Judgment:
R. Pal, J.
1. I have had the privilege of reading the judgment of my learned Brother. While I concur with the views expressed by him, having regard to the fact that we have been unable to accept an earlier Division Bench judgment on one of the issues involved in this case. I would like to express my view in a few brief paragraphs.
2. Two issues have arisen for our decision in this appeal. The first is the question of maintainability of an appeal from an order granting conditional leave to defend under Order 37 of the Code of Civil Procedure. The second relates to the merits of the order under appeal which arise for decision only if we decide the first in the affirmative.
3. On the first issue a Division Bench of this court in M/s Merchants of Traders (P) Ltd. v. M/s Sarmon Put. Ltd. : 1997(1) CHN 286 has held that an appeal from such an order as is now under appeal before us, was not maintainable as a judgment under Clause 15 of the Letters Patent. In arriving at this decision the Division Bench followed two earlier decisions on the point namely, Hiralal Deb Gupta v. Salil Kumar Paul: : AIR1973Cal320 and Bonwarilal Roy v. Sohanlal Daga: ILR(1955) 1 Cal 299. The ratio of those two earlier decisions was that the order was not appelable because by refusing leave to defend or by granting conditional leave to defend under Order 37, it did not necessarily mean that the plaintiff would succeed in the suit. Order 37 as it stood then envisaged a decree being passed subsequently.
4. Since those two decisions were rendered, in 1976, Order 37 has been amended. In our opinion the ratio in Hiralal Dev Gupta v. Salil Kumar Pal (supra) and Bonwarilal Roy v. Sohanlal Daga (supra) can no longer be said to be applicable to Order 37 as it stands after theamendment.
5. We say so far the following reasons : The procedure now prescribed for passing summary Judgments is materially similar to the procedure which is prescribed under Chapter XIIIA of the Original Side Rules of this court. This envisages a decree being passed immediately upon the defendants failure to obtain leave to defend or failing to comply with the condition subject to which the leave may be granted.As far as this court is concerned, it has been consistently held that an order granting conditional leave to defend under Chapter 13A is an appealable order as a 'Judgment' under Clause 15 of the Letters Patent [see : Chattu Lal Misser and Ors. v. M/s Marwari Commercial Bank Ltd. and Anr. ; AIR 1926 Cal 668 (DB);.Mitra Mukherjee & Co. v. Ajit Kumar Sarkar; AIR 1963 Cal 9 (DB)]. Indeed the two decisions relied upon in M/s Merchant and Trader's case also recognised that an orders refusing leave to defend or giving such leave on conditions under Chapter 13A of the High Court Rules were appealable because they 'involved' and were 'automatically followed by a decree'. Under Order 37 of the Code as it now stands order refusing or granting conditional leave to defend 'involve' or are 'automatically followed by a decree'. On the same resoning such orders must be held to be appealable under Clause 15 of the Letters Patent.
6. Secondly, prior to the 1976 Amendment, Order 37 had been amended as far as the Bombay High Court was concerned. The 1976 Amendment of the Code to a large extent incorporates the Bombay High Court Amendment. As far as the Bombay High Court amendment was concerned, the Bombay High Court held that an order granting conditional leave to defend was a judgment under Clause 15 and the appealable as such [see Ramanlal Shantilal & Co. v. Chunilal Damodardas & Ors. AIR 1932 Bom 163 (DB)] The appealability of such orders was also recognised in passing by the Supreme Court in Milkiram (India) Pvt. Ltd. v. Chamanlal : : AIR1965SC1698 where it was said in connection with an order under the Bombay High Court Amendment to Order 37 granting leave to defend on conditions:
'No doubt an appeal lies against it under the Letters Patent but that is merely an internal appeal in a High Court, which is not like an appeal under section 96 or a revisional application under section 115.'
7. After the 1976 Amendment there has been no change in the law as far as Bombay High Court is concerned and it is still held that an order refusing leave to defend is an appealable one (See : M/s D. Shanalal & etc. v. Bank of Maharastra : : AIR1989Bom150 ).
