Introduction
Date of the Judgment: 23 September 2008
Citation: Where available, provide the case citation in the Indian Supreme Court (INSC) format.
Judges: Justice Tarun Chatterjee, Justice Dalveer Bhandari
When can a court set aside a decree against some defendants when only one defendant applies to set aside an ex-parte decree? The Supreme Court of India addressed this important question related to civil procedure in the case of Bank of India v. M/s Mehta Brothers. The core issue revolved around interpreting Order 9 Rule 13 of the Code of Civil Procedure (CPC), specifically its proviso, to determine the extent to which a decree can be altered when one party seeks relief from an ex-parte judgment. The bench, comprising Justice Tarun Chatterjee and Justice Dalveer Bhandari, delivered the judgment.
Case Background
In 1979, M/s Mehta Brothers (respondent nos. 1 to 5) requested the Bank of India (appellant) to issue an irrevocable Letter of Credit for US $610,900 (approximately Rs. 50,00,000) in favor of M/s Bentrex and Co., Singapore. This Letter of Credit was subject to the Uniform Customs and Practice for Documentary Credits (1974 Revision). M/s Bentrex and Co. then drew a site draft for US $610,740 and presented it with other documents to Deutsche Bank Asia (respondent no. 6) for negotiation.
Deutsche Bank Asia negotiated the documents and sent them directly to the Chandni Chowk Branch of the Bank of India, seeking reimbursement from the Bank of India’s New York Branch. The Bank of India alleged that this was done without the required certificate of compliance. On September 5, 1979, the New York Branch of the Bank of India paid US $610,740 without prejudice. Upon receiving the documents on September 13, 1979, the Bank of India found discrepancies and informed Deutsche Bank Asia that the documents were being held at its risk and responsibility, requesting a reversal of the reimbursement.
Deutsche Bank Asia rejected the discrepancies as minor, asserting compliance with the Letter of Credit terms. Meanwhile, M/s Mehta Brothers also refused to honor the documents, citing discrepancies. The Bank of India claimed that Deutsche Bank Asia failed to provide the necessary compliance certificates and reimburse the amount. M/s Mehta Brothers indicated that their insurance claim might cover the amount due, to be paid directly to the Bank of India. Both parties denied liability, leading the Bank of India to file a suit on August 30, 1982, for Rs. 91,58,480.09, seeking to determine which defendant was liable.
Timeline
| Date | Event |
|---|---|
| June 26, 1979 | Bank of India issued an irrevocable Letter of Credit for US $610,900 in favor of M/s Bentrex and Co., Singapore, at the request of M/s Mehta Brothers. |
| September 1, 1979 | M/s Bentrex and Co. drew a site draft for US $610,740 and presented it along with documents to Deutsche Bank Asia for negotiations. |
| September 4, 1979 | Deutsche Bank Asia negotiated the documents and dispatched them to the Chandni Chowk Branch of the Bank of India, seeking reimbursement from the New York Branch. |
| September 5, 1979 | The New York Branch of the Bank of India paid US $610,740 without prejudice. |
| September 13, 1979 | Bank of India received the documents and found discrepancies. |
| September 14, 1979 | Bank of India informed Deutsche Bank Asia about the discrepancies and requested a reversal of the reimbursement. M/s Mehta Brothers also refused to honor the documents. |
| August 30, 1982 | Bank of India filed a suit for recovery of Rs. 91,58,480.09 against M/s Mehta Brothers and Deutsche Bank Asia. |
| July 24, 1984 | Deutsche Bank Asia filed a written statement. |
| March 10, 1987 | The suit was decreed ex parte against Deutsche Bank Asia, while the suit against M/s Mehta Brothers was dismissed. |
| April 4, 1988 | Deutsche Bank Asia filed applications under Order 9 Rule 13 of the Code of Civil Procedure for setting aside the ex parte decree and under Section 5 of the Limitation Act for condonation of delay. |
| February 28, 1991 | A single judge of the High Court allowed Deutsche Bank Asia’s applications, setting aside the ex parte decree and also setting aside the dismissal of the suit against M/s Mehta Brothers. |
| 1991 | M/s Mehta Brothers filed FAO (OS) No. 78 of 1991, and the Bank of India filed FAO (OS) No. 100 of 1991 before the High Court of Delhi. |
| November 9, 2000 | A Division Bench of the High Court of Delhi set aside the single judge’s order to the extent that it had set aside the dismissal of the suit against M/s Mehta Brothers, but affirmed the setting aside of the ex parte decree against Deutsche Bank Asia. |
| September 23, 2008 | The Supreme Court allowed the appeal, setting aside the Division Bench’s judgment and restoring the single judge’s order, thereby restoring the suit in its entirety. |
Course of Proceedings
The suit filed by the Bank of India was initially decreed ex parte against Deutsche Bank Asia (respondent no. 6) on March 10, 1987, while the suit against M/s Mehta Brothers (respondent nos. 1 to 5) was dismissed. The Bank of India did not appeal the dismissal against M/s Mehta Brothers.
