Delhi High Court
Vidya Projects Private Limited vs Essel Infraprojects Limited & Ors on 19 August, 2025
Author: Purushaindra Kumar Kaurav
Bench: Purushaindra Kumar Kaurav
$-
* IN THE HIGH COURT OF DELHI AT NEW DELHI
BEFORE
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV
+ CS(COMM) 501/2024, I.A. 5462/2025, I.A.18261/2025
Between: -
VIDYA PROJECTS PRIVATE LIMITED
(THROUGH ITS AUTHORIZED REPRESENTATIVE)
GALI NO. 4, PATEL NAGAR
NEAR POLICE NAKKA
RATHDHANA ROAD,
SONEPAT,
HARYANA - 131001
ALSO AT:
GALI NO. 3, VIKAS NAGAR
NEAR UNIQUE GARDEN
MURTHAL ROAD
SONEPAT
HARYANA - 131001
.....PLAINTIFF
(Through: Mr. Kamal Mehta and Mr. Nishant Mankoo, Advocates.)
AND
ESSEL INFRAPROJECTS LIMITED
(THROUGH ITS MANAGING DIRECTOR)
513/A, 5h FLOOR
KOHINOOR CITY, KIROL ROAD,
KURLA (WEST), MUMBAI,
MAHARASHTRA - 400070
ALSO AT:
Signature Not Verified Signature Not Verified
Signed By:AMIT KUMAR Signed
SHARMA
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 1 KUMAR KAURAV
PLOT NO. 19 85 20, 6th FLOOR,
FILM CITY
SECTOR -16A
NOIDA-201301
UTTAR PRADESH
ALSO AT:
413-414, SHARMJEVAN
B-5, OPP, LODHA NEW CUFFE PARADE
WAD ALA-EAST
MUMBAI CITY,
MAHARASHTRA-400037
PAN INDIA INFRAPROJECTS LIMITED
(THROUGH LIQUIDATOR-APPOINTED BY HON'BLE
NCLT)
377 NAKSHATRA, AMBAZARI ROAD,
GANDHINAGAR, NAGPUR. 440010
ALSO AT:
513/A, 5™ FLOOR
KOHINOOR CITY, KIROL ROAD,
KURLA (WEST), MUMBAI,
MAHARASHTRA - 400070
MUKARBA CHOWK PANIPAT TOLL ROADS LIMITED
(THROUGH ITS MANAGING DIRECTOR)
513/A, 5TH FLOOR
KOHINOOR CITY, KIROL ROAD,
KURLA (WEST), MUMBAI,
MAHARASHTRA - 400070
ALSO AT:
PLOT NO. 19 85 20, 6th FLOOR,
FILM CITY
SECTOR -16A
NOIDA-201301
UTTAR PRADESH
Signature Not Verified Signature Not Verified
Signed By:AMIT KUMAR Signed
SHARMA
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 2 KUMAR KAURAV
WELSPUN INFRAFACILITY PRIVATE LIMITED
(THROUGH ITS MANAGING DIRECTOR)
T-11, 3RD FLOOR,
VASANT SQUARE MALL
SECTOR-B POCKET-V
VASANT KUNJ
NEW DELHI-110070
ALSO AT:
WELSPUN CITY, VILLAGE VERSAMEDI,
TALUKA ANJAR, DISTRICT KUTCH
GUJARAT-370110
.....DEFENDANTS
(Through: Mr. Monish Panda and Mr. Anmool Jassal, Advocates for D-4.)
------------------------------------------------------------------------------------
% Reserved on: 01.08.2025
Pronounced on: 19.08.2025
-----------------------------------------------------------------------------------
JUDGMENT
I.A. 8819/2025 (by D-4 under Order XXXVII Rule 3(5) of CPC)
By way of the instant application, Defendant No. 4 seeks
unconditional leave to defend the present suit.
2. The instant suit is under Order XXXVII of the Code of Civil
Procedure, 1908 (hereinafter referred to as'CPC‟) for recovery of Rs 4, 10,
00,000/-, along with past, pendente lite, and future interest.
Submissions advanced by the parties
3. Mr. Monish Panda, learned counsel for Defendant No.4, submitted
that the suit is misconceived and not maintainable. He further contends that
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 3 KUMAR KAURAV
the Plaintiff is not entitled to any summary judgment against Defendant
No.4.
4. Learned counsel for Defendant No.4 further makes the following
submissions:
(i) There exists no privity of contract between the Plaintiff and
Defendant No.4 as it has neither undertaken nor agreed to make
any payment to the Plaintiff or satisfy any alleged claim.
(ii) The plaint discloses no cause of action against Defendant No.4,
rendering the suit, as against Defendant No.4, non-maintainable.
(iii) Any claim of the Plaintiff, if at all, lies against Defendant Nos.1 to
3 and Defendant No.4 is neither a necessary nor a proper party.
(iv) The Plaintiff had invoked Section 11 of the Arbitration and
Conciliation Act, 1996 for the appointment of an arbitrator, which
was later withdrawn.
(v) The suit is barred by limitation and the Plaintiff has filed a
misconceived application under Section 14 of the Limitation Act
seeking exclusion of time spent in the Section 11 proceedings.
(vi) Defendant No.4 is not a party to the alleged substitution and
settlement agreement dated 25.06.2020; any agreement between
Defendant No.4, Defendant No.3, and National Highway
Authority of India (hereinafter referred to as ‗NHAI') is
independent, and no rights flow to the Plaintiff therefrom.
(vii) Reliance is placed on the decisions of the Supreme Court in the
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 4 KUMAR KAURAV
cases of „Essar Oil Limited Vs. Hindustan Shipyard Limited1',
'IDBI Trusteeship Services Limited vs. Hubtown Limited2‟ and
„B.L. Kashyap and Sons Limited vs. JMS Steels and Power
Corporation and Another3‟.
5. He prays that, in view of the facts of the present case, Defendant No.4
be granted unconditional leave to defend as there exists a substantial and
bona fide defence, indicating a strong likelihood of success in the suit.
6. The aforesaid submissions are vehemently opposed by Mr. Kamal
Mehta, learned counsel for the Plaintiff.
7. Mr. Mehta, learned counsel for the Plaintiff has made the following
broad submissions:-
(i) In the Business Transfer Agreement (hereinafter referred to as
BTA) dated 08.06.2020, under the heading of "current
liabilities," the specific amount owed to the Plaintiff was
explicitly acknowledged and assigned to Defendant No.4.
(ii) Clauses 1.3 and 1.4 of the BTA, which deal with "Assumed
Contracts" and "Assured Liabilities" respectively,
unequivocally establish that certain rights and liabilities,
including the Plaintiff‟s claim, were transferred and vested in
Defendant No.4, thereby entitling the Plaintiff to seek
enforcement of the agreed terms against the concerned
Defendant.
(2015) 10 SCC 642
(2017) 1 SCC 568
(2022) 3 SCC 294
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 5 KUMAR KAURAV
(iii) While clarifying that the Plaintiff does not oppose the grant of
leave to defend in principle, he stresses that such leave should
be made conditional on securing the admitted sum of
Rs.4,10,00,000/- from Defendant No.4. He explains that from
the total admitted liability of Rs.6,10,00,000/-, Defendant
No.4 has already made a part-payment of Rs.2,00,00,000/-
which itself is an acknowledgment of liability. Therefore,
Defendant No.4 cannot now disown or avoid its obligation to
pay the balance amount.
