Rajni Kumar v. Suresh Kumar Malhotra, 2003 (3) SCALE 434

Case Summary

1. Appeal before the Supreme Court by way of Special Leave Petition under Article-136 of the Constitution. Leave granted. The court discusses and contrasts Order 37, Rule 4 from Order 9, Rule 13.
2. Facts of the case:
   1. This is a tenant landlord dispute. The landlord Suresh Kumar (respondent herein) filed a summary suit under Order-37 of CPC against tenant Rajni Kumar (appellant herein) for recovery of dues.
   1. Despite due service of summons, the tenant neither entered appearance nor filed an application seeking leave to defend the suit. The trial court passed ex-parte judgment in favour of the landlord and decreed the claimed amount with 18% rate of interest.
   1. The tenant then filed an application under O-37, R-4 to set aside the ex-parte judgment passed in the summary suit on grounds that she was not duly served and therefore exceptional circumstances  exist. She also sought leave to defend but failed to give any good grounds for the same in her affidavit. The trial court rejected the application of the tenant.
   1. She moved to the High Court in appeal. She said  that  sufficient amount had been deposited with the landlord as advance and therefore the provisions of summary suit does not apply to the case and that she has good ground for defence. The High Court held that though exceptional circumstances existed following which she wasn’t able to enter appearance but she hasn’t put forward a  good  prima facie defence in her application seeking leave to defend. The High Court thus dismissed the appeal.
   1. The tenant/ appellant moved the Supreme Court under Article-136 by way of SLP. Leave granted.
3. Question of Law before the Supreme Court:
   1. Whether the High Court committed jurisdictional error in declining to set aside the ex parte decree on the application of the appellant under Order 37, Rule 4 on the ground that she failed to disclose facts sufficient to entitle her to defend the suit?
   1. Whether in the facts and circumstances an interest rate of 18% p.a. justified in light of S-34 of CPC, 1908, which put a cap of 6% p.a. on non-commercial transactions?

• Decision of the Supreme Court:
  • In this view of the matter, we do not find any illegality much less jurisdictional error in the order under challenge to warrant interference of this Court. In as much as having regard to the provisions of Section 34 of the C.P.C. and the facts of the case that the liability does not arise out of a commercial transaction, we are of the view that the grievance of the appellant with regard to rate of interest is justified. We, therefore, reduce the rate of interest from 18 per cent to 6 per cent per annum.
• Important paragraphs from the judgment:

A careful reading of Rule 4 shows that it empowers, under special circumstances, the court which passed an ex parte decree under Order 37 to set aside the decree and grant one or both of the following reliefs, if it seems reasonable to the court so to do and on such terms as the court thinks fit:

1. To stay or set aside execution and
2. To give leave to the defendant
   1. To appear to the summons, and
   1. To defend the suit.

The expression ‘special circumstances’ is not defined in C.P.C. nor is it capable of any precise definition by the court, because problems of human beings are so varied and complex. In an application under Order 37, Rule 4, the court has to determine the question, on the facts of each case, as to whether circumstances pleaded are so unusual or extraordinary as to justify putting the clock back by setting aside the decree; to grant further relief in regard to post-decree matters, namely, staying or setting aside the execution and also in regard to pre decree matters viz. to give leave to the defendant to appear to the summons and to defend the suit.

In considering an application to set aside ex parte decree, it is necessary to bear in mind the distinction between suits instituted in the ordinary manner and suits filed under Order 37, C.P.C. O-37, R-7 says that except as provided there under the procedure in suits under Order 37 shall be the same as the procedure in suits instituted in the ordinary manner. Order 37, Rule 4 specifically provides for setting aside decree in summary suit, therefore, provisions of Order 9, Rule 13 will not apply to a suit filed under Order 37.

