The Himachal Pradesh High Court dismissed two petitions filed by parties to a civil suit challenging an order granting conditional leave to defend under Order 37 Rule 3 CPC. The trial court had allowed the defendant to defend the suit subject to furnishing security equivalent to the plaintiff's claim of Rs.52,00,000 within 15 days. The High Court, exercising its limited supervisory jurisdiction under Article 227 of the Constitution of India, declined interference, holding that the trial court's order was neither arbitrary nor contrary to settled principles governing leave to defend in commercial suits.
Background & Facts
The Genesis
The dispute arose from an agreement for sale executed on 09.08.2023 between Narip Bajwa (plaintiff), Vice President of Sree Cements posted at Jaipur, and Sanjeev Maria (defendant), a resident of Shimla. The agreement pertained to sale of land measuring 00-02-30 hectares along with a three-and-a-half storeyed building situated at Mauja/Mohal Dhagog, Tehsil Shimla (Rural), Himachal Pradesh, for a total consideration of Rs.4,00,00,000.
Key Facts
- Rs.52,00,000 was paid as part payment at the time of execution of the agreement.
- Clause 9 of the agreement required the defendant to cooperate with the plaintiff in obtaining permission under Section 118 of the H.P. Tenancy and Land Reforms Act, 1972 for the plaintiff to purchase agricultural land, as the plaintiff was a non-agriculturist.
- The plaintiff alleged that despite more than one year and five months elapsing, the defendant neither cooperated nor responded to requests for necessary documents or permissions.
- The plaintiff's father passed away during this period, prompting the plaintiff to terminate the agreement by issuing a notice on grounds of non-cooperation.
- The plaintiff sought recovery of Rs.52,00,000 with 12% interest per annum from the date of institution of the suit.
- The defendant admitted execution of the agreement and receipt of Rs.52,00,000 but contended that the plaintiff failed to demonstrate efforts to obtain the requisite permission under Section 118.
Procedural History
- 09.08.2023: Agreement for sale executed between the parties.
- 14.05.2025: Trial Court (Senior Civil Judge, Shimla) allowed the defendant's application for leave to defend subject to furnishing security of Rs.52,00,000 within 15 days, in CMA No.483 of 2025 in Civil Suit No.36 of 2025 titled Narip Bajwa v. Sanjeev Maria.
- CMPMO No.355 of 2025: Filed by plaintiff challenging the conditional leave granted to the defendant.
- CMPMO No.255 of 2025: Filed by defendant challenging the imposition of security condition.
- 15.06.2026: Matter reserved for judgment.
- 21.07.2026: Judgment delivered by the High Court.
The Parties' Positions
Plaintiff's Case
- The plaintiff argued that the defendant had no substantial defence and the trial court erred in granting conditional leave.
- It was contended that the defence raised was contrary to the agreement and that the defendant could not escape liability upon termination of the agreement.
- The plaintiff relied on the admitted execution of the agreement and receipt of payment to assert that the defendant's defence was frivolous.
Defendant's Case
- The defendant contended that the plaintiff failed to make efforts to obtain permission under Section 118 and did not request the defendant in writing to supply necessary documents.
- The defendant argued that the plaintiff terminated the agreement without fulfilling his obligations under Clause 9.
- The defendant claimed to have made out a plausible defence and sought unconditional leave to defend.
Relief Sought
- CMPMO No.355 of 2025: Set aside the trial court's order granting conditional leave to defend and dismiss the defendant's application for leave to defend.
- CMPMO No.255 of 2025: Set aside the condition of furnishing security imposed by the trial court and grant unconditional leave to defend.
The Legal Issue
The central question was whether the trial court erred in granting conditional leave to defend under Order 37 Rule 3 CPC when the defendant had raised triable issues indicating a plausible defence, and whether the High Court could interfere under Article 227 of the Constitution of India in such matters.
Arguments Presented
For the Petitioner (Plaintiff in CMPMO No.355 of 2025)
The plaintiff argued that the defendant had no substantial defence and the trial court failed to consider the requirements under Order 37 Rule 3 CPC. It was contended that the defence raised was not borne out of the contract or statutory rights and was contrary to the admitted facts. The plaintiff relied on the admitted execution of the agreement and receipt of payment to assert that the defendant's defence was frivolous and vexatious, warranting refusal of leave to defend.