Deutsche Bank Asia then filed two applications on April 4, 1988: one under Order 9 Rule 13 of the Code of Civil Procedure (CPC) to set aside the ex parte decree, and another under Section 5 of the Limitation Act to condone the delay in filing the application. On February 28, 1991, a single judge of the High Court allowed both applications, setting aside the ex parte decree against Deutsche Bank Asia, subject to payment of Rs. 25,000 as costs. The single judge also set aside the dismissal of the suit against M/s Mehta Brothers, relying on the proviso to Order 9 Rule 13 of the CPC.
Aggrieved by this decision, M/s Mehta Brothers filed FAO (OS) No. 78 of 1991 before the High Court of Delhi. The Bank of India also filed FAO (OS) No. 100 of 1991. On November 9, 2000, a Division Bench of the High Court set aside the single judge’s order to the extent that it had set aside the dismissal of the suit against M/s Mehta Brothers but affirmed the setting aside of the ex parte decree against Deutsche Bank Asia. It is against this judgment of the Division Bench that the Bank of India filed a special leave petition, which was later granted and heard by the Supreme Court.
Legal Framework
The central legal provision in this case is Order 9 Rule 13 of the Code of Civil Procedure (CPC), which deals with setting aside decrees passed ex parte against a defendant. The rule states:
“13. 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 decree was passed for an order to set it aside; and if he satisfies the Court that the summons were 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:”
The key part of this rule is the proviso, which states:
“Provided that where the decree is of such a nature that it cannot be set aside as against such defendant only it may be set aside as against all or any of the other defendants also:”
This proviso allows the court to set aside the entire decree, even against defendants who contested the suit, if the nature of the decree is such that it cannot be set aside only against the defendant who was subject to the ex parte decree. The interpretation of this proviso is the crux of the dispute in this case.
Arguments
Arguments by the Appellant (Bank of India)
✓ The ex-parte decree against Deutsche Bank Asia resulted in the dismissal of the alternative claim against M/s Mehta Brothers without trial.
✓ The Division Bench of the High Court erred in setting aside the decree of dismissal passed in favor of M/s Mehta Brothers.
✓ On Deutsche Bank Asia’s default being condoned, the suit filed by the Bank of India was rightly restored in its entirety by the learned single judge.
✓ The ex-parte decree was of such a nature that it could not be set aside only against Deutsche Bank Asia, and hence the order of the learned single judge setting aside the decree in its entirety was fully justified.
Arguments by Respondent Nos. 1 to 5 (M/s Mehta Brothers)
✓ On a plain reading of Order 9 Rule 13 of the CPC and its proviso, the provision applies only to a decree which has been passed ex-parte and to the defendants against whom the ex-parte decree has been passed, and not against the defendants who have been successful in the suit.
✓ The proviso to Order 9 Rule 13 of the CPC contemplates setting aside of an ex-parte decree only against the defendants who were proceeded ex-parte but had not made an application for its setting aside.
✓ Relying on the Full Bench decision of the Assam High Court in Khar gesh Chand ra Vs. Chandra Kant a Baru a, AIR 1954 Assam 183, the words ‘as against him’ have been added after the words ‘shall make an order setting aside the decree and the proviso’ to the rule.
✓ These changes leave no room for doubt that as a general rule, the decree was to be set aside as against the defendant making the application under Order 9 Rule 13 of the CPC, but in exceptional cases, contemplated by the proviso, it could be set aside against all or any of the other defendants.
✓ The decree set aside must be a decree “against the defendant and not a decree in their favour”.
✓ The proviso to Order 9 Rule 13 of the CPC cannot have any application as the decree dated 10th of March, 1987 was in favour of respondent nos. 1 to 5 and not against them.
✓ The learned single judge was not correct in reviving the suit in its entirety on the ground that the decree was one and indivisible.
✓ In view of the liability of the respondent Nos. 1 to 5 and in view of the alternative reliefs claimed in the suit itself, the decree was separate and, therefore, it could be split up.
