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How To Institute A Summary Suit- Order 37

Summary Suit is the specific fast track procedure for enforcing a right in an effective manner as the Courts pass judgements without hearing the defence. While it would appear to be violative of the principle of Natural Justice, Audi Alteram Partem, this procedure is only applicable to limited subject matters where the defendant does not have a defence. Summary Suit is embedded in Order XXXVII of the Civil Procedure Code, 1908. The object underlying the summary suits is to prevent unreasonable obstruction by the defendant who has no defence and to assist expeditious disposal of cases.

Civil litigation generally is a long drawn battle, which goes on for years. Therefore, Order 37 is one of the pre-eminent provisions in hand. The object of this provision is to ensure that the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining a decree by raising untenable and frivolous defences in class of cases where speedy decisions are desirable in the interest of Commercial transactions.

Applicability and Extent
The provisions of Order 37 apply to High Courts, City Civil Courts, Courts of Small Causes and other superior Courts. They apply to Suits based on:
  1. promissory notes [1], bills of exchange [2] and hundies [3], and
  2. suits in which plaintiff seeks to recover a debt or liquidated demand [4] in money payable by the defendant, with or without interest, arising:
    1. on a written contract, or
    2. on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty; or
    3. on a guarantee, where the claim against the principal is in respect of a debt or liquidated demand only.

Jurisdiction

Suits can be instituted where (a) the defendant resides, or (b) the defendant carries on business or personally works for gain or, (c) the cause of action wholly or partly arises. Based on the value of the suit, pecuniary jurisdiction can be decided. Based on the pecuniary jurisdiction suit can be filed either in High Court or District Court.

Limitation
The suit can be filed within 3 years from the date of cause of action having arisen. The said period of limitation cannot be condoned.

Discretionary Power
The discretionary power conferred upon the court under Order 37 should be exercised judicially, judiciously and on well settled principles of natural justice. Wherever defence raises triable issue, leave should be granted unconditionally. If it is not done, leave may become illusory. [4] Care should be taken to see that the object of the rule to assist the expeditious disposal of commercial cases should not be defeated. But it also must be ensured that real and genuine triable issues are not shut out by unduly severe orders as to deposit. [5]

Institution of Summary Suit
A summary suit is instituted by presenting a plaint in an appropriate civil court. After institution of a summary suit, the defendant is required to be served with a copy of the plaint and summons in the prescribed form. Rule 2 and Rule 3 of order 37 provide for procedure of summary suits.

Rule 2 provides that after the summons of the suit has been issued to the defendant, the defendant must enter an appearance within ten days of service of summons and the plaintiff will serve a summons for judgement to the defendant. The defendant is not entitled to defend a summary suit unless he enters an appearance. In default of this, the plaintiff will be entitled for a decree which will be executed forthwith.

Rule 3 prescribes the mode of service of summons and leave to defend. The defendant must apply for a leave to defend within ten days from the day of service of summons upon him and such leave will be granted only if the affidavit filed by the defendant discloses such facts as may be deemed sufficient to entitle him to defend. Such leave may be granted to the defendant unconditionally or upon such terms as may appear to the Court or judge to be just. [6]

Leave to defend, however should not be refused unless the Court is satisfied that the facts disclosed by the defendant do not indicate that he has substantial defence to raise or that the defence intended to be put by him is frivolous and vexatious. If a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend should not be granted to him in the Court.

At the hearing for such summons for judgement, if the defendant does not apply for leave to defend or such leave to defend is refused, the plaintiff is entitled to a decree forthwith. The court or the judge may, for sufficient cause shown by the defendant, excuse the delay of the defendant in entering an appearance or in applying for leave to defend the suit.

No hard and fast rule can be laid down as to in what cases leave to defend may be granted. Each case must be decided on it’s own facts and circumstances and the discretion must be exercised judicially and in consonance with the principles of natural justice which form the foundations of our law. [7]

Notes:
The principle of Res Judicata is not applicable to summary suits, i.e. summary suits can be filed in the matters which are directly and substantially in issue in a previously instituted ordinary suit.

Test
The test whether leave to defend should be granted or not is to see whether the defence raises a real, honest and bona fide dispute and raises a triable issue or not. If the court I satisfied that the defence has raised a triable issue or a fair dispute has arisen, leave to defend should not be refused. [8] Again, it is hazardous and unfair to pronounce a categorical opinion on such matter before the evidence is taken. It is only in those cases where the defence is patently dishonest or so unreasonable that it could not reasonably be expected to succeed that the exercise of discretion to grant unconditional leave can be refused. [9]

As the matter is in the discretion of the court, no hard and fast rule can be laid down as to when the discretion should be exercised by granting unconditional leave to the defendant. In general, the test is to see whether the defence raises real issue and not a sham one, in the sense that, if facts alleged by the defendant are established, there would be a good or even a plausible, defence on those facts. [10]

In Precision Steel & Engg. Works v. Prem Deva Niranjan Deva Tayal [11] a three judge bench held that mere disclosure of facts, not a substantial defence is the sine qua non. What is a substantial defence depends upon the facts and circumstances of each case.

Under special circumstances the court can set aside the decree and stay the execution and may grant the leave to defendant to appear and defend the suit. However, inherent power under section 151 of the Civil Procedure Code cannot be exercised for setting aside such decrees. [12]

Appeal

No appeal lies against an order granting or refusing leave to defend under Rule 3. However, where a decree is passed in a summary suit, an appeal lies.