8. Finally there is the decision of the Supreme Court in Shah Babulal Khimji v. Jayaben D. Kama and Anr. : [1982]1SCR187 which has been quoted in extenso in the judgement of my learned brother. I would like to emphasize the following passage :
'Where the trial Judge in a suit under Order 37 of the Code of Civil Procedure refuses the defendant leave to defend the suit, the order directly affects the defendant because he loses a valuable right to defend the suit and his remedy is confined only to contest the plaintiffs case on his own evidence without being given a chance to rebut that evidence. As such an order vitally affects a valuable right of the defendant it will undoubtedly be treated as a judgment within the meaning of the Letters Patent so as to be appealable to the larger Bench.'
9. The observations appear to relate to Order 37 as it stood prior to its amendment when even after denial of leave to defend, the decree did not automatically follow and the defendant could still contest the plaintiffs case on its own evidence. The principle would a fortiori be applicable now after the 1976 amendment to Order 37 when with thedismissal of the application for leave to defend, the decree follows immediately.
10. Had the decision in Merchant Traders Co. not been there we would have had no hesitation in holding that given the present form or Order 37, an order refusing leave to defend or granting such leave conditionally is appelable under Clause 15 of the Letters Patent. Since a contrary view has been expressed by a court of co-ordinate jurisdiction in our opinion the issue should be referred to a larger Bench.
11. Until the issue of appealability is decided by a larger Bench there is strictly speaking, no question of granting any relief to the appellant. Even if there were, we are not persuaded to hold on the merits that the appellant has raised a bona fide dispute to the claim of the plaintiff. As noted by my learned Brother the claim of the plaintiff/ respondent is on the basis of dishonoured cheques. The defence is that the appellant had made payments to the plaintiffs/respondent and one Unique Traders, a concern of the plaintiff/respondent's brother, which were in excess of the amounts claimed in the plaint.
12. The reference to Unique Traders is a red herring. M/s Unique Traders is not a party to the suit. The appellant has not filed any proceedings for claiming any amount against M/s Unique Traders. It appears from the documents annexed that the appellant had received goods from Unique Traders and the plaintiff respondent. Separate accounts were maintained. Payments which were made to the account of Unique Traders had been receipted as such and payments to the plaintiff/ respondent have also been seperately receipted. The appellant had never asked for return of the cheques given to the plaintiff respondent and indeed, by several letters including letters dated 23rd April 1996, 6th May 1996. 9th May 1996 and 20th May 1996 the appellant has admitted inter alia to its Banker that a sum of Rs. 65,580 was payable to the plaintiff respondent after adjusting an amount of Rs. 4.60.576/- on account of monies paid in excess to Unique Traders. If the amount were not 'adjusted' the admitted dues to the plaintiff/respondent would be over Rs. 5 lakhs.
13. In the circumstances it cannot be held that the learned Judge has exercised his discretion arbitrarily in granting the appellant conditional leave to defend subject to furnishing security for five lakhs and in default directing a decree for that sum.
B. Panigrahi, J.
14. The instant appeal and the application are directed against an order/judgment passed by the learned trial Judge whereby and whereunder it was directed on a suit insituted by the plaintiffs/ respondents under Order 37 of the Code of Civil Procedure, 1908 against the appellant for grant of conditional leave to enter appearance and file written statement subject to furnishing a Bank Guarantee for Rs. 5,00,000/- or furnishing a security by way of immovable property for the like amount and in case of default on furnishing such security a decree for Rs. 5,00,000/ against the appellants would be passed and for balance amount claimed in the suit it was directed to be tried at the final hearing of the case.
