ITEM NO.14               Court No.3             SECTION IX

           S U P R E M E   C O U R T   O F   I N D I A                          RECORD OF PROCEEDINGS                      Petition(s) for Special Leave to Appeal (Civil) No(s).13489/2009

(From the judgement and order dated 08/05/2009 in  WP No. 8234/2009  of The HIGH  COURT OF JUDICATURE AT BOMBAY)

M/SFIXITY PACKAGING INDUSTRIES PVT. LTD. & ORS.    Petitioner(s)

                VERSUS

SPL.RECOVERY OFFICER,K.U.COOP.BK.LD.&ORS          Respondent(s)

(With prayer for interim relief)

Date: 06/08/2009  This Petition was called on for hearing today.

CORAM :         HON'BLE MR. JUSTICE S.B. SINHA         HON'BLE MR. JUSTICE DEEPAK VERMA

For Petitioner(s) Mr. P.S. Narasimha, Sr. Adv. Mr. Shwetank Sailakawal, Adv. Mr. S. Udaya Kumar Sagar, Adv. Ms. Bina Madhavan, Adv.

For Respondent(s) Mr. Shekhar Naphade, Sr. Adv. Mr. Vinay Navare, Adv. Ms. Abha R. Sharma, Adv.

          UPON hearing counsel the Court made the following                                O R D E R  

Leave granted.

The appeal is disposed of in terms of the signed order with no order as to costs.

(KALYANI GUPTA) SR. P.A.

(PUSHAP LATA  BHARDWAJ)

COURT MASTER

[SIGNED REPORTABLE ORDER IS PLACED ON THE FILE.]

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.        OF 2009 ARISING OUT OF SLP(C) NO. 13489 OF 2009

M/S FIXITY PACKAGING INDUSTRIES  PVT. LTD & ORS. .... APPELLANTS

VERSUS

UDYEN JAIN (HUF) .... RSPONDENT

J U D G M E N T  

SINHA J.

Leave granted. Defendants in a suit for recovery for a sum of Rs. 2,66,39,028/- are  

before us  aggrieved by and dissatisfied  with a judgment and order dated  

08.05.2009  passed  by  the  High  Court  of  Judicature  at  Bombay  in  Writ  

Petition No. 8234 of 2008.   

Respondent  herein filed the aforementioned suit  inter alia  on the  

premise  that  the  cheques  issued  by  the  appellants  herein  for  the  said  

amounts, when presented to the bank stood dishonoured.  The suit was filed  

in terms of Order XXXVII of the Code of Civil Procedure.  

Appellants filed an application praying for leave to defend in the  

said  suit.   The  learned trial  judge  framed the following  question  for  its  

consideration.

“Whether  prima  facie  triable  issue  exists  in  defendant's  favour for granting leave to defend?  If  yes, whether conditional or unconditional?”

In a very detailed judgment, it was opined that for all intent and  

purpose the defendants-appellants have no defence.  The learned trial judge  

rejected a contention raised on behalf of the defendants even with regard to  

maintainability of account as a summary suit.  It was opined:-

“Further  more  apart  from  the  cheques  in  question  there  are  statements  of  accounts  and  the  document  of  balance  confirmation  in  the  form  of  acknowledgement  of  indebtedness  followed  by  categorical admissions in the notice reply Exh-3/20.  If  at  all  these  facts  are  cumulatively  taken  into  consideration in all  its seriousness,  there appears not  even  a  little  scope  to  find  out  any  sort  of  such  questions which would be required to be decided on  the  strength  of  evidence.   On  the  contrary  all  the  aforesaid  documents  undoubtedly  point  out  towards  categorical admissions on defendant's  part for which  no  inference  prevails  in  a  fashion   of  availability  of  plausible, good or reasonable defence.  It is in such a  situation  the  case  in  hand  is  squarely  covered  by  a  situation of total absence of any plausible defence and  the  contentions  claiming  availability  of  defence  are  nothing  but  sham  and  illusory  pretending  that  whatever questions in concern with maintainability of  summary  suit,  misjoinder  of  parties,  locus  standi  of  plaintiff, want of cause of action and no forms a triable  issues in the matter.  Being so, the conclusion emerges  only in a fashion of non entitlement of leave to defend  the suit.”

