Indian Bank v. Maharashtra State Co-Op. Marketing Federation [1998 SC] | Current Affairs & General Knowledge - CLAT PDF Download

The question which arises for consideration in these appeals is whether the bar to proceed with the trial of subsequently instituted suit, contained in Section 10 of the Code of Civil Procedure, 1908 is applicable to summary suit filed under Order 37 of the Code.

The respondent Federation applied to the appellant Bank on 5-6-1989 to open an Irrevocable Letter of Credit in favour of M/s. Shankar Rice Mills. Pursuant to that request the Bank opened an Irrevocable Letter of Credit on 6.6.1989. The agreed arrangement was that the documents drawn under the said Letter of Credit when tendered to the appellant Bank were to be forwarded to the Federation for their acceptance and thereafter the Bank had to make payments to M/s. Shankar Rice Mills on behalf of the Federation.

On 6.2.1992 the Bank filed Summary Suit No. 500 of 1992 in the Bombay High Court under Order 37 of the Code against the Federation for obtaining a decree of Rs. 4,96,58,160/- alleging that the said amount has become recoverable under the said Letter of Credit. The Bank took out summons for judgment. The Federation appeared before the Court and took out Notice of Motion seeking stay of the summary suit on the ground that it has already instituted a suit being Suit No. 400 of 1992 against the Bank for recovery of Rs. 3,70,52,217 prior to the filing of the summary suit.

A learned Single Judge of the Bombay High Court, who heard the summons for judgment and the Notice of Motion, held that the concept of trial is contained in Section 10 of the Code is applicable only to a regular/ordinary suit and not to a summary suit filed under Order 37 of the Code and, therefore, further proceedings under Summary Suit No. 500 of 1992 were not required to be stayed. The learned Judge was also of the view that there was no merit in the defence raised by the Federation. He, therefore, granted leave to the Federation to defend the suit conditionally upon the Federation depositing Rs. 4 crores in the Court. The summons for judgment was disposed of accordingly and the Notice of Motion was dismissed.

Aggrieved by the order of the learned Single Judge in summons for judgment the Federation filed Appeal before the Division Bench of the High Court; and against the order passed on Notice of Motion it preferred Appeal. The Division Bench was of the view that the word “trial” in Section 10 has not been used in a narrow sense and would mean entire proceedings after the defendant enters his appearance, held that Section 10 of the Code applies to a summary suit also. It also held that the summary suit filed by the Bank being a subsequently instituted suit was required to be stayed. It allowed both the appeals, set aside the orders passed by the learned Single Judge and stayed the summary suit till the disposal of the prior suit filed by the Federation.

Section 10 of the Code prohibits the Court from proceeding with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit provided other conditions mentioned in the section are also satisfied. The word ‘trial’ is no doubt of a very wide import as pointed out by the High Court. In legal parlance it means a judicial examination and determination of the issue in civil or criminal Court by a competent Tribunal. According to Webster Comprehensive Dictionary, it means the examination, before a tribunal having assigned jurisdiction, of the facts or law involved in an issue in order to determine that issue. Thus in its widest sense it would include all the proceedings right from the stage of institution of a plaint in a civil case to the stage of final determination by a judgment and decree of the Court. Whether the widest meaning should be given to the word ‘trial’ or that it should be construed narrowly must necessarily depend upon the nature and object of the provision and the context in which it is used.

Therefore, the word “trial” in Section 10 will have to be interpreted and construed keeping in mind the object and nature of that provision and the prohibition to ‘proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit.’ The object of the prohibition contained in Section 10 is to prevent the Courts of concurrent jurisdiction from simultaneously trying two parallel suits and also to avoid inconsistent findings on the matters in issue. The provision is in the nature of a rule of procedure and does not affect the jurisdiction of the Court to entertain and deal with the later suit nor does it create any substantive right in the matters. It is not a bar to the institution of a suit. It has been construed by the Courts as not a bar of the passing of interlocutory orders such as an order for consolidation of the later suit with the earlier suit, or appointment of a Receiver or an injunction or attachment before judgment. The course of action which the Court has to follow according to Section 10 is not to proceed with the ‘trial’ of the suit but that does not mean that it cannot deal with the subsequent suit any more or for any other purpose. In view of the object and nature of the provision and the fairly settled legal position with respect to passing of interlocutory orders it has to be stated that the word ‘trial’ in Section 10 is not used in its widest sense.

The provision contained in Section 10 is a general provision applicable to all categories of cases. The provisions contained in Order 37 apply to certain clauses of suits. One provides a bar against proceeding with the trial of a suit, the other provides for granting of quick relief. Both these provisions have to be interpreted harmoniously so that the objects of both are not frustrated. This being the correct approach and as the question that has arisen for consideration in this appeal is whether the bar to proceed with the trial of subsequently instituted suit contained in Section 10 of the Code is applicable to a summary suit filed under Order 37 of the Code, the words ‘trial of any suit’ will have to be construed in the context of the provisions of Order 37 of the Code. Rule 2 of Order 37 enables the plaintiff to institute a summary suit in certain cases. On such a suit being filed the defendant is required to be served with a copy of the plaint and summons in the prescribed form. Within 10 days of service the defendant has to enter an appearance. Within the prescribed time the defendant has to apply for leave to defend the suit and leave to defend may be granted to him unconditionally or upon such terms as may appear to the Court or Judge to be just. If the defendant has not applied for leave to defend, or if such an application has been made and refused, the plaintiff becomes entitled to judgment forthwith. If the conditions on which leave was granted are not complied with by the defendant then also the plaintiff becomes entitled to judgment forthwith. Sub-rule (7) of Order 37 provides that save as provided by that order the procedure in summary suits shall be the same as the procedure in suits instituted in the ordinary manner.

Thus in classes of suits where adopting summary procedure for deciding them is permissible the defendant has to file an appearance within 10 days of the service of summons and apply for leave to defend the suit. If the defendant does not enter his appearance as required or fails to obtain leave the allegations in the plaint are deemed to be admitted and straightaway a decree can be passed in favour of the plaintiff. The stage of determination of the matter in issue will arise in a summary suit only after the defendant obtains leave. The trial would really begin only after leave is granted to the defendant. This clearly appears to be the scheme of summary procedure as provided by Order 37 of the Code.

Considering the objects of both the provisions, i.e. Section 10 and Order 37 wider interpretation of the word “trial” is not called for. We are of the opinion that the word ‘trial’ in Section 10 in the context of a summary suit, cannot be interpreted to mean the entire proceedings starting with institution of the suit by lodging a plaint. In a summary suit the ‘trial’ really begins after the Court or the Judge grants leave to the defendant to contest the suit. Therefore, the Court or the Judge dealing with the summary suit can proceed up to the stage of hearing the summons for judgment and passing the judgment in favour of the plaintiff if (a) the defendant has not applied for leave to defend or if such application has been made and refused or if (b) the defendant who is permitted to defend fails to comply with the conditions on which leave to defend is granted.

We, therefore, allow these appeals, set aside the impugned judgment of the Division Bench of the High Court and restore the order passed by the learned Single Judge.