Holding

The court is not required to grant leave to defend to all defendants merely because it was granted to one, and it may pass decree against defendants who do not file a written statement, especially where the defence is dishonest and mala‑fide.

Summary

The respondents filed a summary suit under Order XXXVII of the CPC for recovery of Rs.85,62,500 based on a memorandum of agreement signed by the plaintiffs and the defendants. Defendants 1 and 2 applied for unconditional leave to defend, which was dismissed by the trial judge, while the trial judge granted leave to defend to Defendant 3, who was held to be a pro‑forma party. The appellants argued that, because the suit sought a composite amount, granting leave to defend to only one defendant would lead to inconsistent decrees and that the plaintiff could not obtain a decree against the others without granting them leave. The Division Bench held that the CPC contains no provision obligating the court to grant leave to defend to all defendants once it is granted to one, and that the plaintiff may join any or all parties at his option under Order 1 Rule 6. It further observed that the defence raised by the appellants was dishonest and mala‑fide, given the existence of a binding settlement agreement, and that the court may pass decree against defendants who fail to file a written statement under Orders VIII, IX and XV. Consequently, the appeal was dismissed with costs.

Issues considered

Whether a court must grant leave to defend to all defendants in a summary suit when it has granted leave to defend to one defendant.
Whether a decree can be passed against defendants who have not filed a written statement or are not at issue under the CPC provisions.
Whether the defence raised by the appellants is bona fide in view of the settlement agreement.

Legislation cited

Code of Civil Procedure, 1908s. Order 1 Rule 6, s. Order IX Rule 11, s. Order VIII Rule 10, s. Order VIII Rule 5, s. Order XV Rule 2, s. Order XXXVII Rule 4

Subjects

summary suitleave to defenddecreeCivil Procedure Codemala fide defencecomposite liabilityjoint and several liabilityOrder 1 Rule 6Order VIIIOrder IXOrder XVOrder XXXVII

Judgment

SMT. KAMLESH KOHLI AND ANR. A
v.
ESCOTRAC FINANCE AND INVESTMENT LTD. AND ORS.

OCTOBER 5, 1999

[K.T. THOMAS AND M.B. SHAH, JJ.] B

Civil Procedure Code, 1908-0rder XXXVIJ Rule 4, Order I Rule 6,
Order VIII Rules 5 and· 10, Order IX Rule 11 and Order XV Rule 2--Leave
to defend-Grant of-Suit for recovery of debts-Application by defendants
for grant of leave to defend unconditional/y-Dismissed-011 appeal, court C
granting leave to defend to one of the defendants and denying to
others-Validity of-Held, courts not obliged to grant leave to defend to all
defendants merely because it was granted to one of the defendants.

Respondent-companies filed a summary suit for recovery of debts D
against defendants. Defendant no. 2, sole proprietor of defendant no. 1
firm and defendant No. 3, son of defendant no. 2 filed an application for
grant of leave to defend unconditionally. Single Judge of High Court
dismissed the application and decreed the suit. Being aggrieved, defendant
nos. 2 and 3 filed separate appeals before the Division Bench of the High
Court. Appeal filed by defendant no. 2 contending that her son was only E
attorney for prosecuting the writ petition and had no authority to enter
into agreement was dismissed by the court holding that the plea was wholly
misconceived, malafide and abuse of process of law. However, in the appeal
filed by defendant no. 3, the court granted leave to defend unconditionally
as it was averred by the respondents that he was arrayed only as a F
proforma party and no relief was claimed against him personally. Hence
the present appeal by defendant nos. 1 and 2.

On behalf of appellants it was contended that the suit was for
recovery of composite amount and therefore when leave to defend was G
granted to defendant no. 3, it ought to have been granted to them also,
otherwise there would be inconsistent decrees.

Dismissing the appeal, the Court

HELD : 1. Civil Procedure Code nowhere prescribes that decree H
373
374 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A against some of the defendants to a suit cannot be passed or that if the
suit is dismissed qua one defendant it is required to be dismissed against
other defendants too. Order 1 Rule 6 makes the position clear by providing
that plaintiff may at his option join as parties to the same suit all or any
of the persons severally, or jointly and severally, liable on any one contract
B including parties to bills of exchange, hundis and promissory notes. There-
fore, even presuming that defendant no. 3 was jointly and severally liable
to pay the amount specified in the memorandum of agreement, it was
optional for the plaintiff to join him as party defendant. In the instant
case, however, that is not the situation because plaintiff has specifically
averred that defendant no. 3 is joined as formal party. Further Order VIII
C Rules 5 and 10, Order IX Rule 11 and Order XV Rule 2 makes the position
clear by providing that decree can be passed against the defendant who
has not filed the written statement or who remains absent or who is not at
issue with the plaintiff on any question of law or of fact. (377-B; E]

