Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s).5528 OF 2019
(arising out of SLP (Civil) No(s). 9368 of 2018)
SUDIN DILIP TALAULIKAR ...APPELLANT(S)
VERSUS
POLYCAB WIRES PVT. LTD. AND OTHERS ...RESPONDENT(S)
JUDGMENT
NAVIN SINHA, J.
Leave granted.
2. The appellant is aggrieved by grant of conditional leave to
defend in Summary Suit No. 1289 of 2015 filed against him, by
the respondent under Order XXXVII of the Code of Civil
Procedure, 1908 (hereinafter referred to as “the Code”) for
recovery of Rs.64,18,609/, inclusive of interest.
3. Learned counsel for the appellant submitted that under the
Second Proviso to subRule 5 of Rule 3 of Order XXXVII of the
Signature Not Verified
Code, the condition for deposit of Rs.30,00,000/ could not have
Digitally signed by
MEENAKSHI KOHLI
Date: 2021.04.13
15:06:23 IST
Reason:
been ordered in absence of any admissible dues. The fact that
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there may have been a commercial transaction between the
parties in the past, cannot ipso facto be construed as an
admission of debt merely because the respondent may have so
claimed in the suit. The respondent had unconditionally
withdrawn the prosecution instituted by him earlier under
Section 138 of Negotiable Instruments Act
(hereinafter referred to as “the Act”), for the same dues. All
legitimate dues have been paid. The defective goods were
returned, the balance of five lacs was also paid, and the
accounts cleared, after which no further transactions had taken
place between the parties. Reliance was placed on IDBI
2017(1)
Trusteeship Services Limited vs. Hubtown Limited,
SCC 568.
4. Learned counsel for the respondent submitted that the
summary suit had been instituted for recovery of outstanding
dues with regard to goods supplied to the appellant. It was for
the appellant to demonstrate that he had paid for goods. The
impugned orders notice that the appellant had placed no
documentary evidence in his reply. The reference to the
admitted commercial transaction between the parties has been
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made in that context. The withdrawal of the criminal
prosecution was irrelevant. It was no bar to the maintainability
of the summary suit. It is for the appellant to prove during the
trial of the suit that he had in fact paid for the goods as claimed.
The impugned orders are based on sound exercise of discretion
in the facts of the case and merit no interference.
5. A brief recapitulation of facts would bring the matter in
proper perspective for appreciation of issues involved. The
respondent supplied electrical cables and wires to the appellant
between 09.05.2010 to 03.06.2011. Acknowledging some
payments they claimed outstanding dues of Rs.34,24,633/.
Likewise, for supplies between 01.04.2010 to 10.03.2011 they
claimed dues of Rs.1,88,377/. A notice was given to the
appellant under Section 138(b) of the Act after the cheques
dated 01.03.2014 and 01.03.2014 were dishonored, as the
account was blocked. The respondent then instituted a
prosecution under Section 138 read with Section 142 of the Act
lodged for Rs.34,24,633/ on 30.04.2014 with regard to the
former instrument and on 01.08.2014 with regard to the latter
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instrument. Different dates have been mentioned in different
documents placed before us.
6. While the prosecution under the Act was pending, the
respondent instituted the present summary suit on 24.11.2015
for a cumulative sum of Rs.36,13,410/, being the total amount
of two dishonored instruments, with an additional claim for
Rs.28,05,199/ as interest at the rate of 18% per annum
amounting to a total of Rs.64,18,609/. The Suit expressly
referred to the pendency of the prosecution under the Act.
7. In Summons for Judgment No. 105 of 2016 dated
16.03.2016, in the summary suit the respondent relied upon the
extracts of accounts of the appellant to support its claim for
unpaid dues. The prosecutions under the Act were withdrawn
on 14.12.2015. The order withdrawing the prosecution under
the Act is unconditional in nature and is a suomoto action.
8. The appellant in its defence to the summons for judgment
relied upon the institution of the prosecution under the Act prior
to the suit and its unconditional withdrawal to contend that
there were in fact no dues payable. The appellant further relied
upon an order dated 29.10.2015 passed in the prosecution
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under the Act requiring the respondent to produce certain
original documents materials to the complaint and only
subsequent to which, without producing the said documents the
prosecution under the Act was unconditionally withdrawn.
Denying any dealings with the respondents after 2011, the
appellant questioned that there was no occasion for it to issue a
cheque in the year 2014 for any alleged dues of the year 2011. It
was further contended that different inks had been used in the
instruments for the signatures and its contents. Defective goods
on the consignment had been returned and the balance of
Rs.5,00,000/ paid, facts which were not disputed by the
respondent.
