{"id":267592,"date":"2008-10-03T00:00:00","date_gmt":"2008-10-02T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/southern-sales-services-ors-vs-sauermilch-design-handels-gmbh-on-3-october-2008"},"modified":"2018-02-06T23:34:37","modified_gmt":"2018-02-06T18:04:37","slug":"southern-sales-services-ors-vs-sauermilch-design-handels-gmbh-on-3-october-2008","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/southern-sales-services-ors-vs-sauermilch-design-handels-gmbh-on-3-october-2008","title":{"rendered":"Southern Sales & Services & Ors vs Sauermilch Design & Handels Gmbh on 3 October, 2008"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Southern Sales & Services & Ors vs Sauermilch Design & Handels Gmbh on 3 October, 2008<\/div>\n
Author: …………….J.<\/div>\n
Bench: Altamas Kabir, Markandey Katju<\/div>\n
                                                                      1\n\n             IN THE SUPREME COURT OF INDIA\n\n             CIVIL APPELLATE JURISDICTION\n\n             CIVIL APPEAL NO.     OF 2008\n(@ Special Leave Petition(Civil) No.20544 of 2008)\n\n\nSouthern Sales & Services & Ors.           ...Appellants\n\n\n                            Vs.\n\nSauermilch Design & Handels GMBH           ...Respondent\n\n\n\n                      J U D G M E N T\n<\/pre>\n
ALTAMAS KABIR,J.\n<\/p>\n
\n
1.   Leave granted.\n<\/p>\n
\n
2.   This appeal, which is directed against the order<\/p>\n
     passed by the Karnataka High Court on 26th June,<\/p>\n
     2008, in a proceeding under Order 37 of the Code<\/p>\n
     of   Civil    Procedure,     raises    an   interesting<\/p>\n
     question of law regarding the interpretation of<\/p>\n
     Rule 3, Sub-rule (5) thereof.\n<\/p>\n
\n
3.   Rule 3, as it now reads, was introduced in Order<\/p>\n
     37 of the Code by way of amendment with effect<\/p>\n
     from 1st February, 1977.     Prior to such amendment,<\/p>\n
     Rule 3 of Order 37 was as follows :-\n<\/p>\n
                                                                 2<\/span><\/p>\n
\n
    “Rule 3. (1) The Court shall, upon an
\n    application by the defendant, give leave to
\n    appear   and  to   defend  the   suit,  upon
\n    affidavits which disclose such facts as
\n    would make it incumbent on the holder to
\n    prove consideration, or such other facts as
\n    the Court may deem sufficient to support the
\n    application.\n<\/p>\n
    (2)   Leave   to   defend   may   be   given
\n    unconditionally or subject to such terms as
\n    to payment into Court, giving security,
\n    framing and recording issues or otherwise as
\n    the Court thinks fit.”\n<\/p>\n
\n     By   virtue     of   the    Code     of    Civil   Procedure<\/p>\n
(Amendment)   Act<\/a>,    1976,     Rule    (3)    of   Order   37   was<\/p>\n
substituted by Rule 3 as it now exists and introduced<\/p>\n
various changes of which one of the more significant<\/p>\n
changes was the introduction of Sub-rules (4) and (5)<\/p>\n
which read as follows:-\n<\/p>\n
\n
     “3.   (4)  If   the   defendant  enters   an
\n     appearance, the plaintiff shall thereafter
\n     serve on the defendant a summons for
\n     judgment in Form No.4A in Appendix B or such
\n     other Form as may be prescribed from time to
\n     time, returnable not less than ten days from
\n     the   date  of   service  supported   by  an
\n     affidavit verifying the cause of action and
\n     the amount claimed and stating that in his
\n     belief there is no defence to the suit.\n<\/p><\/blockquote>\n
     (5) The defendant may, at any time within
\n     ten days from the service of such summons
\n     for judgment, by affidavit or otherwise
\n     disclosing such facts as may be deemed
\n     sufficient to entitle him to defend, apply
\n     on such summons for leave to defend such
\n     suit, and leave to defend may be granted to
