In the case of International Computer's Consultants v. Home Computers Services (P) Limited, (1997-3) 117 P.L.R. 10, a Division Bench took the view that once triable issues are raised with bonafide and firm defence, leave should be granted. But if the defence is frivolous or vexatious, leave should be refused. Where there is reasonable doubt and the Court feel it just and reasonable, the Court may impose such condition while granting the leave, as it may deem fit and proper.
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Punjab-Haryana High Court
Mrs. Ramesh Rani vs Harsh Malhotra And Ors. on 12 August, 1999
Equivalent citations: (1999) 123 PLR 453
1. The short question that arises for consideration is, in regard to the scope of jurisdiction exercisable by the learned trial Court while granting additional leave to the defendant in a suit under Order 37 of the Code of Civil Procedure.
2. The relevant facts are that the plaintiff filed a suit for recovery of Rs. 69,158/- against the defendants. It was stated that the money had been lent to the defendant No. 1 and the payment was made by cheques amounting to Rs. 35,000/- and Rs. 5,000/- dated 25.11.1995, drawn on State Bank of Patiala. Defendant No. 2 and 3 had stood guarantor for defendant No. 1 for repayment of the said loan with interest at the rate of 17% per annum, as agreed. Documents for the grant of loan were executed.
3. The defendants upon putting in appearance filed an application in accordance with the provisions of Order 37 of the Code of Civil Procedure for leave to defend, the defendants claimed that they had not executed the document and had not taken the loan, as stated by the plaintiff. According to the defendants, the documents were forged and fabricated one and the rate of interest was stated to be, in any case, exorbitant and not recoverable.
4. The application for leave to defend was contested by the plaintiff. According to the plaintiff, the application was not maintainable and was beyond time. The trial Court come to the conclusion that triable issues were raised by the defendants. However, it granted conditional leave, vide order dated 17.7.1997. The learned trial Court directed the applicant-defendants to furnish security for the sum of Rs. 10,000/-. It is this order which has been challenged in this revision before this Court.
5. It is not disputed that the application for leave to defend the suit was filed beyond time. However, the delay in filing of this application was condoned on the concession given by the counsel for the non applicant-plaintiff, as recorded by the learned trial Court. Thus, this ground would not survive for consideration before this Court now.
6. From the above narrated facts, it is clear that the claim of the plaintiff was based upon a written document executed in furtherance to the loan received by cheque. However, in the written statement, no specific and definite reply or execution was referred in relation to the cheque. However, execution of the document was denied and the agreement was stated to be forged and fabricated one. The learned trial Court considering the merit of the defence found that triable issues were raised and, therefore, granted leave in the above stated manner. Exercise of discretion in granting additional leave to the limited extent of furnishing security for Rs. 10,000/- is the sole question to be decided in this revision.
7. According to the learned counsel for the petitioner, learned trial Court has not exercised the discretion in consonance with the settled principle of law and, therefore, the order suffers from an error of jurisdiction apparent on the face of it.
8. Sub-Rule (5) of Rule 3 of Order 37 of the Code of Civil Procedure reads as under:-
"(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 Judge 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."
9. This rule vests pervasive judicial discretion in the Court to grant, refuse or grant conditional leave to defend, the suit, by the defendant. This discretion, of course, has to be exercised in accordance with settled principle of law. Where the Court exercises its discretion either way, it must have a direct nexus and relation to the contents and specific pleadings of the parties. Leave has to be granted in relation to the subject matter of the claim in the suit and normally not in relation to part thereof, unless such severance is called for in the given facts and circumstances of each case.
10. For example, where the Court finds that part of the claim raised in the suit by the plaintiff at least prima facie seems to be satisfied on the basis of a valid counter claim or other documentary evidence, which would show partial satisfaction of the amount.
11. Obviously there is dual purpose sought to be served under the specific provisions of Order 37 of the Code of Civil Procedure. One is to provide expeditious disposal of the claim of the party by adopting recourse to summary procedure, while the other is to provide a safeguard to the interest of the plaintiff by granting or refusing or granting additional leave to defend to the other party. In other words, if the Court is satisfied with the claim of the plaintiff and the fact that the defendant has only sham or moonshine defence, the Court may refuse to grant leave to defend and pass the decree forthwith. But in some cases depending on the nature of the defence, the Court may grant leave with or without condition. This would obviously depend on the facts and circumstances of each case. The Court strikes a balance between the case of the plaintiff and the defence raised by the defendant. The interest of justice demand that interest of no party should be jeopardised. Where the interest of the plaintiff is to be secured there defendant should also have a fair chance to prove his defence.