15. The skeletal picture of the case which has emerged from the pleading are as follows :
The defendants/appellants had transacted certain business in purchase of goods from the plaintiffs on various dates and allegedly issued A/C Payee Cheques in favour of the plaintiff against those purchases for valuable condsideration . Those cheques, on being presented by the plaintiff/respondent to his bank, i.e.. Bank of Baroda, on various dates, were dishonoured by the banker-on account of 'Refer to drawer', 'Insufficient of Fund'. 'Payment stopped by the drawer'. The principal amount claimed by the plaintiff under those dishonoured cheques is Rs. 11,872.80 and the interst accrued thereon at the rate of Rs. 19/- P. A. till the date of filing of the suit which came to Rs. 58.687.60 thus a claim was made for the total amount of Rs. 12,16,360.40. Since the appellants had failed and neglected to pay the said amount of Rs. 12,16,560.40 or any portion thereof despite several demands by the plaintiffs/respondents. Judges Summon was taken out against the appellants for paying the said amount. The plaint was filed under the Summary procedure i.e., under Order 37 of the Code of Civil Procedure on the basis of those dishonoured cheques. The plaintiffs took out an application for attachment before judgment. He also made a separate prayer for grant of injunction and the learned single Judge, on 18th July, 1996 was, however, inclined to pass an order of injunction restraining the appellants for dealing with on disposing of their properties as mentioned in the said application. The appellant/ defendants after entering appearance in court applied for extension of time by making an application for leave to defend the suit. The application for attachment before judgment was disposed of on 6th August, 1996, whereupon the learned single Judge directed the appellants to furnish security of Rs. 4,00,000/- within four months from the date and the said amount be kept with their learned advocate on record. With those observations, the learned Judge vacated the earlier interim order. The appellants, subsequently, filed another application for relieving them from depositing the amount of Rs. 4,00,000/- in terms of the previous order. But the learned single Judge refused to alter the order whereby the defendant was directed to furnish security to the extent of Rs. 4,00,000/-. So, therefore, the appellants preferred an appeal from the aforementioned direction before a Division Bench of this Court which had set aside the order of the Trial Judge and remitted back the same with a direction to hear out the security afresh and dispose of the same with a reasoned order.
16. The learned trial Judge, after remand has, however, directed appellants to furnish security of Rs. 5,00,000/- by way of bank guarantee or immovable properties within four weeks from the date of the order on compliance of such condition; the defendant was granted leave to file written statement. Being aggrieved by the order dated 18th August, 1998, the defendants have preferred this present appeal and further prayed for interim stay to furnish security. However, the court in this appeal passed an interim order. The learned advocate appearing for the plaintiff/respondent has, at the outset, taken a formidable ground about the appealability of the order which is being assailed before us. It has been strongly submitted that the order in question not being a Judgment or a decree, therefore, it could neither be appealed aginst under the provisions of Order 43 of the Code of Civil Procedure nor under Clause 15 of the Letters Patent Rule.
17. Strong reliance has been placed on ILR 1955(1) Calcutta page 299 in the case of Bonwari Lal v. Sohan Lal Daga. In the aforementioned judgment it has been held as follows :
'An order under order XXXVII, Rule 3 - order refusing leave to defend or giving leave on terms if a judgment within Clause 15 of Letters Patent Appeal against such order, whether maintainable -order, whether may be challenged in appeal against decree passed in suit.
An order under O.XXXVH Rule 3 of the Code of Civil Procedure refusing leave to defend or giving leave en terms, is not a 'judgement' within the meaning of cl. 15 of the Letters Patent and no appeal is maintainable under the clause.'
18. The Division Bench further held as follows :
'Where a decree is passed in the suit after such an order has been made, the propriety of the order may be challenged in an appeal aginst the decree. But where there has been no appeal against the decree, an appeal against the order even if it were maintainable will be infructuous and cannot be entertained.'
19. The Division Bench while deciding the above case had further dissented from the view expressed by Madras High Court in the case of G. Simaram Chettiar v. P.A. Valli Ammal 1935 AIR (Mad.) 43.
20. The Court further disagreed with the views of the Bombay High Court reported in 1921 1LR Bombay, page 268.
21. Reliance was, however, placed on the judgments reported in (1925) 30CWN 298 Chattu Lal Misser and Others v. Marwari Commercial Bank, Ltd. and others, and in the case of Sukhlal Chudermuli v. Eastern Bank Ltd. 1915, ILR 42 Calcutta page 738.
22. The learned advocate appearing for the plaintiff/respondent has again relied upon Judgment of this court reported in AIR 1973 page 320 in the case of Hiralal Debgupta v. Salif Kumar Paul. In the aforementioned Judgment the views expressed in Bonwari Lal case was followed and the Court held as follows :
Appeal against an order under Order 37 Rule 3, granting conditional leave to the defendant to defend in the suit is incompetent since such order is not a 'judgment' within clause 15 and since no appeal is provided for by the Code. However adjudication of rights finally by the decree in the suit being 'judgment' within Clause 15, the decree is appealable. Hence the proper course is to file appeal against the decree in which the validity of the order can be canvassed. The fact that Order 37 Rule 4 enables a defendant to apply for setting aside such decree does not deprive him of the right of appeal from the decree.'
