Supreme Court Upholds Mandatory Security Deposit for Setting Aside Ex-Parte Decree in Small Causes Court: Arti Dixit & Anr vs. Sushil Kumar Mishra & Ors (2023)

Date of the Judgment: May 18, 2023

Citation: 2023 INSC 556

Judges: K.M. Joseph, J. and Hrishikesh Roy, J.

Can an ex-parte decree be set aside if the party seeking to do so does not comply with the mandatory requirements of depositing the decretal amount or providing sufficient security? The Supreme Court of India addressed this crucial question in a recent case concerning the Provincial Small Cause Courts Act, 1887. The Court examined the requirements for setting aside an ex-parte decree, specifically focusing on the need for a security deposit or valid security. The judgment was delivered by a two-judge bench comprising Justice K.M. Joseph and Justice Hrishikesh Roy.

Case Background

The case revolves around an ex-parte decree for ejectment and recovery of dues obtained by Respondents 1 to 4 against the Appellants on October 18, 2012. The Appellants, upon learning of the decree during execution proceedings on April 5, 2014, filed an application to set aside the decree on May 6, 2014, under Order IX Rule 13 of the Code of Civil Procedure (CPC). On the same day, they also filed an application under Section 17 of the Provincial Small Cause Courts Act, 1887, seeking permission to furnish security instead of depositing the full decretal amount. The Appellants initially sought to provide a surety of ₹50,000 and deposit the remaining amount. They later proposed a rental shop as security, which was owned by the Municipal Corporation, not the surety.

Timeline:

Course of Proceedings

The Trial Court initially dismissed the Appellants’ application under Section 17 of the Provincial Small Cause Courts Act, 1887, stating that a subsequent application for accepting a surety had already been admitted. The High Court, in a revision, directed the Trial Court to decide the matter expeditiously after noting that the surety had been accepted. Subsequently, the Trial Court allowed the application to set aside the ex-parte decree, finding that the Appellants had complied with Section 17(1) of the Act. However, the Additional District Judge (ADJ) reversed this order, stating that the Trial Court had to first determine compliance with Section 17. The ADJ remanded the matter back to the Trial Court to consider the issue of compliance with Section 17. The Trial Court then rejected the application under Section 17 and the surety provided by the Appellants, which was upheld by the ADJ. The High Court dismissed the Appellants’ writ petition, upholding the ADJ’s order, stating that the mandatory requirements of Section 17 were not met.

Legal Framework

The core of this case lies in the interpretation of Section 17 of the Provincial Small Cause Courts Act, 1887, which stipulates the procedure for setting aside an ex-parte decree. The relevant portion of Section 17 reads:

“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 section mandates that an applicant seeking to set aside an ex-parte decree must either deposit the decretal amount or provide security as directed by the court, at the time of presenting the application. The Supreme Court has previously interpreted this provision in Kedarnath v. Mohan Lal Kesarwari and others [AIR 2002 SC 582], holding that the application for setting aside the ex-parte decree must be accompanied by either the deposit or a prior application seeking permission to furnish security.

Section 145 of the Code of Civil Procedure, 1908, is also relevant, as Section 17(2) of the Provincial Small Cause Courts Act, 1887, states that the security may be realised in the manner provided by Section 145 of the CPC. Section 145 of CPC allows for the enforcement of security by selling the property provided as security.

Arguments

Appellants’ Submissions:

• ✓ The Appellants filed the application under Order IX Rule 13 of the CPC and Section 17 of the Provincial Small Cause Courts Act, 1887, on the same day, May 6, 2014, which is valid as per Kedarnath (supra).
• ✓ The Trial Court failed to pass an order on their application under Section 17, and they should not suffer due to the court’s inaction.
• ✓ The security offered, a shop allotted by the Municipal Council, was accepted on May 24, 2014. Any subsequent issues with the security should not be held against them.
• ✓ The High Court’s order on December 3, 2015, acknowledged the acceptance of the security, and the ADJ erred in overlooking this.
• ✓ The Trial Court had to give direction on the sufficiency of security within the prescribed period.

Respondents’ Submissions:

• ✓ The requirements of Section 17 of the Provincial Small Cause Courts Act, 1887, are mandatory. The security was not filed on May 6, 2014, but on May 24, 2014, thus not complying with the proviso to Section 17(1).
• ✓ The Appellants did not press the application under Section 17 dated 06.05.2014 and also filed another application for security.
• ✓ The security offered was a shop owned by the Municipal Corporation, not the surety, and thus was not enforceable under Section 17(2) read with Section 145 of the CPC.
• ✓ The period of limitation for providing security had expired.
• ✓ The application under Order IX Rule 13 was rejected because the security was not valid and not because security was not furnished.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the application to set aside the ex-parte decree was in conformity with the proviso to Section 17 of the Provincial Small Cause Courts Act, 1887?
2. Whether the applicant furnished any security on 06.05.2014?
3. Whether the prayer to permit the appellant to deposit/furnish security for a sum of Rs.50,000/- was in consonance with Section 17?
4. What was the duty of the Court in the face of such prayer under Section 17?
5. Whether the furnishing of the security consisting of the rented shop belonging to the Local Body, was sufficient compliance with Section 17?
6. What is the effect of the application dated 12.05.2014 and the order dated 25.05.2014 on the same which is obviously after 06.05.2014?

