Decision of the SC in Raj Duggal vs. Ramesh Kumar Bansal, 1991 (1) SCC 191, where a question had been raised regarding leave to defend in a suit under Order XXXVII of the Code of Civil Procedure. While considering the said question, the Supreme Court set out the principles to decide whether leave should be granted or denied in the following manner :-
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 has 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 defendant merely because of its inherent implausibility or its inconsistency.
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