23. An identical question has again appeared to be considered before a Division Bench of this Court reported in 1997(1) CHN, page 287 in the case of Merchant of Traders (P)Ltd. v. Sarman (P) Ltd. It has been observed in the above judgment as follows :
The instant appeals are preferred against the order of a learned single Judge granted leave to appellants/defendants to defend the suit under Order 37 of the Code of Civil Procedure, 1908, on condition of deposit of Rs. 30,00,000/- either in cash or by way of a bank guarantee or by real property. The appellant/defendant contended that the order to grant leave to defend the suit should have been unconditional. The respondent/plaintiff contended that appeals were not maintainable. No appeal maintainable from an order grantingconditional leave to defend a suit because such order is not a judgment within the meaning of clause 15 of the Letters Patent.'
24. The defendant/appellant while assailing the stand of the plaintiffs/ respondent has strongly contended that the order granting conditional leave to file written statement is as good as refusal and therefore, it is appealable. Strong reliance has been placed upon the judgment reported in AIR 1963 Calcutta page 9 in the case of Mitra Mukherjee and Co. and another v. Ajit Kumar Sarkar. In the aforementioned case a Division Bench of this Court has observed as follows :
' An appeal being preferred against the said order it was contented by counter for the plaintiffs that no appeal lay therefrom. Considering the provisions of 0.37 and 0.43 of the Code of Civil Procedure Sanderson C.J. said that, in his judgment taking the said provisions as a guide it might reasonably be held that the order in so far as it directed the attachment of the property was a judgment and was appealable, but in so far as it directed security to be furnished, it was not appealable. It was to this observation that Mr. Banerjee referred in support of his contention that as the order appealed from is one for furnishing security no appeal lay from it and that even if we are disposed to hold that on the facts of the case that the defendants have disclosed a good and bona fide defence we could not entertain any appeal from the order directing the furnishing of security. The proposition seems to be an astounding one. The result of the order is that if security is not furnished a decree against the defendants would be drawn up and as a matter of fact a decree has been drawn up and the suit finally disposed of. It is absurd to suggest that such an order is not appealable or that there is any reason to hold that the appeal from the order directing security to be furnished is not maintainable. The effect of non-compliance with the order, as I have already pointed out , is to deprive the defendants of a valuable right, namely, to defend the suit and clearly in such a case it can not be said that the order directing the security, in default whereof a decree was to be drawn up against the defendants is not appealable. This point in my opinion has no merits.'
25. In the above case, the Division Bench has. however, distinguished the judgment of Haji Mahamuddin and Co. v. Eastern Japan Trading Co. AIR 1923 Cal. 639 (v.10) ILR 50 page 215. On reading the facts of the case it is found that the plaintiffs in the above suit filed an application for attachment before judgment and defendants were called upon to show cause as to why he should not be directed to furnish security for the claim of the case of the plaintiff. Thus, the Division Bench held that the said order was not appealable. But from the view taken in Mitra Mukherjee's case the trite position has emerged that the grant of conditional leave or any direction to furnish security failing which a decree would follow amounted to a judgment and is, therefore, appealable under chapter XIIIA of the High Court Rules and Order (Original Side) Calcutta.
26. Strong reliance was placed in the case Shah Babulal Khimji v. Jayaben D. Kanta and another reported in : [1982]1SCR187 as follows :
'81. We now proceed to deal with the main controversy as to what is the true scope, meaning and purport of the word 'judgment' used in Clause 15 of the Letters Patent. Numerous authorities on both sideswere cited before us in the course of the veryable arguments advanced by counsel for the parties and it appears that there are three leading Judgments which have spelt out certain tests to determine as to when an order passed by a trial Judge can be said to be a 'Judgment' within the meaning of clause 15 of the Letters Patent. A very narrow view on this point was taken by a Division Bench of the Calcutta High Court in the case of Justice of the Peace for Calcutta (1872-8 Beng LR 433) (supra) where Sir Gouch, C.J. on an interpretation of clause 15 of the Letters Patent observed thus :
'We think that 'Judgment' in clause 15 means a decision which affects the merits of the question between the parties by determining some right or liability. It may be either final or preliminary, or interlocutory, the difference between them being that a final Judgment determines the whole cause or suit, and a preliminary or interlocutory judgment determines only a part of it, leaving other matters to be determined.'
