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Judgment Summary — Rajiv Sahai Endlaw, J.

Proceedings referenced in opinion: CM(M) 1269/2017 & CM No. 40406/2017 (for stay); CMs. No. 40407/2017 & 40408/2017 (for exemption).
Date of impugned order: 15th July, 2017 (in CS No. 15562/2016 (Old No. 230/2016), Court of Additional District Judge (ADJ)-04 (South West), Dwarka Courts, New Delhi).
Statutory provisions engaged: Article 227 of the Constitution of India; Order XXXVII of the Code of Civil Procedure, 1908; Section 115 CPC (discussed as the ordinary remedy).

Factual and Procedural Background

The petitioner (plaintiff in the original suit) filed a civil suit under Order XXXVII CPC seeking recovery of Rs. 10 lakhs. The suit was based on five cheques (Rs. 2 lakhs each) and an "Indemnity Bond‑Cum‑Service Undertaking" executed by the respondent/defendant, who was alleged to have been employed by the petitioner as a Transition Captain and sent for training (Type Rating Training on Bombardier DHC‑8 Series 400) at the petitioner's expense. The plaint alleged that the respondent's performance was assessed below standard by a Pilot Review Board, that his services were terminated on 21 June 2012, and that as a consequence the respondent became liable to reimburse training costs; the cheques presented for encashment were dishonoured.

The learned Additional District Judge (ADJ) granted unconditional leave to the respondent/defendant to defend the suit. The petitioner challenged that grant by filing the present petition under Article 227, contending (first) that conditional leave should have been granted and (later at the hearing) that leave should have been dismissed. The High Court examined whether Article 227 was the appropriate remedy (observing that a revision under Section 115 CPC is the ordinary remedy) but proceeded to consider the matter on its merits under the parameters of Section 115 CPC. After hearing, the petition under Article 227 was dismissed and no costs were awarded.

Legal Issues Presented

  1. Whether a petition under Article 227 of the Constitution is maintainable to challenge an order granting unconditional leave to defend in a summary suit, or whether the proper remedy is a Revision Petition under Section 115 CPC.
  2. Whether the learned ADJ erred in granting unconditional leave to defend (i.e., whether leave to defend should have been dismissed or at least made conditional).
  3. Whether a suit for recovery based on an Indemnity Bond‑Cum‑Service Undertaking (and associated cheques) is maintainable under the summary procedure of Order XXXVII CPC without proof of actual loss (in particular on the pleadings and documents before the Court in this case).

Arguments of the Parties

Petitioner's (Plaintiff's) Arguments

  • The petitioner initially contended that the leave to defend application should have been dismissed; alternatively, that conditional leave to defend should have been granted.
  • The petitioner's counsel relied on certain earlier judgments (not brought to court during argument) and asserted that similar petitions had been filed previously; counsel asked the Court to record that the learned ADJ had returned findings in favour of the petitioner/plaintiff.
  • The petitioner advanced the case on the basis of the Indemnity Bond‑Cum‑Service Undertaking and the cheques and stated that the dismissal of leave to defend was warranted on the materials available.

