Delhi High Court Restores Defendant’s Defence in ₹14.33 Lakh Recovery Suit; Holds Non-Payment of Costs Was Curable and Striking Off Defence Disproportionate Prejudice
Delhi High Court Restores Defendant’s Written Statement Struck Off for Unpaid Costs; Finds Default Curable and Permanent Loss of Defence Disproportionately Harsh
Facts
The petitioner/defendant, Kabir Sardar, challenged orders dated 30 May 2025 and 6 April 2026 passed by the District Judge (Commercial Court-10), Tis Hazari Courts, Delhi, in Madan Lal v. Kabir Sardar. By the first order, his defence was struck off and his written statement taken off the record. By the second, his review application was dismissed.
The underlying commercial suit was instituted by Madan Lal on 27 July 2024 for recovery of ₹14,33,873 along with interest. The defendant was served on 20 August 2024 and physically filed his written statement on 6 November 2024, within the statutory outer limit of 120 days from service.
The written statement initially contained curable procedural defects, including absence of signatures and defects in the Statement of Truth. The Trial Court permitted rectification subject to costs of ₹2,500. A corrected written statement was subsequently filed.
On 28 February 2025, the Trial Court found that the written statement had ultimately been filed within the 120-day outer limit and took it on record subject to further costs of ₹2,000.
Those costs remained unpaid. Further costs were imposed, and despite counsel’s undertaking to pay them, payment was not made. On 30 May 2025, rejecting the explanation of “server error”, the Trial Court struck off the defence and removed the written statement from the record.
The plaintiff’s evidence was thereafter recorded and closed, and the matter reached final arguments. The defendant’s subsequent attempts to deposit the costs and restore his defence were unsuccessful, leading to the present petition.
Issues
The principal issues were:
- Whether a defendant whose written statement was filed within the statutory 120-day period could permanently lose his defence merely for subsequent non-payment of costs.
- Whether non-payment of costs was a curable procedural default or justified the extreme consequence of striking the written statement off the record.
- Whether a litigant should suffer permanently because money intended for payment of court-imposed costs was transferred to his counsel but was not paid to the opposite party.
- Whether Section 35A CPC was applicable where there was no finding that the defence was false or vexatious.
- Whether the default was more appropriately governed by Section 35B CPC, and whether that provision mandates permanent forfeiture of the right to defend.
- Whether restoring the defence at an advanced stage of trial would prejudice the plaintiff and, if so, whether such prejudice could adequately be compensated through costs and expedited proceedings.
Petitioner’s Arguments
Kabir Sardar submitted that he had actually transferred amounts of ₹2,000, ₹3,000 and ₹2,500 on 28 February, 10 March and 5 May 2025 respectively to Mr. Dubey, the advocate then representing him before the Trial Court, specifically towards payment of the costs imposed.
He maintained that he genuinely believed his lawyer would deposit those amounts as directed by the Court.
After discovering the position, he directly transferred ₹5,000 to the respondent on 22 April 2026 in compliance with the subsequent order.
The petitioner contended that, as a layperson unfamiliar with court procedure, he should not permanently lose the opportunity to defend a recovery claim exceeding ₹14 lakh because of his lawyer’s default.
He relied upon Rafiq v. Munshila and Dwarika Prasad (Deceased) through LRs v. Prithvi Raj Singh, invoking the principle that litigants ordinarily should not suffer because of counsel’s negligence and disputes should preferably be adjudicated on their merits.
Respondent’s Arguments
The respondent opposed restoration of the defence.
It was argued that the petitioner himself admitted in his review application that the amounts had been transferred to his former advocate rather than to the respondent, despite specific directions requiring payment of costs.
According to the respondent, the petitioner’s repeated failures were not bona fide procedural lapses but reflected a dilatory strategy.
It was further contended that restoring the defence when the plaintiff’s evidence had already concluded and the matter had reached final arguments would disturb proceedings that had substantially progressed towards finality.
Analysis of the Law
Non-Payment of Costs Does Not Mechanically End the Defence
The High Court accepted that failure to comply with an order directing payment of costs may ordinarily justify closure of the defaulting party’s right to prosecute or defend proceedings.
However, such a consequence cannot be imposed mechanically.
Where the record discloses a bona fide explanation and the default can be cured without causing irreparable prejudice to the opposite party, permanently closing the defence may be unjustified.