82. An analysis of the observations of the Chief Justice would reveal the following tests were laid down by him in order to decide whether or not an order passed by the Trial Judge would be a Judgment:
(1) a decision which effects the merits of the question between the parties;
(2) by determining some right or liability:
(3) the order determining the right or liability may be final, preliminary or interlocutory, but the determination must be final or one which decides even a part of the controversy finally leaving other matters to be decided later.
83. Thus, examining the tests laid down by Sir Richard Gouch, C.J., it seems to us that the view taken by the learned Chief Justice appears to place a very strict and narrow interpretation on the word 'judgment' under which orders deciding matters of moment or valuable right of the parties without finally deciding the suit may not amount to a judgment and hence, not appealable. In giving this interpretation the learned Chief Justice was guided by two considerations.
(1) That a liberal interpretation may allow vexed litigants to carry any discretionary order of the trial court in appeal, and (2) that it would confer more extensive rights to appeal against the Judge sitting on the Original Side than the right of appeal given to a Trial Judge sitting in the mofussil. We are doubtless impressed with the force of the reasons given by him but we feel that despite those considerations the law must be interpreted as it stands and a Court is not justified in interpretating a legal term which amounts to a complete distortion of the word 'judgment' so as to deny appeals even against unjust orders to litigants having genuine grievances so as to make them scapegoats in the garb of protecting vexations appeals. In such cases, a just balance must be struck so as to advance the object of the statute and give the desired relief to the litigants, if possible. Although it is true that this decision is practically the locus classlous so far as the Calcutta High Court is concerned and has been consistently followed by later decisions at the same time, it cannot be denied that in a number of cases the conscience of the Judges was so shocked that they tried to whittle down or soften the rigours of this decision so much so that in one case the observations of the Chief Justice were not only not followed but were described as antiquated and in other cases the Judges strongly expressed themselves that the High Court should give upits fondness to stick to the principles laid down by the learned Chief Justice. It is not necessary for us to burden this judgment with later decisions of the Calcutta High Court in trying to comment on the correctness of the principles laid down by Sir Gouch C.J., but a few instances may be quite revealing.
84. In Chandi Charan Sana v. Jnanendra Nath Bhattacharjee 29 Cal LJ 225: (AIR 1919 Cal. 667) Sir Ashutosh Mookherjee in his leading judgment modified the strict rule of interpretation of 'judgment' laid down by Sir Gouch. C.J. and pointed out that the words 'merits of the question between the parties by determining a right of liability', were not to be confined or restricted to the controversy in a suit itself but could take within its fold any right involved in any application which puts an end to the suit or the proceeding. Sir Mookherjee, J. has widened the scope of the observations of Sir Gouch. C.J. and adopted some of the observations of Sir White, C.J. in Taljiram Row's case (1912 ILR 35 Mad 1 ) (supra) and in this connection observed thus :-
'It is plain that the expression 'some right of liability is not restricted to the right in controversy in the suit itself ... On the other hand, if we adopt the wider definition formulated by White C.J. in the case of Taljiram Row v. Alagappa Chettiar, (1912 ILR 35 Mad. 1) the decision is unquestionably a judgment within the meaning of the Letters Patent. The test is, not what the form of the adjudication is but what is its effect in the suit of proceeding in which it is made. If its effect, whatever its form may be, and whatever may be the nature of the application on which it is made, is to put an end to the suit or proceeding so far as the court before which the suit or proceeding is pending is concerned, or if its effect, if it is not compiled with, is to put an end to the suit or proceeding, the adjudication is a judgment, Mathura v. Harem (1915 ILR 43 Cal 857): (AIR 1916 Cal. 361)'
27. In the Lea Badin's case : AIR1935Cal35 (supra), the following observations were made :
'To remove the incongruity which appears in the decision of this court and to lay down some definite rule by which orders might be tested when it has to be determined whether or not they are judgment within the meaning of me clause, this court will some day have to abandon its fond adherence to the antiquated defination of Gouch. C.J. and boldly acknowledge its allegiance to the tests laid down by White. C.J.
