Supreme Court Allows Appeal Against Ex-Parte Decree in Rent Dispute: Shyam Kumar Gupta vs. Shubham Jain (2 February 2023)

Date of the Judgment: 2 February 2023

Citation: 2023 INSC 89

Judges: Dinesh Maheshwari, J. and Bela M. Trivedi, J.

Can a tenant be denied the opportunity to defend a case if they have deposited the principal amount of rent and costs, but not the mesne profits, as required by law? The Supreme Court of India recently addressed this question in a case concerning the setting aside of an ex-parte decree in a rent dispute. The core issue revolved around whether the High Court was right in upholding the order of the Trial Court which rejected the tenant’s application to set aside an ex parte decree due to non-compliance with Section 17 of the Provincial Small Cause Courts Act, 1887. The Supreme Court bench comprised Justices Dinesh Maheshwari and Bela M. Trivedi, with the judgment authored by Justice Dinesh Maheshwari.

Case Background

The case began when Shubham Jain, the respondent, filed a civil suit in the Small Causes Court against the late father of the appellants, claiming that the defendant was a tenant in his shop at a monthly rent of Rs. 2,000. The respondent alleged that the tenant had failed to pay rent from February 2015 to May 2015, totaling Rs. 8,000, along with 15% municipal tax, despite notice.

The Trial Court, finding the service of summons sufficient, proceeded ex parte as the defendant did not appear. On 9 March 2016, the court decreed the suit, ordering the defendant to pay Rs. 8,000 in arrears, vacate the shop, and pay Rs. 2,000 per month as damages for use and occupation until the shop was vacated.

The defendant, the predecessor of the appellants, then filed an application on 20 August 2016 under Order IX Rule 13 of the Code of Civil Procedure, 1908 (CPC), along with an application under Section 5 of the Limitation Act, 1963, and Section 17 of the Provincial Small Cause Courts Act, 1887, seeking to set aside the ex-parte decree. He also tendered Rs. 11,212, inclusive of costs, as the decretal amount. The respondent objected, arguing that the deposit was insufficient as it did not cover damages for use and occupation until possession was handed over.

The Trial Court upheld the respondent’s objection, stating that the defendant had not complied with Section 17 of the Provincial Small Cause Courts Act, 1887, which requires the deposit of the total amount due under the ex-parte decree, including compensation for use until the application to set aside the decree was filed. The Trial Court dismissed the application. The defendant, the father of the appellants, died on 26 September 2017, and the appellants were substituted in his place.

Timeline

Course of Proceedings

The Trial Court initially decreed the suit ex-parte on 9 March 2016, due to the defendant’s non-appearance. The defendant then filed an application to set aside the ex-parte decree, which was rejected by the Trial Court on 1 September 2022. The Trial Court held that the defendant had not complied with Section 17 of the Provincial Small Cause Courts Act, 1887, as he had not deposited the full amount due, including the mesne profits. The High Court of Judicature at Allahabad, Lucknow Bench, upheld the Trial Court’s decision on 21 September 2022, agreeing that there was non-compliance with Section 17 of the Act of 1887. The High Court relied on the Supreme Court’s decision in Kedarnath v. Mohan Lal Kesarwari (2002) 2 SCC 16, which held that Section 17 is mandatory. The appellants then appealed to the Supreme Court.

Legal Framework

The case primarily revolves around Section 17 of the Provincial Small Cause Courts Act, 1887, and Order IX Rule 13 of the Code of Civil Procedure, 1908. Section 17 of the Provincial Small Cause Courts Act, 1887, states:

“17. Application of the Code of Civil Procedure .—(1) The procedure prescribed in the Code of Civil Procedure, 1908 (5 of 1908), shall save in so far as is otherwise provided by that Code or by this Act, be the procedure followed in a Court of Small Causes , in all suits cognizable by it and in all proceedings arising out of such suits:
Provided that an applicant for an order to set aside a decree passed ex parte or for a review of judgment shall, at the time of presenting his application, either deposit in the Court the amount due from him under the decree or in pursuance of the judgment, or give such security for the performance of the decree or compliance with the judgment as the Court may, on a previous application made by him in this behalf, have directed.”

This provision mandates that an applicant seeking to set aside an ex-parte decree must deposit the amount due under the decree or provide security. Order IX Rule 13 of the Code of Civil Procedure, 1908, provides:

“13. Setting aside decree ex parte against defendants. – In any case in which a decree is passed ex parte against a defendant, he may apply to the Court by which the decree was passed for an order to set it aside; and if he satisfies 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:”

This rule allows a defendant to apply for setting aside an ex-parte decree if they were not duly served or were prevented from appearing due to sufficient cause. The court can impose terms, such as costs or payment into court, while setting aside the decree. The interplay of these provisions determines the conditions under which an ex-parte decree can be set aside in a Small Causes Court.

