IDBI TRUSTEESHIP SERVICES LTD. versus HUBTOWN LTD.

7. Dr. Singhvi argued that there is no breach whatsoever of the Regulations inasmuch as the suit, based upon a Corporate Guarantee to enforce its terms, is filed by an Indian company, namely, the debenture trustee IDBI Trusteeship Pvt. Ltd., against another Indian company namely Hubtown Ltd, the beneficiary being a subsidiary of Hubtown namely Vinca, which is also an Indian company. There is therefore no question ofany funds going out of the country in violation ofany FEMA Regulation, the ultimate repose of the funds being for the benefit of Vinca which is an Indian company. He argued before us that admittedly ~ 418 .crores were paid by FMO, a Dutch company, and have been swallowed by the development project that has been set up by Amazia and Rub ix. He also argued that there is no question of any infraction of the FEMA Regulations for the reason that these funds went to purchase . equity shares ofVinca in the form offully convertible debentures, such debentures having to be converted into shares after a certain period, and that, therefore, there was no question of any illegality in the said transaction. He further submitted that it is only in 201 I that defaults were made in payment, as a result of which the Corporate Guarantee was invoked. The said Corporate Guarantee is unconditional and not a word has been stated against its invocation, namely, that it has not been IDBI TRUSTEESHIP SERVICES LTD. v. HUBTOWN .LTD. [R. F. NARIMAN, J.] alleged to have been invoked wrongly. According to him, there is no defence whatsoever to the suit, and the defence being entirely frivolous and vexatious, leave to defend ought to·have been refused altogether. But, he stated as an alternative argument, that in any case the Appellant- plaintiff should be fully secured for the amount claimed in the plaint. He also submitted before us that the test laid down in Mecheiec Engineers & Manufacturers v. Basic Equipment Corporation, (1976) 4 SCC 687 is no longer good law in view of the fact that o.xxxvn of the Code of Civil Procedure, 1908 ("CPC") was amended in 1976, and it is the amended provision that has to be looked at. He cited certain judgments before us to show that this court has taken the view that the amended provision makes a sea change in the law, as a result of which it is open to the court, even if itthinks that a triable issue is made out, to secure the plaintiff in monetary terms as a condition for leave to defend the suit.

8. ShriAspi Chinoy, Ld. senior counsel appearing on behalf of the Respondent, has reiterated the submissions of his predecessor in the Bombay High Court. According to him there is a clear breach of the FEMA Regulations and this being so, the Ld. Single Judge was correct in referring to the judgment in Immami Appa Rao vs. G. Ramalingamurthi, ( 1962) 3 SCR 739, and stating that where two persons may be party to an illegality, the court would be justified, in the larger public interest, in not lending the court's aid to a person who comes to court to enforce such illegality. That this may incidentally benefit the defendant is of no moment, and therefore the Ld. Single Judge was correct in primafacie coming to the conclusion that the suit was to lend assistance to the plaintiff in enforcing something illegal, the Corporate Guarantee being part of the larger illegal transaction. According to Id. senior coi;nsel, there is in fact no change made by the amendment of 1976, save and except in one area – that where the defendant admits that a certain amount is due from him, then even though leave to defend may be granted, the admitted amount ought to be deposited or secured. Short of this change, the law continues to be the same, and therefore, according to him, triable issues having been raised in the present case, it is clear that clause (e) of the propositions laid down in paragraph 8 of Mechelec's case alone would entitle the Plaintiff to an order for deposit into court or security, and sub-clause ( e) not being attracted, the Ld. Single Judge was absolutely right in the conclusion that he reached. He also asked us not to interfere with the Ld. Single Judge's judgment under c f2016] I 1 S.C.R. Article 136 as there was nothing perverse in the Single Judge's conclusions.