(iv) He submits that the payment of Rs.2,00,00,000/-by Defendant
No.4 to the Plaintiff serves as concrete proof that the BTA
dated 08.06.2020 has been acted upon, at least in part, and that
the performance under this agreement is not merely theoretical
but has been practically implemented to some extent.
(v) Reliance has been placed on the decision of the Supreme
Court in the case of Rahul S. Shah vs. Jinendra Kumar
Gandhi and Others4,to reiterate that Defendant no.4 be
directed to file an affidavit of assets and liabilities, in addition
to the condition of deposition of the disputed amount.
8. In rejoinder submissions, Mr. Panda, learned counsel for Defendant
no.4 submits that Defendant no.4 is a listed company and has a market
capitalization of Rs. 3000 Crores. Hesubmits that there are no reasons to
apprehend any flight risk of the said Defendant, so as to render the judgment
and decree unexecutable. He also explained that in order to discharge the
(2021) 6 SCC 418
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 6 KUMAR KAURAV
liability under the BTA, certain payments were made, and the same cannot
be construed to be unequivocal to the extent of admitting the entire sum, as
claimed. He further explained the chain of circumstances resulting in the
payment of Rs.2,00,00,000/-.
9. I have considered the submissions made by learned counsel appearing
on behalf of the parties and also perused the record.
10. Before delving into the factual matrix of the case, it is imperative to
first outline the framework of Order XXXVII of the CPC, its scope, and the
slant adopted by Courts while considering applications seeking leave to
defend under the said provision. A foundational understanding is essential to
appreciate the legal strictures within which such applications are to be
adjudicated.
Scope of Sub-Rule 5 of Rule 3 of Order XXXVII of CPC
11. The object of the summary procedure enshrined under Order XXXVII
of the CPC is to provide a swift and efficacious remedy in specific classes of
suits, predominantly involving commercial transactions. The legislature,
drawing upon long-standing experience and established practices,
incorporated this special procedure to address litigation arising from written
contracts, bills of exchange, promissory notes, and other documents
involving liquidated amounts. In commercial hubs, where monetary liquidity
and transactional certainty are vital, prolonged litigation can significantly
hamper business operations. Therefore, the legislative intention behind this
summary mechanism is to expedite the resolution of suits where the
Plaintiff's claim is based on an ascertained sum and the Defendant does not
appear to possess a substantial or bona fide defence.
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 7 KUMAR KAURAV
12. Principally, the object is to ensure that the Defendant does not unduly
prolong litigation or frustrate the Plaintiff's right to obtain an early decree by
raising frivolous, vexatious, or untenable defences, particularly in cases
where expedition is of paramount importance to the interests of trade and
commerce. The very structure of Order XXXVII of CPC is premised on the
legislative belief that in a certain category of claims, delays are not only
detrimental to individual litigants but corrosive to the commercial fabric at
large.
13. The procedural framework under Rules 2 and 3 of Order XXXVII of
CPC governs the initiation and conduct of such suits. Rule 2 provides that
upon the institution of the suit and issuance of summons, the Defendant is
required to enter an appearance within the stipulated period. Upon such
appearance, the Plaintiff must serve a summons for judgment. Crucially, the
Defendant is not entitled to defend the suit unless he seeks and is granted
leave to defend by the Court. In the absence of such leave, the Plaintiff is
entitled to a decree as prayed for, which is executable forthwith. Rule 3 of
Order XXXVII of CPC is extracted as under: -
[3. Procedure for the appearance of Defendant--(1) In a suit to which
this Order applies, the Plaintiffshall, together with the summons under
rule 2, serve on the Defendant a copy of the plaint and
annexuresthereto and the Defendant may, at any time within ten days of
such service, enter an appearance either inperson or by pleader and, in
either case, he shall file in Court an address for service of notices on
him.
(2) Unless otherwise ordered, all summonses, notices and other judicial
processes, required to be served on the Defendant, shall be deemed to
have been duly served on him if they are left at the address given by
him for such service.
(3) On the day of entering the appearance, notice of such appearance
shall be given by the Defendantto the Plaintiff's pleader, or, if the
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 8 KUMAR KAURAV
Plaintiff sues in person, to the Plaintiff himself, either by
noticedelivered at or sent by a pre-paid letter directed to the address of
the Plaintiff's pleader or of the Plaintiff,as the case may be.
(4) If the Defendant enters an appearance, the Plaintiff shall thereafter
serve on the Defendant asummons for judgment in Form No. 4A in
Appendix B or such other Form as may be prescribed fromtime to time,
returnable not less than ten days from the date of service supported by
an affidavit verifyingthe cause of action and the amount claimed and
stating that in his belief there is no defence to the suit.
(5) The Defendant may, at any time within ten days from the service
of such summons for judgment,by affidavit or otherwise disclosing
such facts as may be deemed sufficient to entitle him to defend,
applyon such summons for leave to defend such suit, and leave to
defend may be granted to himunconditionally or upon such terms as
may appear to the Court or Judge to be just:
Provided that leave to defend shall not be refused unless the Court is
satisfied that the facts disclosedby the Defendant do not indicate that
he has a substantial defence to raise or that the defence intended tobe
put up by the Defendant is frivolous or vexatious:
Provided further that, where a part of the amount claimed by the
Plaintiff is admitted by the Defendant to be due from him, leave to
defend the suit shall not be granted unless the amount so admitted to
be due is deposited by the Defendant in Court.
(6) At the hearing of such summons for judgment,--(a) if the Defendant
has not applied for leave to defend, or if such application has been
made andis refused, the Plaintiff shall be entitled to judgment
forthwith; or (b) if the Defendant is permitted to defend as to the whole
or any part of the claim, the Court orJudge may direct him to give such
security and within such time as may be fixed by the Court or Judgeand
that, on failure to give such security within the time specified by the
Court or Judge or to carry outsuch other directions as may have been
given by the Court or Judge, the Plaintiff shall be entitled tojudgment
forthwith.
(7) The Court or Judge may, for sufficient cause shown by the
Defendant, excuse the delay of the Defendant in entering an
appearance or in applying for leave to defend the suit.]‖
14. The provisions of Sub-rule 5 of Rule 3 of Order XXXVII of CPC
would provide inter alia that the Defendant may, at any time within ten (10)
days from the service of such summons for judgment, by affidavit or
otherwise, disclose such facts as may be deemed sufficient to entitle him to
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 9 KUMAR KAURAV
defend, and apply on such summons for leave to defend such suit. Such
leave to defend may be granted to him unconditionally or upon such terms
as may appear to the Court or Judge to be just.
15. The provisions of Sub-rule (5) of Rule 3 of Order XXXVII of the
CPC lay down the procedural framework governing a Defendant's right to
seek leave to defend a summary suit. This provision empowers the
Defendant to apply for such leave, either by affidavit or otherwise, within
ten days from the service of summons for judgment. The application must
disclose such facts that, if established, would entitle the Defendant to defend
the suit. Upon such an application, the Court may grant leave either
unconditionally or subject to such terms as it deems just and reasonable.
