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PETITIONER: M/S. SUNIL ENTERORISES & ANR.

       Vs.

RESPONDENT: SBI COMMERCIAL & INTERNATIONALBANK LTD.

DATE OF JUDGMENT:       30/04/1998

BENCH: S.C. AGRAWAL, S. RAJENDRA BABU

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T RAJENDRA BABU.J.      Leave granted.      This 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. Under 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

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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.      In 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.      The 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 defend.      (b) If  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.      (c) If  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.      (d) If  the defendant has no defence, or if the defence      is sham  or  illusory  or  practically  moonshine,  the      defendant is  not entitled  to leave defend. (e) If 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 secured.      In 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.      In 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

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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. Appeals, therefore, stand allowed accordingly.