Sunday, 23 December 2012

Principle to grant leave to defend in order XXXVII of CPC Suit.


Leave to Defend in summery Suit under order XXXVII of CPC.

The defendant may, at any time within ten days from service of such summons for judgment, by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such 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:
Provided that leave to defend shall not be refused unless the Court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defence to raise or that the defence intended to be put up by the defendant is frivolous or vexatious:
Provided further that, where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit shall not be granted unless the amount so admitted to be due is deposited by the defendant in Court.
Landmark Judgment about principle to grant the leave to defend in summery suit under order XXXVII of CPC>
MECHELEC ENGINEERS AND MANUFACTURERS
Vs.
RESPONDENT:
M/S. BASIC EQUIPMENT CORPORATION
DATE OF JUDGMENT01/11/1976
BENCH:
BEG, M. HAMEEDULLAH
BENCH:
BEG, M. HAMEEDULLAH
RAY, A.N. (CJ)
SINGH, JASWANT
CITATION:
1977 AIR 577 1977 SCR (1)1060
1976 SCC (4) 687
ACT:
Civil Procedure Code, S. 115--Jurisdiction of High Court to interfere with the Trial Court's discretionary order, when exercisable.
HEADNOTE:
The appellant issued the respondent a cheque which was dishonoured. The respondent alleged that the cheque was the consideration for goods supplied. The appellant admitted issuing the cheque but denied by privity of contract. The respondent filed a suit under order 37 C.P.C., and the appellant applied for the required leave to defend, which was granted by the trial Court unconditionally. On revision under section 115 C.P.C., the High Court held that triable issues arose for adjudication., but, it considered the defence to be dishonest. If allowed the revision petition and gave conditional leave to defend on the ground that the defences were not bona fide.
Allowing the appeal, the Court
HELD: It is only in cases where the defence is patently dishonest or so unreasonable that it could not reasonably be expected to succeed that the exercise of discretion by the Trial Court to grant leave unconditionally may be questioned. In other cases, it is not fair to pronounce a categorical opinion on such a matter before the evidence of the parties is taken so that its effects could be examined. High Court's interference under sec. 115 C.P.C. with the correct exercise of its discretion by the trial Court was patently erroneous. 11062
Santosh Kumar v. Bhai Mool Singh [1958] S.C.R. 1211 at 1215, Jacobs v. Booth's Distillery Co. [1901] 85 L.T. 262 followed.
Smt. Kiranmoyee Dassi and another v. Dr. J. Chatterjee (49 C.W.N. 246 ,at 253) distinguished. M.L. Sethi v.R.P. Kapur [1973] (1) S.C.R. 697: The Managing Director (MIG) Hindustan Aeronautics Ltd. Bulana- gar, Hyderabad & A nr. v. A Ajit Prasad Tarway, Manager (Purchase and Stores). Hindustan Aeronautics Ltd. Balanagar, Hyderabad (AIR 1973 SC 76); D.L.F. Housing & Construction Co. Pvt. Ltd., New Delhi v. Sarup Singh & Ors. [1970] 2. S.C.R. 368; and Milkhiram (India) (P) Ltd. and Ors. v. Chamanlal Bros. (AIR 1965 SC 1998) referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 508 of 1976. (Appeal by Special Leave from the Judgment and Order dated 27-10-1975 of the Delhi High Court in Civil Revision No. 115/75).
S.N. Andley, Urea Dutta and T.C. Sharma, for the appellant.
K.C. Agarwala and M.M.L. Srivastava, for the respondent. The Judgment of the Court was delivered by BEG. J. The plaintiff-respondent ,alleged to be a regis- tered partnership firm filed a suit on 25th April, 1974, through Smt. Pushpa Mittal, shown as one of its partners, for the recovery of Rs. 21,265.28 as principal and Rs. 7655/-, as interest at 12% per annum. according to law and Mercantile usage, on the strength of a cheque drawn by the defendant on 12th May, 1971, on the State Bank of India, which, on presentation, was dishonoured. The plaintiff alleged that the cheque
1061
was given as price of goods supplied. The defendant-appel- lant firm admitted the issue of the cheque by its Managing partner, but, it denied any privity of contract with the plaintiff firm. The defendant-appellant had its own version as to the reasons and purposes for which the cheque was drawn.
The suit was instituted under the provisions of Order 37 Civil Procedure Code so that the defendant-appellant had to apply for leave under Order 37, Rule 2, of the Code to defend. This leave was granted unconditionally by the Trial Court after a perusal of the cases of the two sides. Order 37, Rule 3, Civil Procedure Code lays down: "( 1 ) The Court shall, upon application by the defendant give leave to appear and to defend the suit, upon affidavits which dis- close such facts as would make it incumbent on the holder to prove consideration, or such other facts as the Court may deem sufficient to support the application.
(2) Leave to defend may be given uncondi- tionally or subject to such terms as to payment into Court, giving security, framing and recording issues or otherwise as the Court thinks fit".
A learned Judge of the High Court of Delhi had on a revision application under Section 115 Civil Procedure Code interfered with the order of the Additional District Judge of Delhi granting unconditional leave, after setting out not less than seven questions on which the parties were at issue. The learned Judge had, after discussing the cases of the two sides and holding that triable issues arose for adjudication, nevertheless, concluded that the defences were not bona fide. He, therefore, ordered: "For these reasons I would allow the revision petition and set aside the order of the trial Court. Instead I would grant leave to the defendant on their paying into Court the amount of Rs. 21,265.28 together with interest at the rate of 6 per cent per annum from the date of. suit till payment and costs of the suit (Only court fee amount at this stage and not the lawyer's fee). The amount will be deposited within two months. There will be no order as to costs of this revision".
The only question which arises before us in this appeal by special leave: Could the High Court interfere, in exercise of its powers under section 115, Civil Procedure Code, with the discretion of the Additional District Judge, in granting unconditional leave to defence to the defendant-appellant upon grounds which even a perusal of the order of the High Court shows to be reasonable ? Santosh Kumar v. Bhai Mool Singh(1), was a case where a cheque, the execution of which was admitted by the defend- ant, had been dishonoured. The defendant had set up his defences for refusal to pay.
(1)[1958] SCR 1211-1215.
1062
This Court noticed the case of Jacobs v. Booth's Distill- ery Company(1), where it was held that, whenever a defence raises a really triable issue, leave must be given. Other cases too were noticed there to show that this leave must be given unconditionally where the defence could not be shown to be dishonest in limine. This Court observed there (at p. 1215):
"The learned Counsel for the plaintiff- respondent relied on Gopala Rao v. Subba Rao (AIR 1936 Mad. 246, Manohar Lal v. Nanhe Mal (AIR 1938 Lah. 548), and Shib Karan Das v. Mohammed Sadiq (AIR 1936 Lah. 584). All that we need say, about them is that if the Court is of opinion that the defence is not bona fide, then it can impose conditions and is not tied down to refusing leave to. defend. We agree with Varadachariar J. in the Madras case that the Court has this third course open to it in a suitable case. But, it cannot reach the conclusion that the defence is not bona fide arbitrarily. It is as much bound by judicial rules and judicial procedure in reaching a conclusion of this kind as in any other matter",
On general principles, relating to the exercise of jurisdiction of High Courts under section 115, Civil Proce- dure Code, several cases were cited before us by Mr. Andley: M.L. Sethi v.R.P. Kapur(2); The Managing Director (MIG) Hindustan Aeronautics Ltd. Balanagar, Hyderabad & lint. v. Ajit Prasad Tarway, Manager, (Purchase & Stores), Hindustan Aeronautics Ltd., Balanagar, Hyderabad(3); D.L.F. Housing & Construction Co. Pvt. Ltd. New Delhi v. Sarup Singh & Ors. (4); Milkhiram (India) Pvt. Ltd. & Ors. v. Chamanlal Bros.(5)
We need not dilate on the well established principles repeatedly laid down by this Court which govern jurisdiction of the High Courts under section 115 C.P.C. We think that these principles were ignored by the learned Judge of the High Court in interfering with the discretionary order after a very detailed discussion of the facts of the case by the learned Judge of the High Court who had differred on a pure question of fact--whether the defences could be honest and bona fide. Any decision on such a question, even before evidence has been led by the two sides, is generally hazard- ous. We do not think that it is fair to pronounce a cate- gorical opinion on such a matter before the evidence of the parties is taken so that its effects could be examined. In the case before us, the defendant had denied, inter alia, liability to pay anything to the plaintiff for an alleged supply of goods. It is only in cases where the defence is patently dishonest or so unreasonable that it could not reasonably be expected to succeed that the exercise of discretion by the Trial Court to grant leave unconditionally may be,
(1) [1901] 85 L.T. 262. (2) [1973] 1 S.C.R. 697. (3) AIR 1973. SC 76. (4) [1970] (2) SCR 368. (5) AIR 1965 SC 1698.
1063
questioned. In the judgment of the High Court we are unable to find aground of interference covered by Section 115 C.P.C.
In Smt. Kiranmoyee Dassi & Anr. v. Dr. J. Chatterjee(1), Das. J., after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by order 17 C.P.C. in the form of the following propositions (at p. 253):
"(a) If the Defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the Defendant is entitled to unconditional leave to defend.
(b) If the Defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the Defendant is entitled to unconditional leave to defend. (c) If the Defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shews such a state of facts as leads to the infer- ence that at the trial of the action he may be able to establish a defence to the plaintiff's claim the Plaintiff is not entitled to judg- ment and the Defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.
(d) If the Defendant has no defence or the defence set up is illusory or sham or practi- cally moonshine then ordinarily the Plaintiff is entitled to leave to sign judgment and the Defendant is not entitled to leave to defend. (e) If the Defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the Plain- tiff is entitled to leave to sign judgment, the Court may protect the Plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise se- cured and give leave to the Defendant on such condition, and thereby show mercy to the Defendant by enabling him to try to. prove a defence".
The case before us certainly does not fall within the class (e) set out above. It is only in that class of case that an imposition of the condition to deposit an amount in Court before proceeding further is justifiable. 49 C.W.N. 246, 253.
1064
Consequently, we set aside the judgment and order of the High Court and restore that of the Additional District Judge. The parties will bear their own costs. M.R . Appeal allowed.

