Delhi High Court
International Computers Consultants vs Home Computers Services (P) Ltd. on 1 August, 1997
Equivalent citations: 1997VAD(DELHI)662, 68(1997)DLT407, (1997)117PLR10
Author: J.B. Goel
Bench: J.B. Goel
JUDGMENT J.B. Goel, J.
(1) This Regular First Appeal is directed against order, judgment and decree dated 18th September, 1995 passed by the learned Additional District Judge in a suit filed by the respondent-plaintiff on the basis of a cheque, tried under the provisions of Order 37 of the Code of Civil Procedure (for short 'the Code'). The application for leave to defend filed by the appellant-defendant has been disallowed, leave refused and the suit has been decreed.
(2) Briefly, the facts are that the respondent-plaintiff had filed a suit for recovery of Rs. 27,840.00 on the basis of a cheque in the sum of Rs. 27.000.00 issued by the appellant in its favour. The suit was tried under summary procedure of Order 37 of the Code, summons of suit and for judgment were accordingly served on the defendant and in due course the appellant-defendant filed an application under Order 37, Rule 3(5) of the Code for leave to appear and defend the said suit on various grounds as pleaded therein. The learned Trial Court vide detailed impugned order and judgment came to the conclusion that the defense sought to be raised by the defendant is frivolous, dishonest, bogus and illusory and the application has no merits and accordingly refused leave to defend and decreed the together with interest @ 12% per annum from. the date of the filing of the suit till realisation.
(3) Being aggrieved, defendant has come in appeal against the said order, judgment and decree.
(4) Learned Counsel for the appellant has contended that the learned Trial Court has acted illegally and has exercised jurisdiction unreasonably and on untenable grounds has rejected the application drawing wrong inferences and conclusions which is not permissible at this stage. The application of the defendant disclosed facts which raised triable issues and if accepted are sufficient to non-suit the plaintiff; and hence the impugned order and judgment are not sustainable. Whereas learned Counsel for the respondent has supported the order and judgment and has contended that as the defense sought to be as raised is not bonafide and is intended to delay the disposal of the suit, no triable issue was raised and the learned Trial Court has rightly come to the conclusion it reached.
(5) The plaintiff in the plaint as well as in the affidavit filed in support of the application for summons for judgment had alleged that the plaintiff and defendant knew each other as they belong to the same professional community, they had business relations, the plaintiff had sold some computer hardware and software to the defendant and that the defendant in order to discharge the liability (to pay cost) had issued a cheque dated 17.12.1990 in the sum of Rs. 27,000.00 ; the cheque was presented twice on 17.12.1990 and again on 27.12.1990 but it was returned by defendant's Bank due to insufficient funds and was dishonoured. The plaintiff had sent a notice for payment, to which no reply was given nor any payment made. The defendant in the application for leave to defend has taken the following pleas :
(a) That the plaintiff company is not registered under the Companies Act, nor the plaint and the affidavit have been signed by a duly authorised person on behalf of the plaintiff. (b) That Shri Deepak Jain the representative of the plaintiff company had approached the defendant and persuaded him to purchase one computer system Pc Xt with associate software for a sum of Rs. 27.000.00 ; and got an undated cheque of Rs. 27,000.00 by giving an assurance that the same will be presented for encashment only after the supply and delivery of the computer. But the said Shri Deepak Jain has filled the undated cheque with a date and presented the same for encashment without supplying the computer, the said cheque is without consideration and as such the suit is not maintainable. The defendant had no liability to discharge by means of this cheque. (e) That the cheque in question was obtained by Shri Deepak Jain fraudulently and by misrepresentation for encashment of the same after the delivery of the computer and the suit is a misuse of the process of law.
(6) This application was supported by the affidavit of Shri Rakesh Mathur, proprietor of defendant. The plaintiff did not file any reply to this application.
(7) In a suit tried under summary procedure of Order 37 of the Code the defendant is not entitled to defend the suit unless he obtains leave to defend the suit from the Court as provided under Sub-rule (5) of Rule 3 of Order 37.
(8) The object of this provision is to see that the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining an early decree by raising untenable and frivolous defenses in a class of cases where speedy decisions are desirable in the interest of trade and commerce which are likely to be seriously impeded if in particular money disputes between the parties are not adjudicated upon expeditiously. However, at the same time, it has to be kept in mind that the provision of this order is merely rule of procedural law and is designed to facilitate justice and further its end and not a penal enactment for punishment and is not designed to be an instrument of injustice.
