India Bank v/s Maharashtra State Cooperative Federation Ltd. (1998)

CaseINDIAN BANK Vs. MAHARASHTRA STATE CO-OPERATIVE MARKETING FEDERATION LTD.,
CourtBefore the Supreme Court of India
BenchJustice S.C. Agrawal and Justice G.T. Nanavati
Author of the judgementJustice G.T. Nanavati
Decided On5 May, 1998
Advocates for the appellantSameer Parekh, Ms. Bina Madhavan, P.H. Parekh
Advocates for the respondentD.M. Nargolkar
Author of the briefAditi Mozika
KeywordsRes Sub Judice, Civil Procedure

Brief Facts and procedural history:

The Respondent Federation opened in the Appellant Bank an Irrevocable Letter of Credit for a sum of Rs. 3,78,90,000/- in favor of M/s. Shankar Rice Mills on 5 June 1989. This was done on 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 and the Notice of Motion was dismissed by the single bench. Aggrieved by the Order of the Learned Single Judge, the Federation preferred Appeals No. 953 and 954 of 1994 before the Division Bench of the High Court.

According to the division bench the word ‘trial’ in section 10 has not been used in a narrow sense and would mean the 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.

Issue before the Honorable Supreme Court:

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?

Held:

  1. 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.
  2. The course of action which the court has to follow according to section 10 is not to proceed with the ‘trial’ of the suit. This does not mean that it cannot deal with the subsequent suit or for any other purpose.
  3. The provision contained in section 10 is a general provision applicable to all categories of cases, while those contained in Order 37 apply to certain classes of suits. One provides a bar against proceedings with the trial of a suit, while 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.
  4. In suits where summary procedure has been adopted, 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 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. It is only if and after the defendant obtains leave that the stage of determination of the matters in issue will arise. The trial would really begin only after leave is granted to the defendant. This is the scheme of summary procedure as provided by Order 37 of the Code.
  5. 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 favor 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.