Court’s Decision
The Delhi High Court dismissed the appeal, upholding the summary decree for ₹7,01,433/-, ruling that:
- The appellant failed to enter appearance within the prescribed time under Order XXXVII CPC.
- The appellant did not file an application for condonation of delay in entering appearance, making the decree unassailable.
- The plea of fraud could have been raised only through an application for leave to defend, which was never properly filed.
- The procedural requirements of Order XXXVII CPC are strict, and failure to comply results in forfeiture of rights to contest the suit.
- The court held that “the technicality based scheme of Order XXXVII CPC cannot be ignored by the court, much less by either of the litigants.”
Based on the above findings, the court ruled that the impugned judgment and decree did not suffer from any legal infirmity and dismissed the appeal.
Facts of the Case
- The respondent (plaintiff in the original suit), a proprietorship firm, filed a summary suit under Order XXXVII CPC against the appellant (defendant in the original suit) for the recovery of ₹7,01,433/-.
- The claim was based on business transactions between the two parties, where the appellant had outstanding payments as per the running accounts maintained by both parties.
- The appellant issued two cheques amounting to ₹4,00,000/-, but both cheques were dishonoured due to insufficient funds.
- The respondent contended that the total outstanding liability of ₹7,01,433/- was admitted in the books of accounts, supported by relevant invoices and proof of supply of goods.
- The suit was decreed ex-parte in favor of the respondent since the appellant failed to enter appearance in the time prescribed under Order XXXVII CPC despite due service of summons.
Issues Before the Court
- Was the appellant served with the summons to enter appearance under Order XXXVII CPC in accordance with law?
- Did the appellant enter appearance within the prescribed period under Order XXXVII CPC?
- Was the summary judgment obtained through fraud, as alleged by the appellant?
- Was the appellant’s failure to enter appearance and file for leave to defend justified, or did it warrant the dismissal of the appeal?
- Does procedural non-compliance under Order XXXVII CPC bar the appellant from contesting the decree?
Petitioner’s (Appellant’s) Arguments
- The appellant contended that the respondent had obtained the decree by fraud, concealing the fact that ₹3,00,000/- had already been paid as full and final settlement.
- The appellant argued that the suit itself was liable to be dismissed on the ground that fraud vitiates all proceedings.
- The appellant claimed that summons were served on 22.05.2018 at its Dehradun factory, and were subsequently transmitted to its Delhi office. However, no formal appearance was entered in time.
- An application for condonation of delay in seeking leave to defend was filed on 02.07.2018, but the appellant did not enter formal appearance before that.
- The appellant contended that since fraud had been committed by the respondent, the decree should be set aside, as fraud nullifies all legal proceedings.
Respondent’s Arguments
- The respondent argued that the appellant had ample opportunity to enter appearance but failed to do so within the time prescribed under Order XXXVII CPC.
- The respondent asserted that the summons to enter appearance were duly served, and the appellant’s failure to act on them was its own fault.
- The respondent contended that Order XXXVII CPC does not allow for condonation of delay unless formal appearance is entered. Since the appellant never entered appearance, it lost the right to contest the suit.
- The respondent also argued that the appellant’s plea of fraud was not related to the issuance of summons, which is the only ground on which an ex-parte decree under Order XXXVII CPC can be challenged.
- Since no leave to defend was sought within the stipulated period, the summary decree was rightly passed.
Analysis of the Law
Order XXXVII CPC and Its Application
- Order XXXVII CPC is a special procedure for summary suits, primarily for commercial disputes involving liquidated sums.
- It provides for expedited disposal of cases, where the defendant must enter appearance within 10 days of receiving summons.
- If the defendant fails to enter appearance, the plaintiff is entitled to a decree without further proof.
- Leave to defend can only be sought after entering appearance, and failure to do so means the suit will be decreed automatically.
Appellant’s Procedural Lapse
- The appellant did not enter appearance within 10 days.
- The appellant did not apply for condonation of delay in entering appearance.
- The plea of fraud could only be raised if an application for leave to defend was filed, which was not done.
- Since the appellant defaulted on all procedural requirements, the decree was unchallengeable.
Precedent Analysis
The court reaffirmed established legal principles, holding that:
- Failure to enter appearance under Order XXXVII CPC results in an automatic decree in favor of the plaintiff.
- Fraud must be related to the service of summons to challenge a summary decree; otherwise, it is irrelevant.
- Strict adherence to procedural requirements is necessary under Order XXXVII CPC.
This ruling aligns with several prior judgments upholding the mandatory nature of procedural compliance in summary suits.
Court’s Reasoning
- The service of summons was not disputed, and the appellant had sufficient time to enter appearance but failed to do so.
- The plea of fraud could have been raised only through an application for leave to defend, which was never properly filed.
- The procedural requirements of Order XXXVII CPC are strict, and non-compliance leads to automatic decrees.
- The court categorically rejected the appellant’s plea of fraud, holding that the technicality-based scheme of Order XXXVII CPC cannot be ignored.
Conclusion
- The Delhi High Court upheld the summary decree and dismissed the appeal.
- The court ruled that the appellant’s failure to enter appearance in time was fatal, and the plea of fraud was legally untenable.
- The impugned judgment and decree were upheld, and the appellant’s applications were dismissed.
Implications of the Judgment
- Strict compliance with procedural requirements under Order XXXVII CPC is mandatory.
- Failure to enter appearance within time bars a defendant from contesting the suit.
- Fraud as a defence must be raised in a legally permissible manner, i.e., through a properly filed application for leave to defend.
- Commercial litigants must be cautious about procedural timelines, as failure to act within the prescribed period can lead to an automatic decree.