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PETITIONER: MECHELEC ENGINEERS AND MANUFACTURERS

       Vs.

RESPONDENT: M/S. BASIC EQUIPMENT CORPORATION

DATE OF JUDGMENT01/11/1976

BENCH: BEG, M. HAMEEDULLAH BENCH: BEG, M. HAMEEDULLAH RAY, A.N. (CJ) SINGH, JASWANT

CITATION:  1977 AIR  577            1977 SCR  (1)1060  1976 SCC  (4) 687

ACT:             Civil Procedure Code, S. 115--Jurisdiction of High Court         to  interfere  with the Trial Court’s  discretionary  order,         when exercisable.

HEADNOTE:             The  appellant issued the respondent a cheque which  was         dishonoured.  The respondent alleged that the cheque was the         consideration  for  goods supplied. The  appellant  admitted         issuing the cheque but denied by privity  of  contract.  The         respondent  filed  a  suit under order 37  C.P.C.,  and  the         appellant  applied for the required leave to  defend,  which         was granted by the trial Court unconditionally. On  revision         under  section 115 C.P.C., the High Court held that  triable         issues  arose  for  adjudication., but,  it  considered  the         defence  to be dishonest.  If allowed the revision  petition         and gave conditional leave to defend on the ground that  the         defences were not bona fide.         Allowing the appeal, the Court             HELD: It is only in cases where the defence is  patently         dishonest  or  so unreasonable that it could not  reasonably         be  expected to succeed that the exercise of  discretion  by         the  Trial  Court to grant leave  unconditionally   may   be         questioned.   In other cases, it is not fair to pronounce  a         categorical opinion on such a matter before the evidence  of         the parties is taken so that its effects could be  examined.         High  Court’s  interference under sec. 115 C.P.C.  with  the         correct  exercise of its discretion by the trial  Court  was         patently erroneous. 11062             Santosh  Kumar v. Bhai Mool Singh [1958] S.C.R. 1211  at         1215,  Jacobs v. Booth’s Distillery Co. [1901] 85  L.T.  262         followed.             Smt.  Kiranmoyee Dassi and another v. Dr. J.  Chatterjee         (49 C.W.N. 246 ,at 253) distinguished.             M.L.  Sethi  v.R.P.  Kapur [1973] (1)  S.C.R.  697:  The         Managing   Director (MIG) Hindustan Aeronautics Ltd. Bulana-         gar,  Hyderabad  & A nr. v. A Ajit  Prasad  Tarway,  Manager         (Purchase and Stores). Hindustan Aeronautics Ltd. Balanagar,         Hyderabad  (AIR 1973 SC 76); D.L.F. Housing  &  Construction         Co.  Pvt.  Ltd., New Delhi v. Sarup Singh & Ors.  [1970]  2.         S.C.R.   368;  and  Milkhiram (India) (P) Ltd. and  Ors.  v.

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       Chamanlal Bros. (AIR 1965 SC 1998) referred to.