Despite arriving at the aforementioned finding, it was held :

“But  considering  the  facts  that  series  of  transactions had taken place in between parties to suit  and  that  defendant  No.  1  on  various  occasions  had  also made repayment of the loan amount, transferred  his  individual  liability  in  the  loan  account  of  defendant No. 1 company, the contentions in concern  with  helplessness  of  defendants  to  make  repayment

because of financial crunch and so on, there appears  reason to give an opportunity to defend out of mercy  so that they may attempt to prove and establish their  respective contentions.   But at the same time as the  transaction  has  its  nexus  with  advancement of  loan  amount and as the plaintiff has been deprived of the  money blocked in the hands of defendants, who must  have derived undue advantage of the  situation in the  form of unjust, enrichment, plaintiff's  rights need to  be adequately  protected, while  showing  such mercy,  by  granting  leave  to  defend.   Hence,  the  point  is  replied accordingly with the order to follow:

ORDER

1) Application  is  allowed  subject  to  condition  of  depositing an amount of Rs. 2,00,00,000/_(Two crores)  out of total suit claim of Rs. 2,66,39,028/- (Two crores  sixty six lacs thirty nine thousand and twenty eight) in  this proceeding within a period of two months, failing  in which order granting liberty to defend shall stand  automatically revoked, and plaintiff  shall be entitled  to sign the judgment. 2) Defendants  are  further  directed  to  furnish  on  

record  written  statement  within  the  aforesaid  period.

3) In  the  event  of  compliance  of  the  order  Asstt.  Superintendent would invest the said amount in a  fixed deposit in any Nationalised bank for a period  of one year.”

On the aforementioned premise, it was  directed the appellants to  

deposit a sum of Rs. 2,00,00,000/-(two crores) out of a total suit claim of Rs.  

2,66,39,028/- in the proceeding within a period of two months from the date  

of passing of the said order.  A writ petition was filed by the appellants  

questioning the legality and/or validity of the said order.  The High Court  

noticed  all  the  contentions  raised  on  behalf  of  the  appellants.     It,  

furthermore, also noticed a decision of this Court in  Sunil Enterprises &  

Anr. v.  SBI Commercial & International Bank Ltd. reported in (1998) 5  

SCC 354 where the law has been laid down in the following terms:-

“(a)  If the defendant satisfies the court that he has  a  good  defence  to  the  claim  on  merit,  the  defendant  is  entitled to unconditional leave to defend.

(b) If the defendant raises a tribal issue indicating  that  he  has  fair  and  bona  fide  or  reasonable  defence,  although  not  a  possibly  good  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  discloses that at the trial  he may be able to  establish a defence to the plaintiff's  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 to defend.”

Holding that the learned trial judge has granted conditional leave having  

regard  to  the  facts  and  circumstances  of  this  case  as   the  same  was  

voluntary not reasonable or fair defence.  The High Court opined that the  

learned  trial  judge  has  not  committed  any  error  in  passing  the  said  

condition or order.

Mr.  P.S.  Narasimha,  the  learned  senior  counsel  appearing  on  

behalf  of  the  appellants  would  contend that  assailing  it  is  a  case  where  

conditions  were required to be reposed for granting  leave to defend in  

terms of  Order  XXXVII  Rule  3(v)  of  the  Code  of  Civil  Procedure,  the  

conditions imposed being wholly unreasonable, this Court should interfere  

therewith.  Our attention, furthermore, has been drawn to the fact that at  

least  two  other  parties  namely  Mrs.  Dolly  Tehmuras  Mistri  and  Mr.  

Kaikhusru Jehangirji Daruwala have filed two complaint petitions before  

the Judicial Magistrate First Class, Court No. VII, Pune under Section 138  

of the Negotiable Instruments Act claiming that the cheques issued in their

favour  for  a  sum  of  Rs.  40,00,000/-  (Rupees  forty  lacs  only)  and  Rs.  

50,00,000/- (Rupees fifty lacs only) respectively had bounced.

Mr. Shekhar Naphade,  the learned senior counsel  appearing on  

behalf of the respondent, however, urged that the learned trial judge  for  

our intent and purpose  has found that appellants have no defence at all in  

the suit proceedings:-

(1)issuance of cheque in favour of the respondents is not in dispute;

(2)the  balance  amount  payable  by  the  appellants  to  the  respondent  

mentioned in a statement  has also not been disputed; and   

(3)they have not raised any defence in reply to the notice of demand served  

upon them.  