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

The Court also considered the following legal provisions:

Judgment

Authorities and their use by the Court:

• Kedarnath v. Mohan Lal Kesarwari and others [AIR 2002 SC 582]*: The Supreme Court followed this authority, reiterating that an application to set aside an ex-parte decree must be accompanied by a deposit or a prior application seeking permission to furnish security.
• Ram Bharose v. Ganga Singh [AIR 1931 Allahabad 727]*: The Court discussed this Full Bench decision of the Allahabad High Court, which held that the deposit or security must be furnished within 30 days.
• Bhagwandas Arora v. First ADJ Rampur [(1983) 4 SCC 1]*: The Court discussed this authority, noting that the case dealt with a technical defect in the security bond, which was not the case here.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the mandatory nature of Section 17 of the Provincial Small Cause Courts Act, 1887. The Court emphasized that the provision requires strict compliance, and the failure to deposit the decretal amount or provide valid security at the time of filing the application renders the application incompetent. The Court also considered the fact that the security provided by the appellants was not enforceable under Section 17(2) of the Act, as the shop belonged to a third party. While the Court acknowledged the Trial Court’s failure to pass an order on the application under Section 17, it held that the appellants’ subsequent action of furnishing an invalid security could not rectify the initial non-compliance.

Logical Reasoning

Judgment

The Supreme Court upheld the decisions of the lower courts, dismissing the appeal. The Court found that the Appellants failed to comply with the mandatory requirements of Section 17 of the Provincial Small Cause Courts Act, 1887. The Court held that the security provided by the Appellants was not valid, and the application to set aside the ex-parte decree was therefore not maintainable. The Court emphasized that while it is true that the Trial Court did not pass an order on the application under Section 17, the appellants proceeded to furnish security on their own, which was found to be unacceptable in law. The Court also noted that the appellants did not challenge the order of the Additional District Judge dated August 1, 2017, which was binding on the Trial Court.

“On a literal interpretation of Section 17 of the Act, which contemplates the Application under Section 17 being filed before the Application under Order IX Rule 13, whether appellants have made out a case. The first question, which we would have to consider is, whether the Application is in conformity with the proviso to Section 17. Did the applicant furnish any security on 06.05.2014? The answer can only be in the negative.”

“While it is true that no order was passed on the application under Section 17 on 06.05.2014, the fact remains that the appellants on their own furnished a surety as stated. The High Court reasons that the security so provided was unacceptable on two grounds. Firstly, it was not furnished along with the application under Order IX Rule 13 on 06.05.2014. Secondly, it is found that it was not acceptable in law.”

“In the facts, having regard to the Order dated 01.08.2017 and the security being found unacceptable, we find no merit in the appeal generated by special leave. The appeal will stand dismissed.”

Key Takeaways

• ✓ Strict compliance with Section 17 of the Provincial Small Cause Courts Act, 1887, is mandatory when seeking to set aside an ex-parte decree.
• ✓ An applicant must either deposit the decretal amount or furnish valid security at the time of filing the application.
• ✓ Security provided must be enforceable under Section 17(2) of the Act, read with Section 145 of the Code of Civil Procedure.
• ✓ Failure to comply with these requirements will render the application to set aside the ex-parte decree incompetent.
• ✓ The Court’s failure to pass an order on an application under Section 17 does not excuse the applicant from complying with the mandatory requirements of the section.

Directions

No specific directions were given by the Supreme Court.

Development of Law

The judgment reinforces the mandatory nature of Section 17 of the Provincial Small Cause Courts Act, 1887, and clarifies that the security provided must be valid and enforceable. It reiterates the principle laid down in Kedarnath (supra) that an application to set aside an ex-parte decree must be accompanied by either a deposit or a prior application seeking permission to furnish security. The ratio decidendi of the case is that non-compliance with the mandatory requirements of Section 17 will result in the dismissal of the application to set aside the ex-parte decree.

Conclusion

The Supreme Court dismissed the appeal, holding that the Appellants failed to comply with the mandatory requirements of Section 17 of the Provincial Small Cause Courts Act, 1887. The Court emphasized that the security provided by the Appellants was not valid and enforceable, and the application to set aside the ex-parte decree was therefore not maintainable. This judgment underscores the importance of strict compliance with procedural laws and the need for valid security when seeking to set aside an ex-parte decree in a Small Causes Court.