16. The first proviso to Sub-rule 5 underscores the principle that leave to
defend shall not be refused unless the Court is satisfied that the defence
proposed is neither substantial nor genuine. It explicitly safeguards the
Defendant from a summary dismissal of the defence, unless it is clearly
frivolous or vexatious. Thus, a prima facie credible defence must be
afforded an opportunity to be presented and adjudicated. It is of significance
to note that in the adjudication of a leave to defend application, the Court
has no opportunity to enter into any appreciation of evidence, which may be
led by the parties during the trial. The scope of this adjudication is itself of a
summary character, largely based on the facts pleaded by the parties. The
determination as to whether the defence disclosed by the defendant is
substantial or vexatious or frivolous, is to be based on a prima facie
appreciation of the facts and on an assumption of the truthfulness of the
foundational facts forming the basis of such defence. The phrase used in the
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 10 KUMAR KAURAV
first proviso ―unless the Court is satisfied that the facts disclosed by the
Defendant do not indicate that he has a substantial defence‖ also signifies
that the facts in a leave to defend application are merely required to
"indicate" towards a substantial defence. Thus, the bar for allowing a leave
to defend is not set at any exceptionally high pedestal.
17. The second proviso introduces a qualifying condition i.e. where the
Defendant admits a part of the amount claimed by the Plaintiff to be due,
leave to defend shall not be granted unless the admitted sum is deposited in
Court. This serves as a safeguard against misuse of the grant of leave by
Defendants who, while acknowledging liability to some extent, seek to
avoid or delay payment.
18. A cumulative reading of Sub-rule (5) and its provisos reveals that the
overarching scheme of Order XXXVII favours the grant of leave to defend
as a norm, with its refusal being an exception based on the parameters of
non-disclosure of substantial defence, vexatiousness, and frivolousness of
the defence. The Court is vested with the discretion to grant leave
unconditionally or upon terms it considers just, thereby balancing the need
for expediency with the demands of fairness. However, this discretion is
restricted where the Defendant admits part of the claim. In such cases, the
statute mandates that the admitted amount must first be deposited in Court,
failing which the leave to defend cannot be granted.
19. This ensures that the summary procedure retains its integrity by
filtering out defences that lack substance while simultaneously allowing
genuine disputes to proceed to trial under appropriate safeguards.
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 11 KUMAR KAURAV
Judicial discourse on the leave to defend in summary suits
20. The jurisprudence surrounding the grant of leave to defend under
Order XXXVII is fairly trite.
21. In Santosh Kumar v. Bhai Mool Singh5, the Supreme Court ruled
that when the defence raises a bona fide and clear triable issue,
unconditional leave to defend must ordinarily be granted under Order
XXXVII Rule 3(1). The Court emphasised that at the leave stage, it is
sufficient if the Defendant‟s affidavit discloses facts which, if proved, would
constitute a plausible defence; documentary proof is not mandatory at this
stage. The discretion to impose conditions under Rule 3(2) is to prevent
dilatory tactics, not to compel premature proof. It further held that the Trial
Court and High Court erred in construing the defence as vague due to the
absence of documents, resulting in an arbitrary exercise of discretion and a
failure of justice. The Supreme Court set aside the impugned orders and
remanded the case for trial, awarding costs to the appellants. The relevant
extracts are reproduced below: -
"6. At first blush, Order 37 Rule 2(2), appears drastically to curtail a
litigant's normal rights in a court of justice, namely to appear and
defend himself as of right, if and when sued, because it says that when a
suit is instituted on a bill of exchange, hundi or & promissory note
under the provisions of sub-rule (1)--
―... the Defendant shall not appear or defend the suit unless he obtains
leave from a judge as hereinafter provided so to appear and defend.‖
But the rigour of that is softened by Rule 3(1) which makes it obligatory
on the court to grant leave when the conditions set out there are
fulfilled. Clause (1) runs--
AIR 1958 SC 321
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 12 KUMAR KAURAV
―The court shall, upon application by the Defendant, give leave to
appear and to defend the suit, upon affidavits which disclose such facts
as would make it incumbent on the holder to prove consideration, or
such other facts as the court may deem sufficient to support the
application.‖
But no sooner is the wide discretion given to the court in Rule 2(2)
narrowed down by R. 3(1) than it is again enlarged in another
direction by R. 3(2) which says that
―Leave to defend may be given unconditionally or subject to such terms
as to payment into court, giving security, framing and recording issues
or otherwise as the court thinks fit.‖
The learned counsel for the Plaintiff argues that the discretion so
conferred by R. 3(2) is unfettered and that as the discretion has been
exercised by the learned trial Judge, no appeal can lie against it unless
there is a ―grave miscarriage of justice or flagrant violation of law‖
and he quotes D.N. Banerji v. P.R. Mukherjee [(1952) 2 SCC 619 :
(1953) SCR 302, 305] and Waryam Singh v. Amarnath [(1954) SCR
565].
Now what we are examining here are laws of procedure. The spirit in
which questions about procedure are to be approached and the manner
in which rules relating to them are to be interpreted are laid down in
Sangram Singh v. Election Tribunal, Kotah, Bhurey Lal Baya [(1955) 2
SCR 1, 8, 9] .
―Now a code of procedure must be regarded as such. It is procedure,
something designed to facilitate justice and further its ends; not a penal
enactment for punishment and penalties; not a thing designed to trip
people up. Too technical a construction of sections that leaves no room
for reasonable elasticity of interpretation should therefore be guarded
against (provided always that justice is done to both sides) lest the very
means designed for the furtherance of justice be used to frustrate it.
Next, there must be ever present to the mind the fact that our laws of
procedure are grounded on a principle of natural justice which
requires that men should not be condemned unheard, that decisions
should not be reached behind their backs, that proceedings that affect
their lives and property should not continue in their absence and that
they should not be precluded from participating in them. Of course,
there must be exceptions and where they are clearly defined they must
be given effect to. But taken by and large, and subject to that proviso,
our laws of procedure should be construed, wherever that is reasonably
possible, in the light of that principle.‖
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 13 KUMAR KAURAV
Applied to the present case, these observations mean that though the
court is given a discretion it must be exercised along judicial lines, and
that in turn means, in consonance with the principles of natural justice
that form the foundations of our laws. Those principles, so far as they
touch the present matter, are well known and have been laid down and
followed in numerous cases.
7. The decision most frequently referred to is a decision of the House of
Lords in England where a similar rule prevails. It is Jacobs v. Booth's
Distillery Company [(1901) 85 LT 262] . Judgment was delivered in
1901. Their Lordships said that whenever the defence raises a ―triable
issue‖, leave must be given, and later cases say that when that is the
case it must be given unconditionally, otherwise the leave may be
illusory. See, for example, Powszechny Bank Zwiazkowy W. Polsce v.