The opinion does not contain a detailed account of any specific arguments advanced on behalf of the respondent/defendant.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Mechelec Engineers & Manufacturers v. Basic Equipment Corporation (1976) 4 SCC 687 The Supreme Court held that a High Court should not lightly interfere with discretionary orders; interference is warranted only where the defence is patently dishonest or so unreasonable that it could not reasonably be expected to succeed. The Court recorded the principle and noted that the petitioner relied on it, but observed that subsequent authority (IDBI Trusteeship Services Ltd. v. Hubtown Ltd.) made reliance on Mechelec misconceived in the present context.
Siri Krishan Bhardwaj v. Manohar Lal Gupta & Another (AIR 1977 Delhi 226 (DB)) Referenced as part of authorities concerning interference with discretionary orders (in the context of leave to defend). Not specifically analyzed in detail; cited among authorities on limits to interference with discretionary orders.
Sadhana Lodh v. National Insurance Co. Ltd. (2003) 3 SCC 524 Where a remedy under the Code of Civil Procedure is available, a petition under Article 227 does not lie. The Court relied on this principle to observe that a revision under Section 115 CPC is the ordinary remedy and questioned maintainability of Article 227 for this grievance.
State Bank of Saurashtra v. Ashit Shipping Services (P) Ltd. (2002) 4 SCC 736 In cases of indemnities, loss must be proved; Order XXXVII does not provide for claims based on indemnity bonds because a loss must be proved and summary procedure is inappropriate. The Court applied this principle to hold that the plaintiff's claim under the Indemnity Bond could not properly be pursued under Order XXXVII without proof of loss and thus summary procedure was inappropriate on the pleadings before it.
Ashwani Bahl & Ors. v. Air India Ltd. Where parties had genuinely pre‑estimated losses before entering an agreement, the party in breach may be liable for such pre‑estimated damages (relying on Saw Pipes). The Court observed this authority but distinguished it: it was a full trial/arbitral setting where evidence supported a genuine pre‑estimate of loss, unlike the present summary suit scenario.
Mahanagar Telephone Nigam Ltd. v. Haryana Telecom Ltd. (2010 SCC OnLine Del 1220) Cited as a case relating to objections to an arbitral award. The Court noted it was an arbitral award objection case and thus governed by different principles (Section 34 of the Arbitration Act) and could not be analogised to a civil suit under Order XXXVII CPC.
Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 Supports enforcement of genuine pre‑estimate of damages where parties had arrived at such pre‑estimate and evidence supports it. The Court referred to Saw Pipes as authority validating cases where pre‑estimated loss was proved on evidence, distinguishing them from the present summary procedure case.
Union of India v. Raman Iron Foundry (1974) 2 SCC 231 Referenced as the otherwise settled position from which Saw Pipes departed on its facts. Used to explain that Saw Pipes represented a fact‑driven departure and cannot be taken to allow summary proceedings in every indemnity/contract damages case.
IDBI Trusteeship Services Limited v. Hubtown Limited (2017) 1 SCC 568 Subsequent authority which, according to the Court, makes reliance on Mechelec in the present context misconceived. The Court relied on this later decision to reject the petitioner's submission that Mechelec supported his case.
Smita Conductors Ltd. v. Prabhudas Liladhar Pvt. Ltd. Described as containing an "illuminating discussion" on the subject of summary proceedings and related issues. The Court cited it as useful authority supporting its analysis that the present suit was not maintainable under Order XXXVII on the pleadings and agreement before it.
Varun Gauba v. Punjab & Sind Bank & Ors. Referenced in relation to the topic under discussion (no specific rule extracted in the opinion). Used as an additional reference point; the opinion does not elaborate a distinct application beyond citation.

Court's Reasoning and Analysis

The Court's analysis followed these principal steps, based strictly on the materials and reasoning appearing in the opinion:

  1. Maintainability: The Court first questioned the propriety of invoking Article 227 to challenge the ADJ's discretionary order granting leave to defend, observing that a remedy under the CPC (specifically a Revision Petition under Section 115 CPC) is the normal course. The Court cited Sadhana Lodh to support the proposition that Article 227 does not lie where an adequate remedy under the CPC exists.
  2. Despite the maintainability concern, the Court elected to deal with the petition on its merits "on the parameters of Section 115 CPC" after hearing counsel.
  3. Pleadings and evidence: The Court noted procedural shortcomings in the petitioner’s presentation — initially no copy of the plaint was annexed; when produced it disclosed that the suit was founded on the Indemnity Bond‑Cum‑Service Undertaking and the cheques. The plaint alleged that the respondent had been assessed below standard by a Pilot Review Board and terminated, but the petitioner had not produced any document identifying the Pilot Review Board, its constitution, its report, or reasons for the assessment.
  4. Nature of claim vs. summary procedure: The Court emphasised the legal principle (from State Bank of Saurashtra) that claims based on indemnity require proof of actual loss, and that Order XXXVII (summary decree procedure) is not appropriate for claims that require proof of loss. The Court concluded that the present suit was essentially for recovery of losses under an indemnity and therefore did not fall within the proper ambit of Order XXXVII on the pleadings before it.
  5. Cheques as security tied to agreement: The Court observed that the cheques were delivered as security in terms of the Indemnity Bond and thus were not purely standalone negotiable-instrument cases (i.e., not a typical straightforward suit arising only from cheque dishonour suitable for summary disposal). Because the cheques were issued for consideration referenced in the agreement, the plaintiff could not convert the case into a simple summary cheque recovery without addressing the underlying contractual/indemnity claims and proof of loss.
  6. Doubts about entitlement without evidence: The Court expressed skepticism about permitting recovery under the indemnity clause based solely on an assessment of performance (a variable factor) without evidence of the Pilot Review Board's findings or proof of loss. The Court also noted that the plaint did not state how long the respondent served after training, and that the practice of taking five cheques might indicate intention to encash proportionately; yet the petitioner presented all cheques without disclosing the quantum or particulars of any loss.
  7. Precedent and distinction: The Court considered authorities relied upon by the petitioner (including Ashwani Bahl/Air India and Saw Pipes) and distinguished them on the basis that those were cases where a pre‑estimate of loss had been proved on evidence or arose in arbitral/full trial contexts. The Court also observed that reliance on Mechelec was ill-founded in view of the later IDBI Trusteeship decision.
  8. Conclusion on merits: For reasons different from those recorded by the learned ADJ (and spelled out above), the Court found no merit in the petition. The Court clarified it was not laying down a blanket rule that indemnity‑based suits can never be brought under Order XXXVII, but that on the language of the Indemnity Bond and on the pleadings and documents in the present case the suit was not maintainable under Order XXXVII CPC.

