JUDGMENT

ALTAMAS KABIR,J.

1. Leave granted.

2. This appeal, which is directed against the order passed by the Karnataka High Court on 26th June, 2008, in a proceeding under Order 37 of the Code of Civil Procedure, raises an interesting question of law regarding the interpretation of Rule 3, Sub-rule (5) thereof.

3. Rule 3, as it now reads, was introduced in Order 37 of the Code by way of amendment with effect from 1st February, 1977. Prior to such amendment, Rule 3 of Order 37 was as follows :-

"Rule 3. (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."

By virtue of the Code of Civil Procedure (Amendment) Act, 1976, Rule (3) of Order 37 was substituted by Rule 3 as it now exists and introduced various changes of which one of the more significant changes was the introduction of Sub-rules (4) and (5) which read as follows:-

"3. (4) If the defendant enters an appearance, the plaintiff shall thereafter serve on the defendant a summons for judgment in Form No.4A 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.

(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 Judges 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."

It may also be profitable to refer to Sub-rule (6) which provides as follows:-

"(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) if the 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 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."

4. In the instant case, the respondent filed a suit under Order 37 of the Code of Civil Procedure, hereinafter referred to as "the Code", for recovery of a sum of Euro 757,885.42 equivalent to Rs.3,86,52,156.42 in Indian currency. On being served with Summons for Judgment in terms of Rule 3, Sub-rule (4), of Order 37 of the Code, the petitioner filed an affidavit providing various details which made out triable issues in the suit. On the basis of the said affidavit the learned XXXI Additional City Civil Judge, Bangalore, granted conditional leave to the petitioner to defend the suit.

5. Being aggrieved by the said order, the respondent company moved in revision before the High Court which af