Paros [(1932) 2 KB 353] in England and Sundaram Chettiar v. Valli
Ammal [(1935) ILR 58 Mad 116] in India. Among other cases that
adopt the ―triable issue‖ test are Kiranmoyee Dassi v. J. Chatterjee
[(1945) 49 CWN 246] and Gopala Rao v. Subba Rao [AIR (1936) Mad
246] .
The learned counsel for the Plaintiff-respondent relied on Gopala Rao
v. Subba Rao [AIR (1936) Mad 246] , Manohar Lal v. Nanhe Mal [AIR
1938 Lah 548] , and Shib Karan Das v. Mohammed Sadiq [AIR 1936
Lah 584] . All that we need say about them is that if the court is of
opinion that the defence is not bonafide, then it can impose conditions
and is not tied down to refusing leave to defend. We agree with
Varadachariar, J., in the Madras case that the court has this third
course open to it in a suitable case. But it cannot reach the conclusion
that the defence is not bona fide arbitrarily. It is as much bound by
judicial rules and judicial procedure in reaching a conclusion of this
kind as in any other matter. It is unnecessary to examine the facts of
those cases because they are not in appeal before us. We are only
concerned with the principle.
8. It is always undesirable, and indeed impossible, to lay down hard
and fast rules in matters that affect discretion. But it is necessary to
understand the reason for a special procedure of this kind in order that
the discretion may be properly exercised. The object is explained in
Kesavan v. South Indian Bank Ltd. [ILR 1950 Mad 251] , and is
examined in greater detail in Sundaram Chettiar v. Valli Ammal
[(1935) ILR 58 Mad 116] to which we have just referred. Taken by and
large, the object is to see that the Defendant does not unnecessarily
prolong the litigation and prevent the Plaintiff from obtaining an early
decree by raising untenable and frivolous defences in a class of cases
where speedy decisions are desirable in the interests of trade and
commerce. In general, therefore, the test is to see whether the defence
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 14 KUMAR KAURAV
raises a real issue and not a sham one, in the sense that, if the facts
alleged by the Defendant are established, there would be a good, or
even a plausible, defence on those facts.‖
22. While relying on the aforesaid decision, the Supreme Court in
Machalec Engineering & Manufacturing v. Basic Equipment
Corporation,6 held that Order XXXVII of CPC, as it then stood, enjoins
upon the Court to grant leave, upon application by the Defendant to seek
leave to appear and to defend the suit, upon facts "which disclose such facts
as would make it incumbent on the holder to prove consideration on such
other facts as the Court may deem sufficient to support the application".
23. In Raj Duggal v. Ramesh Kumar7, the Supreme Court further
emphasised that the test for granting leave to defend hinges on whether the
defence raises a real, honest, and bona fide dispute, warranting trial. The
presence of a triable issue, or even a fair dispute, necessitates that leave not
be refused. The relevant extract reads as under: -
―3. Leave is declined where the court is of the opinion that the grant of
leave would merely enable the Defendant to prolong the litigation by
raising untenable and frivolous defences. The test is to see whether the
defence raises a real issue and not a sham one, in the sense that if the
facts alleged by the Defendant are established there would be a good or
even a plausible defence on those facts. If the court is satisfied about
that leave must be given. If there is a triable issue in the sense that
there is a fair dispute to be tried as to the meaning of a document on
which the claim is based or uncertainty as to the amount actually due
or where the alleged facts are of such a nature as to entitle the
Defendant to interrogate the Plaintiff or to cross-examine his witnesses
leave should not be denied. Where also, the Defendant shows that even
on a fair probability he was a bona fide defence, he ought to have
leave. Summary judgments under Order 37 should not be granted
where serious conflict as to matter of fact or where any difficulty on
issues as to law arises. The court should not reject the defence of the
(1976) 4 SCC 687
AIR 1990 SC 2218
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 15 KUMAR KAURAV
Defendant merely because of its inherent implausibility or its
inconsistency.‖
24. In IDBI Trusteeship Services Limited, the Supreme Court has
extensively considered the amendment of Order XXXVII of CPC in the year
1976. While considering pre-amendment and post-amendment provisions of
Order XXXVII Rule 3 of CPC, the Court found that the discretion that the
Court exercises under Order XXXVII in refusing the leave to defend or to
grant conditional or unconditional leave to defend is a discretion akin to
Joseph's multi-coloured coat - in the sense that it encapsulates a number of
possibilities. The Court noted that the life of the law, not being logic but the
experience of the trial Judge, is what comes to the rescue in these cases.
However, the Court underscored the need for laying down guidelines or
principles so that the exercise of discretion must be informed and the
exercise of judicial discretion in an arbitrary manner is obviated. The Court
also observed that at one end of the spectrum is unconditional leave to
defend, granted in all cases which present a substantial defence and at the
other end of the spectrum are frivolous or vexatious defences, leading to
refusal of leave to defend. In between these two extremes are various kinds
of defences raised, which yield conditional leave to defend in most cases.
The Court, therefore, emphasised that the defences have to be guided by
broad principles, which are ultimately applied by the trial Judge, so that
justice is done on the facts of each given case. In paragraph 17 of the
aforenoted decision, the Supreme Court has laid down the following broad
principles:-
―17. It is thus clear that O.XXXVII has suffered a change in 1976, and
that change has made a difference in the law laid down. First and
foremost, it is important to remember that Milkhiram's case is a direct
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 16 KUMAR KAURAV
authority on the amended O.XXXVII provision, as the amended provision
in O.XXXVII Rule 3 is the same as the Bombay amendment which this
Court was considering in the aforesaid judgment. We must hasten to add
that the two provisos to sub-rule (3) were not, however, there in the
Bombay amendment. These are new, and the effect to be given to them is
something that we will have to decide. The position in law now is that the
trial Judge is vested with a discretion which has to result in justice being
done on the facts of each case. But Justice, like Equality, another
cardinal constitutional value, on the one hand, and arbitrariness on the
other, are sworn enemies. The discretion that a Judge exercises under
Order XXXVII to refuse leave to defend or to grant conditional or
unconditional leave to defend is a discretion akin to Joseph's multi-
coloured coat - a large number of baffling alternatives present
themselves. The life of the law not being logic but the experience of the
trial Judge, is what comes to the rescue in these cases; but at the same
time informed by guidelines or principles that we propose to lay down to
obviate exercise of judicial discretion in an arbitrary manner. At one end
of the spectrum is unconditional leave to defend, granted in all cases
which present a substantial defence. At the other end of the spectrum are
frivolous or vexatious defences, leading to refusal of leave to defend. In
between these two extremes are various kinds of defences raised which
yield conditional leave to defend in most cases. It is these defences that
have to be guided by broad principles which are ultimately applied by
the trial Judge so that justice is done on the facts of each given case.‖
25. A perusal of the guidelines enumerated in the aforenoted paragraphs
would demonstrate that on Defendant establishing substantial defence,
which is likely to succeed and raising triable issues, showing a fair or
reasonable defence, the Defendant is entitled for unconditional leave,
whereas, various other factors need to be considered while granting
conditional leave to defend or refusal to grant leave to defend.
