What Is Conditional Leave to Defend and How Much Deposit Can the Court Ask?

What is conditional leave to defend?

It's the middle path. The defendant in a summary suit has put up a defence that isn't worthless, but isn't convincing either. So the court doesn't refuse leave and pass a decree, and it doesn't wave the case through to trial. It says: you can defend, but first deposit this much, or give this security, by this date. Meet the condition and the suit goes to trial. Miss it, and Order XXXVII Rule 3(6)(b) of the Code of Civil Procedure, 1908 (CPC) lets the plaintiff take judgment at once.

The condition is nearly always about money. Cash paid into court is the common version. Others are a bank guarantee, an FD pledged in the court's name, or a charge over property. Now and then the court adds terms about how or when the trial runs, an early date for evidence for instance. But the deposit is what keeps defendants awake. It's also what plaintiffs ask for.

Why does this matter so much? Because of how a summary suit is built. The defendant can't file a written statement as of right. It must enter appearance within 10 days of service (our guide on a defendant who does not appear in a summary suit covers what happens if it doesn't). After that the plaintiff serves a summons for judgment, and the defendant gets 10 days from that service to ask for leave, filing an affidavit that explains its side. The order on that application shapes the whole case. The application itself is covered on our page on leave to defend in a summary suit. Here we stay with the deposit.

Order 37 Rule 3: the text behind the deposit

How courts decide whether to attach a condition

The working tests come from the Supreme Court's decision in IDBI Trusteeship Services Ltd. v. Hubtown Ltd. (2016). Put plainly, they go like this. A substantial defence that's likely to succeed gets unconditional leave. Triable issues showing a fair or reasonable defence ordinarily get unconditional leave too. If there are triable issues but the court doubts the defendant's good faith, or doubts the issues are genuine, it can impose conditions, including payment into court or security. A defence that's plausible but improbable can attract heavier conditions, up to depositing the whole principal with interest. No substantial defence, and a frivolous or vexatious one? Leave is refused. And whatever's admitted must be deposited before leave is granted at all.

Then came B.L. Kashyap and Sons Ltd. v. JMS Steels and Power Corporation (2022). The Supreme Court said granting leave is the ordinary rule and refusing it the exception. If some reasonable doubt about the defence remains, the right course is usually leave on conditions, not outright refusal. That cuts two ways on deposits. Outright refusal becomes rarer. And conditional leave with a deposit becomes the natural landing spot for a lot of middling defences.

So at the leave hearing, the judge is really asking one question. How far do I trust this defence? Less trust, bigger deposit. A defence resting on documents the defendant created before the dispute earns more trust. One built on things said for the first time in the leave affidavit earns less. Much less, in our experience.

Where a defence falls and the condition that usually follows

This is a simplified reading of the Hubtown categories as we see courts apply them. Each case turns on its own papers, and the figure in any order is for the judge to fix.

How much conditional leave to defend deposit can the court ask?

Order XXXVII doesn't fix a percentage. If someone tells you the court always orders 25 or 50 percent, they're guessing. All the rule says is that the terms must be just. What we actually see is a wide spread. A defence that's close to genuine may cost a modest slice of the principal, while one that's barely plausible can cost the full principal with some interest on top. The ceiling is the amount claimed. A court won't order you to deposit more than the plaintiff could get under a decree.

Some things push the figure up. A written acknowledgment of the debt, a ledger confirmation, an unpaid cheque. Others pull it down, like a dispute raised in writing before the suit, say a quality complaint sent when the goods arrived. Contradictions between your leave affidavit and your own earlier emails push it up sharply. Courts also look at conduct. If you paid nothing for a year while promising payment every month, it's hard to argue that a big deposit is unfair.

Can you plead that you can't afford it? You can. It's relevant but rarely decisive. Judges don't want a condition to turn into a refusal of leave in disguise, so they sometimes shape it to be workable: security instead of cash, more time, deposit in instalments. They have much less patience for a defendant who pleads poverty without a balance sheet or bank statement in support.

Interest is its own question. Some orders ask for principal only. Others add interest at a stated rate up to the date of the order. If the order says nothing about interest, read it as principal only. But check with your lawyer before you deposit.

The admitted amount rule: the deposit you can't argue away

The second proviso to Order XXXVII Rule 3(5) is absolute. Admit any part of the claim and leave can't be granted until that part is deposited. The judge has no discretion on it. And it's the most common reason defendants are shocked by the size of the deposit.