Holding and Implications

Holding: The petition under Article 227 was DISMISSED. The Court found no merit in the petition and ordered no costs.

Implications and direct effect:

  • The High Court rejected the challenge to the ADJ's order granting unconditional leave to defend; accordingly, the ADJ's grant of leave stands subject to the trial court's further proceedings (the opinion does not alter the ADJ's order by allowing the petition).
  • The Court emphasised that where a remedy under the CPC (Section 115) is available, Article 227 is not the proper route — reinforcing the principle of seeking revision under Section 115 for such grievances. The Court nevertheless considered the merits under the parameters of Section 115 before dismissing the petition.
  • The Court held, on the facts and pleading before it, that a suit founded on an indemnity bond and linked cheques was not properly maintainable under Order XXXVII CPC without proof of loss and appropriate evidence (for example, documentation of the Pilot Review Board's assessment or other proof of damage). The opinion does not lay down a broad new precedent beyond these fact‑specific findings.
  • No costs were awarded, and no broader or novel legal rule was formulated beyond the application of existing authorities to the facts of the case.

Note: This summary is confined strictly to the statements and reasoning contained in the provided opinion extract. No information has been inferred beyond what is explicitly present in that text.

    Spicejet Ltd. Petitioner v. Arun Kumar

    Rajiv Sahai Endlaw, J.

    CMs. No. 40407/2017 & 40408/2017 (both for exemption)

    1. Allowed, subject to just exceptions.

    2. The application is disposed of.

    CM(M) 1269/2017 & CM No. 40406/2017 (for stay)

    3. This petition under Article 227 of the Constitution of India impugns the order [dated 15th July, 2017 in CS No. 15562/2016 (Old No. 230/2016) of the Court of Additional District Judge (ADJ)-04 (South West), Dwarka Courts, New Delhi] granting unconditional leave to the respondent/defendant to defend the suit filed by the petitioner/plaintiff under Order XXXVII of the Code of Civil Procedure, 1908 (CPC) for recovery of Rs. 10 lakhs, on the basis of cheques issued by the respondent/defendant in favour of the petitioner/plaintiff and an agreement entered into between the respondent/defendant and the petitioner/plaintiff, who had an employer and employee relationship.

    4. The contention of the counsel for the petitioner/plaintiff is not that the leave to defend application should have been dismissed but that conditional leave to defend should have been granted. However, the counsel for the petitioner/plaintiff at this stage states that his first contention is that the leave to defend application should have been dismissed.

    5. I have enquired from the counsel for the petitioner/plaintiff, as to how a petition under Article 227 of the Constitution of India is maintainable with respect to the aforesaid grievance. The grievance is redressable under the CPC by preferring a Revision Petition under Section 115 of CPC.