suit under XXXVII of Civil procedure Code (suit under 37 of CPC)


ORDER XXXVII. SUMMARY PROCEDURE 


 Courts and classes of suits to which the Order is to apply

(1) This Order shall apply to the following Court, namely:-

(a) High Courts, City Civil Courts and Courts of Small Causes; and

(b) other Courts;

Provided that in respect of the Courts referred to in clause (b), the High Court may, by notification in the Official Gazette, restrict the operation of this Order only to such categories of suits as it deems proper, and may also, from time to time, as the circumstances of the case may require, by subsequent notification in the Official Gazette, further restrict, enlarge or vary, the categories of suits to be brought under the operation of this Order as it deems proper.

(2) Subject to the provisions of sub-rule (1) the Order applies to the following classes of suits, namely:-

(a) suits upon bills of exchange, hundies and promissory notes;

(b) suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest, arising,-

(i) on a written contract, or

(ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty; or

(iii) on a guarantee, where the claim against the principal is in respect of a debt or liquidated demand only.]
 ------------------------------------------------------------------------------------------------------------

Judgment of Supreme Court of India in order XXXVII of CPC.

Milkhiram (India) Private Ltd. ... vs Chamanlal Bros.
Equivalent citations: AIR 1965 SC 1698
Author: J Mudholkar
Bench: P Gajendragadkar, K W Shah, J Mudholkar
JUDGMENT
J.R. Mudholkar, J.
1. The question which we have to consider in this appeal by special leave is whether the trial Judge was right in granting leave to the appellants to defend the suit based upon promissory notes executed by the appellant No, 1, which was instituted on the original side of the High Court at Bombay on condition that the appellants deposited security to the extent of Rs. 70,000. The other appellants are sought to be made liable upon an indenture of guarantee dated 20-11-62 with respect to the amounts advanced to the appellant No. 1. The procedure followed in the case was that set out in Order 37, Civil Procedure Code. Rules 2 and 3 of this Order have been amended by the Bombay High Court. Sub-rule 1 of Rule 2 provides that suits of certain kinds specified therein may be instituted by presenting a plaint in the form prescribed but the summons shall be in Form 4 in Appendix III or in such other Form as may from time to time be prescribed. Suits upon bills of exchange, hundis or promissory notes or for liquidated amounts are some of the kinds of suits which can be instituted under this provision. Sub-rule 2 provides that in suits of this kind the defendant shall not defend the suit unless he enters an appearance and obtains leave from the judge as provided in Order 37 so to defend. It further provides that in default of entering an appearance and of his obtaining such leave to defend the allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree as prayed for in the plaint. Sub-rules 2 and 3 of Rule 3 of Order 37 as amended by the High Court run thus:
"(2) If the defendant enters an appearance, the plaintiff shall thereafter serve on the defendant a summons for judgment returnable not less than ten clear days from the date of service supported by an affidavit verifying the cause of action and the amount claimed and stating that in his belief there is no defence to the suit.
(3) The defendant may at any time within ten days from the service of such summons for judgment by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend apply on such summons for leave to defend the suit. Leave to defend may be granted to him unconditionally or upon such terms as to the Judge appear just."
The appellants filed an affidavit as required by Sub-rule 3 purporting to disclose facts sufficient to entitle them to defend the suit. Upon a perusal of the plaint and the affidavits of parties and documents filed along with the plaint the learned Judge thought it fit to grant only conditional leave to the appellants to defend the suit. The amount for which the plaintiff-respondents have claimed relief in the suit is Rs. 4,05,434.38. As against this claim the Court has ordered the appellants to deposit security for Rs. 70,000 only. The appellants considering themselves aggrieved by the order preferred an appeal under Letters Patent which was summarily dismissed by the appeal Court. They have now come up by special leave to this Court. In support of the appeal Mr. Yogeshwar Prasad has raised two points. The first is that the defence disclosed by the appellants in their affidavit raises a triable issue and that, therefore, it was incumbent upon the learned trial Judge to grant unconditional leave to defend. The second ground is that the promissory notes upon which the suit is based is only a collateral security for the performance of the agreement between the parties relating to the export of pulses and, therefore, the suit was not of a nature which fell within the ambit of Order 37, Rule 2 of the Code.
2. It will be convenient to deal with the second point first. The respondents in their plaint have alleged that from time to time they advanced monies to the appellants and obtained promissory notes from them. They are four in number and the total amount advanced under them was Rs. 3,45,000. The execution and consideration for these promissory notes is admitted by the appellants. The respondents have further stated in their plaint that Mikhiram (India) Private Ltd., appellant No. 1, had been permitted by the Government of India to export 5250 tons of pulses on certain conditions and that at the request of the other appellants the respondents agreed to finance the company's business of export of pulses on the terms and conditions set out in a letter dated February 7, 1962 addressed to them by the company. One of the terms set out in the letter is to the effect that the company will act in consultation with the respondents and also under their control. Another term is that 50 per cent of the profits will be paid to the respondents in consideration of the financial accommodation given by them. The plaint proceeds to state that on account of a change in the political and economic condition in India soon after the agreement was entered it became necessary to revise and alter the terms of the agreement of February 7, 1962 and that a further agreement was arrived at between the parties the terms of which are set out in a letter D/- November 20, 1962 addressed by the company to the respondents. One of the revised terms was that if the business which the company was to do became impossible or "obviously unprofitable" the agreement dated February 7, 1962 would stand cancelled forthwith and that in that event the company would repay to the respondents on demand the advance made to the company under the first agreement together with interest at 9 per cent per annum from the date of the advance till realisation. The company further agreed to reimburse the respondents for and on account of any loss incurred by them up to the date of the cancellation of the first agreement with further interest at 9 per cent. The revised agreement also provided that the company would try to obtain a revision of the conditions concerning export of pulses from the Ministry of Commerce and Industry and that thereupon it would be in the absolute discretion of respondents to decide whether to continue the financing of the business thereafter or to cancel and terminate the original agreement. The plaint recites that on November 20, 1962 the appellants 2 to 4 executed an indenture of guarantee to secure repayment to the respondents up to the limit of Rs. 7,00,000 and interest thereon. The Ministry, however, did not revise the original terms and conditions relating to the export of pulses but only extended the period from that originally fixed upto June 30, 1963. For these reasons and for some other reasons set out in the plaint the respondents formed an opinion that it became unprofitable for them to continue to finance the appellants any further and cancelled the agreement dated February 7, 1962. It is because of this that they called upon the appellant to repay the amounts advanced by the respondents together with interest at 9 per cent. In paragraph 12 of the plaint the plaintiffs have averred as follows:
"The plaintiffs say that under the said further Agreement dated 20th November 1962 and under the Guarantee dated 20th November 1962 the plaintiffs are entitled to claim from the defendants the losses suffered in the said business upto the date of cancellation of the said Agreement dated 7th February, 1962. The plaintiffs submit that the relief with regard to the claim for losses is a separate and independent relief and would entail a taking of accounts. The plaintiffs, therefore, pray for leave under Order 2, Rule 2 of the Civil Procedure Code to sue the defendants for further reliefs in respect of losses suffered by them in the said business upto the date of cancellation of the Agreement dated 7th February 1962 together with interest." On the basis of these averments in the plaint the appellants contend that the only claim which the respondents had or could have against them is on the basis of the agreement that that claim would be for an unliquidated amount and that consequently the suit could not be brought under Order 37, Rules 2 and 3 of the Code. It seems to us, however, to be clear from the perusal of the plaint as well as the affidavits of the appellants that the cause of action for respondents' claim as laid in the suit is prima facie independent of the aforesaid agreement. No doubt they advanced the money by way of financing the export business of the company but the right to repayment was absolute and unconditional. This is made clear by the subsequent agreement executed by the appellants 2 to 4. No doubt the respondents contend that they are also entitled to recover damages from the appellants under the agreement but according to them this claim is in addition to and not in substitution of that based upon the promissory notes and the indenture of guarantee. The suit for its enforcement could, therefore, be instituted under Order 37, Rule 2. A mention may be made of a decision in Bimal Kumari v. Asoka Mitra,
, upon which reliance was placed on behalf of the
appellants in support of the contention that where the plaintiff is entitled to two reliefs but sues for only one the whole suit is liable to be dismissed. Without expressing any view as to the correctness of the decision it is sufficient to say that what the High Court was dealing with there was a suit in which upon the same facts the plaintiff was, according to the High Court, not only entitled to sue but bound to seek two reliefs but sued only for one of them. In the case before us the reliefs claimed in the suit are distinct from the relief claimable on the basis of the agreement between the parties.
3. Mr. Yogeshwar Prasad contended that it was incumbent upon respondents to claim in their suit not only what they say was payable to them under the promissory notes but also the damages to which they were entitled by virtue of the agreement between the parties. A suit of this kind would certainly be out of purview of Order 37, Rule 2. The short answer to the question is that the respondent did make an application to the Court under Order 2. Rule 2, Sub-rule 3, C. P. C, for leave to reserve their claim under the agreement for being adjudicated in another suit. The Court granted leave to them and, therefore, no further question arises. Moreover what we are concerned with is the claim made by the respondents in the present suit. Here they have sought relief only on the basis or the promissory notes and the indenture of guarantee. Even assuming that they were also entitled to other relief on the same cause of action it was certainly open to them even to relinquish their claims for other reliefs. The mere fact that (hey did so to avail themselves of the summary procedure provided in Order 37, could not affect their suit adversely. However, in this case the respondents obtained leave to reserve their claim based upon the agreement before they took out summons against the appellants under Order 37, Rule 2, Sub-rule 2. That order was not challenged by the appellants and has become final between the parties so far as the present suit is concerned.
4. Now we will come to the first point. Mr. Yogeshwar Prasad contends that the order of the High Court by which it demanded security from the appellants was wrong in law inasmuch as no reasons were given by the trial fudge for making it. In support of the contention reliance is placed upon the decision in Waman Vasudeo Wagh v. M/s. Pratapmal Dipaji & Co. ILR (1962) Bom, 206: (AIR 1960 Bom. 520). That case is however distinguishable. There what was challenged was the order of the City Civil Court which granted leave to the defendant to defend the suit for recovery of a sum of Rs. 18725/- upon the condition of depositing Rs. 7500/- as security. It was urged before the High Court that where a subordinate court /makes an order which is open to appeal or revision it should give some reasons in support of that order. No reasons having been given the order was set aside and the matter was remitted to the City Civil Court for passing a fresh order in accordance with law. While laying down the normal rule it does not appear to have been intended to make it inflexible. Nor again it appears to have been contemplated that elaborate reasons to support the imposition of conditions must be given. In the ease before us the order made is by the High Court itself and not by the subordinate court. No doubt an appeal lay against it under the Letters Patent but that is merely an internal appeal in a High Court, which cannot be likened to an appeal under Section 96 or a revision application under Section 115 of the Code. Moreover Order 49, Rule 3, Sub-rule (5) provides that nothing contained in Rules 1 to 8 of Order 20 will apply to any Chartered High Court in exercise of its ordinary or extraordinary civil jurisdiction. The provision relating to the giving of reasons in support of a decision are to be found in Rule 4 of Order 20. Since these provisions do not apply to Chartered High Courts, like the High Court at Bombay the decision relied upon cannot be 'pressed in aid.
5. Learned counsel relied upon a decision of this Court in Santosh Kumar v. Bhai Mool Singh. . That was a case in which the Court of Commercial Subordinate Judge, Delhi, had held that the defence raised a triable issue but that defence was vague and was not bona fide because the defendant had produced no evidence to prove his assertion. For these reasons the Court granted leave to defend the suit on the condition of the defendant giving security for the entire claim in the suit and costs thereon. This Court held that the test is to see whether the defence raises a real issue and not a sham one, in the sense that, if the facts alleged by the defendant are established, there would be a good, or even a plausible defence on those facts. If the Court is satisfied about that, leave must be given unconditionally. This Court further held that the trial Court was wrong in imposing a condition about giving security on the ground that documentary evidence had not been adduced by the defendant. This Court pointed out that the stage of proof can only arise after leave to defend has been granted and that the omission to adduce documentary evidence would not justify the inference that the defence sought to be raised was vague and not bona fide. While dealing with the matter Bose, J., who spoke for the Court observed (at p. 1216 (of SCR)):
