M/S Jack One Shanti Ent vs. M/S Arora Fabric

Facts

The petitioner, M/s Jack One Shanti Ent, filed a Civil Revision Petition challenging an order dated 02.09.2024 by the learned District Judge (Commercial) which granted conditional leave to defend a suit. The condition imposed was a deposit of Rs. 2 lakhs within three weeks. The petitioner argued that out of three disputed invoices, one had been paid, and the genuineness of the other two was contested. They also contended that a cheque relied upon by the respondent pertained to a closed account and was issued as security for unrelated transactions. The petitioner further claimed the suit was barred by limitation. The respondent, M/s Arora Fabric, argued that the petitioner's documents were false and the deposit condition was rightly imposed.

Held

The Court acknowledged that the learned District Judge (Commercial) had observed that the defendant had substantial defences which were not frivolous or vexatious and required evidence. However, the Court found the condition of depositing Rs. 2 lakhs to be onerous, considering the financial capacity of the defendant/revisionist. Therefore, the Court reduced the deposit amount to Rs. 50,000/- to be deposited within four weeks from the date of the order. The Court reasoned that while conditional leave to defend was appropriate due to reasonable doubt about the probability of the defence, the imposed condition needed to be proportionate to the defendant's financial standing. The Court did not expressly leave any issue undecided.

Key Issues

1. Whether the condition of depositing Rs. 2 lakhs within three weeks for leave to defend, as imposed by the learned District Judge (Commercial), is onerous and renders the defendant's right to participate in the litigation impossible, considering the defendant's financial capacity and the substantial nature of their defence? The petitioner argued that the deposit amount was excessively high, making it impossible for them to defend the suit, thereby rendering their right to defend nugatory. They sought a waiver of this condition. The respondent contended that the documents relied upon by the petitioner were false and frivolous, and the deposit condition was justified. The petitioner also raised the issue of the suit being barred by limitation and disputed the genuineness of two out of three invoices, stating one was already paid. They also highlighted that the cheque presented by the respondent was from a closed account and was given as a security cheque for past transactions unrelated to the current dispute, and that the account was closed due to the introduction of GST.