9. The Civil Judge by order dated 20.07.2017 recorded the
satisfaction of a triable defence but granted conditional leave to
defend with an unreasoned finding based on the existence of a
commercial relationship between the parties. The High Court
acknowledged that there was no admission by appellant about
its liability to repay any amount, but because the appellant had
not disputed a commercial relationship and purchase of goods
from the respondent, and in absence of any material to show
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sufficient payment, the order for conditional leave to defend
required no interference.
10. Order XXXVII, Rule 3 of the Code dealing with the
procedure for summary suit, in the relevant extract provides as
follows:
“3. Procedure for the appearance of defendant
XXXXX
(4) if the defendant enters an appearance, the
plaintiff shall thereafter serve on the defendant a
summons for judgement in Form No. 4A in Appendix B
or such other Form as may be prescribed from time to
time, returnable not less than ten days from the date
of service supported by an affidavit verifying the
cause of action and the amount claimed and stating
that in his belief there is no defence to the suit.
(5) The defendant may, at any time within ten days
from the service of such summons for judgement, 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
vexatious:
Provided further that, where a part of the amount
claimed by the plaintiff is admitted by the defendant
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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.
XXXXX
11. 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. However, in an appropriate case, 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. In contradistinction to the earlier subjective
satisfaction of the court, 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 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.
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12. The controversy in the facts of the present case is therefore
not with regard to any dues admitted by the appellant or not,
and the requirement to deposit the same. The issue for
adjudication is whether on basis of the materials on record,
whether their has been just and proper exercise of the discretion
to grant conditional leave to defend by deposit of Rs.30,00,000/
after consideration of all material and relevant factors.
13. In , this court has laid down the
Hubtown Limited (supra)
principles which should guide exercise of such discretion as
follows :
“…17.1. 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.
17.2. 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.
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
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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.
17.5. 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.
17.6. 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.”
14. In our opinion, both the Civil Judge and the High Court
have posed unto themselves the wrong question and have
therefore misdirected themselves in application of the above
principles by granting conditional leave to defend without
properly adverting and referring to the facts of the case and the
materials on record. The fact that there was commercial dealing
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between the parties was not in issue at all. According to the
plaint of the respondent, commercial dealings between the
parties ended on 03.06.2011. It stands to reason why
outstanding payment in respect of the same came to be made by
cheque as late as 01.03.2014. It does not appeal to logic or
reason much less to the usual practice in commercial dealings.
In any event the respondent has not furnished any explanation
with regard to the same. At this stage it becomes necessary to
notice the contention of the appellant that the signatures and
the contents of the cheques are in different writings. The
respondent had the option to institute a summary suit at the
very inception of the dispute. But it consciously opted for a
prosecution under the Act which undoubtedly was a more
efficacious remedy for recovery of any specified amount of a
dishonoured instrument raising a presumption against the
drawer, as in a summary suit the possibility of leave to defend
could not be completely ruled out, in which case the recovery
gets delayed and protracted.
15. Significantly on 29.10.2015, in the prosecution instituted
by the respondent under the Act, the court required the
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respondent to file certain additional documents because the
appellant denied the existence of any legal liability for any sum
due. It is only thereafter that the Summary Suit was instituted
on 24.11.2015. The prosecution under the Act was
subsequently unconditionally withdrawn on 14.12.2015. These
facts are not in dispute and are clearly discernible from the
records. This coupled with the specific contention of the
appellant, not denied by the respondent, that it had returned
defective goods and paid the balance dues of Rs.5,00,000/, we
find the conclusion to grant leave to defend as perfectly justified.
16. But the defence raised by the appellant in the aforesaid
background was certainly not a sham or a moonshine much less
frivolous or vexatious and neither can it be called improbable.
The appellant had raised a substantial defence and genuine
triable issues. The failure both by the Trial Judge and the High
Court to notice and consider the aforesaid issues as discussed
by us hereinbefore leaves us satisfied that there was no
justification to grant conditional leave to defend. The fact that
there may have been commercial relations between the parties
was the ground for the institution of the summary suit but could
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not per se be the justification for grant of conditional leave sans
proper consideration of the defence from the materials on
record.
17. In the result, the impugned orders granting conditional
leave to defend are held to be unsustainable and are set aside.
The appellant is granted unconditional leave to defend.
18. The appeal is allowed.
.……………………….J.
(Ashok Bhushan)
………………………..J.
(Navin Sinha)
New Delhi,
July 15, 2019.
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