'Taken by and large, the object is to see that the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining an early decree by raising untenable and frivolous defences in a class of cases where speedy decisions are desirable in the interests of trade and commerce. In general, therefore, the test is to see whether the defence raises a real Issue and not a sham one, in the sense that, if the facts alleged by the defendant are established, there would be a good, or even a plausible, defence on those facts."
The latter part of the observations of the learned Judge have to be understood in the background of the facts of the case this Court was called upon to consider. The trial Judge being already satisfied that the defence raised a triable issue was not justified in imposing a condition to the effect that the defendant must deposit security because he had not adduced any documentary evidence in support of the defence. The stage for evidence had not been reached. Whether the defence raises a triable issue or not has to be ascertained by the Court from the pleadings before it and the affidavits of parties and it is not open to it to call for evidence at that stage. If upon consideration of material placed before it the Court comes to the conclusion that the defence is a sham one or is fantastic or highly improbable it would be justified in putting the defendant upon terms before granting leave to defend. Even when a defence is plausible but is improbable the Court would be justified in coming to the conclusion that the issue is not a triable issue and put the defendant on terms while granting leave to defend. To hold otherwise would make it impossible to give effect to the provisions of Order 37 which have been enacted, as rightly pointed out by Bose, J., to ensure speedy decision in cases of certain types. It will be seen that Order 37, Rule 2 is applicable to what may be compendiously described as commercial causes. Trading and commercial operations are liable to be seriously impeded if, in particular, money disputes between the parties are not adjudicated upon expeditiously. It is these considerations which have to be borne in mind for the purpose of deciding whether leave to defend should be given or withheld and if given should be subjected to a condition.
6. It may be mentioned that this Court relied upon the decision in Jacobs v. Booth's Distillery Co. (1901) 85 LT 262, in which the House of Lords held that whenever a defence raises a triable issue leave must be given and also referred to two subsequent decisions where it was held that when such is the case leave must be given unconditionally. In this connection we may refer to the following observations of Devlin, L. J. in Fieldrank Ltd. v. Stein :
"The broad principle, which is founded on (1901) 85 LT 262, is summarised on p. 266 of the Annual Practice (1962 Edn.) in the following terms:
"The principle on which the Court acts is that where the defendant can show by affidavit that there is a bona fide triable issue, he is to be allowed to defend as to that issue without condition."
If that principle were mandatory, then the concession by counsel for the plaintiffs that there is here a triable issue would mean at once that the appeal ought to be allowed; but counsel for the plaintiffs has drawn our attention to some comments that have been made on (1901) 85 LT 262. They will be found at pp. 251 and 267 of the Annual Practice, 1962. It is suggested (see p. 251) that possibly the case, if it is closely examined, does not go as far as it has hitherto been thought to go; and on the top of p. 267 the learned editors of the Annual Practice have this note:
"The condition of payment into Court, or giving security, is nowadays more often imposed than formerly, and not only where the defendant consents but also where there is a good ground in the evidence for believing that the defence set up is a sham defence and the master 'is prepared very nearly to give judgment for the plaintiff."
It is worth noting also that in Lloyd's Banking Co. v. Ogle (1876) 1 Ex. D. 262, at p. 264 in a dictum which was said to have been overruled or qualified by (1901) 85 LT 262, Bramwell, B., had said that
"... .those conditions (of bringing money into Court or giving security) should only be applied when there is something suspicious in the defendants mode of presenting his case."
I should be very glad to see some relaxation of the strict rule in (1901) 85 LT 262. I think that any Judge who has sat in chambers in R S. C, Order 14 summonses has had the experience of a case in which, although he cannot say for certain that there is not a triable issue, nevertheless he is left with a real doubt about the defendant's good faith, and would like to protect the plaintiff, especially if there is not grave hardship on the defendant in being made to pay money into Court. I should be prepared to accept that there has been a tendency in the last few years to use this condition more often than it has been used in the past, and I think that that is a good tendency;"
These observations as well as some observations of Chagla, C. J., in Rawalpindi Theatres Private Ltd. v. M/f. Film Group Bombay, 60 Bom LR 1378 at p. 1374, may well be borne in mind by the Court sitting in appeal upon the order of the trial Judge granting conditional leave to defend. It is indeed not easy to say in many oases whether the defence is a genuine one or not and, therefore, it should be left to the discretion of the trial Judge who has experience of such matters both at the bar and the bench to form his own tentative conclusion about the quality or nature of the defence and determine the conditions upon which leave to defend may be granted. If the Judge is of opinion that the case raises a triable issue, then leave should ordinarily be granted unconditionally. On the other hand, if he is of opinion that the defence raised is frivolous, or false, or sham, he should refuse leave to defend altogether. Unfortunately, however, the majority of cases cannot be dealt with in a clear cut way like this and the Judge may entertain a genuine doubt on the question as to whether the defence is genuine or sham or in other words whether it raises a triable issue or not. It is to meet such cases that the amendment to Order 37, Rule 2 made by the Bombay High Court contemplates that even in cases where an apparently triable issue is raised the Judge may impose conditions in granting leave to defend. Thus this is a matter in the discretion of the trial Judge and in dealing with it, he ought to exercise his discretion judiciously. Care must be taken to see that the object of the rule to assist the expeditious disposal of commercial causes to which the order applies, is not defeated. Care must also be taken to see that real and genuine triable issues are not shut out by unduly severe orders as to deposit. In a matter of this kind, it would be undesirable and inexpedient to lay down any rule of general application.
7. For these reasons we uphold the order of the trial Judge and affirmed by the appeal Court and dismiss the appeal with costs. At the request of the counsel appellants we extend the time for depositing security by a period of two months from the date of our judgment.


