Sunil Enterorises & Anr Vs. SBI Commercial & International Bank Ltd.
 INSC 265 (30
Agrawal, S. Rajendra Babu Rajendra Babu.J.
appeal arises out of an order made by the High Court of Bombay affirming an
order made by the Trial Judge in a summary suit filed under Order 37 of C.P. C.
whereby the Trial Judge had issued summons for Judgment and made it absolute
against the appellants and consequently passed a decree against them for a sum
of Rs. 37,51,519.43 with interest and certain other incidental charges. A suit
was brought by the respondents on the basis of bills of exchange in respect of
which the appellants are the acceptors. M/s. Khanna Sales Corporation are the grawees
of the bill who have Local Bill Discounting facility with the respondents.
the said facility, M/s. Khanna Sales Corporation discounted the bills of
exchange. The respondent bank made payments to M/s. Khanna Sales Corporation on
the basis of the bills of exchange. Since the amounts under the Bills of
Exchange were not paid and received by the respondent bank when they were
presented within the stipulated time and since demand did not come for to
despite notice of demand, the respondent bank filed a summary suit as aforesaid.
Nine bills of exchange had been drawn by M/s. Khanna Sales Corporation. The
appellants before us sought leave to defend themselves contending that the
Bills of Exchange were executed without consideration as neither the goods were
sold nor supplied in the transaction in question. The appellant alleged fraud,
collusion and connivance between the officers of the respondent and M/s. Khanna
Sales Corporation. The learning Trial Judge refused the leave to defend suit.
On appeal, the Division Bench considered the matter and held that the
undisputed position is that the appellants are the acceptors of the Bills of
Exchange in question and that no goods were supplied or actually sold by M/s. Khanna
Sales Corporation to the appellants and, therefore, the Bills of Exchange were
not supported by consideration. Section 43 of the Negotiable Instruments Act
saves the right of the holder in due courses like the respondent to claim the
amount of Bill of Exchange. In certain other instances the Bills of Exchange
had been negotiated through the bank without any difficulty and, therefore,
Division Bench was of the view that there is no logic in the submission made on
behalf of the appellants. If any fraud has been alleged that could be
reflective on their conduct and, therefore, it would be too much for the
respondent bank or their officers to be instrumental in perpetration of such a
fraud by the appellants and M/s. Khanna Sales Corporation and, therefore, the
appellants cannot escape their liability and responsibility under the Bills of
Exchange in question. On that basis they took the view that pleas raised by the
appellants were frivolous and have no substance and merits in their defence.
this appeal it is contended that what should be examined at the stage of grant
of leave to defend is whether there was a real or a snam defence and whether
the facts alleged by the appellants if established would be a good defence and
the trial court should go into the question whether the facts alleged were true
or not, as that situation would arise only after leave was granted and at the
trial. That a condition as to security could be imposed if the Court was of the
opinion that the defence was out forward with a view to prolong this suit.
position in law has been explained by this Court in Santosh Kumar vs. Mool
Singh (1958) SCR 1211. Milkhiram (India) Private Ltd. vs. Chaman Lal Bros. AIR
1965 SC. 1698 and Michalec Eng. & Mfg. vs. Bank Equipment Corporation AIR
1977 SC 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
the defendant raises a triable issue indicating that he has a fair or bona fide
or reasonable defence, although not a possibly food defence, the defendant is
entitled to unconditional leave to defend.
the defendant discloses such facts as may be deemed sufficient to entitle him
to defend, that is, if the affidavit disclosed that at the trial he may be able
to establish a defence to the plaintiff 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.
the defendant has no defence, or if the defence is sham or illusory or
practically moonshine, the defendant is not entitled to leave defend.
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
fact in identical matters on the file of the said High Court in summary suit
No. 2963 of 1990 Dena Bank vs. M/s. Sunil Enterprises and summary suit No.1193
of 1989 Bank of India vs. Mahendra Sarabhai Choksi, leave to defend had been
granted to defendants.
those cases the circumstances arising are that the Bills of Exchange were
accepted by the defendant even though they had already discharged earlier. Bills
of Exchange as and when they were due and the bank had continued to pay out
such large amounts of Bills of Exchange accepted by the party who is already a
defaulter. It is also contended that some of the Bills of Exchange were mere
secondary documents and, therefore, these matters require examination. It
cannot be said that the defence raised by the appellants is totally defenceless
or moonshine or illusory as noticed earlier in the course of this order.
Therefore, the view taken by the High Court that appellants have absolutely no
prima facie case, may not be correct. And in the circumstances, we allow
appeals, set aside the order made by the Division Bench and the judge on the
original side of the Bombay High Court and dismiss the Summons for Judgment,
grant leave and direct unconditional leave to the defendant to defend the suit.
therefore, stand allowed accordingly.