9. This case therefore raises a larger and very important question: namely, whether the judgment in Mechelec's case continues to be the law even after the amendment ofO.XXXVII in 1976. To appreciate the respective submissions of counsel, it is necessary to set out O.XXXVII c Rule 3 as it stood pre-amendment and as it now stands. O.XXXVII, Rule 3 (pre-amendment) "3. Defendant showing defence on merits to have leay~ to appear. (1) The Court shall, upon an 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. (2) 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." O.XXXVII, Rule 3 (post amendment) "3. Procedure for the appearance of defendant.-( I) In a suit to which this Order applies, the plaintiff shall, together with the summons under Rule 2, serve on the defendant a copy of the plaint and annexures thereto and the defendant may, at any time within ten days of such service, enter an appearance either in person 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 defendant to the plaintiff's IDBI TRUSTEESHIP SERVICES LTD. v. HUBTOWN LTD. [R. F. NARIMAN, J.] pleader, or, if the plaintiff sues in person, to the plaintiff himself, either by notice delivered at or sent by a prepaid 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 a summons for judgment in Form 4-A in Appendix B or such other Form as may be prescribed from time to time, returnable not less than ten days from the date of service supported by an affidavit verifying the cause of action and the amount claimed and stating that in his belief there is no defence to the suit. c (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, apply on such summons for leave to defend such suit, and leave to defend may be granted to him unconditionally 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 disclosed by the defendant do not indicate that he has a substantial defence to raise or that the defence intended to be 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 and is refused, the plaintiff shall be entitled to judgment forthwith; or (b) ifthe defendant is permitted to defend as to the whole or any part of the claim, the Court or Judge may direct him to give such security and within such time as may be fixed c by the Court or Judge and that, on failure to give such security within the time specified by the Court or Judge or to carry out such other directions as may have been given by the Court or Judge, the plaintiff shall be entitled to judgment 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."

10. The 3 judge bench in Mechelec's case heard an appeal from a judgment of the Delhi High Court. In paragraph 2 of the judgment, the unamended O.XXXVII Rule 3 is set out, after which, in paragraph 4, the Court stated that the only question which arose before them in that appeal by special leave 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, upon grounds which even a perusal of the impugned judgment of the High Court showed to be reasonable. The answer to the question thus posed was in the question itself, and this Court had no doubt that the High Court judgment, in interfering with the trial court's judgment under its revisional jurisdiction, was wrong. Paragraphs 6 and 7, which constitute the ratio of the judgment, went into the well-established principles repeatedly laid down by this court which govern the jurisdiction of the High Courts under Section 115 of the CPC. This Court held that such principles had been ignored in the judgment under appeal. However, in paragraph 8, the judges set out the 5 propositions governing 0.XXXVII laid down in Kiranmoyee Dassi Smt v. Dr J. Chatterjee, AIR 1949 Cal 4 79, as follows: "In Kiranmoyee Dassi Smt v. Dr J. Chatterjee [AIR 1949 Cal 4 79 : 49 CWN 246, 253 : ILR (1945) 2 Cal 145.] Das, J., after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by Order 37 CPC in the form of the following propositions (atp. 253): "(a) If the defendant satisfies the court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend. IDBI TRUSTEESHIP SERVICES LTD. v. HUBTOWN LTD. [R.F. NARIMAN, J.] (b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend. (c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shews such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the court may in its discretion impose conditions as to the time or mode of trial but not as to payment into court or furnishing security. (d) If the defendant has no defence or the defence set-up is illusory or sham or practically'.moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend. (e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into cburt or othel"Wise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence." [para 8]

11. As the case before the court did not fall within clause (e), this Court held that imposition of a condition to deposit an amount in court would not be possible, and allowed the appeal as aforesaid. lt is interesting to note that a binding four judge bench decision on order37 in Milkhiram (India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1698, was bunched together with several other judgments that were relied upon in paragraph 6, as judgments relating to the exercise ,of jurisdiction of High Courts under section 11 S of the CPC.

12. We find that Milkhiram 's case is in fact an important judgment. c A on the scope of O.XXXVII of the CPC, and is not a judgment on principles to be applied under Section 115. This judgment, being a judgment of four learned judges of this court, set out, in paragraph I, O.XXXVII, Rule 3 sub-rules (2) and (3) as amended by the Bombay High Court at the relevant time, as follows: c "(2) If the defendant enters an appearance, the plaintiff shall thereafter serve on the defendant a summons for judgment returnable not less than ten clear days from the date of service supported by an affidavit verifying the cause of action and the amount claimed and stating that in his belief there is no defence to the suit. (3) 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, apply on such summons for leave to defend the suit. Leave to defend may be granted to him unconditionally or upon such terms as to the Judge appear just."