26. In B.L. Kashyap, the Plaintiff therein, a registered partnership firm
engaged in the manufacture and supply of iron and steel products, instituted
a summary suit under Order XXXVII of the CPC for recovery of
outstanding dues arising from supplies made for the real estate project titled
"MIST". Defendant No. 1 therein, sought leave to defend on the plea of
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 17 KUMAR KAURAV
absence of privity of contract, contending that all purchase orders and
invoices were in the name of Defendant No. 2 therein. The Trial Court,
finding no triable issues, declined leave to defend to both Defendants and
decreed the suit jointly and severally against them. The High Court
subsequently affirmed that the decision rendered by the Trial Court, holding
the defences to be frivolous and vexatious. Upon appeal, the Supreme Court,
while elucidating the governing principles for grant of leave to defend under
Order XXXVII of CPC, observed that denial of leave is justified only where
the defence is frivolous or vexatious, whereas the existence of reasonable
doubt may warrant the imposition of conditions. Noting that Defendant No.
2 had raised bona fide triable issues as to his liability, the Court set aside the
findings of the courts below in so far as they pertained to him, granted
conditional leave to defend on the strength of the deposit already made, and
directed the Trial Court to proceed with the trial qua Defendant No. 2 in
accordance with law.
27. In paragraph no.33 of the aforenoted decision, the Supreme Court has
made the following observations:-
―33. It is at once clear that even though in IDBI Trusteeship4, this Court
has observed that the principles stated in para 8 of Mechelec Engineers
case shall stand superseded in the wake of amendment of Rule 3 of Order
37 but, on the core theme, the principles remain the same that grant of
leave to defend (with or without conditions) is the ordinary rule; and
denial of leave to defend is an exception. Putting it in other words,
generally, the prayer for leave to defend is to be denied in such cases
where the Defendant has practically no defence and is unable to give out
even a semblance of triable issues before the court.
33.1. As noticed, if the Defendant satisfies the Court that he has
substantial defence i.e. a defence which is likely to succeed, he is entitled
to unconditional leave to defend. In the second eventuality, where the
Defendant raises triable issues indicating a fair or bona fide or
reasonable defence, albeit not a positively good defence, he would be
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 18 KUMAR KAURAV
ordinarily entitled to unconditional leave to defend. In the third
eventuality, where the Defendant raises triable issues, but it remains
doubtful if the Defendant is raising the same in good faith or about
genuineness of the issues, the trial court is expected to balance the
requirements of expeditious disposal of commercial causes on one hand
and of not shutting out triable issues by unduly severe orders on the
other. Therefore, the trial court may impose conditions both as to time or
mode of trial as well as payment into the court or furnishing security. In
the fourth eventuality, where the proposed defence appears to be
plausible but improbable, heightened conditions may be imposed as to
the time or mode of trial as also of payment into the court or furnishing
security or both, which may extend to the entire principal sum together
with just and requisite interest.
33.2. Thus, it could be seen that in the case of substantial defence, the
Defendant is entitled to unconditional leave: and even in the case of a
triable issue on a fair and reasonable defence, the Defendant is
ordinarily entitled to unconditional leave to defend. In case of doubts
about the intent of the Defendant or genuineness of the triable issues as
also the probability of defence, the leave could yet be granted but while
imposing conditions as to the time or mode of trial or payment or
furnishing security. Thus, even in such cases of doubts or reservations,
denial of leave to defend is not the rule; but appropriate conditions may
be imposed while granting the leave. It is only in the case where the
Defendant is found to be having no substantial defence and/or raising no
genuine triable issues coupled with the court's view that the defence is
frivolous or vexatious that the leave to defend is to be refused and the
Plaintiff is entitled to judgment forthwith. Of course, in the case where
any part of the amount claimed by the Plaintiff is admitted by the
Defendant, leave to defend is not to be granted unless the amount so
admitted is deposited by the Defendant in the court.
33.3. Therefore, while dealing with an application seeking leave to
defend, it would not be a correct approach to proceed as if denying the
leave is the rule or that the leave to defend is to be granted only in
exceptional cases or only in cases where the defence would appear to be
a meritorious one. 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. It gets perforce reiterated that even if
there remains a reasonable doubt about the probability of defence,
sterner or higher conditions as stated above could be imposed while
granting leave but, denying the leave would be ordinarily countenanced
only in such cases where the Defendant fails to show any genuine triable
issue and the court finds the defence to be frivolous or vexatious.‖
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 19 KUMAR KAURAV
28. In Kiranmoyee Dassi v. J. Chatterjee8, the Calcutta High Court
delineated five guiding propositions for dealing with applications under
Order XXXVII of CPC:-
(i) "Where the Defendant discloses a good defence on merits,
unconditional leave to defend must be granted;
(ii) Where the defence raises a triable issue, indicative of a fair
or bona fide dispute, unconditional leave should still be
granted;
(iii) Where the affidavit discloses facts that may entitle the
Defendant to defend, albeit not establishing a defence outright,
leave should be granted--though the Court may impose terms
as to the time or mode of trial, but not in relation to security or
deposit;
(iv) Where the defence is sham, illusory or moonshine, leave to
defend ought to be refused and the Plaintiff is entitled to
judgment;
(v) In such cases, however, the Court may, in its discretion,
impose conditions such as requiring deposit of the claimed
amount or furnishing of security before granting leave, thereby
affording the Defendant a chance to prove his case.‖
29. While reiterating the aforesaid proposition, the Bombay High Court in
Bankay Bihari G. Agrawal vs M/sBhagwanji Meghihi & Ors.,9observed
that mere non-adherence to the prescribed timeline under Rule 227the
Bombay High Court (Original Side) Rules, 1980 does not ipso facto entitle
the Defendant to unconditional leave to defend; rather, judicial discretion
must be exercised to evaluate, even in cases of such delay, the merits of the
defence. It was held that the Court is thus empowered to assess whether the
defence is bona fide or merely illusory, and thereafter, on a holistic
consideration, determine whether leave to defend should be granted
AIR 1949 Cal 479
2000 SCC OnLine Bom 655
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 20 KUMAR KAURAV
unconditionally, conditionally, or refused altogether. Any contrary
interpretation would allow a Defendant with a sham defence to secure an
unconditional right to contest solely on account of the Plaintiff‟s procedural
lapse.
30. Furthermore, this Court in Sh. Rinku Aggarwal v. Smt. Kanta Kumar
while affirming the legal position explicated through the aforenoted
precedents, held that before leave to defend can be granted under Order
XXXVII of CPC, the Defendant must satisfy the Court that a good defence
exists on merits. The Defendant is required to raise triable issues which
indicate the presence of a fair, bona fide, or reasonable defence, even if such
defence does not amount to a positively strong defence. Where the
Defendant discloses plausible and reasonable grounds raising triable issues,
leave to defend may be granted either unconditionally or subject to terms.
Conversely, if the defence set up is found to be illusory, sham, or vexatious,
the Defendant would not be entitled to any leave to defend the suit.
