I need to know if SOAPUI sets default values for mandatory elements while sending request

When you see your xml request in your test step editor, it does not have to be exactly what is sent to the target service. See the following example.

You can have a request XML which includes Groovy variables, as following:

When you send a request, the xml is transformed, in this case the variable is substituted with the zip code value:

Here you see the final XML and the HTTP header. Nothing else happens behind the scene.

Your target service probably does not validate the request XML and so it does not complain. The service just provides a correct answer for an incorrect request.