IDBI TRUSTEESHIP SERVICES LTD. versus HUBTOWN LTD.

Citation: [2016] 11 S.C.R. 660 · Decided: 15-11-2016 · Supreme Court of India · Bench: KURIAN JOSEPH · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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[2016] 11 S.C.R. 660 
IDBI TRUSTEESHIP SERVICES LTD. 
v. 
HUBTOWN LTD. 
(Civil Appeal No. I 0860of2016) 
NOVEMBER 15, 2016 
(KURIAN JOSEPH AND R. F. NARIMAN, JJ.) 
Code of Civil Procedure, 1908: 
Or. XXXVII, r.3 (unamended and as amended in 1976) -
Summary Suit - Principles for grant of leave to defend - Change in 
latt\ pre & post-amendment - Effect of the amendment on the ratio 
contained in Mec/1e/ec's case (pre-amendment) - Pre-amendment, 
there ll'as no compulsion for making any deposit as a condition 
precedent to grant of leave to defend a suit - Plea of defendant 
that post-amendment the only change in law was that deposit of 
any admitted amount was now a condition precedent for grant of 
leave to defend - However, plaintiff pleaded that post-amendment 
even if the Court thinks that a triable issue is raised by defendant, 
the plaintiff ought to be secured in monetary terms as a condition 
for leave to defend - Held: 01: XXXVII has suffered a change in 
1976, and that change has made a difference in the law laid down 
in Meclte/ec's case (pre-amendment) - The position in !all' now is 
that the trial Judge is vested with a discretion which has to result in 
iustice being done on the facts of each case - Thus, post-amendment 
even if the defendant raises triable issues, if a doubt is left with the 
trial judge about the defendants good faith, or the genuineness of 
the triable issues, the trial judge may impose conditions both as to 
time or mode of trial, as well as payment into Court or fi1rnishing 
security - Further, Mecltelec's case (3 Judges) did not consider the 
binding decision of 4 judges in Milkltiram's case lt'hich is a direct 
authority on the amended provision in Or. XXXVIJ, r.3 - Therefore, 
by virtue of amendment in law and the binding decision of four 
iudges in Milkltiram's case, principles stated in Mechelec's case 
governing 01: XXXVIl will noll' stand superseded. 
Or. XXXVIl, r.3 - Summary suit by appellant - Grant of 
unconditional leave to defend the suit, to respondent - Propriety of 
660 
JOBI TRUSTEESHJP SERVICES LTD. v. HUBTOWN LTD. 
- FMO, a Dutch company invested in 'V' (subsidiary of defendant) 
- 'V' invested said money in OPCDs (Optionally Partially Convertible 
Debentures) issued by 'A' & 'R' - Debenture Trust Deed executed in 
relation to this investment - Plaintiff appointed as Debenture Trustee 
under the Debenture Trust Deed -
Defendant issued an 
unconditional, irrevocable Corporate Guarantee in favour of 
plaintiff on behalf of 'V' - Default in payments - Corporate 
Guarantee invoked - Summary suit by plaintiff to enforce its rights 
arising out of said Corporate Guarantee - Defendant alleged that 
the amount invested by 'V' in OPCDs issued by 'A' & 'R' was to 
circumvent FEMA Regulations and thus, the Corporate Guarantee 
was part of a larger illegal transaction - High Court allowed 
unconditional leave to defend holding that defendant raised a 
triable issue - On appeal, held: The suit was filed only on invocation 
of Corporate Guarantee and it is not the defendant :S case that the 
said Guarantee was wrongly invoked - Even if a triable issue may 
be said to arise on the application of FEMA Regulations, 
nevertheless, there is a real doubt about the defendants good faith 
and the genuineness of such a triable issue - Therefore, it cannot 
be said that the defendant raised a substantial defence to the claim 
made in the suit - Rather the defence raised appears to be in the 
realm of being 'plausible but improbable' - This being the case, the 
plaintiff needs to be protected - Defendant to be granted leave to 
defend the suit only if it deposits the principal sum invested by FMO, 
or gives security for the said amount - Impugned judgment set aside 
- Suit to be tried expeditiously by High Court - FEMA Regulations 
- regns. 4 & 5. 
Allowing the appeal, the Court 
HELD: 1.1 The present case raises a larger and very 
important question: namely, whether the judgment in Mechelec's 
case continues to be the law even after the amendment of 
o.xx:xvn in 1976. [Para 9] (686-BJ 
1.2 The 3 judge bench in Mechelec's case stated that the 
only question which arose before them was whether the High 
Court could, in exercise of its powers under Section 115 of the 
CPC, interfere with the discretion of the district court in granting 
unconditional leave to defend to the defendant-respondent. 
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SUPREME COURT REPORTS 
[2016] 11 S.C.R.

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