Case BriefsHigh Courts

Delhi High court: Vibhu Bhkaru, J. dismissed a revision petition filed under Section 115 CPC impugning an order passed by the Additional District Judge in the subject summary suit whereby the respondents were granted unconditional Leave to Defend.

The respondents had defaulted in repaying the loan extended to them by the petitioner. Thereafter, the petitioner filed a suit for recovery of the loan under Order 37 CPC. The respondents, in response to the aforesaid summary suit, filed a reply to the application filed by the plaintiff under Order 37 Rule 3(4) CPC for “summons for judgment”, instead of an application under Order 37 Rule 5 for “leave to defend”. By the impugned order the trial judge held that the said discrepancy could be ignored, and the reply filed on behalf of the respondents could be treated as leave to defend in the interest of justice. He accordingly granted the respondents an unconditional leave to defend. Aggrieved thereby, the petitioner filed the present revision.

Preeti Singh, Advocate for the petitioner contended that trial court grossly erred in treating the reply filed by the respondents as an application for leave to defend under Order 37 Rule 3(5).

The High Court, however, was of the view that the contentions of the petitioner were not persuasive. It was observed: It is relevant to bear in mind the object of prescribing the procedure for seeking leave to defend under Order 37 Rule 3(5) CPC. The rationale for evolving such a procedure, requiring the defendant to file a leave to defend, is to enable the Court to evaluate whether there exist any triable issue warranting the suit to be set down for trial. In the present case, the reply filed by the respondents had clearly set out the grounds of defence.” It was reiterated that the rules of procedure are meant to aid the delivery of justice and a minor infraction of such rules of procedure ought not to visit the concerned party with consequences which substantially defeat the ends of justice.

Also, the petitioner did not contest the trial court’s conclusion that the respondents had a reasonable defence. In such view of the matter, the Court dismissed the revision petition.[Netrapal Singh v. Ravinder Kumar Kalyanai, 2019 SCC OnLine Del 9622, decided on 07-08-2019]

Case BriefsSupreme Court

Supreme Court: On the question relating to the power of the court to grant leave to defend in case of sham or moonshine defence in a commercial dispute, the bench of Ashok Bhushan and Navin Sinha, JJ said,

“if the court is satisfied of a plausible or probable defence and which defence is not considered a sham or moonshine, but yet leaving certain doubts in the mind of the court, it may grant conditional leave to defend.”

The Court also explained that in a summary suit, if the defendant discloses such facts of a prima facie fair and reasonable defence, the court may grant unconditional leave to defend. This naturally   concerns the subjective satisfaction of the court on basis of the materials that may be placed before it.

Explaining the distinction between both the above mentioned subjective satisfactions of the court, the bench said,

“in the latter case there is an element of discretion vested in the court. Such discretion is not absolute but has to be judiciously exercised tempered with what is just and proper in the facts of a particular case.”

The court said that the ultimate object of a summary suit is expeditious disposal of a commercial dispute. The discretion vested in the court therefore requires it to maintain the delicate balance between the respective rights and contentions by not passing an order which may ultimately end up impeding the speedy resolution of the dispute.

The Court also relied upon the decision in IDBI Trusteeship Services Limited vs. Hubtown Limited,  (2017) 1 SCC 568, wherein it was held,

“17.3 Even if the defendant raises triable issues, if a doubt is left with the trial Judge about the defendant’s good faith, or the genuineness of the triable issues, the trial Judge may impose conditions both as to time or mode of trial, as  well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.

17.4. If the defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.”

[Sudin Dilip Talaulikar v. Polycap Wires Pvt. Ltd, 2019 SCC OnLine SC 857, decided on 15.07.2019]

Case BriefsHigh Courts

Delhi High Court: Rekha Palli, J., without expressing any opinion on merits of the case, allowed an appeal filed by the appellant who was the defendant in a suit for recovery of money, against the order of the trial court whereby the suit was decreed against him without granting him leave to appeal.

The respondent alleged that the appellant borrowed Rs 12 lakhs from him for construction of a house. The money, he alleged, was paid in cash without any receipt. It was further alleged that the appellant issued a post dated cheque drawn on UTI Bank Ltd. for the repayment of the said amount. However, on presentation, the said cheques were returned by the Bank with remark “payment stopped by the drawer”. The respondent filed a complaint under Section 138 of the Negotiable Instrument Act, 1885 against the appellant. However, the said complaint was rejected by the Metropolitan Magistrate. Pursuant thereto, the respondent instituted the present suit under Order 37 CPC claiming recovery of the said Rs 12 lakhs along with interest. The appellant filed n application for leave to defend which was rejected by the Additional District Magistrate, and the suit was decreed against him.

C. Mohan Rao with Lokesh Kumar Sharma, Advocate appearing for the appellant contended that the trial court gravely erred in declining to grant leave to defend to the appellant even though the pleas raised by him clearly showed that his defence was fair and reasonable. Per contra, Rajshekhar Rao, Vinay Kumar and Raghav Kacker, Advocates representing the respondent supported the impugned order.