(9) The scope of the provision of Order 37 and the principles to be taken into consideration for grant or refusal of leave to defend have, inter alia, been considered by the Supreme Court in Santosh Kamar v. Bhai Mool Singh, , M/s. Mechelec Engineers & Manufacturers v. M/s. Basic Equipment Corpn., and Mrs. Raj Duggal v. Ramesh Kumar Bansal, .
(10) In Santosh Kumar (supra) it has been laid down that at this stage all that the Court has to deter-line is whether "if the facts alleged by the defendants are duly proved this will afford a good, or merely a plausible answer to the plaintiff's claim; once Court is satisfied about that, leave cannot be withheld. In other words if the defense raises a "triable issue" leave must be given unconditionally, and on the other hand if the Court is of the opinion that the defense is not bonafide, or the defendant wants to prolong the litigation and evade a speedy trial, then it can impose condition. In general, the test is to see whether the defense raises a real issue and not a sham one, in the sense that, if the facts alleged by the defendant are established.. there would be a good, or even a plausible defense on those facts.
(11) In M/s. Mechelec Engineers & Manufacturers, the Supreme Court has referred to with approval the following principles laid down in Smt. Kiramnoyee Dassi v. Dr. J. Chatterjee, (1945) 49 Cal. Wn 246 (253) :
(i) (a) If the defendant satisfies the Court that he has a good defense to the claim on its merits, or (b) where he raises triable issue indicating that he has a fair or bonafide or reasonable defense although not a positively good defense, the defendant is entitled to unconditional leave to defend. (ii) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say although the affidavit does not positively and immediately make it clear that he has a defense, yet shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defense to the plaintiff's claim; the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security; (iii) (a) If the defendant has no defense or the defense is illusory or sham or practically moonshine the defendant is not entitled to leave to defend. (b) In such a case although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defense to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defense.
Again in the Mrs. Raj Duggal's case (supra) the principles have been reiterated as under: "Leave is declined where the Court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defense. The test is to see whether defense raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even plausible defense on those facts. If the Court is satisfied about that leave must be given. If there is a triable issue in the sense that there is a fair dispute to be tried as to meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross-examine his witnesses leave should not be denied. Where also, defendant shows that even on a fair probability he has a bona fide defense, he ought to have leave. Summary judgment under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The Court should not reject the defense of the defendant merely because of its inherent implausibility or its inconsistency."
(12) First two cases were decided under the provisions of Rule 3 of Order 37 as existing before their amendment in 1976. Rule 3 has been replaced making detailed provisions therein about the manner, method and circumstances in which leave to defend may be granted or refused. The code before its amendment in 1976, did not give any guidance as to the grounds on which the petition for leave to defend the suit would be refused. To remove this shortcoming Sub-section (5) of Rule 3 has been recast. Leave to defend may be granted if the defendant by affidavit or otherwise discloses such facts to the Court as may be deemed sufficient to entitle him to defend. Its first proviso makes it clear that the leave shall not be refused unless the Court is satisfied that the facts disclosed do not indicate that he has a substantial defense to raise or that the defense raised is frivolous or vexatious.
(13) Still the test whether to grant leave or not will be whether a triable issue, i.e. not a positively good defense but a fair, or bona fide or a reasonable defense which needs investigation is made out, if so, leave must be given. And on the other hand, in case, the Court is not satisfied that a plausible ground is made out, or the Court comes to the conclusion that the defense raised is frivolous or vexatious the leave would be refused. And in case of doubt leave may be granted subject to such conditions as the Court deems just and reasonable, depending upon the facts and circumstances of each case.
(14) The jurisdiction to grant leave or to refuse the same is to be exercised on the basis of the affidavit filed by the defendant. That alone at that stage is the relevant document and the inquiry is to be confined to the averments made in the affidavit. If the averments made in the affidavit disclose such facts which if ultimately proved to the satisfaction of the court would disentitle the plaintiff from judgment in his favour that by itself makes it obligatory upon the court to grant leave. At this stage the court is not required to record a finding on disputed questions of fact as at this stage defendant is not required to adduce proof with which he is going to support his defense ultimately. It is possible that the defendant may fail to make good the defense raised by him. It is only the plausibility of the defense raised and not the certainty of the same, that is relevant and sufficient to entitle the defendant to leave to defend the suit. It is immaterial that facts alleged and disclosed are controverted by the plaintiff because the stage to prove is yet to come though they may be considered by the court in evaluating if the defense is wholly untenable or vexatious.