Arguments

Appellants’ Arguments:

• The appellants argued that the Trial Court and High Court took too rigid a view by not considering that the principal amount of rent and costs were deposited.
• They contended that the defendant had deposited Rs. 8,000 towards arrears of rent and Rs. 3,212 towards costs and that the application should not have been dismissed for not depositing the mesne profits.
• It was submitted that it was not a case of wilful avoidance of the requirements of Section 17 of the Act of 1887.
• They argued that since the appellants had now deposited the amount towards rent/mesne profits until April 2023, they deserved a chance to contest the suit on merits.

Respondent’s Arguments:

• The respondent argued that the Trial Court’s decision, affirmed by the High Court, was justified as the requirements of Section 17 of the Provincial Small Cause Courts Act, 1887, were not specifically met at the time of filing the application to set aside the ex-parte decree.
• The respondent contended that the deposit was insufficient as it did not cover damages for use and occupation until possession was handed over.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue that the court addressed was:

• Whether the High Court was correct in upholding the Trial Court’s decision to reject the application for setting aside the ex-parte decree due to non-compliance with Section 17 of the Provincial Small Cause Courts Act, 1887, when the principal amount of rent and costs were deposited, but not the mesne profits.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court allowed the appeal, setting aside the orders of the High Court and the Trial Court. The Court held that the defendant’s application under Order IX Rule 13 of the CPC should be allowed, and the ex-parte decree should be set aside. The suit was restored for consideration on its merits.

How each authority was viewed by the Court:

• Kedarnath v. Mohan Lal Kesarwari (2002) 2 SCC 16: The Supreme Court distinguished this case, noting that in Kedarnath, there was a total non-compliance of Section 17 of the Provincial Small Cause Courts Act, 1887, whereas, in the present case, the defendant had made a deposit, showing a bonafide attempt to comply with the law.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The Court noted that the defendant had deposited the principal amount of rent and costs, showing a bonafide attempt to comply with the law.
• The Court found that the Trial Court and High Court had taken too technical and impractical a view by not considering that the principal amount of rent and costs were deposited.
• The Court emphasized that the requirements of Section 17 of the Provincial Small Cause Courts Act, 1887, should be viewed practically and not as a penalty for every mistake, especially when the amount payable is not explicitly quantified in the decree.
• The Court noted that the appellants had deposited the amount towards rent/mesne profits until April 2023, showing their willingness to comply.
• The Court observed that the matter related to a shop where the predecessor of the appellants had been continuing as tenant, and the respondent was seeking eviction only on the ground of default in payment of rent, thus warranting an opportunity to contest the suit on merits.

The Court’s reasoning was a blend of factual considerations (the deposit of the principal amount and the willingness to pay) and legal interpretation (the practical application of Section 17 of the Provincial Small Cause Courts Act, 1887). The legal aspects slightly outweighed the factual aspects in the Court’s decision.

Logical Reasoning

The Court reasoned that while Section 17 of the Provincial Small Cause Courts Act, 1887, is mandatory, it should be interpreted practically. The Court noted that the defendant had made a bonafide attempt to comply with the law by depositing the principal amount of rent and costs. The Court also considered the fact that the appellants had now deposited the amount towards rent/mesne profits until April 2023. The Court found that the lower courts had taken too rigid and impractical a view of the matter. The Court emphasized that the defendant should be given an opportunity to contest the suit on merits.

The Supreme Court considered the alternative interpretation that the requirements of Section 17 of the Act of 1887 should be strictly adhered to, as was held by the High Court. However, the Supreme Court rejected this interpretation, stating that it was too technical and impractical. The Court held that the bonafide attempt of the defendant to seek a merit decision of the suit after due contest should not be ignored. The Court also considered the fact that the decree in question had not been merely a money decree but had been for eviction too. The Court’s final decision was based on a practical and equitable interpretation of the law, balancing the need for compliance with the law and the need for fairness and justice.

The Court’s decision was articulated clearly, stating that the deposit of the principal amount and costs showed a bonafide attempt to comply with the law. The Court also noted that the appellants had now deposited the amount towards rent/mesne profits until April 2023, showing their willingness to comply. The Court also noted that the matter related to a shop where the predecessor of the appellants had been continuing as tenant, and the respondent was seeking eviction only on the ground of default in payment of rent. The Court held that the defendant should be given an opportunity to contest the suit on merits.

The majority opinion was delivered by Justice Dinesh Maheshwari, with Justice Bela M. Trivedi concurring.

The Court’s reasoning was based on the principle that a procedural law should not be used to deny a party the opportunity to contest a case on merits. The Court emphasized that the requirements of Section 17 of the Provincial Small Cause Courts Act, 1887, should be interpreted practically and not as a penalty for every mistake, especially when the amount payable is not explicitly quantified in the decree.