12. In a case titled as Sunil Enterprises and Anr. v. SBI Commercial and International Bank Limited, (1998-3) 120 P.L.R. 608, the Hon'ble Supreme Court reiterated the principles enunciated in the case of Santosh Kumar v. Mool Singh, (1958) S.C.R. 1211; A.I.R. 1958 S.C. 321 and spelt out the factors and circumstances, which the Court must consider while granting leave to defend the suit. The principles stated are as under:-
"4. The position in law has been explained by this Court in Santosh Kumar v. Mool Singh, (1958) S.C.R. 1211; A.I.R. 1958 S.C. 321, Milkhiram (India) Private Limited v. Chaman Lal Bros., A.I.R. 1965 S.C. 1698 and Michalec Eng. and Mfg. v. Bank Equipment Corporation, A.I.R. 1977 S.C. 577. The propositions laid down in these decisions may be summed up as follows:-
(a) If the defendant satisfies the Court that he has a good defence to the claim on merits, the defendant is entitled to unconditional leave to defend.
(b) If the defendant raises a triable issue indicating that he has a fair or bonafide or reasonable defence, although not a possible good defence, the defendant is entitled to unconditional leave to defend.
(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defence to the plaintiffs claim, the Court may impose conditions at the time of granting leave to defend-the conditions being as to time of trial or mode of trial but not as to payment into Court or furnishing security.
(d) If the defendant has no defence, or if the defence is sham or illusory or practically moonshine, the defendant is not entitled to leave defend.
(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine, the Court may show mercy to the defendant by enabling him to try to prove a defence but at the same time protect the plaintiff, imposing the condition that the amount claimed should be paid into Court or otherwise secured.
In fact in identical matters on the file of the said High Court in summary suit No. 2963 of 1990 Dena Bank v. Sunil Enterprises and Summary Suit No. 1153 of 1989 Bank of India v. Mahendra Sarabhai Choksi, leave to defend had been granted to defendants."
13. The Hon'ble Apex Court noticed that unless the defence raised was totally defenceless or moonshine or illusory, the court may grant conditional or even unconditional leave.
14. In the case of International Computer's Consultants v. Home Computers Services (P) Limited, (1997-3) 117 P.L.R. 10, a Division Bench took the view that once triable issues are raised with bonafide and firm defence, leave should be granted. But if the defence is frivolous or vexatious, leave should be refused. Where there is reasonable doubt and the Court feel it just and reasonable, the Court may impose such condition while granting the leave, as it may deem fit and proper.
15. Applying the said principle to the present case, I have no hesitation in affirming the view taken by the learned trial Court though not dealt with in detail in the impugned judgment, that the defendant may have raised triable issue but it lacks bonafide. It was for the defendant-applicant to explain and show that the claim of the plaintiff in relation to the giving of loan by cheque was fictitious and as such cheques were not encashed in their account.
16. Judicial discretion to be exercised by the court has to create a balance so that none of the parties to the lis suffer avoidable prejudice. The learned trial court had granted conditional leave to the defendant-applicant in which I see no error of jurisdiction. But a question that remains to be answered is whether the condition imposed while granting the leave is just fair and equitable? Answer to this has to be in the negative in the facts and circumstances of the present case.
17. I am unable to see any valid reason for the trial Court to impose the condition by restricting its scope to Rs. 10,000/- only having found that the plaintiff's claim was fully justified and there was serious doubt in the defence raised by the defendants in the suit with regard to its genuiness. The defence may not be totally illusory and sham but was not certainly a satisfactory and bonafide defence to the claim raised by the plaintiff. The discretion exercised by the learned trial Court in the above manner may not stand in conformity to the settled principle of law. It was not a case where the defendant pleaded satisfaction of the claim that either the claims of the plaintiff was totally forged or fabricated or it was genuine in its entirety. The fabrication of the agreement has to be adjudicated upon during the trial but there was no valid and proper answer to the averments in relation to the cheque.
18. For the reasons aforestated, I am of the considered view that the defendant-applicant should have been called upon to furnish security at least to the extent of principal amount i.e. Rs. 40,000/-, which is stated to have been given by cheque.
19. Consequently, this revision is partially accepted and the order of the learned trial Court, for the reasons stated above, is modified to the limited extent that defendants-applicants shall furnish security in cash or by immovable property to the satisfaction of the trial Court to the extent of Rs. 40,000/-.
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