I've got a scenario where I've two files, the first is index.php and also the other is index.htm.

Wouldso would I setup a rewrite condition / rule to ensure that if index.htm is available around the server inside a subdirectory, pass the request for this file. And when the file doesn't exist pass the request to /index.php?

It is dependent in your subdirectory structure, only one solution is always to simply employ index.php solely, and write some PHP in front of index.php to check on for the presence of another file:

 if(file_exists("subfolder/index.htm")) exit(file_get_contents("subfolder/index.htm"));

Otherwise, browse the flags for RewriteCond

http://httpd.apache.org/docs/2.0/mod/mod_rewrite.html

No requirement for spinning, use [cde] by having an absolute path:

DirectoryIndex