31. It is, thus, a well-entrenched legal proposition that, while adjudicating
an application for leave to defend under Order XXXVII of CPC, the Court
must eschew any presumption that refusal of leave is the norm, or that such
leave is to be granted solely in exceptional circumstances or only where the
defence appears manifestly meritorious.Understandably, the remedy of
summary suit is a departure from the norms of an adversarial judicial
process wherein a party facing allegations is entitled to present a defence in
his favour. It is for this reason that, despite the existence of a special
summary procedure for securing a judgment, the leave to defend is granted
to the defendant as a matter of course, except when the exceptional
CS(OS) 1912/2006
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 21 KUMAR KAURAV
circumstances necessitating its denial exist. For, at the core of it lies the
basic principle that adjudication must be based on the appreciation of
evidence of both sides, provided there is a reasonable defence in sight.
32. Where the Defendant discloses triable issues indicative of a fair, bona
fide, or reasonable defence, the ordinary course is to grant unconditional
leave, save where compelling and cogent reasons necessitate departure from
this norm.
33. Even in instances where a reasonable doubt persists regarding the
plausibility of the defence, the Court may, in the interests of justice, impose
calibrated conditions, reserving outright refusal strictly for those rare cases
where no genuine triable issue is demonstrated and the defence is manifestly
frivolous or vexatious.Between the broad spectrum of substantial defence
and frivolous or vexatious defence, there lies a myriad set of circumstances
which require the Court to enter into a delicate judicial inquiry. These
circumstances evolve on a case to case basis, and no amount of linguistic
gymnastics could fit these circumstances into rigid compartments.
Ultimately, the test is whether, on an overall assessment of the case, a fair
and reasonable defence is in sight, which could only be determined upon
trial and appreciation of evidence. If yes, the Court must not shut the doors
at the outset. However, depending on the plausibility of the defence,
conditions could be imposed so as to safeguard the interests of the plaintiff
as well as to uphold the integrity of the summary procedure. Thus,
conditional leave operates as an intermediate safeguard, harmonising the
imperatives of commercial celerity with the principles of natural justice.
34. The doctrinal constant across the aforementioned decisions is that the
grant of leave to defend is the norm; refusal is the exception. The Court's
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 22 KUMAR KAURAV
discretion, while broad, must be exercised judicially, eschewing arbitrary
denial and ensuring that no genuine triable issue is foreclosed save in cases
of manifestly sham or vexatious defence.
35. The conditions so imposed need not invariably be pecuniary in nature;
they may equally extend to procedural directives, including the structuring
of an organised and accelerated trial framework, thereby harmonising the
protection of parties‟ rights with the objective of prompt adjudication.
36. At this stage, it is also pertinent to note the decision relied upon by
learned counsel for the Plaintiff in the case of Rahul S. Shah, wherein, the
Supreme Court has mandated that, in suits and execution proceedings,
Courts adhere to specific procedural safeguards. In money suits, it has been
directed that, prior to the settlement of issues, the Defendant may be
compelled to disclose, on oath, assets commensurate with the liability
claimed. Furthermore, in appropriate cases, and at any stage during the
pendency of the suit, the Court may invoke its inherent powers under
Section 151 of CPC to require the furnishing of security to ensure
satisfaction of any eventual decree.
37. Paragraph no.42 of the said decision is extracted as under:-
"42. All Courts dealing with suits and execution proceedings shall
mandatorily follow the below-mentioned directions:
"1. In suits relating to delivery of possession, the court must examine
the parties to the suit under Order X in relation to third.
2. Party interest and further exercise the power under Order XI Rule 14
asking parties to disclose and produce documents, upon oath, which
are in possession of the parties including declaration pertaining to
third party interest in such properties.
3. In appropriate cases, where the possession is not in dispute and not
a question of fact for adjudication before the Court, the Court may
appoint Commissioner to assess the accurate description and status of
the property.
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 23 KUMAR KAURAV
4. After examination of parties under Order X or production of
documents under Order XI or receipt of commission report, the Court
must add all necessary or proper parties to the suit, so as to avoid
multiplicity of proceedings and also make such joinder of cause of
action in the suit.
5. Under Order XL Rule 1 of CPC, a Court Receiver can be appointed
to monitor the status of the property in question as custodia legis for
proper adjudication of the matter.
6. The Court must, before passing the decree, pertaining to.
7. Delivery of possession of a property ensure that the decree is
unambiguous so as to not only contain clear description of the property
but also having regard to the status of the property.
8. In a money suit, the Court must invariably resort to Order XXI Rule
11, ensuring immediate execution of decree for payment of money on
oral application.
9. In a suit for payment of money, before settlement of issues, the
Defendant may be required to disclose his assets on oath, to the extent
that he is being made liable in a suit. The Court may further, at any
stage, in appropriate cases during the pendency of suit, using powers
under Section 151 CPC, demand security to ensure satisfaction of any
decree.
10. The Court exercising jurisdiction under Section 47 or under Order
XXI of CPC, must not issue notice on an application of third-party
claiming rights in a mechanical manner. Further, the Court should
refrain from entertaining any such applications that has already been
considered by the Court while adjudicating the suit or which raises any
such issue which otherwise could have been raised and determined
during adjudication of suit if due diligence was exercised by the
applicant.
11. The Court should allow taking of evidence during the execution
proceedings only in exceptional and rare cases where the question of
fact could not be decided by resorting to any other expeditious method
like appointment of Commissioner or calling for electronic materials
including photographs or video with affidavits.
12. The Court must in appropriate cases where it finds the objection or
resistance or claim to be frivolous or mala-fide, resort to Sub-Rule (2)
of Rule 98 of Order XXI as well as grant compensatory costs in
accordance with Section 35A.
13. Under section 60 of CPC the term".........in name of the judgment-
debtor or by another person in trust for him or on his behalf' should be
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 24 KUMAR KAURAV
read liberally to incorporate any other person from whom he may have
the ability to derive share, profit or property.
14. The Executing Court must dispose of the Execution Proceedings
within six months from the date of filing, which may be extended only
by recording reasons in writing for such delay.
15. The Executing Court may on satisfaction of the fact that it is not
possible to execute the decree without police assistance, direct the
concerned Police Station to provide police assistance to such officials
who are working towards execution of the decree. Further, in case an
offence against the public servant while discharging his duties is
brought to the knowledge of the Court, the same must be dealt
stringently in accordance with law.
16. The Judicial Academies must prepare manuals and ensure
continuous training through appropriate mediums to the Court
personnel/staff executing the warrants, carrying out attachment and
sale and any other official duties for executing orders issued by the
Executing Courts."
Factual analysis
38. On the conspectus of the settled legal position, when the factual
canvas of the instant suit is subjected to scrutiny, it becomes manifest that
the suit has been instituted by the Plaintiff seeking a decree in its favour and
against all the Defendants, jointly and severally, for recovery of the
outstanding sum of Rs. 4,10,00,000/- alleged to be due and payable under
the Substitution and Amendment Agreement dated 25.06.2020.
39. The reliefs prayed in the instant civil suit are extracted as under:-
―(a) pass a decree in favor of Plaintiff and against the Defendants jointly
and severally to pay the outstanding dues of Rs.4,10,00,000.00 (Rupees
Four Crores and Ten Lacs only) payable to the Plaintiff under
Substitution and Amendment Agreement dated 25.06.2020;
(b) direct the Defendants to pay a sum of Rs. 1,96,80,000/- to the
Plaintiff, jointly and severally, towards past interest on the aforesaid
principal amount of Rs. 4,10,00,000/- calculated @ 12 % p.a. for the
period June, 2020 to May, 2024;
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 25 KUMAR KAURAV
(c) direct the Defendants to pay to the Plaintiff, jointly and severally,
pendente-lite and future interest on the aforesaid amount of Rs.