    6. The counsel for the petitioner/plaintiff, instead of replying on the basis of law, states that he has filed several other petitions against similar orders and for this reason he has filed this petition under Article 227 of the Constitution of India and states that there are judgments in this regard. The counsel is however neither carrying the said judgments nor is able to show whether this aspect has been discussed therein. It is a typical case of cut, copy and paste arguments.

    7. The law in this regard is well settled. Against an order of grant of leave to defend and for the grievance of the leave to defend application having not been dismissed, a Revision Petition under section 115 of cpc lies. mechelec engineers & Manufacturers v. Basic Equipment Corporation (1976) 4 SCC 687 was also a case arising from exercise of jurisdiction under section 115 of the cpc by this Court. Supreme Court held that this Court erred in interfering with the discretionary order and it is only in cases where the defence is patently dishonest or so unreasonable that could not be reasonably be expected to succeed that the exercise of discretion by the Trial Court to grant leave unconditionally may be questioned. Reference may also be made to Siri Krishan Bhardwaj…Petitioner v. Manohar Lal Gupta & Another…S AIR 1977 Delhi 226 (DB). It has been held by the Supreme Court in Sadhana Lodh v. National Insurance Co. Ltd. (2003) 3 SCC 524 that if a remedy under CPC is available, a petition under Article 227 of the Constitution of India, does not lie.

    8. Be that as it may, having spent time on the matter, it is deemed appropriate to deal with the matter on merits on the parameters of Section 115 of CPC.

    9. Inspite of the challenge being to the order of grant of unconditional leave to defend, no copy of the plaint has been annexed to the paper book. The counsel for the petitioner/plaintiff, on enquiry, has handed over a copy of the plaint and which is taken on record and a perusal whereof shows the petitioner/plaintiff to have instituted the suit, pleading (i) that the respondent/defendant was working with the petitioner/plaintiff as a Transition Captain in the Flight Operations Department; (ii) that during the course of his employment, the respondent/defendant was sent for a training program as Transition Captain on Bombardier DHC-8 Series 400 (Q 400); (iii) that the respondent/defendant had executed an Indemnity Bond-cum-Service Undertaking dated 21st November, 2011 in this regard in favour of the petitioner/plaintiff; (iv) that the aforesaid training was conducted at Toronto and the petitioner/plaintiff had incurred all expenses in this regard on the representation of the respondent/defendant that he shall work with the petitioner/plaintiff for a minimum period of three years in such functions as may be assigned to him by the petitioner/plaintiff; (v) that the respondent/defendant had also deposited five cheques of Rs. 2 lakhs each with the petitioner/plaintiff to cover up the tangible and other intangible costs of the training, in the event of the respondent/defendant leaving the employment of the petitioner/plaintiff before completing minimum period of three years; (vi) that the respondent/defendant attended the abovementioned training; however, his performance was assessed below standard by the Pilot Review Board; this performance analysis amounted to violation of the terms of the Letter of Appointment and his services were terminated by a termination order dated 21 June, 2012; (vii) therefore, the respondent/defendant became liable to reimburse the training costs incurred by the petitioner/plaintiff and the petitioner/plaintiff presented the cheques for payment and which have been dishonoured.

    10. The counsel for the petitioner/plaintiff has drawn attention to the agreement, on the basis of which the suit was filed and copy whereof is filed at page 106 of the paper book and which is titled as “Indemnity Bond-Cum-Service Undertaking” and attention is invited to the following clauses thereof:

    “A. Spice Jet Limited is sending me for training to assume pilot's responsibility as rated Transition Captain on Bombardier DHC-8, Series 400 (Q 400) (hereinafter referred to as the Type Rating Training).

    B. The above training costs are fully borne by Spice Jet Limited.

    C. I have deposited 05 undated cheques of Rs. 10 Lac (Rupees Ten Lacs Only) (amount to be arrived by dividing total cost by 2 Lacs each)], as a security to cover the tangible and other intangible costs of the above. In the event of my leaving employment with Spice Jet Limited before completing minimum period of Three (3) years, the same will be encashed by the company. Otherwise, on completion of 3 years of employment with the company, there cheques will be returned to me.