13. The trial court found that the defence disclosed by the affidavit required by sub-rule (3) was sufficient to grant leave to defend the suit, but as against a claim of~ 4,05,434.38/-, the Court ordered the appellant to deposit security worth~ 70,000/-. A first appeal having been dismissed, the Supreme Court had to decide whether it was incumbent upon the trial court to grant unconditional leave to defend, having found that a triable issue exists. Since this judgment is of seminal importance in deciding the issue raised before us, it is necessary for us to quote parts ofthisjudgment, as follows: "Learned counsel relied upon a decision of this court in Santosh Kumar v. Bhai Moo/ Singh [ (1958) SCR 1211] and particularly upon a passage at p. 1216. That was a case in which the Court of Commercial Subordinate Judge, Delhi, had held that the defence raised a triable issue but that defence was vague and was not bona fide because the defendant had produced no evidence to prove his assertion. For these reasons the court granted leave to defend the suit on the condition of the defendant giving security for the IDBI TRUSTEESHIP SERVICES LTD. v. HUBTOWN LTD. [R. F. NARIMAN, J.] entire claim in the suit and costs thereon. This court held that 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 unconditionally. This Court further held that the trial court was wrong in imposing a· condition about giving security on the ground that documentary evidence had not been adduced by the defendant. This Court pointed out that the stage of proof can only arise after leave to defend has been granted and that the omission to adduce documentary evidence would not justify the inference the defence sought to be raised was vague and not bona fide. While dealing with the matter Bose, J., who spoke for the Court observed (p. 1216): "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 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." The latter part of the observations of the learned Judge have to be under-stood in the background of the facts of the case this Court was called upon to consider. The trial Judge being already satisfied that the defence raised a triable issue was not justified in imposing a condition to the effect that the defendant must deposit security because he had not adduced any documentary evidence in support of the defence. The stage for evidence had not been reached. Whether the defence raises a triable issue or not has to be ascertained by the court from the pleadings before it and the affidavits of parties and it is not open to it to call for evidence at that stage. If upon consideration of material placed before it the court comes to the conclusion that the c c defence is a sham one or is fantastic or highly improbable it would be justified in putting the defendant upon terms before granting leave to defend. Even when a defence is plausible but is improbable the court would be justified in coming to the conclusion that the issue is not a triable issue and put the defendant on terms while granting leave to defend. To hold otherwise would make it impossible to give effect to the provisions of Order 37 which have been enacted, as rightly pointed out by Bose, J., to ensure speedy decision in cases of certain types. It will be seen that Order 3 7 Rule 2 is applicable to what may be compendiously described as commercial causes. Trading and commercial operations are liable to be seriously impeded if, in particular, money disputes between the parties are not adjudicated upon expeditiously. It is these considerations which have to be borne in mind for the purpose of deciding whether leave to defend should be given or withheld and if given should be subjected to a condition. It may be mentioned that this Court relied upon the decision in Jacobs v. Booth's Distillery Co. [(1901) 85 LT 262] in which the House of Lords held that whenever a defence raises a triable issue leave must be given and also referred to two subsequent decisions where it was held that when such is the case leave must be given unconditionally. In this connection we may refer to the following observations of Devlin, L.J. in Fie/drank Ltd. v. Stein [ (1961) 3 AELR 681 at pp 682-3] : "The broad principle, which is founded on Jacob v.Booth 's Distillery Co. is summarised on p. 266 of the Annual Practice ( 1962 Edn.) in the following terms: 'The principle on which the court acts is that where the defendant cari show by affidavit that there is a bona fide triable issue, he is to be allowed to defend as to that issue without condition."' If that principle were mandatory, then the concession by counsel for the plaintiffs that there is here a triable issue would mean at once that the appeal ought to be allowed; IDBI TRUSTEESHIP SERVICES LTD. v. HUBTOWN LTD. [R. F. NARIMAN, J.] but counsel for the plaintiffs has drawn our attention to some comments that have been made on Jacobs v. Booth's Distillery Co. [( 190 I) 85 LT 262] They will be found at pp. 25 I and 267 ofthe Annual Practice, 1962. It is suggested (seep. 25 I) that possibly the case, if it is closely examined, does not go as far as it has hitherto been thought to go; and. on the top of p. 267 the learned editors of the Annual Practice have this note: "The condition of payment into court, or giving security, is nowadays more often imposed than formerly, and not only where the defendant consents but also where there is a good ground in the evidence for believing that the defence set up is a sham defence and the master 'is prepared very nearly to give judgment for the plaintiff." It is worth noting also that in Lloyd's Ba11ki11gCo. v.Ogle I Ex. D. at p. 264 in a dictum which was said to have been overruled or qualified by Jacob v. Booth's Distillery Co. [ (1901) 85 LT 262) Bramwell, B., had said that " …. those conditions (of bringing money into court or giving. security) should only be applied when there is something suspicious in the defendant's mode of presenting his case." I should be very glad to see some relaxation of the strict rule in Jacob v. Booth's Distillery Co. I think that any Judge who has sat in chambers in RSC, Order 14 summonses has had the experience of a case in which, although he cannot say for certain that there is not a triable issue, nevertheless he is left with a real doubt about the defendant's good faith, and would like to protect the plaintiff, especially ifthere is not grave hardship on the defendant in being made to pay money into court. I should be prepared to accept that there has been a tendency in the last few years to use this condition more often than it has been used in the past, and r think that that is a good tendency;" These observations as well as some observations ofChagla, C.J., in Rawalpindi Theatres Private Ltd. v. Film Group Bombay [ (1958) BLR 13 73 at p 13 74] may well be borne in mind by the court sitting in appeal upon the order of the c c trial Judge granting conditional leave to defend. It is indeed not easy to say in many cases whether the defence is a genuine one or not and therefore it should be left to the discretion of the trial Judge who has experience of such matters both at the bar and the bench to form his own tentative conclusion about the quality or nature of the defence and determine the conditions upon which leave to defend may be granted. If the Judge is of opinion that the case raises a triable issue, then leave should ordinarily be granted unconditionally. On the other hand, ifhe is ofopinion that the defence raised is frivolous, or false, or sham, he shou Id refuse leave to defend altogether. Unfortunately, however, the majority of cases cannot be dealt with in a clear cut way like this and the judge may entertain a genuine doubt on the question as to whether the defence is genuine or sham or in other words whether it raises a triable issue or not. It is to meet such cases that the amendment to Order 37 Rule 2 made by the Bombay High Court contemplates that even in cases where an apparently triable issue is raised the Judge may impose conditions in granting leave to defend. Thus this is a matter in the discretion of the trial Judge and in dealing with it, he ought to exercise his discretion judiciously. Care must be taken to see that the object of the rule to assist the expeditious disposal of commercial causes to which the Order applies, is not defeated. Care must also be taken to see that real and genuine triable issues are not shut out by unduly severe orders as to deposit. In a matter of this kind, it would be undesirable and inexpedient to lay down any rule of general application." [paras 7 – 12]