4,10,00,000/- (Rupees Four Crores and ten Lacs only) @ 12 % p.a. or at
any other rate as the Hon'ble court may deem fit and proper.
(d) award cost of the proceedings; and
(e) pass any other and further order(s) as this Hon'ble Court may deem
fit and proper in the facts and circumstances of the present case.‖
40. The facts further disclose that the NHAI awarded the highway
construction project to Defendant No. 1 in the year 2015. Defendant No. 3 is
stated to be a Special Purpose Vehicle (SPV) constituted by Defendant No.
1. The project was awarded to Defendant No. 1, who, in turn, incorporated
Defendant No. 3 as its wholly owned SPV. Subsequently, Defendant No. 3
awarded the work to Pan India Infraprojects Private Limited, i.e., Defendant
No. 2, which is also a wholly owned subsidiary of Defendant No. 1 and
functions as a nodal agency for infrastructure-related undertakings of the
Essel Group. Thus, Defendants No. 1 to 3 are sister concerns. Defendant No.
4 is a company duly incorporated under the Companies Act, to whom the
entire business was later transferred pursuant to a Business Transfer
Agreement. According to the Plaintiff, Defendant No. 4 has assumed all
contractual obligations previously executed by the other Defendants in
connection with the business transferred to it.
41. Vide Letter of Award ("LOA") dated 31.01.2017, Defendant No. 2
awarded a contract to the Plaintiff for the execution of works comprising
Earthwork, Granular Sub-Base (GSB), Wet Mix Macadam (WMM),
Drainage, and Culverts for the section spanning KM 64 to KM 75, in
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 26 KUMAR KAURAV
accordance with the technical specifications and drawings prescribed under
IRT/MORTH norms.
42. During the subsistence of the project, a Substitution and Amendment
Agreement dated 25.06.2020 came to be executed amongst Defendant Nos.
1, 2, 3, and the Plaintiff. It is averred that under the terms of the said
agreement, it was agreed inter se that the Engineering, Procurement and
Construction (EPC) contract would be amended so as to substitute
Defendant No. 2 with Defendant No. 3. It is the case of the Plaintiff that the
payment liability of Defendant No. 2 towards the Plaintiff, which had
already crystallized as on the date of execution of the said agreement, was
quantified at Rs. 6,10,00,000/- The same was agreed to be discharged in
three instalments, as set forth in the agreement. Further, the said agreement
also recorded that the said liability of Rs. 6,10,00,000/- would stand
assigned to Defendant No. 3 along with the transfer of the business.
43. It is additionally submitted on behalf of the Plaintiff that, under a
BTA dated 08.06.2020, Defendant No. 3 transferred its business, along with
all rights and liabilities, to Defendant No. 4, subject to the terms and
conditions embodied therein. Learned counsel for the Plaintiff, while
drawing the attention of this Court to the relevant provisions of the said
agreement, has contended that under the clause titled "Assumed Contracts
and Assured Liabilities," the liability amounting to Rs. Rs. 6,10,00,000/- in
favour of the Plaintiff was also subsumed and consequently transferred to
Defendant No. 4.
44. For the sake of clarity, relevant clauses are extracted as under:-
― 1.3 Assumed Contracts: Assumed Contracts means all contracts,
arrangements, sub-contactagreements, purchase orders (including
purchase orders booked prior to the Closing date but pending
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 27 KUMAR KAURAV
execution as on the Closing Date), and purchase orders to the extent
act there are subsisting warranty obligations in favour of the
Transferor as on the ClosingDate, and other commitments, in each
case, executed by the Transferor prior to theClosing Date, to the extent
related to the Identified Business, and more specifically statedin
Annexure B
Assumed Liabilities. Upon the terms and subject to the conditions of
this Agreement, the Transferee shall assume effective as of the Closing
Date, and from and after the Closing Date, the Transferee shall pay,
discharge or perform when due, as appropriate, the liabilities set forth
below (the "Assumed Liabilities"):
a) all liabilities relating to the Identified Business for its operations
from and after the Closing Date;
b) all liabilities for trade accounts payable, arising in connection with
the identity of Business, as of the Closing Date and reflected in the
Financial Statements,
c) all liabilities and obligations arising on or after the Closing Date in
connection with the Assumed Contracts;
d) in respect of the Assumed Contracts, all obligations that are
required to be performed from and after the Closing Date including
that under the Financing Agreements;
e) all liabilities arising out of acts, omissions, events relating to or
occurring in connection with the operations of the Identified Business
on or after Closing Date based on the acts or omissions of the
Transferee occurring on or after the Closing Date;
f) in respect of taxes, all liabilities pertaining to the Identified Business
for its operations from and after the Closing Date. It is specifically
clarified that all income tax (including cesses and surcharges
applicable thereupon) and/or capital gains taxes (including cesses and
surcharges applicable thereupon) pertaining to the transfer of the
Identified Business shall be to the account of the Transferor;
The list of Assumed Liabilities as on the date of the Financial
Statements is specified in Annexure C. Transfe ror represents that, as
on the Execution Date, there has been no change in the amount of
Assumed Liabilities as mentioned in Annexure C, except for accrual of
interest in terms of the Financing Agreements
1.5 Excluded Liabilities: Excluded Liabilities means any liability or
obligation of the Transferor(whether known or unknown, absolute,
accrued, contingent, liquidated, unliquidated or otherwise, due or to
become due or otherwise) which shall not be transferred or assumed by
the Transferee and will include the following:
a) any claims not relating to or not arising in connection with Identified
Business,
b) any claims and liabilities arising in respect of the Identified Business
directlyattributable to any events, facts or circumstances in existence
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 28 KUMAR KAURAV
on or prior to theClosing Date (even if such Claim is made or liability
is crystallised after the ClosingDate), except the trade account
payables as of the Closing Date (which form a partof the Assumed
Liabilities);
c) any liabilities or obligations for taxes relating to the Identified
Business for any period on or prior to the Closing Date;
d) all liabilities under any Assumed Contracts that arise on or after the
Closing Date tothe extent they arise out of or relate to; h) any breach
of, or failure to comply withany covenant or obligation in any such
contract, prior to Closing Date, (ii) any event that occurred prior to the
Closing Date which, with or without notice, lapse of or both, would
constitute such a breach or failure; or (iii) any obligation which was
required to be fuifilied by Transferor or any of its affiliates / associated
entities/related parties prior to the Closing Date.