90. The next leading case which lays down the test of a judgment and which seems to have found favour with most of the High Courts in India is the test laid down by Sir Arnold White C.J. in Taljiram Row's case (1912 ILR 35 Mad 1) (supra) where the learned Chief Justice pointedly spelt out the various tests and observed thus :-
' The test seems to me to be not what is the form of the adjudication but what is its effect in the suit or proceeding in which it is made. If its effect, whatever its form may be the nature of the application on which it is made, is to put an end to the suit or proceeding so far as the court before which the suit or proceeding is pending is concerned, or in its effect, if it is not compiled with, is to put an end to the suit or proceeding, I think the adjudiction is a judgment within the meaning of the clause. An adjudiction on an application which is nothing more than a step towards obtaining a final adjudication in the suit is not in my opinion, a Judgment within the meaning of the Letters Patent.
I think too, an order on an independent proceeding which is ancilliaryto the suit (not instituted as a step towards judgment, but with a view to rendering the judgment effective if obtained) e.g. an order on an application for an interim injunction, or for the appointment of a receiver is a 'judgment' within the meaning of the clause.'
91. Analysing the observations of the learned Chief Justice it would appear that he has laid down the following tests in order to assess the import and definition of the word 'Judgment' as used in clause 15 of the Letters Patent :
(1) It is not form of adjudication which is to be seen but its actual effect on the suit or proceeding ;
(2) If, irrespective of the form of the suit or proceeding the order impugned puts an end to the suit or proceeding it doubtless amounts to a judgment:
(3) Similarly, the effect of the order, if not compiled with is to terminate the proceedings the said order would amount to a judgment;
(4) Any order in an independent proceeding which is ancilliary to the suit (not being a step towards judgment) but is designed to render the judgment effective can also be termed as judgment within the meaning of the Letters Patent.
So, far as this test is concerned, the learned Chief Justice had in mind orders passed by the trial Judge granting or refusing ad interim injunction or apponting or refusing to appoint a receiver.
(5) An order may be a Judgment even if it does not affect the merits of the suit or proceedings or does not determine any rights in question raised in the suit or proceeding.
(6) An adjudication based on a refusal to excercise discretion the effect of which is to dispose of the suit, so far as that particular adjudication is concerned, would certainly amount to a judgment within the meaning of the Letters Patent.
113(3). Intermediary or interlocutory judgment--Most of the interlocutory orders which contain the quality of finality are clearly specified in clauses (a) to (W) of Order 43 Rule 1 and have already been held by us to be judgments within the meaning of the Letters Patent and therefore appealable. There may also be interlocutery orders which are not covered by Order 43, Rule 1 but which also possess the characteristics and trapping of finality in that, the orders may adversely affect a valuable right of the party or decide an important aspect of the trial in an ancilliary proceeding. Before such an order can be a judgment the adverse effect on the party concerned must be direct and immediate rather than indirect or remote. For instance where the trial Judge in a suit under Order 37 of the Code of Civil Procedure refuses the defendant leave to defend the suit, the order directly affects the defendant because he loses a valuable right to defend the suit and his remedy is confined only to contest the plaintiffs case on his own evidence without being given a chance to rebut that evidence. As such an order vitally affects a valuable right of the defendant it will undoubtedly be treated as a judgement within the meaning of the Letters Patent so as to be appealable to a larger Bench. Take the converse case in a similar suit where the trial Judge allows the defendant to defend the suit in which case although the plaintiff is adversely affected but the damage or prejudice caused to him is not direct or immediate but of a minimal nature and rather too remote because the plaintiff still possess his full right to show that the defence is false and succeed in the suit. Thus, such an order passed by the trial Judge would not amount to a judgmentwithin the meaning of Clause 15 of the Letters Patent but will be purely an interlocutory order.'
28. Reliance has, however, been placed in a reported Judgment : AIR 1926 Calcutta 668. The Division Bench has held in the following manner in the case of Chattu Lall Misser and Ors. v. Marwari Commercial Bank Ltd. and Others.
'Where defendant's attorney gave the plaintiff another opportunity by again entering appearances after defendant had already appeared in person the period of 10 days runs from the date of the laterappearance.'