Sunday, 4 November 2012

Setting Aside Ex-Parte Decree:


Setting Aside Ex-Parte Decree:

Order IX Rule 13 of Civil Procedure Code,1908.

2. Dismissal of suit where summons not served in consequence of the plaintiffs failure to pay cost

Where on the day so fixed it is found that the summons has not been served upon the defendant in consequence of the failure of the plaintiff to pay the court-fee or postal charges, if any, chargeable for such service, or failure to present copies of the plaint as required by rule 9 of Order VII, the Court may make an order that the suit be dismissed:

Provided that no such order shall be made, if, notwithstanding such failure, the defendant attends in person or by agent when he is allowed to appear by agent on the day fixed for him to appear and answer.]

1. Rule 2 was substituted by Act No. 46 of 1999. section 19 and now again substituted by Act No. 22 of 2002. Section 10(w.e.f. 1-7-2002).

3. Where neither party appears, suit to be dismissed

Where neither party appears when the suit is called on for hearing, the Court may make an order that the suit be dismissed.

4. Plaintiff may bring fresh suit or Court may restore suit to file.

Where a suit is dismissed under rule 2 or rule 3, the plaintiff may (subject to the law of limitation) bring a fresh suit, or he may apply for an order to set the dismissal aside, and if he satisfies the Court that there was sufficient cause for 1[such failure as is referred to in rule 2], or for his non-appearance, as the case may be, the Court shall make an order setting aside the dismissal and shall appoint a day for proceeding with the suit.
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Parimal vs Veena @ Bharti on 8 February, 2011
Bench: P. Sathasivam, B.S. Chauhan
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO...1467... OF 2011
(Arising out of S.L.P.(C) NO. 19632 of 2007)
Parimal ... Appellant Versus
Veena @ Bharti ...Respondent J U D G M E N T
Dr. B.S. CHAUHAN, J.
1. Leave granted.
2. This appeal has been preferred against the judgment and order dated 17.7.2007, passed by the High Court of Delhi at New Delhi, in FAO No.63 of 2002, by which the High Court has allowed the application under Order IX Rule 13 of the Code of Civil Procedure, 1908 (hereinafter called CPC), reversing the judgment and order dated 11.12.2001, passed by the Additional District Judge, Delhi.
3. FACTS:
(A) Appellant got married to the respondent/wife on 9.12.1986 and out of the said wed lock, a girl was born. The relationship between 1