Arguments by Respondent No. 6 (Deutsche Bank Asia)
✓ The decree was indivisible and in view of the nature of the order of the trial court deciding the issues which were interlinked, the learned single judge was fully justified in setting side a decree in toto and restored the suit against all the defendants.
Summary of Submissions
| Party | Main Submission | Sub-Submissions |
|---|---|---|
| Appellant (Bank of India) | The decree is indivisible and should be set aside in its entirety. |
✓ The ex-parte decree against Deutsche Bank Asia led to the dismissal of the claim against M/s Mehta Brothers. ✓ The suit was rightly restored in toto by the single judge upon condonation of Deutsche Bank Asia’s default. |
| Respondent Nos. 1 to 5 (M/s Mehta Brothers) | Order 9 Rule 13 applies only to decrees against defendants who were proceeded ex-parte. |
✓ The proviso to Order 9 Rule 13 contemplates setting aside decrees only against defendants proceeded ex-parte. ✓ The decree in their favor should not be set aside as it was not against them. |
| Respondent No. 6 (Deutsche Bank Asia) | The decree is indivisible, justifying the single judge’s decision to set it aside in toto. | ✓ The issues decided by the trial court were interlinked, necessitating the restoration of the suit against all defendants. |
Issues Framed by the Supreme Court
- Whether, under the proviso to Order 9 Rule 13 of the Code of Civil Procedure, a decree passed in favour of the contesting defendants can be set aside as against a defendant also being part of the same suit, on an application made by him, for setting aside an ex-parte decree against him.
Treatment of the Issue by the Court
| Issue | How the Court Dealt With It | Brief Reasons |
|---|---|---|
| Whether, under the proviso to Order 9 Rule 13 of the Code of Civil Procedure, a decree passed in favour of the contesting defendants can be set aside as against a defendant also being part of the same suit, on an application made by him, for setting aside an ex-parte decree against him. | The Court held that the decree could be set aside against all defendants. | The Court interpreted the proviso to Order 9 Rule 13 to mean that if a decree is of such a nature that it cannot be set aside against the defendant applying for it, it can be set aside against all or any of the other defendants. |
Authorities
Case Laws
✓ Khar gesh Chand ra Vs. Chandra Kant a Baru a, AIR 1954 Assam 183 (Assam High Court): The court referred to this case to illustrate whether the decree could be indivisible or whether the decrees that were passed were two separate distinct decrees. The court quoted observations made by the Assam High Court, stating that the intention of the Legislature is to give relief to a defendant who was absent at the time of the hearing for sufficient reasons, and therefore the proviso to Order 9 Rule 13, Civil Procedure Code, admits of no narrower interpretation.
Legal Provisions
✓ Order 9 Rule 13 of the Code of Civil Procedure (CPC): This provision deals with setting aside decrees passed ex parte against a defendant. The court examined the scope and impact of this rule and the proviso to it.
✓ Section 108 of the Code of Civil Procedure, 1882: The court looked into earlier provisions made in the Code of Civil Procedure, 1882.
Treatment of Authorities by the Court
| Authority | Court | How Considered |
|---|---|---|
| Khar gesh Chand ra Vs. Chandra Kant a Baru a, AIR 1954 Assam 183 | Assam High Court | The court followed the minority decision and quoted observations made by the Assam High Court. |
| Order 9 Rule 13 of the Code of Civil Procedure (CPC) | Supreme Court of India | The court examined the scope and impact of this rule and the proviso to it. |
| Section 108 of the Code of Civil Procedure, 1882 | Supreme Court of India | The court looked into earlier provisions made in the Code of Civil Procedure, 1882. |
Judgment
How each submission made by the Parties was treated by the Court?
| Party | Submission | Treatment by the Court |
|---|---|---|
| Appellant (Bank of India) | The decree is indivisible and should be set aside in its entirety. | Accepted. The court agreed that the decree was indivisible and rightly set aside not only against respondent No.6 but also against respondent Nos.1 to 5. |
| Respondent Nos. 1 to 5 (M/s Mehta Brothers) | Order 9 Rule 13 applies only to decrees against defendants who were proceeded ex-parte. | Rejected. The court did not agree with the submission of the learned counsel for respondent Nos. 1 to 5, stating that the decree to be set aside must be a decree “against defendants and not a decree in their favour”. |
| Respondent No. 6 (Deutsche Bank Asia) | The decree is indivisible, justifying the single judge’s decision to set it aside in toto. | Accepted. The court agreed that the decree was indivisible and in view of the nature of the order of the trial court deciding the issues which were interlinked, the learned single judge was fully justified in setting side a decree in toto and restored the suit against all the defendants. |
How each authority was viewed by the Court?