'Where the order was that upon security for a ceratin amount being given within a certain time, the defendants should have leave to defend, but that in default of the defandants giving security within the time aforesaid, a decree was to be drawn up.'
29. The Supreme Court, in the case of Milkhiram (India) Private Ltd. and Ors. v. Chaman Lal Bros. (AIR 1965 page 1698) held no doubt an appeal lay against the order under the Letters Patent but i.e., merely an internal appeal in High Court which cannot be likened to an appeal under section 96 or a revision under section 115 of the Code. The aforementioned case arose from Bombay High Court on the basis of amended Rule to Order XXXVII Rule 3(3) of the Code of Civil Procedure. in the aforesaid case, the Supreme Court has distinguished from the judgment of this court reported in : AIR1955Cal402 in the case of Bimal Kumari v. Ashoke Mitra. The Bombay High Court consistently and systematically has followed that the order refusing leave to defend the suit of the order directing to furnish security falling which the decree would follow amounts to passing a Judgment and, therefore, appealable.
30. To appreciate the different contentions raised by the learned advocates appearing for the both parties. I feel it convieient to quote the provisions of Order 37 Rule 3(1) 3(2) prior to 1976 Amendment which as follows :
' 3.(1) The court shall, upon application by the defendant, give leave to appear and to defend the suit, upon affidavits which disclose such facts as would make it incumbent on the holder to prove consideration, or such other facts as the court may deem sufficient to support the application.
(2) Leave to defend may be given unconditionally or subject to such terms as to payment into court, giving security, framing and recording issues or otherwise as the court thinks fit.'
31. There are High Court Amendments as regards to Bombay (Dadra and Nagar Haveli) to sub-Rule 3 of Order 37 which has been quoted hereunder:
'3.(1) The plaintiff shall together with the writ of summons under Rule 2 serve on the defendant a copy of the plaint and exhibits thereto, and the defendant may at any time within ten days of such service enter an appearance . The defendant may enter an appearance in person or by pleader. In either case an address for service shall be given in the memorandum of appearance, and, unless otherwise ordered, all summonses, notices, or other judicial process required to be served on the defendant shall be deemed to have been duly served on him if left at his address for service. On the day of enteringappearance, notice of the appearances shall be given to plaintiffs pleader (or if the plaintiff sues in person to the plaintiff himself) either by notice delivered at, or sent by prepaid letter directed to, the address of the plaintiffs pleader or of the plaintiff as the case may be.
(2) If the defendant enters an appearance, the plaintiff shall thereafter serve on the defendant a summons for judgment in Form No. 4A in appendix B or such other form as may be prescribed from time to time returnable not less than-ten clear days from the date of service supported by an affidavit verifying the cause of action and the amount claimed and stating that in his belief there is no defence in the suit.
(3) The defendant may at any time within ten days from the service of such summons for judgment by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend suit. Leave to defend may be granted to him unconditionally or upon such terms as to the Judge appear just.'
32. After reviewing all the authorities, the court should lay down a definative ruling that if the evidence of the defendant is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence and judgment will be given to the plaintiff. Two tests are appropriate, namely. 'Is what the defendant says credible?' and ' is there a fair or reasonable probability of the defendant having a real or bona fide defence?' Where an issue of fact is raised, the first question must be answered in the affirmative before considering the second.
33. In Bonwari Lal case this court, while disagreeing with the views of the Bombay High Court, held that there might be some amendment to Rule 2 and 3 of the Order XXXII of the Code by the Bombay High Court. Therefore, in that context the Bombay High Court had taken the view that conditional order granting the defendant leave to defend is appealable. But in so far as this court is concerned there was previous Division Bench Judgment which bound the court accordingly it was held to be not maintainable.
34. In the case cited (supra), the said Division Bench did not agree with the observation of Chattutal Misser v. Marwari Commercial Bank Ltd. as the chapter XIII A of the Original Side Rules was considered in 'the Chattulal Misser's case. The Court was of the view that in XIIIA Chapter, the conditional leave to defend a suit on furnishing security would amount to a 'judgment'.. In the same Judgment it was also held that on failure to furnish security when a decree would be drawn up, such decree could be appealed against but not the order. It has been indicated that the drawing up decree was nothing but a mere ministerial process. Even then it was held that the appeal could be filed on the basis of such decree and the order refusing leave to defend the suit would not come within the expression 'judgment'.