\n     him unconditionally or upon such terms as
\n     may appear to the Court or Judges to be
\n     just:\n<\/p><\/blockquote>\n
                                                              3<\/span><\/p>\n
             Provided that leave to defend shall not
\n         be refused unless the Court is satisfied
\n         that the facts disclosed by the defendant do
\n         not indicate that he has a substantial
\n         defence to raise or that the defence
\n         intended to be put up by the defendant is
\n         frivolous or vexatious:\n<\/p><\/blockquote>\n
              Provided further that, where a part of
\n         the amount claimed by the plaintiff is
\n         admitted by the defendant to be due from
\n         him, leave to defend the suit shall not be
\n         granted unless the amount so admitted to be
\n         due is deposited by the defendant in Court.”\n<\/p><\/blockquote>\n
       It may also be profitable to refer to Sub-rule (6)<\/p>\n
which provides as follows:-\n<\/p><\/blockquote>\n
         “(6) At the    hearing   of   such   summons   for
\n         judgment, –\n<\/p><\/blockquote>\n
         (a)   if the defendant has not applied for
\n               leave to defend, or if such application
\n               has been made and is refused, the
\n               plaintiff shall be entitled to judgment
\n               forthwith; or<\/p>\n<\/blockquote>\n
         (b)   if the defendant is permitted to defend
\n               as to the whole or any part of the
\n               claim, the Court or Judge may direct
\n               him to give such security and within
\n               such time as may be fixed by the Court
\n               or Judge and that, on failure to give
\n               such security within the time specified
\n               by the Court or Judge or to carry out
\n               such other directions as may have been
\n               given by the Court or Judge, the
\n               plaintiff shall be entitled to judgment
\n               forthwith.”\n<\/p><\/blockquote>\n
  4.     In the instant case, the respondent filed a suit<\/p>\n
         under Order 37 of the Code<\/a> of Civil Procedure,
\n                                                                          4<\/span><\/p>\n
     hereinafter       referred         to    as     “the      Code”,     for<\/p>\n
     recovery of a sum of Euro 757,885.42 equivalent<\/p>\n
     to    Rs.3,86,52,156.42        in       Indian        currency.          On<\/p>\n
     being served with Summons for Judgment in terms<\/p>\n
     of Rule 3, Sub-rule (4), of Order 37 of the Code<\/a>,<\/p>\n
     the    petitioner      filed        an        affidavit       providing<\/p>\n
     various details which made out triable issues in<\/p>\n
     the suit.     On the basis of the said affidavit the<\/p>\n
     learned      XXXI     Additional              City     Civil     Judge,<\/p>\n
     Bangalore,        granted     conditional             leave     to   the<\/p>\n
     petitioner to defend the suit.\n<\/p><\/blockquote>\n
5.        Being   aggrieved        by        the     said     order,      the<\/p>\n
     respondent company moved in revision before the<\/p>\n
     High      Court       which        after         considering         the<\/p>\n
     submissions made and the defence taken by the<\/p>\n
     defendant\/appellant came to the conclusion that a<\/p>\n
     triable issue had been raised in the suit which<\/p>\n
     would have to be decided in a full-fledged trial.<\/p>\n
     However, the High Court also came to a finding<\/p>\n
     that though the defendant\/appellant had raised a<\/p>\n
     triable      issue,     the        defence           taken     did   not<\/p>\n
     exonerate them from payment of the entire amount<\/p>\n
     claimed by the respondent herein.
