Santosh Kumar Vs. Bhai Mool Singh
[1958] INSC 4 (5 February 1958)
05/02/1958 BOSE, VIVIAN BOSE, VIVIAN DAS,
SUDHI RANJAN (CJ) AIYYAR, T.L. VENKATARAMA SARKAR, A.K.
CITATION: 1958 AIR 321 1958 SCR 1211
ACT:
Negotiable Instruments--Summary Suit on
dishonouyed cheque -Application for leave to de fend-Triable issue-Failure to
produce documentary evidence-If renders defence vague and not bona fide-Grant
Of conditional leave-Discretion of Court, interference withCode of civil
Procedure, 0. XXXVII,rr. 2 and 3.
HEADNOTE:
The respondent filed a suit against the
appellant under xxxvII of the Code of Civil Procedure on the basis of a cheque
for Rs. 60,000 drawn by the appellant in favour of the respondent which, on
presentation to the Bank, had been dishonoured. The appellant applied under r.
3 Of 0. XXXVII for leave to appear and defend the suit on the ground that the
cheque had been given only as a collateral security for the price of goods
supplied, that the goods had been paid for by cash payments and by other
cheques and that therefore the cheque in question had served its I54 1212 end
and was without consideration. The Court held that the defence raised a triable
issue but that the defence was vague and was not bona fide as the appellant had
produced no evidence to prove his assertions and consequently granted leave to
defend the suit on the condition of the appellant giving security for the suit
amount and the costs of the suit :
Held, that the imposition of the condition
was illegal and the appellant was entitled to defend the suit without giving
the security. The object of the special procedure under XXXVII of the Code is
to see that a defendant does not unnecessarily prolong the litigation by
raising untenable and frivolous defences. The test is to see whether the
defence 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, defence on those facts. If the Court is satisfied about that, leave
must be given and given unconditionally.
Held, further, that the Court was wrong in
imposing the condition about giving security on the ground that for want of
production of documentary evidence the defence was vague and not bona fide as
the stage of proof can only arise after leave to appeal and defend has been
granted. Though the Court is given a discretion about imposing conditions it
must be exercised judicially and in consonance with principles of natural
justice. If the discretion is exercised arbitrarily, or is based on a
misunderstanding of the principles that govern 'its exercise, then interference
is called for if there has been a resultant failure of justice.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 96 of 1957.
Appeal by special leave from the judgment and
order dated December 17, 1956, of the Punjab High Court (Circuit Bench) at
Delhi in Civil Misc. No. 896-D of 1956, arising out of the judgment and order
dated November 1, 1956, of the Court of Commercial Subordinate Judge, Delhi in
Suit No. 264 of 1956 under Order XXXVII, C.P.C.
]A. V. Vishwanatha Sastri 'and Naunit Lal,
for the appellant.
Bakhshi Gurcharan Singh and Sardar Singh, for
the respondent.
1958. February 5. The following Judgment of
the Court was delivered by BOSE J.-The defendants, Santosh Kumar and the
Northern General Agencies, were granted special leave to appeal. The plaintiff
filed the suit out of which the 1213 appeal arises on the basis of a cheque for
Rs. 60,000 drawn by the defendants in favour of the plaintiff and which, on
presentation to the Bank, was dishonoured.
The suit was filed in the Court of the
Commercial Subordinate Judge, Delhi, under 0. XXXVII of the Code of Civil
Procedure.
The defendants applied for leave to defend
the suit under r.
3 of that Order.
The learned trial Judge held that " the
defence raised by the defendants raises a triable issue," but he went on
to hold that the defendants " have not placed anything on the file to show
that the defence was a bona fide one." Accordingly, he permitted the defendants
to appear and defend the suit on the condition of their giving security to the
extent of the suit amount and the costs of the suit." The defendants
applied for a review but failed. They then applied under Art. 227 of the
Constitution to the Delhi Circuit Bench of the Punjab High Court and failed
again. As a result, they applied here under Art. 136 and were granted special
leave.