e) all liabilities arising out of or relating to product liability, indemnity,
warranty,infringement, misappropriation or similar claims by any
person to the extent an mgout of acts, omissions or events, or relating
to, or occurring in connection with theoperation of the identified
Business or otherwise prior to the Closing Date orbased upon the acts
or omissions of Transferor and any of its affiliates / associated entities/
related parties occurring after the Closing Date:
f) ail liabilities arising under claims by or with respect to any current
or former employee of the Transferor and any of its affiliates /
associated entities / related parties relating in any way to wages,
salaries, remuneration, compensation,allowances, bonuses, ex-gratia
payments, reimbursements, service benefits (including workers'
compensation and unemployment benefits) and allother entitlements
and all tax deductions and other contributions relating to theforegoing,
termination or continuation of their employment, violation of
employment laws or delay / failure to provide any notice relating to
their employment; in allcases based on acts, omissions or events
occurring prior to the completion of theClosing Date, or based upon
the acts or omissions of Transferor and any ofItsaffiliates / associated
entities / related parties occurring after the Closing.
g) all liabilities in relation to the legal proceedings initiated against the
Transferor prior to the Closing Date or which are initiated post the
Closing Date but relate to a period prior to the Closing Date; (except
as set forth in this Agreement) all liabilities arising out of or relating to
indebtedness incurred by the Transferor; andi) all liabilities (present or
future) , arising out of the Assumed Liabilities (including Labor Cess
liability) exceeding an aggregate amount of Rs.66, 3,13,90,019/-
(Indian Rupees Six hundred and Sixty three Crores Thirteen lakh ninety
thousand and nineteen only).
Notwithstanding any other provision of this Agreement, all Excluded
Liabilities shall continue to remain with the Transferor and the
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 29 KUMAR KAURAV
Transferor shall remain bound by and liable for and shall pay and
discharge the Excluded Liabilities The Parties expressly agree and
acknowledge that the Transferee shall not assume any Excluded
Liability.
1.6 The Transferee shall also be entitled to continue to avail the tax
Incentives, tax deductions, tax holidays and any other tax reliefs for the
unexpired period for which the Transferor was eligible to avail in
relation to the Identified Business of the undertaking which is being
transferred by the Transferor.‖
45. It is, therefore, the emphatic averment of the Plaintiff that the BTA
was duly acted upon by Defendant No. 4, inasmuch as a substantial sum of
Rs. 1,96,00,000/- stood remitted to the Plaintiff through the RTGS
mechanism. The Plaintiff, on this factual foundation, asserts that the balance
consideration in the sum of Rs. 4,10,00,000/- remains unequivocally
outstanding and payable by Defendant No. 4.
46. The principal and foundational defence canvassed on behalf of
Defendant No. 4 is predicated upon the construction of the terms of the
BTA, wherein it is the specific stipulation that Defendant No. 3 undertook
the responsibility of discharging the payment obligations towards unpaid
contractors of Defendant No. 2. Within this contractual framework,
Defendant No. 4 asserts that its role was confined to effectuating payments
not exceeding an aggregate sum of Rs. 44,40,73,965/-, and such
disbursements were to be undertaken strictly in accordance with the
instructions issued by Defendant No. 3. It is further pleaded that these
payments could be made either directly to Defendant No. 3, to Defendant
No. 2, or to the EPC contractors of Defendant No. 2, on behalf of Defendant
No. 3, without Defendant No. 4 ever assuming any direct or independent
liability towards the Plaintiff.
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 30 KUMAR KAURAV
47. The Plaintiff‟s claim is, in essence, sought to be channelled through
Defendant No. 3, predicated on the assertion that the liability of Defendant
No. 3, arising under the underlying commercial arrangement, stood
transferred to Defendant No. 4 under the aegis of the BTA. In this regard,
the Plaintiff contends that such transfer of obligations encompassed the
Plaintiff‟s dues, thereby rendering Defendant No. 4 liable in law.
48. Upon a prima facie evaluation of the factual and legal substratum, this
Court is of the view that the determination as to whether privity of contract
exists inter se the Plaintiff and Defendant No. 4 is not only germane but
constitutes a triable issue warranting adjudication on evidence.
49. Furthermore, it is an admitted position that a certain amount has been
transferred by Defendant No. 4 to the Plaintiff. The Plaintiff contends that
such remittance amounts to part performance and constitutes an unequivocal
acceptance of the entirety of the liability owed by Defendant No. 4 towards
the Plaintiff, whereas, Defendant No.4 rebuts this claim. The aforesaid issue
necessitates adjudication upon appreciation of evidence during the course of
trial, and any conclusive finding at this interlocutory stage would be
untenable. Further, the mode, manner, and purpose of disbursement by
Defendant No. 4, whether direct or indirect, is also a subject matter of
adjudication as there appears to be a significant variance on this aspect, thus
rendering it triable. Nonetheless, the said circumstance discloses a prima
facie case in favour of the Plaintiff, warranting the imposition of conditions
upon Defendant No. 4 while granting leave to defend.
50. It is also to be noted that while the instant suit has been instituted in
the year 2024, the Plaintiff had earlier invoked the jurisdiction of this Court
under Section 11 of the Arbitration and Conciliation Act, 1996, in the year
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 31 KUMAR KAURAV
2022. However, the said petition was subsequently withdrawn. The case of
Defendant No. 4 is that such withdrawal was occasioned by the Plaintiff‟s
own realization of the absence of any privity of contract between itself and
Defendant No. 4. In contradiction, the Plaintiff seeks to invoke the principle
of exclusion of time, contending that a period of 696 days ought to be
excluded from the computation of limitation, as the same was consumed in
the bona fide prosecution of the proceedings under Section 11 of Arbitration
and Conciliation Act, 1996. This competing narrative constitutes a
substantial and material aspect meriting judicial scrutiny and determination
at trial, as the question involved is both of law and fact.
51. Thus, the defence proposed by the defendant could not be termed as
frivolous or vexatious at the outset, and a summary finding to the effect that
no substantive defence has been disclosed, is not justified in the facts of the
present case. Accordingly, the Court deems it apposite to allow the instant
application for leave to defend.
52. Thus, in the interest of expeditious disposal and to safeguard the ends
of justice, it is deemed fit to impose the following conditions upon
Defendant No. 4:
(i) Defendant No. 4 shall not seek any unwarranted or dilatory
adjournments; the proceedings shall be expedited and all parties shall extend
full cooperation to ensure timely progress;
(ii) Defendant No. 4 shall place on record, before the next date of
hearing, a duly sworn affidavit disclosing its assets in compliance with
applicable legal requirements;
(iii) Defendant No. 4 shall deposit a sum of Rs. 2,00,00,000/-with
the Registrar General of this Court within four weeks from today. The said
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 32 KUMAR KAURAV
amount shall be forthwith invested in an interest-bearing fixed deposit
account, with an auto-renewal facility, until further orders of this Court.
53. In view of the aforesaid, the instant application stands disposed of.
CS(COMM) 501/2024, I.A. 5462/2025, I.A.18261/2025
1. Let the matter to continue to proceed before the concerned Joint
Registrar on 13.10.2025.
2. Thereafter, list before the Court on the date to be assigned by the
concerned Joint Registrar.
(PURUSHAINDRA KUMAR KAURAV)
JUDGE
AUGUST 19, 2025/NC
Signed By:AMIT KUMAR Signed
Signing Date:22.08.2025 By:PURUSHAINDRA
11:43:52 33 KUMAR KAURAV