Admissions turn up in more places than people expect. Your own ledger sent to the plaintiff. A balance confirmation signed for audit. An email saying "we will clear Rs 12 lakh by month end". A part payment cheque. Even the leave application, if it says only part of the invoice is disputed. Every rupee of the undisputed part becomes a compulsory deposit.

So if you're a defendant drafting a leave application, be precise about what you dispute and why. Our page on preparing a leave to defend application shows how the affidavit is put together. Blanket denials rarely help. The court reads the documents, finds the admission anyway, and the vagueness then counts against your good faith on the part you genuinely dispute.

Forms the leave to defend deposit can take

Cash in court is the usual form. It goes to the court's accounts branch or registry, depending on the court, and the judge normally directs that it be put in a bank fixed deposit so it earns interest while the case runs. In Delhi, whether at Saket or in the Delhi High Court, the order usually names the officer the deposit goes to and the date by which you file proof.

Courts often accept a bank guarantee where the defendant has banking limits but no spare cash. It has to be unconditional, in favour of the court's registrar or whoever the order names, and valid for long enough, with a duty to renew. If it lapses mid-suit, that can itself be treated as non-compliance.

Property security is possible too. Usually you deposit original title deeds with an undertaking not to sell or mortgage the property, sometimes with a valuation report. The court checks that no bank has a charge on it and that its value covers the amount. A solvent surety, where a third person stands guarantor, is less common in commercial suits. Not unheard of, though.

Asking for a particular form is part of the argument. When Advocate B.K. Singh argues a leave application for a defendant, he walks in with a fallback already worked out: the security the client can actually give, with the papers ready, in case the court leans towards a condition. A judge who hears a concrete offer, say an undertaking backed by a Dwarka flat with the title deeds in the file, is often readier to frame a workable condition than one who only hears that any deposit would ruin the business.

Conditional leave has been granted: what to do next

The date in the order is now the most important date in your case. Treat it as fixed. It is.

1. Get the order and read the exact condition

   Download the order from the court website or get a certified copy. Write down how much, in what form, to which officer or account, whether interest is part of it, and the final date. If anything's unclear, raise it with your lawyer that same day.

2. Line up the money or security

   Talk to your bank about a fixed deposit or guarantee in the court's favour, or dig out the title documents if you're offering property. Banks are slow with guarantees. Start today.

3. Deposit through the right channel

   Deposit exactly as the order says, usually by challan or online payment into the court's account, and keep the receipt. Sending money to the plaintiff's account isn't a deposit in court unless the order allows it.

4. File proof of compliance

   Before the deadline, file an affidavit or application putting the deposit receipt, the guarantee or the property papers on record. Serve a copy on the plaintiff's advocate.

5. Can't make it? Apply before the date

   Move an extension application with reasons and supporting papers, such as the bank's letter about the guarantee. Courts listen far more readily to a request made before the deadline than to an explanation offered after it.

6. Decide fast whether to challenge it

   If the condition is plainly out of proportion to the defence you showed, get advice on a challenge within days. A challenge doesn't stop the clock unless the higher court stays the condition.

7. File the written statement on time

   Once leave takes effect, the court fixes time for the written statement and the suit runs as a commercial suit from there. Stick to that time. Commercial courts enforce their deadlines strictly.

Time and costs around the deposit stage

These are typical patterns in Delhi NCR. They aren't promises. Court fee and process fee figures differ between Delhi, Uttar Pradesh and Haryana, so check the current schedule.

Papers that decide the size of the deposit

• Every email, letter or WhatsApp message where you raised a dispute before the suit was filed. Dates matter, so keep them
• Quality complaints, rejection notes, debit notes or short-supply reports you sent at the time
• Your own ledger of the plaintiff's account, and any balance confirmation someone in your office signed
• The contract or purchase order showing the terms you say they broke
• Proof of payments the plaintiff hasn't given you credit for
• Bank statements and your latest financials, if you'll be asking for time or a different form of security
• Title documents and an encumbrance check for any property you plan to offer
• A certificate under Section 63 of the Bharatiya Sakshya Adhiniyam for the emails and electronic records you rely on

If you're the plaintiff: asking for the right condition

Plaintiffs often oppose leave outright and then go quiet when the judge signals that conditional leave is coming. That's a wasted chance. Come with a reasoned figure. The admitted amount, which has to be deposited anyway, plus the part of the disputed sum that rests on the defendant's own documents. Take the court to each admission by page number.