 the parties did not remain cordial. There was acrimony in the marriage on account of various reasons. Thus, the appellant/husband filed a case for divorce on 27.4.1989, under section 13(1)(i-a) and (i-b) of the Hindu Marriage Act, 1955, against the respondent/wife. (B) Respondent/wife refused to receive the notice of the petition sent to her by the Court on 4.5.1989 vide registered AD cover for the date of hearing on 6.7.1989. Respondent/wife on 28.6.1989 was present at her house when the process server showed the summons to her. She read the same and refused to accept it. Refusal was reported by the process server, which was proved as Ex.OPW1/B. (C) Again on 7.8.1989, she refused to accept the notice for 8.9.1989, sent by the Court through process server. The Court ordered issuance of fresh notices. One was issued vide ordinary process and the other vide Registered AD cover for 8.9.1989. Registered AD was returned to the Court with report of refusal, as she declined to receive the AD notice. Under the Court's orders, summons were affixed at the house of the respondent/wife, but she chose not to appear.
(D) She was served through public notice on 6.11.1989 published in the newspaper `National Herald' which was sent to her address, 3/47, 2

 First Floor, Geeta Colony, Delhi. This was placed on record and was not rebutted by the respondent/wife in any manner. (E) After service vide publication dated 8.11.1989 as well as by affixation, respondent/wife was proceeded ex- parte in the divorce proceedings. Ex-parte judgment was passed by Addl. District Judge, Delhi on 28.11.1989 in favour of the appellant/husband and the marriage between the parties was dissolved.
(F) Two years after the passing of the decree of divorce, on 16.10.1991, the appellant got married and has two sons aged 17 and 18 years respectively from the said marriage.
(G) The respondent, after the expiry of 4 years of the passing of the ex-parte decree of divorce dated 28.11.1989, moved an application dated 17.12.1993 for setting aside the same basically on the grounds that ex-parte decree had been obtained by fraud and collusion with the postman etc., to get the report of refusal and on the ground that she had not been served notice even by substituted service and also on the ground that even subsequent to obtaining decree of divorce the appellant did not disclose the fact of grant of divorce to her during the proceedings of maintenance under Section 125 of the Code of Criminal Procedure, 1973 (hereinafter called Cr.P.C.). The said 3

 application under Order IX, Rule 13 CPC was also accompanied by an application under Section 5 of the Indian Limitation Act, 1963, for condonation of delay.
(H) The trial Court examined the issues involved in the application at length and came to the conclusion that respondent/wife miserably failed to establish the grounds taken by her in the application to set aside the ex-parte decree and dismissed the same vide order dated 11.12.2001.
(I) Being aggrieved, respondent/wife preferred First Appeal No.63 of 2002 before the Delhi High Court which has been allowed vide judgment and order impugned herein. Hence, this appeal. RIVAL SUBMISSIONS:
4. Shri M.C. Dhingra, Ld. counsel appearing for the appellant has submitted that the service stood completed in terms of statutory provisions of the CPC by the refusal of the respondent to take the summons. Subsequently, the registered post was also not received by her as she refused it. It was only in such circumstances that the trial Court entertained the application of the appellant under Order V, Rule 20 CPC for substituted service. The summons were served by publication in the daily newspaper `National Herald' published from 4

 Delhi which has a very wide circulation and further service of the said newspaper on the respondent/wife by registered post. The High Court committed a grave error by taking into consideration the conduct of the appellant subsequent to the date of decree of divorce which was totally irrelevant and unwarranted for deciding the application under Order IX, Rule 13 CPC. More so, the High Court failed to take note of the hard reality that after two years of the ex-parte decree the appellant got married and now has two major sons from the second wife. Therefore, the appeal deserves to be allowed and the judgment impugned is liable to be set aside.
5. On the contrary, Ms. Geeta Dhingra, Ld. counsel appearing for the respondent/wife has vehemently opposed the appeal, contending that once the respondent/wife made the allegations of fraud and collusion of the appellant with postman etc. as he succeeded in procuring the false report, the burden of proof would be upon the appellant and not upon the respondent/wife to establish that the allegations of fraud or collusion were false. The conduct of the appellant even subsequent to the date of decree of divorce, i.e. not disclosing this fact to the respondent/wife during the proceedings under Section 125 Cr.P.C., disentitles him from any relief before this 5

 court of equity. No interference is required in the matter and the appeal is liable to be dismissed.
6. We have considered the rival submissions made by learned counsel for the parties and perused the record.
7. Order IX, R.13 CPC:
The aforesaid provisions read as under:
"Setting aside decree ex-parte against defendant In any case in which a decree is passed ex-parte against a defendant, he may apply to the Court by which the de- cree was passed for an order to set it aside; and if he sat- isfies the Court that the summons was not duly served, or that he was prevented by any sufficient cause from appearing when the suit was called on for hearing, the Court shall make an order setting aside the decree as against him upon such terms as to costs, payment into Court or otherwise as it thinks fit, and shall appoint a day for proceeding with the suit; xx xx xx Provided further that no Court shall set aside a decree passed ex-parte merely on the ground that there has been an irregularity in the service of summons, if it is satisfied that the defendant had notice of the date of hearing and had sufficient time to appear and answer the plaintiff's claim.
xx xx xx" (Emphasis added)
8. It is evident from the above that an ex-parte decree against a 6

 defendant has to be set aside if the party satisfies the Court that summons had not been duly served or he was prevented by sufficient cause from appearing when the suit was called on for hearing. However, the court shall not set aside the said decree on mere irregularity in the service of summons or in a case where the defendant had notice of the date and sufficient time to appear in the court.
The legislature in its wisdom, made the second proviso, mandatory in nature. Thus, it is not permissible for the court to allow the application in utter disregard of the terms and conditions incorporated in the second proviso herein.
9. "Sufficient Cause" is an expression which has been used in large number of Statutes. The meaning of the word "sufficient" is "adequate" or "enough", in as much as may be necessary to answer the purpose intended. Therefore, word "sufficient" embraces no more than that which provides a platitude which when the act done suffices to accomplish the purpose intended in the facts and circumstances existing in a case and duly examined from the view point of a reasonable standard of a cautious man. In this context, "sufficient cause" means that party had not acted in a negligent manner or there 7