\n                                                                         5<\/span><\/p>\n
6.     The High Court held that despite the admission<\/p>\n
     of the defendant regarding the amount claimed by<\/p>\n
     the respondent in the suit, since the same had<\/p>\n
     not   been   paid    to    the      plaintiff\/respondent,               it<\/p>\n
     would be in the fitness of things to direct the<\/p>\n
     defendant\/appellant            to     deposit      a    substantial<\/p>\n
     portion of the amount which had been admitted to<\/p>\n
     be due and payable even if the defence set up by<\/p>\n
     the defendant\/appellant was not sham, moonshine<\/p>\n
     or illusory.       The High Court accordingly modified<\/p>\n
     the      unconditional          leave        granted        to      the<\/p>\n
     defendant\/appellant            to     defend      the     suit      and<\/p>\n
     restricted     the    same          to     the    claim     of      the<\/p>\n
     plaintiff-company         to    the      amount    excluding        the<\/p>\n
     total demand of Euro 3,20,967.51 covered under<\/p>\n
     the documents Annexures G-1 and G-2.                        The High<\/p>\n
     Court directed that leave to defend the suit in<\/p>\n
     respect of the claim of the plaintiff-company for<\/p>\n
     the   said   amount       of    Euro      3,20,967.51     would         be<\/p>\n
     subject       to      the           condition           that        the<\/p>\n
     defendant\/appellant            firm      would    deposit      in   the<\/p>\n
     trial court 55% of the said amount within eight<\/p>\n
     weeks from the date of the orders of the High<\/p>\n
     Court.\n<\/p>\n
                                                                   6<\/span><\/p>\n
\n
7.   The defendant\/appellant has come up to this Court<\/p>\n
     challenging the said order of the High Court.<\/p>\n
8.   On behalf of the defendant\/appellant it was urged<\/p>\n
     that the consistent view taken by this Court in<\/p>\n
     relation to summary trials under Order 37 of the<\/p>\n
     Code<\/a> is that when a Court is satisfied that a<\/p>\n
     triable issue has been raised in defence of the<\/p>\n
     claim   made      on    behalf        of    the     plaintiff,<\/p>\n
     unconditional     leave   has    to    be    granted     to   the<\/p>\n
     defendant to contest the suit and no direction<\/p>\n
     could be given while granting such leave to the<\/p>\n
     defendant    to   deposit       any    amount     by    way       of<\/p>\n
     security.    Mr. T.V. Ratnam, learned advocate, who<\/p>\n
     appeared    for   the   defendant\/appellant            submitted<\/p>\n
     that this view had been taken by the Calcutta<\/p>\n
     High Court as far back as in 1949 in the case of<\/p>\n
     Kiranmoyee Dassi vs. Dr. J. Chatterjee, [AIR 1949<\/p>\n
     Calcutta,     page      479]     and       was    subsequently<\/p>\n
     reiterated and followed by this Court in the case<\/p>\n
     of Santosh Kumar Vs. Bhai Mool Singh, [1958 SCR<\/p>\n
     1211], in which this Court set aside the order of<\/p>\n
     the High Court upon holding that the imposition<\/p>\n
     of a condition while granting leave to defend a<\/p>\n
     suit in which a triable issue has been raised was<\/p>\n
     illegal. If the Court was satisfied that there
\n                                                                                 7<\/span><\/p>\n
      was    a       genuine    triable         issue,    leave      had    to       be<\/p>\n
      given      and     given      unconditionally            to    defend      the<\/p>\n
      suit.\n<\/p>\n
\n
9.    Mr. Ratnam submitted that same view was taken by<\/p>\n
      this Court in Milkhiram (India) Private Ltd. vs.<\/p>\n
      Chamanlal Bros<\/a>., [AIR 1965 SC 1698] and in M\/s.<\/p>\n
      Mechelec         Engineers          and    Manufacturers        Vs.     M\/s.<\/p>\n
      Basic Equipment Corporation, [1976 (4) SCC 687]<\/p>\n
      wherein it was further clarified that it is only<\/p>\n
      in cases where the defence is patently dishonest<\/p>\n
      or so unreasonable that it could not reasonably<\/p>\n
      be    expected       to       succeed,       that    the      exercise         of<\/p>\n
      discretion          by        the      trial        court      to     grant<\/p>\n
      unconditional leave to defend may be questioned.<\/p>\n
10.   In    addition       to       his    aforesaid        submissions          Mr.<\/p>\n
      Ratnam urged that in the absence of any error of<\/p>\n
      jurisdiction             or     the         illegal        exercise            of<\/p>\n
      jurisdiction or the exercise of jurisdiction with<\/p>\n
      material         irregularity,            the   High     Court       had       no<\/p>\n
      jurisdiction             to         entertain        the       revisional<\/p>\n
      application filed by the respondent.                           Mr. Ratnam<\/p>\n