When Advocate B.K. Singh acts for a plaintiff, he hands up a one-page chart at the leave hearing. It lists every admission the defendant made, with the document, its date and the amount it covers. Judges get through dozens of these in a day. One sheet that shows why the defence is thin, and what a fair deposit looks like, goes down well.

Ask for a short time to comply, too. And get the order to say in so many words that if the money doesn't come, a Rule 3(6)(b) decree follows. If the defendant offers property, ask for the title deeds to be deposited, not just described. A condition the other side can dodge by delay doesn't do much for you.

Can the deposit condition be challenged?

An order granting conditional leave isn't a decree, and the CPC gives no regular appeal against it. Where the order came from a district commercial court, say Karkardooma or Tis Hazari, people usually file a petition under Article 227 of the Constitution in the High Court, which can set right orders that are perverse or have no basis. If a single judge of the Commercial Division of the Delhi High Court passed it, the route is narrower. Get advice on the right remedy within days.

Higher courts do step in where a condition effectively shuts out a genuine defence. In B.L. Kashyap, the Supreme Court gave leave to defend to a party the lower courts had refused, and treated an amount it had already deposited as part of the arrangement. But the higher court won't reweigh every fact. Your best shot is an order that overlooks a plain document, or calls a sum admitted when you'd always disputed it.

Filing a challenge doesn't pause the deadline. If the deposit date comes before the higher court has heard you, and there's no stay, the plaintiff can ask for judgment. So either comply under protest or get an interim order before the date.

What happens to the deposited money

A conditional leave to defend deposit sits with the court until the suit is decided, usually in a fixed deposit. If the plaintiff wins, the court releases it, with the interest it's earned, towards the decree, and the plaintiff executes for whatever's left. If the defendant wins, the money comes back with its interest. You don't lose it. It's held.

Sometimes a plaintiff asks for the deposit to be released during the suit, offering its own security, a bank guarantee for the same amount for example. Courts allow that occasionally, mostly where a big part of the claim is admitted. As a defendant, oppose it if there's a real risk the plaintiff couldn't pay it back if your defence succeeds.

How the deposit question plays out for different defendants

• MSMEs and small traders. Cash is tight, and a large deposit can stall the business. Offer property or a guarantee early, with the papers in hand, and show bank statements if you need more time.
• Large companies. Courts assume you have funds or bank limits, so pleading inability rarely gets anywhere. Your argument has to be about how strong the defence is, not how big the cheque would be.
• Startups. A young company sued by a vendor may have investor money that's already committed elsewhere. Explain the real position honestly. A bare claim that the company can't pay, with nothing to back it, can do more harm than good.
• Guarantors and directors sued personally. First check whether the guarantee even covers the amount claimed, and whether the summary procedure applies to it at all. A flaw there can change the leave outcome completely.
• Defendants in UP and Haryana. Order XXXVII reads the same in Ghaziabad, Gautam Buddh Nagar, Gurugram and Faridabad commercial courts. How you deposit, and which officer the order names, differs from court to court. Follow the wording of your order exactly.

Mistakes defendants make with a conditional leave to defend deposit

• Denying everything. A flat denial that your own ledger contradicts wrecks your credibility, and the deposit tends to grow.
• Missing the date by a few days. Rule 3(6)(b) hands the plaintiff a decree on non-compliance. Depositing late may not save your defence.
• Paying the plaintiff directly. Unless the order says you can, money paid outside court doesn't count as meeting the condition.
• Letting the bank guarantee lapse. Watch the expiry date. Renew well ahead.
• Filing a challenge and then sitting back. No stay means the deadline is still running.
• Forgetting about interest. If the order includes interest and you deposit only the principal, you've complied short.

What to do now

Just been served with a summons for judgment? Then the 10-day clock for leave is already running. Pull together every document showing a dispute raised before the suit, and work out what, if anything, you accept. If conditional leave has already been granted, write down the deadline, call your bank today and file proof of compliance before the date. For what comes before and after this stage, read about the summons for judgment, when courts grant unconditional leave, and defending a summary suit. Decree already passed? Look at our note on setting aside a summary suit decree under Order 37 Rule 4.

If you're the plaintiff, build the chart of admissions before the leave hearing and know the figure you want deposited. For the stages after this, see our summary suits page and our note on how fast a summary suit moves in Delhi. For advice on your own papers, or on how courts are treating deposit conditions at the moment, you can reach Advocate B.K. Singh through the contact page.