At first blush, 0. XXXVII, r. 2(2), appears
drastically to curtail a litigant's normal rights in a Court of justice, namely
to appear and defend himself as of right, if and when sued, because it says
that when a suit is instituted on a bill of exchange, hundi or a promissory
note under the provisions of sub-rule (1) "..... the defendant shall not
appear or defend the suit unless he obtains leave from a judge as hereinafter
provided so to appear and defend." But the rigour of that is softened by
r. 3(1) which makes it obligatory on the Court to grant leave when the
conditions set out there are fulfilled. Clause (1) runs- " The Court
shall, upon application by the defendant, give leave to appear and to defend
the suit, upon affidavits which disclose such facts as would make it incumbent
on the holder to prove consideration, or such other facts as the Court may deem
sufficient to support the application." 1214 But no sooner is the wide
discretion given to the Court in r. 2(2) narrowed down by r. 3(1) than it is
again enlarged in another direction by r. 3(2) which says that " Leave to
defend may be given unconditionally or subject to such terms as to payment into
Court, giving security, framing and recording issues or otherwise as the Court
thinks fit." The learned counsel for the plaintiff argues that the
discretion so conferred by r. 3(2) is unfettered and that as the discretion has
been exercised by the learned trial Judge, no appeal can lie against it unless
there is a " grave miscarriage of justice or flagrant violation of
law" and he quotes D. N. Banerji v. P.R. Mukherjee (1) and Waryam Singh v.
Amarnath (2).
Now what we are examining here are laws of
procedure. The spirit in which questions about procedure are to be approached
and the manner in which rules relating to them are to be interpreted are laid
down in Sangrayn Singh v. Election Tribunal, Kotah, Bhurey Lal Baya (1).
" Now a code of procedure must be
regarded as such. It is procedure, something designed to facilitate justice and
further its ends; not a penal enactment for punishment and penalties; not a,
thing designed to trip people up. Too technical a construction of sections that
leaves no room for reasonable elasticity of interpretation should therefore be
guarded against (provided always that justice is done to both sides) lest the
very means designed for the furtherance of justice be used to frustrate it.
Next, there must be ever present to the mind
the fact that our laws of procedure are grounded on a principle of natural
justice which requires that men should not be condemned unheard, that decisions
should not be reached behind their backs, that proceedings that affect their
lives and property should not continue in their absence and that they should
not be precluded from participating in them. Of course, there must be
exceptions and where they are clearly defined (1) [1953[ S.C.R. 302, 305. (2)
[1954] S.C.R. 565.
(3)[1955] 2 S.C.R. 1, 8 9.
1215 they must be given effect to. But taken
by and large, and subject to that proviso, our laws of procedure should be
construed, wherever that is reasonably possible, in the light of that
principle." Applied to the present case, these observations mean that
though the Court is given a discretion it must be exercised along judicial
lines, and that in turn means, in consonance with the principles of natural
justice that form the foundations of our laws. Those principles, so far as they
touch the present matter, are well known and have been laid down and followed
in numerous cases.
The decision most frequently referred to is a
decision of the House of Lords in England where a similar rule prevails.
It is Jacobs v. Booth's Distillery Company
(1). Judgment was delivered in 1901. Their Lordships said that whenever the
deferce raises a " triable issue", leave must be given, and later
cases say that when that is the case it must be given unconditionally,
otherwise the leave may be illusory.
See, for example, Powszechny Bank Zwiazkowy
W. Polsce v. Paros (2), in England and Sundaram Chettiar v. Valli Ammal (3) in
India. Among other cases that adopt the " triable issue " test are
Kiranmoyee Dassi v. J. Chatterjee and Gopala Rao v. Subba Rao (5).
The learned counsel for the
plaintiff-respondent relied on Gopala Rao v. Subba Rao (5), Manohar Lal v.
Nanhe Mal (6), and Shib Karan Das v. Mohammed Sadiq (7). All that we need say
about them is that if the Court is of opinion that the defence is not bona
fide, then it can impose conditions and is not tied down to refusing leave to
defend. We agree with Varadachariar J. in the Madras case that the Court has
this third course open to it in a suitable case. But it cannot reach the
conclusion that the defence is not bona fide arbitrarily. It is as much bound
by judicial rules and judicial procedure in reaching a conclusion of this kind
as in any other matter. It is unnecessary (1) (1901) 85 L.T. 262. (2) [1932] 2
K.B. 353.