The High Court noted that the respondent claimed to have given the entire loan amount to the appellant in cash, without obtaining any receipt or acknowledgment reflecting such a  transaction. While the appellant did not dispute either the issuance of the cheque or his signature thereon, he specifically claimed that the cheque was never given to the respondent, but was given to his father in the year 2007 itself, as security for the chit fund amount which stood repaid. It also emerged from the record that the name of UTI Bank Ltd. stood changed to ‘Axis Bank Ltd.’ in 2007 itself, yet the cheque dated in the year 2013 — which the respondent claimed as having been issued by the appellant, was still drawn on a chequebook of UTI Bank Ltd. Coupled with this was the fact that respondent’s complaint filed under Section 138 NI Act was rejected. It was observed: “If the court finds that the defence is a wholly moonshine and sham, then leave to defend is liable to be rejected: but if the defence is found plausible, though not very probable, the Court would be justified in putting the defendant on terms while granting leave to defend.”

In the present case, the Court was of the opinion that the issue raised by the appellant was a plausible one. Thus, despite the fact that the appellant did not raise these vital issues specifically in his affidavit for leave to defend, the Court held that interest of justice demands that he be granted an opportunity to lead evidence in support of his defence, though the same had to be subject to conditions. Accordingly, he was granted leave to defend, subject to his depositing 50% of the principal amount with the trial court. The appeal was allowed and the order impugned was set aside.[Kadhirvel v. Vinod Kumar, 2019 SCC OnLine Del 9057, decided on 08-07-2019]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Valmiki Mehta, J. dismissed an appeal filed under Section 96 CPC against the order of the trial court whereby appellant’s leave of defend application was dismissed.

The case pertains to a recovery suit filed by the respondent against the appellant. It was an admitted fact that the appellant had taken a loan of Rs 15 lakhs from the respondent. For repayment of the same, the appellant had issued 3 cheques. However, on presentation, the cheques were dishonoured with a remark fund insufficient. Consequently, the respondent filed the subject recovery suit. Thereafter, an application for leave to defend was filed by the appellant which was dismissed by the trial court. Aggrieved thus, the appellant filed the instant petition.

On perusal of the record, the High Court did not find any illegality, whatsoever, in the order of the trial court. In the Court’s opinion, case of the appellant was completely false besides being disjointed. The averments made by the appellant were totally unrelated to the instant matter. The evidence presented was irrelevant. The Court observed that the entire defence of the appellant in the leave to defend application was confusing, to say the least. Its objective was to create confusion and false defence. The Court held that the trial court rightly declined the application of the appellant. Holding thus, the appeal was dismissed. [Ashwani Kumar v. Kalimuddin, 2018 SCC OnLine Del 11003, dated 04-09-2018]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Valmiki Mehta, J. dismissed a regular first appeal filed under Section 96 CPC against the judgment of the trial court whereby the appellant’s application for leave to defend was dismissed.

Brief facts of the case are that the appellant-defendant took a loan of Rs 20 lakhs from the plaintiff and issued two cheques for the part-payment thereof. However, on presentation, the said cheques were dishonoured with remarks funds insufficient. After serving the legal notice, the petitioner filed a suit. The defendant filed an application for leave to defend. His basic defence was that the cheques in question were stolen from his car while he was driving from Rohtak to Delhi. However, the trial court dismissed the defendant’s application for leave to defend. Aggrieved thus, the defendant filed the instant appeal.

The High Court was of the view that judgment of the trial court did not warrant any interference. It was noted that indeed an FIR was filed by the defendant in regard to the said robbery. However, there was no mention of the said cheques being stolen. The defendant was using such fact to create a completely false defence to the suit. Referring to the Supreme Court decision in IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568, the High Court observed that once the defence is clearly frivolous and vexatious and there is no triable issue, leave to defend should not be granted. In the present case too, the Court completely disbelieved the story put forth by the defendant, and concluded that the defence was frivolous and vexatious. Thus, the trial court was right in dismissing the defendant’s application for leave to defend. The appeal was dismissed sans merit. [Mange Ram v. Raj Kumar Yadav,2018 SCC OnLine Del 10316, dated 03-08-2018]

Case BriefsSupreme Court

Supreme Court: With the intent to prevent the arbitrary exercise of judicial discretion under Order 37 CPC while refusing the leave to defend or granting conditional or unconditional leave to defend, the bench of Kurian Joseph and R. F. Nariman, JJ laid down broad guidelines to be kept into mind by the trial judge. The Guidelines are as follows:

  • If the defendant satisfies the Court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit;
  • If the defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend;
  • Even if the defendant raises triable issues, if a doubt is left with the trial judge about the defendant’s good faith, or the genuineness of the triable issues, the trial judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security;
  • If the Defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.
  • If the Defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith
  • If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court.

Stating that Order 37 CPC has suffered a change in 1976, and that change has made a difference in the law laid down, the Court said that the position in law now is that the trial Judge is vested with a discretion which has to result in justice being done on the facts of each case. The Court explained that at one end of the spectrum is unconditional leave to defend, granted in all cases which present a substantial defence. At the other end of the spectrum are frivolous or vexatious defences, leading to refusal of leave to defend. In between these two extremes are various kinds of defences raised which yield conditional leave to defend in most cases. It is these defences that have to be guided by broad principles which are ultimately applied by the trial Judge so that justice is done on the facts of each given case. [IDBI Trusteeship Services Ltd v. Hubtown Ltd, 2016 SCC OnLine SC 1274, decided on 15.11.2016]