It was submitted that from a perusal of the    judgment of the learned  

trial judge it would be evident that the appellants have no defence in the  

suit  at  all.   The  learned  trial  judge  in  his  judgment,  as  indicated  

hereinbefore has taken into consideration the entire fact of the matter.  It  

referred to the two cheques being Exhibit  3/9 and Exhibit  3/10 dated  

15.10.2006 and 1.1.2006 respectively which are said to be  the subject  

matter  of  the  aforementioned  complaint  petitions  filed  by  Mrs.  Dolly  

Tehmuras Mistri and Mr. Kaikhusru Jehangirji Daruwala opined that if  

there had been no transaction by and between the parties, there was no  

reason as to why the said cheques have been issued.  The   individual loan  

transaction between the plaintiff and defendant No. 1  with regard to the  

residual  amount  of  Rs.  4,00,000/-  parted  by  him  in  his  individual

capacity having been transferred to the loan account of defendant No. 1-

company has already been taken into consideration whereunder not gone  

into the details  of the matter inasmuch as it has also been found that the  

other cheques issued by the appellant had bounced.  The learned  trial  

judge was also at pains to reject the contention raised on behalf of the  

appellants that only because a criminal proceeding under Section 138 of  

the Negotiable Instruments Act had been issued the same would come in  

the way of filing of the civil suit:-

“It  has been contended on behalf  of defendants  that plaintiff had already availed a remedy under  Section  138  of  Negotiable  Instruments  Act  for  which he is entitled to get unconditional leave to  defend the suit.  In fact there is no rule that merely  because of initiating  criminal action, individual is  entitled to unconditional leave.  But what is to be  seen as to whether there is available any plausible  defence,  which  appears  not  any  way  available,  particularly when documents Exh-3/8 to 3/13 and  3/20 are taken into consideration.”

    We, therefore, with respect, are not in a position to agree with  

the finding of the learned trial judge that leave should be granted by way  

of mercy,  and are, therefore, not in a position to interfere therewith as  

the  plaintiff-respondent  did  not  challenge  that  aspect  of  the  matter  

before the High Court.  We are, therefore,  of the opinion that  clause (c)  

of paragraph 4 in Sunil's case (supra) which reads as under:

“(c) If  the defendant discloses such facts as  may be  deemed sufficient  to  entitle  him  to  defend, that is, if the affidavit discloses that  at  the  trial  he  may  be  able  to  establish  a  defence to the plaintiff's 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 of furnishing security.”

is applicable to the facts and circumstances of this case.  We are not  

oblivious of the fact that ordinarily the conditions imposed for grant  

of leave to defend in a suit filed under Order XXXVII of the Code of  

Civil Procedure should not be unduly onerous when leave to defend is  

granted.  The conditions imposed thereunder unsustainably   should  

not be onerous.  As a result whereof, the defendant would not be able  

to defend the action for all intent and purpose.  Each case, however,  

has  to  be  considered on its  own  merits.   We,  therefore,  are of  the  

opinion that it is a fit case where while quashing order passed by the  

learned trial  judge  as  also  the  High  Court,  We,  in  exercise  of  our  

jurisdiction  under  Article  136  of  the  Constitution  of  India,  should  

modify the impugned order in the following terms: -

(i)  The appellant shall deposit a sum of Rs. 1,10,00,000/- (Rupees One  

Crore ten lakhs only) before the learned trial judge within a period of  

two months from today.   

(ii)  Within the aforementioned period, the appellant should deposit a  

further sum of Rs. 90,00,000/- (Rupees ninety lacs only) which shall be  

deposited  before the trial judge who shall in turn invest the same in a  

fixed deposit  so as to enable the successful  party i.e.  the plaintiff-  

respondents or the complainants in the other two cases referred to us  

hereinbefore  to be compensated from the said  option,  in the event,  

either  the  suit  or  the  said  complaint  petition  are  decided  in  their  

favour.

     The appeal is disposed of in the aforesaid terms with no order as to  

costs.    

.......................J  [S.B. SINHA]

.......................J [DEEPAK VERMA]

NEW DELHI    AUGUST 06, 2009.