 was a want of bona fide on its part in view of the facts and circumstances of a case or the party cannot be alleged to have been "not acting diligently" or "remaining inactive". However, the facts and circumstances of each case must afford sufficient ground to enable the Court concerned to exercise discretion for the reason that whenever the court exercises discretion, it has to be exercised judiciously. (Vide: Ramlal & Ors. v. Rewa Coalfields Ltd., AIR 1962 SC 361; Sarpanch, Lonand Grampanchayat v. Ramgiri Gosavi & Anr., AIR 1968 SC 222;Surinder Singh Sibia v. Vijay Kumar Sood, AIR 1992 SC 1540; and Oriental Aroma Chemical Industries Limited v. Gujarat Industrial Development Corporation & Another, (2010) 5 SCC 459)
10. In Arjun Singh v. Mohindra Kumar & Ors., AIR 1964 SC 993, this Court observed that every good cause is a sufficient cause and must offer an explanation for non-appearance. The only difference between a "good cause" and "sufficient cause" is that the requirement of a good cause is complied with on a lesser degree of proof than that of a "sufficient cause". (See also: Brij Indar Singh v. Lala Kanshi Ram & Ors., AIR 1917 P.C. 156; Manindra Land and Building Corporation Ltd. v. Bhutnath Banerjee & Ors., AIR 8

 1964 SC 1336; and Mata Din v. A. Narayanan, AIR 1970 SC 1953).
11. While deciding whether there is a sufficient case or not, the court must bear in mind the object of doing substantial justice to all the parties concerned and that the technicalities of the law should not prevent the court from doing substantial justice and doing away the illegality perpetuated on the basis of the judgment impugned before it. (Vide: State of Bihar & Ors. v. Kameshwar Prasad Singh & Anr., AIR 2000 SC 2306; Madanlal v. Shyamlal, AIR 2002 SC 100; Davinder Pal Sehgal & Anr. v. M/s. Partap Steel Rolling Mills (P) Ltd. & Ors., AIR 2002 SC 451; Ram Nath Sao alias Ram Nath Sao & Ors. v. Gobardhan Sao & Ors., AIR 2002 SC 1201; Kaushalya Devi v. Prem Chand & Anr. (2005) 10 SCC 127; Srei International Finance Ltd., v. Fair growth Financial Services Ltd. & Anr., (2005) 13 SCC 95; and Reena Sadh v. Anjana Enterprises, AIR 2008 SC 2054).
12. In order to determine the application under Order IX, Rule 13 CPC, the test has to be applied is whether the defendant honestly and sincerely intended to remain present when the suit was called on for hearing and did his best to do so. Sufficient cause is thus the cause for 9

 which the defendant could not be blamed for his absence. Therefore, the applicant must approach the court with a reasonable defence. Sufficient cause is a question of fact and the court has to exercise its discretion in the varied and special circumstances in the case at hand. There cannot be a strait-jacket formula of universal application. PRESUMPTION OF SERVICE BY REGISTERED POST & BURDEN OF PROOF:
13. This Court after considering large number of its earlier judgments in Greater Mohali Area Development Authority & Ors. v. Manju Jain & Ors., AIR 2010 SC 3817, held that in view of the provisions of Section 114 Illustration (f) of the Evidence Act, 1872 and Section 27 of the General Clauses Act, 1897 there is a presumption that the addressee has received the letter sent by registered post. However, the presumption is rebuttable on a consideration of evidence of impeccable character. A similar view has been reiterated by this Court in Dr. Sunil Kumar Sambhudayal Gupta & Ors. v. State of Maharashtra, JT 2010 (12) SC 287.
14. In Gujarat Electricity Board & Anr. v. Atmaram Sungomal Poshani, AIR 1989 SC 1433, this Court held as under: "There is presumption of service of a letter sent 1

 under registered cover, if the same is returned back with a postal endorsement that the addressee refused to accept the same. No doubt the presumption is rebuttable and it is open to the party concerned to place evidence before the Court to rebut the presumption by showing that the address mentioned on the cover was incorrect or that the postal authorities never tendered the registered letter to him or that there was no occasion for him to refuse the same. The burden to rebut the presumption lies on the party, challenging the factum of service."
(Emphasis added)
15. The provisions of Section 101 of the Evidence Act provide that the burden of proof of the facts rests on the party who substantially asserts it and not on the party who denies it. In fact, burden of proof means that a party has to prove an allegation before he is entitled to a judgment in his favour. Section 103 provides that burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence, unless it is provided by any special law that the proof of that fact shall lie on any particular person. The provision of Section 103 amplifies the general rule of Section 101 that the burden of proof lies on the person who asserts the affirmative of the facts in issue.
PRESENT CONTROVERSY:
1
16. The case at hand is required to be considered in the light of the aforesaid settled legal propositions. The trial Court after appreciating the entire evidence on record and pleadings taken by the parties recorded the following findings:
"The applicant/wife as per record was served with the notice of the petition, firstly, on 4.5.89 when she had refused to accept the notice of the petition vide registered AD cover for the date of hearing i.e. 6.7.89 and thereafter on 7.8.89 when again she refused to accept the notice for 8.9.89 and thereafter when the notice was published in the newspaper `National Herald' on 6.11.89. The UPC Receipt dated 6.11.89 vide which the newspaper `National Herald' dated 6.11.89 was sent to the respondent/applicant at her address 3/47, First Floor, Geeta Colony, Delhi is on record and has not been rebutted in any manner.
In these circumstances, the application u/o 9 Rule 13 CPC filed by the respondent/applicant/wife on 7.1.1994 is hopelessly barred by time and no sufficient ground has been shown by the applicant/wife for condoning the said inordinate delay."
17. So far as the High Court is concerned, it did not deal with this issue of service of summons or as to whether there was "sufficient cause" for the wife not to appear before the court at all, nor did it set aside the aforesaid findings recorded by the trial Court. The trial Court has dealt with only the aforesaid two issues and nothing else. 1