In a suit filed in the ordinary manner a defendant has the right to contest the suit as a matter of course. Nonetheless he may be declared ex parte if he does not appear in response before framing issues; or during or after trial. Though addressing arguments is part of trial, one can loosely say that a defendant who remains absent at the stage of argument, is declared ex parte after the trial. In an application under Order 9 Rule 11, if a defendant is set ex parte and that order is

set aside, he would be entitled to participate in the proceedings from the stage he was set ex parte. But an application under Order 9 Rule 13 could be filed on any of the grounds mentioned there under only after a decree is passed ex parte against defendant. If the court is satisfied that (1) summons was not duly served, or (2) he was prevented by sufficient cause from appearing when the suit was called for hearing, it has to make an order setting aside the decree against him on such terms as to cost or payment into court or otherwise as it thinks fit and thereafter on the day fixed for hearing by court, the suit would proceed as if no ex parte decree had been passed.

But in a suit under Order 37 the procedure for appearance of defendant is governed by provisions of Rule 3 thereof. A defendant is not entitled to defend the suit unless he enters appearance within ten days of service of summons either in person or by a pleader and files in court an address for service of notices on him. In default of his entering an appearance, the plaintiff becomes entitled to a decree for any sum not exceeding the sum mentioned in the summons together with interest at the rate specified, if any, up to the date of the decree together with costs. The plaintiff will also be entitled to judgment in terms of sub-rule (6) of Rule

3. If the defendant enters an appearance, the plaintiff is required to serve on the defendant a summons for judgment in the prescribed form. Within ten days from the service of such summons for judgment, the defendant may seek leave of the court to defend the suit, which will be granted on disclosing such facts as may be deemed sufficient to entitle him to defend and such leave may be granted to him either unconditionally or on such terms as the court may deem fit. Normally the court will not refuse leave unless the court is satisfied that facts disclosed by the defendant do not indicate substantial defence or that defence intended to be put up is frivolous or vexatious. Where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, no leave to defend the suit can be granted unless the admitted amount is deposited by him in Court. In as much as Order 37 does not speak of the procedure when leave to defend the suit is granted, the procedure applicable to suits instituted in the ordinary manner, will apply.

It is important to note here that the power under Order 37 Rule 4 is not confined to setting aside the ex parte decree; it extends to staying or setting aside the execution and giving leave to appear to the summons and to defend the suit. We may point out that as the very purpose of Order 37 is to ensure an expeditious hearing and disposal of the suit filed there under, Rule 4 empowers the court to grant leave to the defendant to appear to summons and defend the suit if the Court considers it reasonable so to do, on such terms as court thinks fit in addition to setting aside the decree. Where on an application, more than one among the specified reliefs may be granted by the Court all such reliefs may be claimed in one application. It is not permissible to claim such reliefs in successive petitions as it would be contrary to the letter and spirit of the provision. That is why where an application under Order 37, Rule 4 is filed to set aside a decree

either because the defendant did not appear in response to summons and limitation expired, or having appeared, did not apply for leave to defend the suit in the prescribed period, the court is empowered to grant leave to defendant to appear to the summons and to defend the suit in the same application. It is, therefore, not enough for the defendant to show special circumstances which prevented him from appearing or applying for leave to defend, he has also to show by affidavit or otherwise, facts which would entitle him leave to defend the suit. In this respect, Order 37, Rule 4 is different from Order 9, Rule 13.

Now averting to the facts of this case, though appellant has shown sufficient cause for his absence on the date of passing ex parte decree, she failed to disclose facts which would entitle her to defend the case. The respondent was right in his submission that in the application under Order 37, Rule 4 the appellant did not say a word about any amount being in deposit with the respondent or that the suit was not maintainable under Order 37.

From a perusal of the order under challenge, it appears to us that the High Court was right in accepting existence of special circumstances justifying her not seeking leave of the court to defend, but in declining to grant relief since she had mentioned no circumstances justifying any defence.

In this view of the matter, we do not find any illegality much less jurisdictional error in the order under challenge to warrant interference of this Court. In as much as having regard to the provisions of Section 34 of the C.P.C. and the facts of the case that the liability does not arise out of a commercial transaction, we are of the view that the grievance of the appellant with regard to rate of interest is justified. We, therefore, reduce the rate of interest from 18 per cent to 6 per cent per annum.

Subject to above modification of the order of the trial court as confirmed by the High Court the appeal is dismissed.