14. We may hasten to add that Mechelec's case has since been followed in a series of judgments of this court- Municipal Corpn. of Delhi v. Suresh Chandra Jaipuria, (1976) 4 SCC 719 at para II; G Sunil Enterprises v. SBI Commercial & International Bank Ltd., (1998) S SCC 354 at para 4; State Bank of Saurashtra v. Ashit Shipping Services (P) Ltd., (2002) 4 SCC 736 at para IO; Uma Shankar Kamal Narain v. M.D. Overseas Ltd., (2007) 4 SCC 133 at paras 8 and 9; SIFY Ltd. v. First Flight Couriers Ltd., (2008) 4 SCC 246 at H para l O; Wada Arun Asbestos. (P) Ltd. v. Gujarat Water Supply & IDBI TRUSTEESHIP SERVICES LTD. v. HUBTOWN LTD. [R.F. NARIMAN, J.] Sewerage Board, (2009) 2 SCC 432 at para 19; R. Saravana Prabhu v. Videocon Leasing & Industrial Finance Ltd., (2013) 14 SCC 606 at para 4; and State Bank of Hyderabad v. Rabo Bank, (2015) 10 sec 521 at para 16.

15. However, there are two judgments of this Court which directly deal with the amendment made to O.XXXVII and the effect thereof on the ratio contained in Mechelec's case. In Defiance Knitting Industries (P) Ltd. v. Jay Arts, (2006) 8 SCC 25, this Court, after setting out the amended O.XXXVII and after referring to Mechelec's case, laid down the following principles – "While giving leave to defend the suit the court shall observe the following principles: (a) If the court is of the opinion that the case raises a triable issue then leave to defend should ordinarily be granted unconditionally. See Milkhiram (India) (P) Ltd. v.Cha111a11lal Bros. [AIR 1965 SC 1698: 68 Bom LR 36] The question whether the defence raises a triable issue or not has to be asce11ained by the court from the pleadings before it and the affidavits of parties. (b) If the court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defence to raise or that the defence intended to be put up by the defendant is frivolous or vexatious it may refuse leave to defend altogether. Kira11111oyee Dassi v. Dr. J. Chatterjee [AIR 1949 Cal 479: 49 CWN 246] (noted and approved in Mechelec case [(1976) 4 SCC 687 : AIR 1977 SC 577] ). (c) In cases where the cou11 entertains a genuine doubt on the question as to whether the defence is genuine or sham or whethef'it ,raises a triable issue or not, the court may impose conditions in granting leave to defend." [para I 3]