 The High Court has not dealt with these issues in correct perspective. The High Court has recorded the following findings: "The order sheets of the original file also deserve a look. The case was filed on 1.5.1989. It was ordered that respondent be served vide process fee and Regd. AD for 6.7.1989. The report of process server reveals that process server did not identify the appellant and she was identified by the respondent himself. In next date's report appellant was identified by a witness. The Retd. AD mentions only one word "refused". It does not state that it was tendered to whom and who had refused to accept the notice. The case was adjourned to 8.9.1989. It was recorded that respondent had refused to take the notice. Only one word, "Refused" appears on this registered envelope as well. On 8.9.1989 itself it was reported that respondent had refused notice and permission was sought to move an application under Order 5 Rule 20 of CPC. On 8.9.1989, application under Section 5 Rule 20 CPC was moved and it was ordered that the appellant be served through "National Herald". The presumption of law if any stands rebutted by the statement made by the appellant because she has
stated that she was staying in the said house of her brother for a period of eight months. The version given by her stands supported by the statement made by her brother."
(Emphasis added)
18. The High Court held that presumption stood rebutted by a bald statement made by the respondent/wife that she was living at different address with her brother and this was duly supported by her brother 1

 who appeared as a witness in the court. The High Court erred in not appreciating the facts in the correct perspective as substituted service is meant to be resorted to serve the notice at the address known to the parties where the party had been residing last. (Vide Rabindra Singh v. Financial Commissioner, Cooperation, Punjab & Ors., (2008) 7 SCC 663).
19. More so, it is nobody's case that respondent/wife made any attempt to establish that there had been a fraud or collusion between the appellant and the postman. Not a single document had been summoned from the post office. No attempt has been made by the respondent/wife to examine the postman. It is nobody's case that the "National Herald" daily newspaper published from Delhi did not have a wide circulation in Delhi or in the area where the respondent/wife was residing with her brother. In such a fact-situation, the impugned order of the High Court becomes liable to be set aside.
20. The appellate Court has to decide the appeal preferred under Section 104 CPC following the procedure prescribed under Order XLIII, Rule 2 CPC, which provides that for that purpose, procedure prescribed under Order XLI shall apply, so far as may be, to appeals 1

 from orders. In view of the fact that no amendment by Delhi High Court in exercise of its power under Section 122 CPC has been brought to our notice, the procedure prescribed under Order XLI, Rule 31 CPC had to be applied in this case. .
21. Order XLI, Rule 31 CPC provides for a procedure for deciding the appeal. The law requires substantial compliance of the said provisions. The first appellate Court being the final court of facts has to formulate the points for its consideration and independently weigh the evidence on the issues which arise for adjudication and record reasons for its decision on the said points. The first appeal is a valuable right and the parties have a right to be heard both on question of law and on facts. (vide: Moran Mar Basselios Catholicos & Anr. v. Most Rev. Mar Poulose Athanasius & Ors., AIR 1954 SC 526; Thakur Sukhpal Singh v. Thakur Kalyan Singh & Anr., AIR 1963 SC 146;Santosh Hazari v. Purshottam Tiwari, AIR 2001 SC 965; Madhukar v. Sangram, AIR 2001 SC 2171; G. Amalorpavam & Ors. v. R.C. Diocese of Madurai & Ors., (2006) 3 SCC 224; Shiv Kumar Sharma v. Santosh Kumari, (2007) 8 SCC 600; and Gannmani Anasuya & Ors. v. 1

 Parvatini Amarendra Chowdhary & Ors., AIR 2007 SC 2380).
22. The first appellate Court should not disturb and interfere with the valuable rights of the parties which stood crystallised by the trial Court's judgment without opening the whole case for re-hearing both on question of facts and law. More so, the appellate Court should not modify the decree of the trial Court by a cryptic order without taking note of all relevant aspects, otherwise the order of the appellate Court would fall short of considerations expected from the first appellate Court in view of the provisions of Order XLI, Rule 31 CPC and such judgment and order would be liable to be set aside. (Vide B.V. Nagesh & Anr. v. H.V. Sreenivassa Murthy, JT (2010) 10 SC 551).
23.In view of the aforesaid statutory requirements, the High Court was duty bound to set aside at least the material findings on the issues, in spite of the fact that approach of the court while dealing with such an application under Order IX, Rule 13 CPC would be liberal and elastic rather than narrow and pedantic. However, in case the matter does not fall within the four corners of Order IX, Rule 13 CPC, the court has no jurisdiction to set aside ex-parte 1

 decree. The manner in which the language of the second proviso to Order IX, Rule 13 CPC has been couched by the legislature makes it obligatory on the appellate Court not to interfere with an ex-parte decree unless it meets the statutory requirement.
24. The High Court has not set aside the material findings recorded by the trial Court in respect of service of summons by process server/registered post and substituted service. The High Court failed to discharge the obligation placed on the first appellate Court as none of the relevant aspects have been dealt with in proper perspective. It was not permissible for the High Court to take into consideration the conduct of the appellant subsequent to passing of the ex-parte decree. More so, the High Court did not consider the grounds on which the trial Court had dismissed the application under Order IX, Rule 13 CPC filed by the respondent/wife. The appeal has been decided in a casual manner.
25. In view of the above, appeal succeeds and is allowed. The judgment and order dated 17.7.2007 passed by the High Court of Delhi in FAO No. 63 of 2002 is set aside and the judgment and order of the trial Court dated 11.12.2001 is restored. 1

 Before parting with the case, it may be pertinent to mention here that the court tried to find out the means of re-conciliation of the dispute and in view of the fact that the appellant got married in 1991 and has two major sons, it would not be possible for him to keep the respondent as a wife. A lump sum amount of Rs. 5 lakhs had been offered by Shri M.C. Dhingra, Ld. counsel for the appellant to settle the issue. However, the demand by the respondent/wife had been of Rs. 50 lakhs. Considering the income of the appellant as he had furnished the pay scales etc., the court feels that awarding a sum of Rs. 10 lakhs to the wife would meet the ends of justice as a lump sum amount of maintenance for the future. The said amount be paid by the appellant to the respondent in two equal instalments within a period of six months from today. The first instalment be paid within three months.
.............................J.
(P. SATHASIVAM)
.............................J.
(Dr. B.S. CHAUHAN)
New Delhi,