Revision
An order passed under Order 37 is a ‘case decided’ under Section 115 of the Civil Procedure Code and is revisable though High Court generally does not interfere with the discretion exercised by the trial court. [13]

Writ
In appropriate cases, a High Court may interfere with an order passed granting or refusing leave under Rule 3. [14]

Principles
The High Court of Calcutta laid down the following principles relating to suits of a summary nature in Kiranmoyee Dassi v. J. Chatterjee [15]:
  1. If the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend.
     
  2. If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.
     
  3. If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he had a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.
     
  4. If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.
     
  5. If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence.
     
  6. Where part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend shall not be granted unless the amount so admitted to be due is deposited by the defendant in Court. [16]

Also, In Milkhiram (India) Private Ltd. vs. Chamanlal Bros [17] it was clarified by the Apex Court that cases where the defence is patently dishonest or so unreasonable that it could not reasonably be expected to succeed, that the exercise of discretion by the trial court to grant unconditional leave to defend may be questioned.

In Neebha Kapoor v. Jayantilal Khandwala [18] the Apex court had held that Order 37 of the Code has been prescribed in terms of the provisions contained in Clause (f) of Sub-section (2) of Section 128 of the Civil Procedure Code so as to expedite trial of suits specified therein. There is no doubt that the underlying public policy behind Order 37 is expeditious disposal of suits of commercial nature.

It provides for such disposal as expeditiously as possible by prescribing time frame therefore. Where, however, applicability of Order 37 of the Code itself is in question which appears to be the principal reason behind the impugned judgment, grant of leave to the defendant may be permissible. The court before passing a decree was entitled to take into consideration the consequences therefore.

Special Circumstances and Sufficient Cause
In Karumilli Bharathi v. Prichikala [19] the difference between special circumstance and sufficient cause was laid down. According to the Rule 4 of the Order XXXVII after decree has been passed by the Court, it may, under special circumstances, set aside the decree, and if necessary stay or set-aside execution, and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the Court so to do, and on such terms as the Court thinks fit.

It is clear that after the decree is passed under Order 37, by adopting summary procedure, if the defendant makes out a special circumstance and if the Court considers it to be reasonable, the Court may set aside the decree passed ex parte. Under this rule what is to be made out by the defendant is 'special circumstance' but not 'sufficient cause'. Order 9 Rule 13 of CPC is also a similar provision provided for setting aside the decree ex parte in a suit instituted in accordance with ordinary procedure.

Under that order if the defendant satisfied the Court that he was prevented by any sufficient cause from appearing, when the suit was called on for hearing, the Court may set aside the ex parte decree passed against him, on such terms as to costs etc. Thus, from a reading of Order 9 Rule 13 CPC it is clear that what is to be made out under that order is that the defendant was prevented by sufficient cause. However, in Order 37 the defendant has to make out a special circumstance.

Order 37 fuels the process of appropriate mechanism and ensures that the defendant does not prolong the litigation process especially in commercial matters. Hence, Summary Suit is a resourceful solution to help prevent unreasonable obstruction and is beneficial for commercial businesses.

End-Notes:
  1. A bill of exchange is a written unconditional order by one party (the drawer) to another (the drawee) to pay a certain sum either immediately or on a fixed date for payment of goods and/or services received. If the sum is to be paid immediately it is called a sight bill. Term bill is the bill of exchange where the sum is to be paid on a fixed date.
  2. A promissory note contains an unconditional promise to pay a certain sum to the order of a specifically named person or to bearer—that is, to any individual presenting the note. A promissory note can be either payable on demand or at a specific time.
  3. A Hundi is an unconditional order in writing made by a person directing another to pay a certain sum of money to a person named in the order. It is a financial instrument evolved on the Indian sub-continent and used for trade and credit purposes.
  4. Santosh Kumar v. Bhai Mool Singh [AIR 1958 SC 321]
  5. Kamlesh Kohli v. Escotrac Finance & Investment Ltd. [(2000) 1 SCC 324]
  6. Mechelec Engineers & Manufacturers v. Basic Equipment Corp. [AIR 1977 S 577]
  7. Santosh Kumar v. Bhai Mool Singh [AIR 1958 SC 321]
  8. Raj Duggal v. Ramesh Kumar [AIR 2010 SC 2885]
  9. Mechelec Engineers & Manufacturers v. Basic Equipment Corp. [AIR 1977 S 577]
  10. Santosh Kumar v. Bhai Mool Singh [AIR 1958 SC 321]
  11. AIR 1982 SC 1518
  12. Ramkarandas v. Bhagwandas [AIR 1965 SC 1144]
  13. Mechelec Engineers & Manufacturers v. Basic Equipment Corp. [AIR 1977 S 577]
  14. Dwarka Prasad Agarwal v. B.D. Agarwal [(2003) 6 SCC 230]
  15. AIR 1949 Cal 479
  16. IDBI Trusteeship Services Ltd. Vs. Hubtown Ltd [(2017) 1 SCC 568]
  17. AIR 1965 SC 1698
  18. (2008) 3 SCC 770
  19. 1999 (3) ALD 366

Written By: Anuja Waykar, Advocate, Bombay High Court.
Email : [email protected]

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