D 2. The High Court rightly arrived at the conclusion that defence is,
on the face of it, dishonest and rnala fide. The reason is not too far to find
out because in a writ petition filed by the plaintiffs, a memorandum of
agreement was arrived at, which was duly. signed by the plaintiffs and
defendant no. 2 as well as defendant no. 3 as attorney of defendant no. 2.
E The Division Bench of the High Court, after recording the presence of
constituted attorneys of the parties and considering the memorandum of
agreement accompanied by application containing the necessary docu-
ments, permitted the plaintiffs to withdraw the writ petition. The plaintiffs
acted upon the said agreement and withdrew the petition. The defendant
F also acted upon the said agreement and paid the first instalment to the
plaintiffs. In view of these facts it is unreasonable to permit the defendant
to raise an illusory contention that the said settlement is not binding on
her. Therefore, the court rightly rejected the application of defendant nos.
1 and 2 for grant of leave to defend. (378-F-H; 379-A; BJ

G ' --
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5725 of
1999.

From the Judgment and Order dated 24.3.98 of the Delhi High Court
H in F.A.0. No. 197 of 1997.
SMT. KAMLESH KOHLI v. ESCOTRAC FINANCE & INVESTMENT LTD. [SHAH, 1.] 375

Manoj Swamp and Ms. Lalita Kohli for M/s. Manoj Swamp & Co. A
for the Appellants

H.N. Salve, (Ms. Pratibha Singh) for Maninder Singh for the
Respondents.
B
The Judgment of the Court was delivered by

SHAH, J. Respondent-Companies filed civil suit against Kamlesh
Kamal & Company (defendant no. 1), Smt. Kamlesh Kohli, wife of Shri
J.N. Kohli (defendant no. 2) and Shri Rajiv Kohli, son of Shri J.N. Kohli
(defendant no. 3) for recovery of Rs. 85,62,500 on the basis of C
Memorandum of Agreement dated 19th November, 1992. It was alleged
that Smt. Kamlesh Kohli had been holding a membership ticket of Delhi
Stock Exchange and had been carrying on business in the name of Kamlesh
Kamal & Company (defendant no. l). She approached the plaintiffs to
provide finance for 'Badia' transactions in or about March/April, 1992. As D
on 10th September, 1992 a sum of Rs. 3.02 corer was due and payable by
•· the defendants. On 21st September, 1992, plaintiffs filed Writ Petition no.
3324 of 1992 in the Delhi High Court against Delhi Stock Exchange
impleading defendant no. 2 and J.N. Kohli, her husband as party
respondents. The matter was settled between the part.ies by an agreement E
dated 19th November, 1992. In view of the agreement between the parties,
the Court permitted withdrawal of the said petition. It is stated that
payment of Rs. 65 lakhs was made to the plaintiffs on the basis of the said
agreement. As the defendants after payment of first instalment did not pay
any amount, the plaintiffs issued notice dated 6th July, 1993 calling upon
defendant Nos. 2 and 3 to pay the remaining amount with interest within
F
15 days of the receipt of the notice. As the defendants repudiated their
liability, the summary suit under Order XXXVII C.P.C. was instituted on
5th November, 1993.

In the said suit, defendants filed IA No. 10145 of 1994 under Order G
XXXVII Rule 4 C.P.C. to grant leave to defend unconditionally. The
learned Single Judge arrived at the conclusion that the contentions that
defendants have absolutely no defence; that they have put forth the plea
of no consideration; and that the second defendant was not a party to the
agreement and that there were other circumstances to be established and, H
376 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R. ...
A therefore, leave should be granted, are without any substance. The Court,
therefore, dismissed the application for leave to defend by judgment and
order dated 1st May, 1997 and decreed the suit for a sum of Rs. 85,62,500
with simple interest @ 15% p.a. from the date of the suit till the date of
the payment.

B
Against the said judgment and decree, Appeal no. FAQ (OS) 197 of
1997 was filed by the mother, Sml. Kamlesh Kohli and Appeal no. FAQ
(OS) 160 of 1997 was filed by the son, Rajiv Kohli. Before the Division
Bench of the High Court, it was not disputed that mother was the sole
proprietor of defendant no. 1 firm and that Memorandum of Agreement
c was signed by Rajiv Kohli as constituted attorney of defendant nos. 1 and
2. It was also not disputed that mother and son were living together. It was
also admitted that in pursuance of the Memorandum of Agreement Smt.
Kamlesh Kohli had signed the cheque in the sum of Rs 65 lakhs which was
given to the plaintiffs. In the appeals, it was contended before the Court
D on behalf of Smt. Kamlesh Kohli that her son was only attorney for
prosecuting the writ petition and that he had no authority to enter into the
agreement dated 19th November, 1992. The Court rejected the said
contention by holding that, to say the least, the plea is wholly misconceived,
ma/a fide and abuse of the process of law and may even amount to
E contempt of the Court. The Court further observed that such dishonest and
convenient pleas deserve to be severely condemned. Accordingly, appeal ,.,.
no. FAQ (OS) 197of1997 filed by Smt. Kalmlesh Kohli was dismissed with
costs quantified at Rs. 22,000 payable to plaintiffs.