16. In Southern Sales & Services v. Sauermilch Design & Handels GMBH, (2008) 14 SCC 457, this Court was squarely asked to render its decision on whether the judgment in Mechelec's case was to a large extent rendered ineffective in view of the amended O.XXXVII. This Court found: c c [2016) 11 S.C.R. "Having considered the submissions made on behalf of the respective parties and the decisions cited, there appears to be force in Mr Sharma's submissions regarding the object intended to be achieved by the introduction of sub-rules (4), (5) and (6) in Rule 3, Order 37 of the Code. Whereas in the unamended provisions of Rule 3, there was no compulsion for making any deposit as a condition precedent to grant of leave to defend a suit by vi11ue of the second . proviso to sub-rule (5), the said provision was altered to the extent that the deposit of any admitted amount is now a condition precedent for grant of leave to defend a suit filed under Order 3 7 of the Code. A distinction has been made in respect of any part of the claim, which is admitted. The second proviso to sub-rule (5) of Rule 3 makes it very clear that leave to defend a suit shall not be granted unless the amount as admitted to be due by the defendant is deposited in court." [para I 5]

17. It is thus clear that O.XXXVll 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 authority on the amended O.XXXVJI provision, as the amended provision E 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 p 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 numb'er 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 dowJ1 to obviate exercise of judicial discretion in an arbitrary manner. At one IDBI TRUSTEESH 1P SERVICES LTD. v. HUBTOWN LTD. '[R.F. NARIMAN, J.] 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 ofleave 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. 1'8. Accordingly, the principles stated in paragraph 8 ofMechelec's case will now stand superseded, given the amendment of 0.XXXVII R.3, and the binding decision of four judges in Milkhiram's case, as follows: a. If the defendant satisfies the Court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit; b. ifthe defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend; c. even ifthe defendant raises triable issues, if a doubt is left with the trial judge about the defendant's 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 furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security; d. if the Defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires .• e. if the Defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the c plaintiff is entitled to judgment forthwith; f. if any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court. 19. Coming to the facts of the present case: ….. a. It is clear that a sum oH'4 I 8 crores has been paid by FMO, the Dutch company, to Vinca for purchase of shares as well as compulsorily convertible debentures. This transaction by itself is not alleged to be violative of the FEMA regulations. b. The suit is filed only on invocation of the Corporate Guarantee which on its terms is unconditional. It may be added that it is not the defendant's case that the said Corporate Guarantee is wrongly invoked. c. Payment under the said Guarantee is to the debenture trustee, an Indian company, for and on behalf ofVinca, another Indian company, so that primafacie again there is no infraction of the FEMA Regulations. d. Since FMO becomes a 99% holder ofVinca after the requisite time period has elapsed, FMO may at that stage utilise the funds received pursuant to the overall structure agreements in India. If this is so, again primafacie there is no breach ofFEMA Regulations. e. At the stage that FMO wishes to repatriate such funds, RBI permission would be necessary. IfRBI permission is not granted, then again there would be no infraction ofFEMA Regulations. f. The judgment in Immami App a Rao's case would be attracted only if the illegal purpose is fully carried out, and not otherwise. 20. Based on the aforesaid, it cannot be said that the defendant has raised a substantial defence to the claim made in the suit. Arguably atthe highest, as held by the lean:ed Single Judge, even ifa triable issue may be said to arise on the application of the FEMA Regulations, nevertheless, we are left with a real doubt about the Defendant's good faith and the genuineness of such a triable issue.~ 418 crores has been stated to be utilized and submerged in a building construction project, with payments under the structured arrangement mentioned above IDBI TRUSTEESHIP SERVICES LTD. v. HUBTOWN LTD. [R.F. NARIMAN, J.] admittedly being made by the concerned parties until 2011, after which payments stopped being made by them. The defence thus raised appears to us to be in the realm of being 'plausible but improbable'. This being the case, the plaintiff needs to be protected. In our opinion, the defendant will be granted leave to defend the suit only ifit deposits in the Bombay High Court the principal sum of~ 418 crores invested by FMO, or gives security for the said amount of~ 418 crores, to the satisfaction of the Prothonotary and Senior Master, Bombay High Court within a period of three months from today. The appeal is accordingly allowed, and the judgment of the Bombay High Court is set aside. 21. We further direct that the suit be tried expeditiously, preferably within a period ofone year from the date of this judgment, uninfluenced by any observations made by us herein. Divya Pandey Appeal allowed. c