of the defendant affecting the merits of the case is adjudicated upon when his application for leave is refused.
Mr. Desai referred to the policy of the law underlying the special procedure in summary suits. I quite agree, but our duty is to construe the rules as they stand at present, and I can see no answer to the argument that the order refusing leave to defend determines a valuable right of a defendant in summary suits. In this view it is not necessary to refer to the Calcutta cases to which our attention has been drawn, and for this reason that I am not quite clear as regards the rules of procedure applicable to summary suits in that Court. It seems, however, the question came up before Sir Amberson Marten in Madanlal v. Kedarnath, and although the Calcutta cases were referred to, the learned Chief Justice left the question as to whether an appeal lay from an order refusing leave to defend in a summary suit open. I, therefore, agree that the objection must be overruled and the appeal must be heard on the merits.
The appeal was then heard on the merits.
Beaumont, C.J:—I do not think we can interfere with the discretion of the learned Judge in the order that he made directing the defendant to furnish security to the extent of Rs. 5,000 as a condition precedent to the granting of leave to defend the suit. The defendant's case was that he did not understand the indent which he signed, and on this the Judge was quite entitled to say that the defendant should be put on terms before leave was granted to him. I do not think Rs. 5,000 was an unreasonable amount. The appeal must, therefore, be dismissed with costs. Notice of motion for stay is also dismissed with costs. Time to bring in the deposit is extended by fourteen days from to-day.
Rangnekar, J.:—I agree.
Attorneys for appellants: Messrs Khandwala & Chotalal.
Attorneys for respondents: Messrs Natvarlal & Co.
Appeal dismissed.
B.K.D
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