In appeal no. FAQ (OS) 160 of 1997 filed by Rajiv Kohli (son), the
F Court granted unconditional leave to defend as it was averred by the
plaintiffs in reply to the application for leave to defend that he was arrayed
only as a proforma party and no relief was claimed against him personally.

Against the said judgment and decree, the defendant nos. 1 and 2
G have preferred this appeal.
~

Learned Counsel for the appellant submitted that when leave to
defend was granted to defendant no. 3, it ought to have been granted to
the appellants otherwise thc:re would be inconsistent decrees. He submitted
H that the suit was for recovery of composite amount and, therefore, once
SMT. KAMLESH KOHLI v. ESCOTRAC FINANCE & INVESTMENT LTD. [SHAH, J.] :;77

leave to defend was granted to defendant no. 3, the Court ought to have A
granted leave to defend, to the remaining defendants, i.e., the present
appellants. He further submitted that considering the defence raised by
defendant no. 2, this was a fit case for grant of leave to defend.

There is no ·substance in the contentions raised by the learned
B
counsel for the appellant. Civil .Procedure Code nowhere prescribes that
decree against some of the defendants to a suit cannot be passed or that
if the suit is dismissed against orie defendant it is required to be dismissed
against other defendants too. Order 1 Rule 6 makes the position clear by
providing that plaintiff may at his option join as parties to the same suit all
or any of the persons severally, or jointly and severally, liable on any one C
contract including parties to bills of exchange, hundis and promissory
notes. Therefore, even presuming that defendant no. 3 was jointly and
severally liable to pay the amount specified in the Memorandum of
agreement, it was optional for the plaintiff to join him as party defendant.
In the present case, however, that is not the situation because plaintiff has D
specifically averred that defendant no. 3 is joined as formal party. Further
Order VIII Rules 5 and 10, Order IX Rule 11 and Order XV Rule 2 make
the position clear by providing that decree can be passed against the
defendant who has not filed the written statement or who remains absent
or who is not at issue with the plaintiff on any question of law or of fact. E
The said provisions are clear and unambiguous requiring no further
elucidation, which read thus :

] ORDER VIII RULE 5

F
Every allegation of fact in the plaint, if not denied specifically or
by necessary implication, or stated to be not admitted in the
pleading of the defendant, shall be taken to be admitted except as
against a person under disability :

Proviso....... G

ORDER VIII RULE 10

Procedure when party fails to present written statement called for
~Coort . H
378 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A Where any party from whom a written statement (is required under
rule 1 or rule 9) fails to present the same within the time (permitted
or fixed by the Court, as the case may be, the Court shall)
pronounce judgment against him, or make such order in relation
to the suit as it thinks fit (and on the pronouncement of such
B judgment, a decree shall be drawn up).

ORDER IX RULE 11

Where there are more defendants than one, and one or more of
them appear, and the others do not appear, the suit shall proceed,
(
c and the Court shall, at the time of pronouncing judgment, make
such order as it thinks fit with respect to the defendants who do
not appear.

ORDER XV RULE 2

D (1) Where there are more defendants than one, and any one of
the defendants is not at issue with the plaintiff on any question of
law or of fact, the Court may at once pronounce judgment for or
against such defendant and the suit shall proceed only against the
other defendants.
E
(2) Whenever a judgment is pronounced under this rule, a decree
shall be drawn up in accordance with such judgment and the
decree shall bear the date on which the judgment was
pronounced.
F Learned Counsel further submitted that this is a fit case in which
Court ought to have granted leave to defend. In our view, the High Court
rightly arrivf?d at the conclusion that defence, is on the face of it, dishonest
and ma/a fide. The reason is not too far to find out beGause in a writ
petition filed by the plaintiffs, a memorandum of agreement was arrived at,
G which was. duly signed by the plaintiffs and Smt. Kamlesh Kohli as well as
Rajiv Kohli as attorney of Smt. Karnlesh Kohli. The Division Bench of the
· High Court, after recording the presence of constituted attorneys of the
parties and considering the Memorandum of agreerr.ent accompanied by
application containing annexures A and B, permitted the plaintiffs to
H withdraw the writ petition. The plaintiffs acted upon the said agreement
SMT. KAMLESH KOHLI v. ESCOTRAC FINANCE & INVESTMENT LTD. (SHAH, J.j 379

<lticiwithdrew the petition. The defendant also acted upon the said A
agreement and paid Rs. 65 lakhs to the plaintiff In view of these facts it
'· is unreasonable to permit the defendant to raise an illusory contention that
the said settlement is not binding on her. Therefore, the Court rightly
rejected the application of defendant nos. 1 and 2 for grant of leave to
defend.
B
In the result, the appeal is dismissed with costs quantified at Rs.
10,000.

S.V.K. Appeal dismissed.