    Now in consideration of Spice Jet Limited arranging the Type Rating Training at considerable costs; I, which expression shall include my heirs, agents, relatives and assigns, irrevocably undertake and covenant as follows:

    1. I shall work for a minimum period of 3 years with Spice Jet Limited in such functions as may be assigned to me by the management from time to time. The three (3) years period shall commence from the date of my joining the Spice Jet Ltd. However, cessation of my services before completion of 3 years as above under Clause 16 & 17 of Appointment letter dated 21-Nov-11 reference number SJ/HR/011/11/151 shall not preclude Spice Jet Ltd. from encashing the cheques given as security for the above training costs. Such early departure of mine shall amount to my leaving services of the Spice Jet Ltd. before completion of the minimum period of 3 (Three) years.

    2. …..

    3. …..

    4. …..

    5. I shall indemnify Spice Jet Limited and bind myself, my heirs, agents, relatives and assigns to pay all claims, charges, costs, damages, demands, expenses, and losses, which Spice Jet Limited may sustain, incur in connection with this Indemnity bond cum Undertaking.

    6. …..

    7. …..

    8. In the event I am terminated as a result of non-conformance with DGCA and other relevant government and company regulations for flight crew, I have no objection to Spice Jet Limited encashing the cheques outlined above.”

    11. What the respondent/defendant had undertaken in the aforesaid Indemnity Bond-cum-Service Undertaking, was to serve the petitioner/plaintiff for a period of three years and to indemnify the petitioner/plaintiff against all costs, damages, demands, expenditures and losses which the petitioner/plaintiff may suffer and to, in the event of termination as a result of non-conformance with DGCA and other relevant government and company regulations for flight crew or on account of leaving the services of the petitioner/plaintiff before completion of the minimum period of three years not object to the petitioner/plaintiff encashing the cheques mentioned in the Indemnity Bond-cum-Service Undertaking.

    12. Though in the plaint reference was also made to the Service Undertaking and to the Appointment Letter but the counsel for the petitioner/plaintiff states that the suit was filed only on the basis of the Indemnity Bond-Cum-Service Undertaking aforesaid and the cheques and on no other document.

    13. The case of the petitioner/plaintiff in the plaint is not of the respondent/defendant having left the employment prior to expiry of three years. The claim of the petitioner/plaintiff can at best be said to be covered by Clause 8 supra which provides for termination as a result of non-conformance with DGCA and other government and company regulations.

    14. I have enquired from the counsel for the petitioner/plaintiff, what is the document to show that the performance of the respondent/defendant was assessed below standard by the Pilot Review Board.

    15. The counsel for the petitioner/plaintiff has argued that there is no document on record in this respect and it is the plea of the petitioner/plaintiff in the plaint and the said fact is not disputed.

    16. Without knowing which is the Pilot Review Board which found the performance of the respondent/defendant to be below standard, who had constituted the same and what is the report thereof and for what reasons, it is not understandable, as to how the suit in the first instance was maintainable under Order XXXVII of CPC.

    17. The suit was essentially for recovery of losses with which the respondent/defendant had agreed to compensate the petitioner/plaintiff in certain situations and such a suit does not lie within the ambit of Order XXXVII of CPC.

    18. Supreme Court in State Bank of Saurashtra v. Ashit Shipping Services (P) Ltd. (2002) 4 SCC 736 held that in cases of indemnities, the question of making good the loss arises only when there is proof that loss is suffered. It was held that Order XXXVII does not provide for a claim based on indemnity bond, because the loss would have to be proved and summary procedure cannot be adopted in such cases.

    19. The counsel for the petitioner/plaintiff has drawn attention to Ashwani Bahl & Ors…. v. Air India Ltd…. 275 and to Mahanagar Telephone Nigam Ltd. v. Haryana Telecom Ltd. 2010 SCC OnLine Del 1220.

    20. The first case was a case of dismissal of objections to an arbitral award finding the appellant therein to be liable to the respondent therein AIR India Ltd. for the breach of his service agreement and while dealing wherewith, a Co-ordinate Bench of this Court held that when the parties have, before entering into the agreement, estimated the losses which will be suffered by breach thereof, the party in breach is liable for such estimate. The aforesaid was held relying on Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705, the reasoning wherein was that for public losses, there is no measure. Moreover, in Saw Pipes Ltd., the Court on the basis of evidence had arrived at a finding of the parties having genuinely arrived at a pre-estimate of damages. It is for this reason only that a view different from otherwise settled position of law in Union Of India v. Raman Iron Foundry . (1974) 2 SCC 231 was taken. Moreover, it was a case, after full trial, and not a case of grant of leave to defend.

