Grant of leave to defend is the ordinary rule; denial is an exception

In the matter of B.L. Kashyap v Sons ltd. v M/s JMS Steels and Power Corporation and Anr. [Civil Appeal No. 379 of 2022] decided by Hon’ble Supreme Court on 18.01.2022.

FACTS

The Plaintiff-Respondent No.1 (JM Steel and Power Corp) is a registered partnership firm manufacturing and supplying a wide variety of iron and steel. The defendant No. 1 was a real estate and infrastructural development firm while Defendant No. 2 (Appellant herein) was a contractor working with defendant No.1 for construction work of its project. Two purchase orders were raised by Defendant No. 2 on the instructions of Defendant No. 1 in relation to which the Plaintiff supplied 200 tons of steel to Defendant No.1. The Defendants failed to make payment of the said purchase orders therefore, the Plaintiff-Respondent No. 1 filed a suit under Order XXVII of the Civil Procedural Code, 1908.

Both the defendants in the suit filed leave to defend which was rejected by the Trial Court observing that the defendants were merely attempting to shift the burden upon each other. The Appellant challenged the judgment and decree passed by the trial court, by way of regular first appeal which was dismissed by the Hon’ble High Court. Hence the present appeal.

OBSERVATIONS

The Hon’ble Supreme Court while referring to the judgments of Mechelec Engineers and Manufacturers v. Basic Equipment Corporation: AIR 1977 SC 577 and IDBI Trusteeship 9 2022 LiveLaw (SC) 59 Services Ltd. v. Hubtown Ltd.[ (2017) 1 SCC 568] held that grant of leave to defend is the ordinary rule and denial of leave to defend is an exception. The prayer for leave to defend is to be denied in cases where the defendant has practically no defense and is unable to give out even a semblance of triable issues before the court.

The Court further discussed the principles to grant of leave to defence-

  1. First, if the defendant satisfies the court that he has substantial defence, he is entitled to unconditional leave to defend.
  2. Where defendant raises triable issues indicating a fair and bona fide defence, he would be ordinarily entitled to unconditional leave to defend;
  3. Where the defendant raises triable issues, but it remains doubtful if the defendant is raising the same in good faith or not, the Trial Court is expected to balance the requirements of expeditious disposal of commercial causes on one hand and of not shutting out triable issues by severe orders on the other.
  4. Lastly, where the proposed defense appears to be plausible but improbable, heightened conditions may be imposed as to the time and mode of trial as also of payment into the court or furnishing security or both.

Therefore, it is only in the case where the defendant is found to be having no substantial defense and/or no genuine triable issues coupled with the Court’s view that the defense is frivolous or vexatious then the leave to defend is to be refused.

In the present case, seeing the circumstances, the Hon’ble Bench was clearly of the view that the Appellant has indeed raised triable issues particularly concerning its liability and the defence of the Appellant cannot be said to be frivolous or vexatious altogether. Therefore, the Appellant was granted leave to defend.