      submitted that as a legal proposition, it was<\/p>\n
      well established that in revisional jurisdiction<\/p>\n
      even       a     wrong     order          cannot    be     corrected           or
\n                                                                      8<\/span><\/p>\n
      interfered      with     and     that       the      scope          of<\/p>\n
      interference is limited to jurisdictional error<\/p>\n
      only as was explained in the case of The Managing<\/p>\n
      Director     (MIG)      Hindustan       Aeronautics          Ltd.,<\/p>\n
      Balanagar, Hyderabad vs. Ajit Prasad Tarway<\/a>. [AIR<\/p>\n
      1973 SC 76].        Mr. Ratnam submitted that on both<\/p>\n
      counts the order of the High Court impugned in<\/p>\n
      the appeal was liable to be set aside.<\/p>\n
11.   Replying to the submissions made on behalf of the<\/p>\n
      appellant,    Mr.    Niraj     Sharma,      counsel       for   the<\/p>\n
      respondent submitted that the legal parameters in<\/p>\n
      which the earlier decisions cited on behalf of<\/p>\n
      the   appellant         had     been        rendered         stood<\/p>\n
      significantly altered after the amendment of the<\/p>\n
      Code<\/a> in 1976.          Learned counsel submitted that<\/p>\n
      with the substitution of Rule 3 of Order 37, the<\/p>\n
      earlier decisions, right up to the decision in<\/p>\n
      the   case    of       M\/s.    Mechelec          Engineers      and<\/p>\n
      Manufacturers      (supra)     were    to    a    large    extent<\/p>\n
      rendered ineffective in view of the addition of<\/p>\n
      Sub-rules (4), (5) and (6) to Rule 3.<\/p>\n
12.   It was urged that Sub-rule (5) of Rule 3 of Order<\/p>\n
      37 is important to this case in the sense that it<\/p>\n
      recognizes a dichotomy between a disputed claim
\n                                                                9<\/span><\/p>\n
    and an admitted claim in a suit filed under Order<\/p>\n
    37 of the Code<\/a>.        As far as the disputed claim is<\/p>\n
    concerned, once the Court comes to a conclusion<\/p>\n
    that   there    is    a   triable     issue,    unconditional<\/p>\n
    leave has to be given to the defendant to defend<\/p>\n
    the suit.      However, in view of the second proviso<\/p>\n
    to Sub-rule (5) of Rule 3, any amount of the<\/p>\n
    claim, if admitted by the defendant to be due<\/p>\n
    from him, has to be deposited in Court before the<\/p>\n
    leave to defend a suit can be granted.<\/p>\n
13. Mr. Sharma submitted that the admission by the
\n    appellant      that    there   were    certain    dues     which<\/p>\n
    would be paid by the end of December, 2002, the<\/p>\n
    High   Court     was      justified     in     directing     the<\/p>\n
    appellant to deposit 55% of the admitted amount<\/p>\n
    as a condition precedent for grant of leave to<\/p>\n
    defend the suit in accordance with the provisions<\/p>\n
    of the second proviso to Sub-rule (5) of Rule 3<\/p>\n
    of Order 37 as it now stands after the amendment<\/p>\n
    effected with effect from 1st February, 1977. Mr.<\/p>\n
    Sharma urged that there was, therefore, no ground<\/p>\n
    or reason for this Court to interfere with the<\/p>\n
    discretion exercised by the High Court in the<\/p>\n
    impugned order.\n<\/p>\n
                                                                   10<\/span><\/p>\n
\n
14.   Having considered the submissions made on behalf<\/p>\n
      of    the    respective      parties     and    the   decisions<\/p>\n
      cited, there appears to be force in Mr. Sharma’s<\/p>\n
      submissions regarding the object intended to be<\/p>\n
      achieved by the introduction of Sub-rules (4),<\/p>\n
      (5) and (6) in Rule 3 of Order 37 of the Code<\/a>.<\/p>\n
      Whereas in the unamended provisions of Rule 3,<\/p>\n
      there was no compulsion for making any deposit as<\/p>\n
      a condition precedent to grant of leave to defend<\/p>\n
      a suit by virtue of the second proviso to Sub-<\/p>\n
      rule (5), the said provision was altered to the<\/p>\n
      extent that the deposit of any admitted amount is<\/p>\n
      now a condition precedent for grant of leave to<\/p>\n
      defend a suit filed under Order 37 of the Code<\/a>.<\/p>\n
      A distinction has been made in respect of any<\/p>\n
      part of the claim, which is admitted. The second<\/p>\n
      proviso to Sub-rule (5) of Rule 3 makes it very<\/p>\n
      clear that leave to defend a suit shall not be<\/p>\n
      granted unless the amount as admitted to be due<\/p>\n
      by the defendant is deposited in Court.<\/p>\n
15.   The   High    Court    has   come   to   a     finding   that     a<\/p>\n
      certain      portion   of    the    plaint     has    been   duly<\/p>\n
      admitted by the appellant herein and accordingly<\/p>\n
      directed 55% thereof to be deposited as a pre-<\/p>\n
      condition for grant of leave to defend the suit.