35. The Bombay High Court in a Division Bench Judgment reported in L.B.P. Chowdhury v. P. Jain (1970) 74 Cal WN 972. The Division Bench of this court in P. Jain's case held that the preliminary order granting or refusing leave to defend would not be a 'Judgment' within the meaning of Clause 15 of the Letters Patent. But the Bombay Division Bench judgment has not followed the said view on account ofthe views taken by the Supreme Court in : [1982]1SCR187 in Khemji's case that even a conditional order would also be a 'judgment' within the meaning of Clause 15 of the Letters Patent.
36. The Khemji's case : [1982]1SCR187 was not placed nor considered by the Division Bench in Merchant of Traders (P) Ltd. case. Had that case been considered the Division Bench might have come to a different conclusion. AIR 1963 page 9 Mitra Mukherjee's case was also not referred to in the above Division Bench judgment in Merchant Traders case. The scope, object and implication of the amended provisions of the Order 37 Rule 3 after 1976 amendment was seemingly not considered.
37. On combined reading of the pre-amendment Rule to Order 37 Rule 3 CPC, after 1976 amendment along with Bombay Amendent, it appears that the Bombay Amendment and also the 1976 Amendment of Rule 3. Order 37 of the Code, there could be no room for doubt that the view taken by the Bombay High Court could be quite pertinent and relevant and therefore, in agreement with the Bombay High Court's views, the Supreme Court, has, in Khemjt's case laid down broad outlines as to in which cases the appeal could lie against the interim orders passed by the court. In the aforesaid circumstances with great respect we are not able to ascribe our views to the Merchant Traders case reported in 1997(1) CHN 206.
38. The learned advocate appearing for the appellant has brought to our notice that the learned trial Judge without discussing merits of the defendant's contentions had, however, abruptly arrived at the conclusion directing the defendant to furnish security. It is the well settled position of law that the court would, whether or not grant leave to defend the suit filed under Order 37 of the Code of Civil Procedure is a matter of discretion which has to be exercised by the Judge based on sound judicial principle. When a learned Judge of a Chartered High Court on the Original Side passed an order against the defendant directing him to furnish security cannot be characterised as bad on the ground that such order is not based on any reason. Because the provisions of Order 20 Rule CPC has no application to the Chartered High Court.
39. Appellants' case is that the cheques were handed over to the plaintiff by way of co-lateral security for the price of goods which the plaintiff supplied to them. They also submitted that the price of those goods was paid by cash from time to time. If the amount in case already paid, we do not see any good and sufficient reason why the defendants again delivered the cheques to the plaintiffs, The learned advocate appearing for the appellants has brought to our notice that the amount has been already paid to one of the sister concerns namely 'Unique Traders' of the plaintiffs. Therefore, there is no reason as to why they would again be asked to pay the same amount over and again. The plaintiff submitted statement of account which has been revealed that the claim against the defendant was Rs. 13 lakhs. Therefore, the trial Court directed the defendants to put in Rs. 5,00,000/- which represents a portion of the amount claimed as security before the learned Registrar. The learned trial Judge upon a perusal of the plaint, affidavit and documents filed by the parties deemed it appropriate granted only conditional leave to defend the suit. While considering the application to grant leave to the defendant to defend suit, he must haveto form an opinion that the defence raised is not frivolous, false or shame and moonshine. If, upon consideration of the material, the court comes to the conclusion that the defence is highly improper or fantastic, it can put the defendant upon term before granting leave to defend.
40. Therefore, in the above situation, we feel that the trial Court has rightly and justifiably imposed a conditional direction to the defendant to put in Rs. 5,00,000/- as Bank Guarantee as a condition precedant for grant of leave to defend. Therefore, we are not in favour of granting any interim stay till the disposal of the appeal.
Since there are divergent opinion on the points as regards appealability of the conditional order directing the defendant to furnish security and on fulfilling that condition the leave could be granted whether or not would come within the expression 'Judgment' therefore, it is desirable that the matter shall be placed before a larger Bench to resolve the dispute once and for all.
Therefore, the Hon'ble Chief Justice is requested to constitute a larger Bench for deciding the above appeal.
41. Appeal allowed