Written Statement Was Filed Within 120 Days
A decisive distinction was that this was not a case where the written statement itself was filed beyond the statutory deadline.
The Trial Court had already expressly found that it had been filed within the outer limit of 120 days and had taken it on record.
The subsequent default related only to payment of costs imposed while curing procedural defects.
Thus, striking off the entire defence transformed a curable payment default into permanent deprivation of the defendant’s opportunity to contest a substantial monetary claim.
Section 35A versus Section 35B CPC
The High Court also corrected the Trial Court’s reliance upon Section 35A CPC.
Section 35A concerns compensatory costs where a claim or defence is found to be false or vexatious. There was no such finding against Kabir Sardar.
The costs imposed here arose from delay and non-compliance with court directions and were therefore, in substance, governed by Section 35B CPC.
The Court held that although Section 35B permits withholding further proceedings by the defaulting party until costs are paid, it cannot be interpreted as compelling irreversible forfeiture of the defence once the default has subsequently been satisfactorily cured and the opposite party has suffered no prejudice incapable of monetary compensation.
Precedent Analysis
Rafiq v. Munshila, 1981 SCC (2) 788
The petitioner relied upon Rafiq for the principle that an innocent litigant should ordinarily not be made to suffer because of the negligence or default of the advocate engaged to represent him.
This principle was relevant because the petitioner produced material showing that he had transferred the requisite amounts to his former counsel believing they would be paid as costs.
Dwarika Prasad (Deceased) through LRs v. Prithvi Raj Singh, 2024 INSC 1030
The petitioner also relied upon this Supreme Court judgment for the proposition that courts should, as far as possible, determine disputes on their merits rather than shutting a litigant out on technical grounds attributable to counsel’s default.
The High Court’s ultimate approach reflected these principles by distinguishing between deliberate abuse of procedure and a procedural lapse that could be remedied through costs without causing irreversible prejudice.
Court’s Reasoning
The High Court found documentary material showing that Kabir Sardar had actually made payments towards the imposed costs to his former counsel on 28 February, 10 March and 5 May 2025.
Cumulatively, those payments exceeded the costs then payable to the respondent.
The Court acknowledged that the earlier “server error” explanation did not fully reconcile with the later explanation involving payments to counsel.
Nevertheless, the material demonstrated that the petitioner had taken actual steps to arrange and transfer the amounts necessary for compliance.
His later direct payment of ₹5,000 to the respondent further supported the inference that the default was not intended to delay proceedings or deliberately evade compliance.
The Court considered four circumstances particularly important:
- the written statement had been filed within the statutory period;
- payments towards the costs had actually been made by the petitioner to his former counsel;
- the default arose from reliance upon that counsel; and
- the petitioner subsequently paid the respondent directly.
In those circumstances, permanently shutting the petitioner out from defending a claim exceeding ₹14 lakh would cause disproportionate prejudice.
At the same time, the Court did not excuse the petitioner’s repeated defaults unconditionally. It sought to balance both sides by restoring the defence subject to additional costs and ensuring that the commercial suit proceeded expeditiously.
Conclusion
The Delhi High Court set aside the orders dated 30 May 2025 and 6 April 2026 and restored Kabir Sardar’s defence.
The Court directed:
- the ₹5,000 already paid directly to the respondent to be adjusted against previously imposed costs;
- the Trial Court to take the petitioner’s written statement back on record;
- the petitioner to pay additional costs of ₹10,000 within one week;
- the petitioner to be permitted, as a last and final opportunity, to seek recall of PW-1 for cross-examination; and
- the Commercial Court to dispose of the suit preferably within six months.
Thus, while recognising the petitioner’s procedural defaults, the High Court held that the proportionate remedy was costs and expedited trial—not permanent forfeiture of his defence.
Case Details
Case: Kabir Sardar v. Madan Lal
Court: High Court of Delhi at New Delhi
Case Number: CM(M) 1057/2026 & CM APPL. 30741/2026; CNR No. DLHC010200142026
Judge: Hon’ble Mr. Justice Ajay Digpaul
Date: 24 August 2026
Result: Petition allowed in terms; orders striking off the defence and dismissing review set aside; written statement restored subject to ₹10,000 additional costs and expedited trial.