    21. The second of the aforesaid judgments was again a case of objections to the arbitral award.

    22. I may in this context notice that entirely different set of law applies to interference under Section 34 of the Arbitration and Conciliation Act, 1996 with the arbitral awards and merely because the Court has found no case for interference, cannot be a precedent for same analogy to be followed in a civil suit.

    23. There is another aspect of the matter. I entertain doubt, whether there can be a claim under the Indemnity Bond, without evidence, on the basis of assessment of performance and which can be a variable factor. It was for the petitioner/plaintiff to assess its employees who would be able to justify the training or to reap returns to the petitioner/plaintiff commensurate with the costs incurred by the petitioner/plaintiff and if the petitioner/plaintiff chooses a person who is not able to deliver with the expectations of the petitioner/plaintiff, the petitioner/plaintiff itself is to blame therefor and cannot prima facie be held to be entitled to damages.

    24. Though the suit was also based on cheques but since the cheques were for consideration mentioned in the Agreement aforesaid, it cannot be treated as a suit only on the basis of cheques to, on account of dishonour thereof, hold a case for dismissal of the application for leave to defend the suit being made out.

    25. The main argument of the counsel for the petitioner/plaintiff is that though the reasoning given by the learned ADJ is in favour of the petitioner/plaintiff but the outcome is against the petitioner/plaintiff.

    26. I have for reasons hereinabove stated, entertained doubts about the very maintainability of the suit under Order XXXVII of CPC, on the basis of pleading in the plaint. Even if the petitioner/plaintiff were to be held to be entitled to the claim on account of below standard performance, the petitioner/plaintiff will have to prove the same.

    27. The plaint is also absolutely silent as to for how much time the respondent/defendant served the petitioner/plaintiff, after the training. From the petitioner/plaintiff taking five cheques of Rs. 2 lakhs each instead of one cheque for Rs. 10 lakhs, it also appears that the purport of the Agreement was to, depending upon the loss, present the cheques for that much amount only. The petitioner/plaintiff however, without giving any reason, has presented all the cheques and without even disclosing the full facts or making even a whisper of the loss, if any suffered by it.

    28. The counsel for the petitioner/plaintiff has at this stage stated (a) that the learned ADJ, though has relied on Mechelec Engineers and Manufacturers supra but has not followed the same; (b) that a suit under Order XXXVII of CPC on the basis of Indemnity Bond and Undertaking Agreement is maintainable; and, (c) that I should record that the learned ADJ has returned findings in favour of the petitioner/plaintiff.

    29. As far as Mechelec Engineers and Manufacturers supra is concerned, the reliance thereon is misconceived in view of the subsequent judgment in IDBI Trusteeship Services Limited v. Hubtown Limited (2017) 1 SCC 568.

    30. What I have held is not that a suit under Order XXXVII of CPC can never lie on the basis of an Indemnity Bond and Undertaking but that on the basis of the language and terms of the Indemnity Bond and Undertaking in the present case and the pleadings of the petitioner/plaintiff, the suit was not maintainable under Order XXXVII of CPC. An illuminating discussion on the subject is to be found in Smita Conductors Ltd. v. Prabhudas Liladhar Pvt. Ltd.. Reference may also be made to Varun Gauba v. Punjab & Sind Bank & Ors…. S 3486.

    31. As far as the last argument is concerned, it is surprising that the petitioner/plaintiff, instead of making out a case on the basis of its document and its averments in the plaint, is wanting to make out a case on the basis of the contents of the order which is under challenge. Moreover, the observations in the order, in view of what I have recorded above, are of no avail.

    32. Thus, though for reasons different from that given by the learned ADJ, no merit is found in the petition.

    33. Dismissed.

    34. No costs.

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    Spicejet Ltd. Petitioner v. Arun Kumar
    (Dec 28, 2017)