\n                                                                   11<\/span><\/p>\n
16.   As has been pointed out by Mr. Sharma, it is now<\/p>\n
      well established as a principle of law that even<\/p>\n
      if a wrong order is passed by a Court having<\/p>\n
      jurisdiction to pass an order in such cases, the<\/p>\n
      revisional Court will not interfere with such an<\/p>\n
      order unless a jurisdictional error is pointed<\/p>\n
      out and established by the person who questions<\/p>\n
      such order.\n<\/p>\n
\n
17.   In the instant case, the High Court did not lack<\/p>\n
      jurisdiction to pass an order with regard to the<\/p>\n
      subject   matter      of     dispute,      though   the   order<\/p>\n
      itself may be incorrect.              There is, therefore,<\/p>\n
      little scope for this Court to interfere with the<\/p>\n
      directions    given     to     the    appellant     herein    to<\/p>\n
      deposit in Court 55% of the admitted dues as a<\/p>\n
      pre-condition to grant of leave to defend a suit.<\/p>\n
      The judgment of the High Court impugned in this<\/p>\n
      appeal does not warrant any interference since<\/p>\n
      the trial Court had exercised its jurisdiction<\/p>\n
      under the second proviso to Sub-rule (5) of Rule<\/p>\n
      3 of Order 37 of the Code<\/a>.                The earlier concept<\/p>\n
      of granting unconditional leave when a triable<\/p>\n
      issue is raised on behalf of the defendant, has<\/p>\n
      been supplemented by the addition of a mandate,<\/p>\n
      which   has   been    imposed        on   the   defendant,    to
\n                                                     12<\/span><\/p>\n
       deposit any amount as admitted before leave to<\/p>\n
       defend the suit can be granted.   The question as<\/p>\n
       to whether leave to defend a suit can be granted<\/p>\n
       or not is within the discretionary powers of the<\/p>\n
       High Court and it does not appear to us that such<\/p>\n
       discretion has been exercised erroneously or with<\/p>\n
       any irregularity which warrants interference by<\/p>\n
       this Court.\n<\/p>\n
\n
18.    The appeal is, therefore, dismissed.<\/p>\n
19.    There will be no order as to costs.<\/p>\n
                                      …………….J.\n<\/p>\n
                                         (ALTAMAS KABIR)<\/p>\n
                                      …………….J.\n<\/p>\n
                                       (MARKANDEY KATJU)<\/p>\n
New Delhi<\/p>\n
Dated: 3.10.2008<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Southern Sales & Services & Ors vs Sauermilch Design & Handels Gmbh on 3 October, 2008 Author: …………….J. Bench: Altamas Kabir, Markandey Katju 1 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 2008 (@ Special Leave Petition(Civil) No.20544 of 2008) Southern Sales & Services & Ors. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-267592","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nSouthern Sales & Services & Ors vs Sauermilch Design & Handels Gmbh on 3 October, 2008 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/southern-sales-services-ors-vs-sauermilch-design-handels-gmbh-on-3-october-2008\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Southern Sales & Services & Ors vs Sauermilch Design & Handels Gmbh on 3 October, 2008 - 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