The Court’s decision could have implications for future cases involving similar disputes, suggesting that courts should take a practical and equitable approach to interpreting procedural laws, especially when it comes to setting aside ex-parte decrees. The decision also underscores the importance of providing an opportunity to contest a case on merits, especially in cases involving eviction.

The Court did not introduce any new doctrines or legal principles. Instead, it applied existing legal provisions in a practical and equitable manner. The Court’s decision was based on the principle that a procedural law should not be used to deny a party the opportunity to contest a case on merits.

The Court did not analyze arguments for and against any doctrines or legal principles. Instead, it focused on the practical application of existing legal provisions. The Court’s decision was based on the principle that a procedural law should not be used to deny a party the opportunity to contest a case on merits.

“In our view, in the present set of facts and circumstances, prayer of the defendant to set aside ex parte decree could not have been denied for want of further deposit in terms of the decree in question.”

“Even if the requirements of Section 17 of the Act of 1887 are held to be mandatory, the present one had not been a case where the defendant had altogether ignored those requirements.”

“For this bonafide and prompt step (albeit taken after approaching this Court), in our view, they do deserve an opportunity to contest the suit on merits, particularly when the matter relates to a shop where the predecessor of the appellants had been continuing as tenant and the plaintiff -respondent is seeking the decree for eviction only on the ground of default in payment of rent.”

Key Takeaways

• When applying Section 17 of the Provincial Small Cause Courts Act, 1887, courts should take a practical view and not penalize defendants for every mistake, especially if the amount due is not explicitly quantified in the decree.
• A bonafide attempt to comply with the law, such as depositing the principal amount of rent and costs, should be considered positively when deciding whether to set aside an ex-parte decree.
• Courts should provide an opportunity to contest a case on merits, especially in cases involving eviction, unless there is a clear and wilful disregard for the law.
• The Supreme Court’s decision emphasizes the importance of balancing procedural requirements with the need for fairness and justice.
• The Supreme Court has clarified that even if a provision is mandatory, it should be interpreted in a way that promotes justice and equity.

Directions

The Supreme Court directed the Trial Court to assign the case a reasonable priority and proceed expeditiously. The appellants were directed to submit their written statement(s) on or before 28 February 2023. The Court also left it open for the respondent-plaintiff to apply for withdrawal of the deposited amount, if so advised.

Development of Law

The ratio decidendi of the case is that while Section 17 of the Provincial Small Cause Courts Act, 1887, is mandatory, it should be interpreted practically, and a bonafide attempt to comply with the law should be considered positively. This decision clarifies that the requirement to deposit the amount due under the decree should not be applied rigidly, especially when the amount payable is not explicitly quantified in the decree, and the defendant has made an attempt to comply with the law. It also emphasizes that the procedural laws should not be used to deny a party the opportunity to contest a case on merits.

Conclusion

The Supreme Court’s decision in Shyam Kumar Gupta vs. Shubham Jain clarifies the interpretation of Section 17 of the Provincial Small Cause Courts Act, 1887, and Order IX Rule 13 of the Code of Civil Procedure, 1908, in the context of setting aside ex-parte decrees. The Court emphasized that a practical and equitable approach should be adopted, ensuring that parties have an opportunity to contest cases on merits. The Court’s decision sets a precedent for how courts should view compliance with procedural laws, particularly in cases involving rent and eviction disputes.

Category

Parent Category: Code of Civil Procedure, 1908

Child Category: Order IX Rule 13, Code of Civil Procedure, 1908

Parent Category: Provincial Small Cause Courts Act, 1887

Child Category: Section 17, Provincial Small Cause Courts Act, 1887

Parent Category: Rent and Eviction

Child Category: Ex-parte Decree

FAQ

Q: What is an ex-parte decree?

A: An ex-parte decree is a court order passed against a defendant who does not appear in court.

Q: What is Section 17 of the Provincial Small Cause Courts Act, 1887?

A: Section 17 of the Provincial Small Cause Courts Act, 1887, requires an applicant seeking to set aside an ex-parte decree to deposit the amount due under the decree or provide security.

Q: What did the Supreme Court decide in this case?

A: The Supreme Court held that the High Court and Trial Court took too rigid a view and that the defendant’s application to set aside the ex-parte decree should be allowed. The Court emphasized that a practical and equitable approach should be adopted.

Q: What should a tenant do if an ex-parte decree is passed against them?

A: A tenant should immediately apply to the court to set aside the decree and comply with the requirements of Section 17 of the Provincial Small Cause Courts Act, 1887, by depositing the amount due under the decree or providing security.

Q: What does the Supreme Court’s judgment mean for future cases?

A: The judgment means that courts should interpret procedural laws practically and provide an opportunity to contest a case on merits, especially in cases involving eviction. Courts should not penalize defendants for every mistake, especially if the amount due is not explicitly quantified in the decree.