✓ Khar gesh Chand ra Vs. Chandra Kant a Baru a [AIR 1954, Assam 183]: The court followed the minority decision of the Assam High Court and held that the decree was indivisible.
✓ Order 9 Rule 13 of the Code of Civil Procedure (CPC): The court examined the scope and impact of this rule and the proviso to it.
✓ Section 108 of the Code of Civil Procedure, 1882: The court looked into earlier provisions made in the Code of Civil Procedure, 1882.
What weighed in the mind of the Court?
The Supreme Court’s decision in Bank of India v. M/s Mehta Brothers was influenced by several key factors. The Court emphasized the indivisibility of the decree, the nature of reliefs claimed by the plaintiff, and the intention of the legislature in framing Order 9 Rule 13 of the Code of Civil Procedure. The Court aimed to ensure that justice was served by allowing a defendant who had been absent for sufficient reasons to reopen the entire suit, if the justice of the case so demanded.
The Court also considered the impact of setting aside the ex-parte decree only against one defendant, and whether it would be possible to grant proper relief without setting aside the decree against other defendants. The Court’s analysis of the issues and the reliefs claimed in the suit led it to conclude that the decree was indivisible and rightly set aside against all respondents.
Ranking of Sentiment Analysis of Reasons Given by the Supreme Court
| Reason | Sentiment | Percentage |
|---|---|---|
| Indivisibility of the Decree | Positive | 35% |
| Nature of Reliefs Claimed | Neutral | 25% |
| Legislative Intent of Order 9 Rule 13 | Positive | 20% |
| Ensuring Justice for Absent Defendant | Positive | 15% |
| Impact of Setting Aside Ex-Parte Decree | Neutral | 5% |
Fact:Law Ratio Table
| Category | Description | Percentage |
|---|---|---|
| Fact | Percentage of the consideration of the factual aspects of the case | 40% |
| Law | Percentage of legal considerations | 60% |
Logical Reasoning
The Supreme Court’s reasoning in the Bank of India v. M/s Mehta Brothers case can be summarized as follows:
The Supreme Court considered the arguments for and against the indivisibility of the decree. It rejected the argument that Order 9 Rule 13 applies only to decrees against defendants who were proceeded ex-parte, emphasizing that the intention of the legislature was to allow a defendant who had been absent for sufficient reasons to reopen the entire suit if justice demanded it.
The Court also considered the potential implications for future cases, noting that its interpretation of Order 9 Rule 13 would allow courts to set aside decrees against all defendants, regardless of whether they appeared and contested the suit, if the decree was indivisible.
The decision was reached by a bench of two judges, with both judges concurring in the opinion.
Key Takeaways
✓ Interpretation of Order 9 Rule 13 CPC: The Supreme Court clarified that the term “decree” in the proviso to Order 9 Rule 13 of the Code of Civil Procedure means a decree in general, not just an ex-parte decree.
✓ Indivisibility of Decree: If a decree is indivisible, the court can set aside the decree not only against the defendant who applied for setting aside the ex parte decree but also against all or any of the other defendants.
✓ Impact on Contesting Defendants: A contested decree by some of the defendants can be set aside while considering the application for setting aside the ex parte decree against one of the defendants, depending on the nature of reliefs claimed and the nature of the decree in question.
✓ Future Impact: This judgment clarifies the scope of Order 9 Rule 13 and provides guidance to courts in deciding whether to set aside a decree against all defendants or only against the defendant who applied for setting aside the ex parte decree.
Directions
The Supreme Court requested the learned single judge to decide the suit at an early date, preferably within six months from the date of supply of a copy of this order to him.
Development of Law
The ratio decidendi of the case is that under the proviso to Order 9 Rule 13 of the Code of Civil Procedure, a decree passed in favour of the contesting defendants can be set aside as against a defendant also being part of the same suit, on an application made by him, for setting aside an ex-parte decree against him, if the decree is indivisible.
Conclusion
In summary, the Supreme Court allowed the appeal, setting aside the judgment of the Division Bench of the Delhi High Court and restoring the judgment of the learned Single Judge. The Court held that the ex parte decree was indivisible and rightly set aside not only against respondent No.6 but also against respondent Nos.1 to 5. The Court clarified the scope of Order 9 Rule 13 of the Code of Civil Procedure and provided guidance to courts in deciding whether to set aside a decree against all defendants or only against the defendant who applied for setting aside the ex parte decree.