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

POLYCAP 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

Code, the condition for deposit of Rs.30,00,000/­ could not have

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withdrawn the prosecution instituted by him earlier under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

Trusteeship Services Limited vs. Hubtown Limited,  2017(1)

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 Hubtown Limited (supra), this court has laid down the

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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