Rs 75 lakh price of reopening a Rs 21.88 crore ex parte decree stays in court, not with lender

Justice Ujjal Bhuyan and Justice Atul S. Chandurkar leave the 423-day delay condoned but order the fourth defendant to keep Rs 75 lakh in deposit instead of paying the lender.

A defendant who applied 423 days late to undo a Rs 21.88 crore ex parte decree will get to contest the suit. The Supreme Court on 28 October 2026 refused to disturb the Madras High Court order that condoned the delay.

It changed one thing: the Rs 75 lakh he was told to pay as the price. That money will not go to the lender. It will sit in a fixed deposit with the High Court until the suit is finally decided.

A bench of Justice Ujjal Bhuyan and Justice Atul S. Chandurkar decided two cross-appeals together. Justice Chandurkar wrote the judgment.

A hire-purchase claim that went unanswered

Integrated Finance Company Limited, the plaintiff, said it had signed hire purchase agreements and a lease with a partnership firm, Business India, the first defendant. The firm was represented by the second to fourth defendants.

The company claimed Rs 21,88,11,451.96 from the firm as on 18 March 2010. It sued in the Madras High Court for that sum, with future interest at 36 per cent.

The defendants did not appear despite service. On 27 August 2021 the first, second and fourth defendants were set ex parte, the third having died.

The plaintiff led evidence. On 15 November 2021, the Single Judge decreed the suit as prayed.

Fifteen months later, an application to undo it

The fourth defendant, Hiroo Hotchand Advani, applied on 15 February 2023 under Order IX Rule 13 of the Code of Civil Procedure to set the decree aside. He also sought condonation of a 423-day delay.

His case was that the suit summons was never served on him. A search, he said, told him on 10 February 2023 that a Mr. Ravi Agrawal had received the summons on 10 December 2011 and had not told him.

The plaintiff denied every ground and called the plea lacking in good faith. The Single Judge agreed. He noted that the fourth defendant had appeared through counsel and filed a common affidavit with the other defendants.

In all probability, the Single Judge held, he knew of the suit before the decree. By an order of 17 March 2023 the application was dismissed for lack of bona fides.

Division Bench condones delay, adds a condition

The fourth defendant appealed (OSA No. 112 of 2023). He added grounds, among them a belief that the second defendant was looking after the proceedings and that the claim was being settled.

On 14 August 2024 the Division Bench said his bona fides in filing the application late could not be doubted. It also held that he had failed to act with due diligence, so the delay could be condoned only on terms.

It noted that the whole claim had been decreed ex parte with interest at 36 per cent a year. It set aside the Single Judge’s refusal, but required him to pay Rs 75 lakh to the plaintiff within four weeks, so that it could be disbursed to various depositors.

He was given four weeks to file a written statement, and the Division Bench directed an early disposal of the suit. Both sides came to the Supreme Court: the fourth defendant against the Rs 75 lakh condition (SLP(C) No. 20884 of 2024), and the plaintiff against the condonation itself (SLP(C) No. 27307 of 2024).

What each side told the Supreme Court

Senior Advocate Siddharth Bhatnagar, for the fourth defendant, said that once the court was satisfied he should be allowed to contest, the delay should have been condoned unconditionally.

Even if a condition was justified, he argued, the money could not be paid to the plaintiff. The claim was seriously disputed, and the Division Bench had not examined his contentions before ordering payment.

Mr. V.P. Raman, for the plaintiff, argued that the Division Bench erred in condoning the delay. The grounds lacked bona fides, he said, and some were raised for the first time in appeal, not before the Single Judge.

In the alternative, he said the Rs 75 lakh was ordered on the fourth defendant’s own submission before the Division Bench, so he could not now wriggle out of it. He added that the sum was on the lower side given the claim and decree, and that a higher amount could be fixed if the delay order stood.

The Court’s interim order of September 2024

The bench began with its own order of 10 September 2024 in the fourth defendant’s SLP. That order said the only fault prima facie was the direction to pay the Rs 75 lakh straight to the plaintiff. The money should instead have been deposited with the Registry and invested.

It stayed execution of the ex parte decree on condition that he deposit Rs 75 lakh with the High Court within two months. The High Court was to invest it in an interest-bearing fixed deposit with a nationalised bank. If he did not deposit in time, the stay would stand vacated without further reference to the Court.

The judgment records that the Rs 75 lakh now stands deposited, though after some delay.

Delay stays condoned, payment does not

The bench framed two questions in para 14. The first was this:

“whether the discretion exercised by the Division Bench in condoning the delay of 423 days in applying for setting aside the ex parte decree deserves to be interfered with” (para 14)

The second was whether the Division Bench was justified in directing payment of Rs 75 lakh to the plaintiff as a condition.

On the first, the bench looked at the grounds in the application before the Single Judge and the added grounds before the Division Bench. It found the discretion could not be called so arbitrary or irrational as to need interference under Article 136 of the Constitution.

The fourth defendant had been given a chance to contest on the merits, and the bench said that exercise should not be thwarted. It declined to interfere with the condonation of the 423-day delay.

On the condition, the bench drew a line. A deposit of Rs 75 lakh as the price of condonation was reasonable. A further direction to pay it to the plaintiff at that stage appeared unwarranted, particularly when the fourth defendant was seeking to set the decree aside.

The Division Bench could have directed a deposit that abided the final outcome of the proceedings. The bench therefore made its 10 September 2024 direction absolute, requiring the sum “to remain in deposit, subject to final outcome of the proceedings” (para 15).

The plaintiff’s plea for a higher sum

The plaintiff had said Rs 75 lakh was too low. The bench did not agree, and found no reason to interfere with the discretion on that count.

It kept open another route. The plaintiff is at liberty to ask the Court to impose appropriate conditions on the fourth defendant when it considers his prayer for stay of execution of the ex parte decree. The fourth defendant can oppose any such request, the bench said, and it left that aspect open.

The bench also cleared the decks for the merits. Observations in para 7 of the Division Bench judgment are not to weigh with the Single Judge when he considers whether to set the decree aside.

That prayer is to be decided on its own merits, uninfluenced by anything said in the High Court judgment or in the Supreme Court’s judgment. The parties’ contentions on it stay open.

Order

The Supreme Court granted leave and disposed of both civil appeals with no order as to costs. The condonation of the 423-day delay stands.

The direction to pay Rs 75 lakh to the plaintiff for disbursal to depositors is modified. The fourth defendant is to deposit that sum with the High Court, to be invested in an interest-bearing deposit, subject to the final outcome of the proceedings. Pending applications are disposed of (para 17).