(15) In this case the plaintiff in the plaint and the affidavit filed in support of summons for judgment had alleged that the defendant had issued the cheque for consideration towards cost of computer, whereas the defendant in his application for leave to defend has alleged that the cheque in question was given in advance towards the price of computer which was to be supplied to him, on the assurance and representation of the plaintiff that they will supply the same in due course and that is why the date in the cheque was not mentioned when the cheque was issued and as the computer was not supplied, the plaintiff was not entitled to present the same for encashment, is not entitled to the amount of the cheque and the cheque is without consideration. This plea is supported by the affidavit of the defendant to which no reply affidavit has also been filed. At this stage there is no reason to disbelieve the same. This plea of the defendant if proved and is accepted, it will certainly disentitle the plaintiff to a judgment on the basis of this cheque. It at once raises a triable issue.
(16) The learned Trial Court has gone into detailed merits of this plea, and relying on Section 118 of the Negotiable Instruments Act and also Section 114(c) of the Indian Evidence Act has come to the conclusion that the cheque was duly signed and executed by the defendant and there is a presumption that it was for consideration. During the arguments, learned Counsel for the plaintiff has also relied upon the presumptions arising under Sections 138 and 139 of the Negotiable Instruments Act. There is no dispute so far as the presumptions arising under these provisions are concerned. However, the presumption that arises is rebuttable and not irrebuttable. The defendant has raised a defense which if is accepted by the Court, would certainly rebut such presumption.
(17) Apart from the presumptions raised at this stage it cannot be said definitely that it was a dated cheque when it was issued by the defendant. In the circumstances, the learned Trial Court was not justified in giving a finding to this effect only on the basis of presumptions relied by it. The learned Trial Court has also observed that the plea taken that the cheque was without consideration is a bald statement and the defendant has not disclosed in detail as to when the plaintiff approached the defendant to purchase the computer and on which date the disputed cheque had been issued. It is not always that the dates of such oral transactions are either noted or are remembered after some time by persons. The date possibly would have been known if the defendant had admitted the date mentioned in the cheque as the date of signing it by him. On the plea taken by the defendant, it cannot be said that the omission to state such facts was so material which in itself will be sufficient to reject his defense at this stage.
(18) Learned Trial Court has further observed that "nothing has been disclosed by the defendant as to whether any such earlier transactions had also been made between the parties wherein it was the practice of the defendant to give a cheque in advance without receiving the goods." Again, this assumption is not justified because it cannot be said on the material on record that there had been series of similar transactions between them. This was also not a relevant consideration at this stage.
(19) The learned Trial Court has then observed that if the plaintiff had not supplied the computer he should have taken steps to give instructions to his banker to stop the payment of the cheque which he had not taken. The occasion for asking the Bank to stop the payment would not have arisen in view of the plea taken in leave to defend the suit.
(20) The learned Trial Court has further observed that a notice of demand had been sent by the plaintiff to which no reply was given and for this an adverse inference has been drawn against the defendant. For this reliance has been placed on Kalu Ram v. Sita Ram, 1980 Rajdhani Law Reporter (note) 44 during arguments. In the cited case inference had been drawn after trial when both the parties had led their evidence and the evidence led by the defendant against whom the inference was drawn was not accepted and non-sending of reply to the notice which contained allegations of fact, was taken as an additional circumstance against the defendant. There is no rule of law that non-giving of reply to a notice always gives rise to an adverse inference being raised against such party. The learned Trial Court was not justified at this stage in drawing such inference.
(21) It may be mentioned that the amount of the cheque is Rs. 27,000.00 whereas, suit has been decreed for recovery of Rs. 27,840.00 . No details are mentioned in the plaint about this excess amount and its admissibility. As such the amount in excess could not be awarded. Also the Court could not award interest after institution of suit under Section 34 of the Act at the rate of 12% p.a. awarded by it, in the absence of a written agreement. This part of decree also is not sustainable.
(22) The question thus that arises is whether the defense raises a triable issue which needs investigation or the defense is sham, vexatious or frivolous.
(23) In our view, the pleas taken by the defendant for leave to defend raise triable issues which needed investigation. And on the material on record at present it cannot be said that the defense is malafide or vexatious and is not bona fide. The defendant is accordingly entitled to leave to defend.
(24) In our view, in the facts and circumstances of the case the learned Trial Court has acted wrongly and unreasonably in exercising the jurisdiction and rejecting the application for leave of the defendant. The impugned order and judgment thus are not sustainable. We, accordingly, set aside the impugned order rejecting application for leave and the consequent judgment and decree passed and allow the appellant-defendant leave to appear and defend the suit before the Trial Court unconditionally.
(25) The parties are directed to appear before the Trial Court on 22.9.1997 and on that day the defendant shall file his written statement alongwith all the documents on which he relies and that may be in his possession. The Trial Court shall proceed to dispose of the suit according to law as expeditiously as possible.
(26) Trial court records be sent back forthwith.
(27) The appeal is accepted. In-the circumstances parties shall bear their own costs.