(3) (1935) 1 L.R. 58 Mad. 116. (4) (1945) 49
C.W.N. 246.
(5) A.I.R. (1936) Mad.246.
(6) A.I.R. 1938 Lah. 548. (7) A.I.R. 1936
Lah. 584.
12l6 no examine the facts of those cases
because they are not in appeal before us. We are only concerned with the
principle.
It is always undesirable, and indeed
impossible, to lay down hard and fast rules in matters that affect discretion.
But it is necessary to understand the reason for a special procedure of this
kind in order that the discretion may be properly exercised. The object is explained
in Kesavan v.
South Indian Bank Ltd. (1), and is examined
in greater detail in Sundaram Chettiar v. Valli Ammal (supra), to which we have
just referred. Taken by and large, the object 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 defences in a
class of cases where speedy decisions are desirable in the interests of trade
and commerce. In general, therefore, the test is to see whether the defence
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,
defence on those facts.
Now, what is the position here? The
defendants admitted execution of the cheque but pleaded that it was only given
as collateral security for the price of goods which the plaintiff supplied to
the defendants. They said that those goods were paid for by cash payments made
from time to time and by other cheques and that therefore the cheque in suit
had served its end and should now be returned. They set out the exact dates on
which, according to them, the payments had been made and gave the numbers of
the cheques.
This at once raised an issue of fact, the
truth and good faith of which could only be tested by going into the evidence
and, as we have pointed out, the learned trial Judge held that this defence did
raise a triable issue. But he held that it was not enough for the defendants to
back up their assertions with an affidavit; they should also have produced
writings and documents which they said were in their possession (1) I.L.R. 1950
Mad. 251.
1217 and which they asserted would prove that
the cheques and payments referred to in their defence were given in payment of
the cheque in suit; and he said- " In the absence of those documents, the
defence of the defendants seems to be vague consisting of indefinite
assertions.................
This is a surprising conclusion. The facts
given in the affidavit are clear and precise, the defence could hardly have
been clearer. We find it difficult to see how a defence that, on the face of
it, is clear becomes vague simply because the evidence by which it is to be
proved is not brought on file at the time the defence is put in.
The learned Judge has failed to see that the
stage of proof can only come after the defendant has been allowed to enter an
appearance and defend the suit, and that the nature of the defence has to be
determined at the time when the affidavit is put in. At that stage all that the
Court has to determine is whether " if the facts alleged by the defendant
are duly proved " they will afford a good, or even a plausible, answer to
the plaintiff's claim. Once the Court is satisfied about that, leave cannot be
withheld and no question about imposing conditions can arise; and once leave is
granted, the normal procedure of a suit, so far as evidence and proof go,
obtains.
The learned High Court Judge is also in error
in thinking that even when the defence is a good and valid one, conditions can
be imposed. As we have explained, the power to impose conditions is only there
to ensure that there will be a speedy trial. If there is reason to believe that
the defendant is trying to prolong the litigation and evade a speedy trial,
then conditions can be imposed. But that conclusion cannot be reached simply
because the defendant does not adduce his evidence even before he is told that
he may defend the action.
We do not wish to throw doubt on those
decisions which decide that ordinarily an appeal will not be entertained
against an exercise of discretion that has been exercised along sound judicial
lines. But if the 1218 discretion is exercised arbitrarily, or is based on a
mis- understanding of the principles that govern its exercise, then
interference is called for if there has been a resultant failure of justice. As
we have said, the only ground given for concluding that the defence is not bona
flde is that the defendant did not prove his assertions before he was allowed
to put in his defence ; and there is an obvious failure of justice if judgment
is entered against a man who, if he is allowed to prove his case, cannot but
succeed. Accordingly, interference is called for here.
The appeal is allowed. We set aside the
orders of the High Court and the learned trial Judge and remand the case to the
first Court for trial of the issues raised by the defendants. The costs of the
appellants in this Court will be paid by the respondent who has failed here.
Appeal allowed.
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