For the Respondent (Defendant in CMPMO No.355 of 2025)
The defendant argued that the plaintiff failed to make efforts to obtain permission under Section 118 of the H.P. Tenancy and Land Reforms Act and did not request the defendant in writing to supply necessary documents. The defendant contended that the plaintiff terminated the agreement without fulfilling his obligations under Clause 9 of the agreement. The defendant claimed to have made out a plausible defence and sought unconditional leave to defend, asserting that the trial court correctly applied the principles governing leave to defend.
The Court's Analysis
The High Court examined the principles governing leave to defend under Order 37 Rule 3 CPC, as enunciated by the Supreme Court in IDBI Trusteeship Services Limited v. Hubtown Limited, (2017) 1 SCC 568 and B.L. Kashyap and Sons Limited v. JMS Steels and Power Corporation, (2022) 3 SCC 294.
The Court noted that the Supreme Court has clarified that grant of leave to defend is the ordinary rule, and denial is an exception. The Court observed:
"Even in the case of raising of triable issues, with the defendant indicating his having a fair or reasonable defence, he is ordinarily entitled to unconditional leave to defend unless there be any strong reason to deny the leave."
The Court further noted that the trial court had considered the defendant's defence based on Clause 11 of the agreement and the plaintiff's failure to demonstrate efforts to obtain permission under Section 118. The Court held that the defendant had raised triable issues indicating a plausible defence, falling within the ambit of para 17.3 and 17.6 of IDBI Trusteeship Services Limited v. Hubtown Limited.
The Court rejected the plaintiff's contention that the defence was frivolous or vexatious, as the defendant had raised a defence based on the agreement and the statutory framework. The Court held that the trial court's order was neither arbitrary nor contrary to settled principles.
The Court also addressed the scope of interference under Article 227 of the Constitution of India, relying on K. Valarmathi v. Kumaresan, 2025 INSC 606 and Nandi Infrastructure Corridor Enterprises Ltd. v. B. Gurappa Naidu, 2026 INSC 434. The Court reiterated that supervisory jurisdiction under Article 227 is not to be exercised to supplant statutory remedies or to reappreciate evidence or facts. The Court held that the trial court's order did not suffer from any jurisdictional error or gross abuse of discretion.
The Verdict
Both petitions were dismissed. The High Court held that the trial court's order granting conditional leave to defend was justified and did not warrant interference under Article 227. The Court directed that the record be sent back to the trial court and that any pending applications be disposed of accordingly.
What This Means For Similar Cases
Leave to Defend Is the Rule, Not the Exception
Practitioners must recognize that the grant of leave to defend is the ordinary rule under Order 37 Rule 3 CPC, and denial is an exception. Courts are expected to grant leave even where triable issues are raised, unless the defence is frivolous or vexatious.
- Courts should not deny leave merely because the defence is not positively good.
- Leave should be denied only where the defendant fails to show any genuine triable issue and the defence is found to be frivolous or vexatious.
Triable Issues Must Be Genuine and Plausible
The defence raised must be plausible and based on the contract or statutory rights. Courts should examine whether the defence is borne out of the agreement or statutory framework.
- Defences based on Clause 11 of the agreement or statutory provisions like Section 118 of the H.P. Tenancy and Land Reforms Act are considered plausible.
- Courts should not shut out triable issues by unduly severe orders, but may impose conditions where doubts exist about the defendant's good faith or genuineness of the issues.
Supervisory Jurisdiction Under Article 227 Is Limited
The High Court reiterated that its supervisory jurisdiction under Article 227 is limited and cannot be exercised to supplant statutory remedies or to reappreciate evidence or facts.
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Courts cannot substitute their own judgment for that of the trial court.
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Interference is warranted only in cases of unwarranted assumption of jurisdiction, gross abuse of jurisdiction, or unjustifiable refusal to exercise jurisdiction.
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Errors of fact or legal flaws that do not affect the final finding are not grounds for interference.