JUDGMENT:         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 508 of 1976.              (Appeal  by Special Leave from the Judgment and   Order         dated  27-10-1975 of the Delhi High Court in Civil  Revision         No. 115/75).               S.N.  Andley,  Urea  Dutta and T.C.  Sharma,  for  the         appellant.             K.C. Agarwala and M.M.L. Srivastava, for the respondent.         The  Judgment of the Court was delivered by             BEG. J. The plaintiff-respondent ,alleged to be a regis-         tered   partnership firm filed a suit on 25th  April,  1974,         through  Smt.  Pushpa Mittal, shown as one of its  partners,         for  the  recovery  of Rs. 21,265.28 as  principal  and  Rs.         7655/-,  as interest at 12% per annum. according to law  and         Mercantile  usage, on the strength of a cheque drawn by  the         defendant  on  12th May, 1971, on the State Bank  of  India,         which,  on  presentation, was  dishonoured.   The  plaintiff         alleged that the cheque         1061         was given as price of goods supplied.  The  defendant-appel-         lant  firm admitted the issue of the cheque by its  Managing         partner,  but,  it denied any privity of contract  with  the         plaintiff firm. The defendant-appellant had its own  version         as  to the reasons and purposes  for  which the  cheque  was         drawn.               The suit was instituted under the provisions of  Order         37 Civil Procedure Code so that the defendant-appellant  had         to  apply for  leave under Order 37, Rule 2, of the Code  to         defend. This leave was granted unconditionally by the  Trial         Court after a perusal of the cases of the two sides.   Order         37, Rule 3, Civil Procedure Code lays down:                            "( 1 ) The Court shall, upon  application                       by  the defendant give leave to appear and  to                       defend  the suit, upon affidavits  which  dis-                       close 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.                          (2) Leave to defend may be given   uncondi-                       tionally  or   subject  to such  terms  as  to                       payment    into   Court,   giving    security,                       framing and recording issues or  otherwise  as                       the     Court thinks fit".             A  learned  Judge of the High Court of  Delhi had  on  a         revision application under Section 115 Civil Procedure  Code         interfered  with the order of the Additional District  Judge         of Delhi granting unconditional leave, after setting out not         less  than  seven  questions on which the  parties  were  at         issue.  The learned Judge had, after discussing the cases of         the  two  sides and holding that triable  issues  arose  for         adjudication, nevertheless, concluded that the defences were         not bona fide. He, therefore, ordered:                              "For  these reasons I would  allow  the                       revision  petition and set aside the order  of                       the  trial  Court.   Instead  I   would  grant                       leave  to the defendant on their  paying  into                       Court  the  amount of Rs.  21,265.28  together                       with  interest at the rate of 6 per  cent  per                       annum from the date of. suit till payment  and                       costs  of the suit (Only court fee  amount  at                       this  stage  and not the lawyer’s  fee).   The

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                     amount  will be deposited within  two  months.                       There  will  be no order as to costs  of  this                       revision".             The only question which arises before us in this  appeal         by  special  leave:   Could the High   Court  interfere,  in         exercise  of its powers under section 115,  Civil  Procedure         Code, with the discretion of the Additional District  Judge,         in   granting   unconditional  leave  to  defence   to   the         defendant-appellant  upon  grounds which even a  perusal  of         the order of the High Court shows to be reasonable ?             Santosh Kumar v. Bhai Mool Singh(1), was a case where  a         cheque,  the execution of which was admitted by the  defend-         ant,  had  been dishonoured.  The defendant had set  up  his         defences for refusal to pay.         (1)[1958] SCR 1211-1215.         1062         This Court noticed the case of Jacobs  v.  Booth’s  Distill-         ery  Company(1), where it was held that, whenever a  defence         raises a  really triable issue, leave must be given.   Other         cases too were noticed there to show that this leave must be         given  unconditionally where the defence could not be  shown         to be dishonest in limine.  This Court observed there (at p.         1215):                           "The  learned Counsel for  the  plaintiff-                       respondent  relied on Gopala Rao v. Subba  Rao                       (AIR  1936 Mad. 246, Manohar Lal v. Nanhe  Mal                       (AIR  1938 Lah.  548),  and Shib Karan Das  v.                       Mohammed  Sadiq (AIR 1936 Lah. 584). 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",             On  general  principles, relating to  the   exercise  of         jurisdiction  of High Courts under section 115, Civil Proce-         dure Code, several cases were cited before us by Mr. Andley:         M.L.  Sethi  v.R.P. Kapur(2); The  Managing  Director  (MIG)         Hindustan Aeronautics Ltd.  Balanagar, Hyderabad & lint.  v.         Ajit Prasad Tarway, Manager, (Purchase & Stores),  Hindustan         Aeronautics Ltd.,  Balanagar,  Hyderabad(3); D.L.F.  Housing         & Construction Co. Pvt. Ltd. New Delhi v. Sarup Singh & Ors.         (4);  Milkhiram  (India)  Pvt.  Ltd.  &  Ors.  v.  Chamanlal         Bros.(5)             We  need not dilate on the well  established  principles         repeatedly laid down by this Court which govern jurisdiction         of  the High Courts under section 115 C.P.C.  We think  that         these  principles were ignored by the learned Judge  of  the         High Court in interfering with the discretionary order after         a  very detailed discussion of the facts of the case by  the         learned Judge of the High Court who had differred on a  pure         question  of fact--whether the defences could be honest  and         bona  fide.  Any decision on such a  question,  even  before         evidence has been led by the two sides, is generally hazard-         ous.   We do not think that it is fair to pronounce a  cate-         gorical opinion on such a matter before the evidence of  the         parties  is taken so that its effects could be examined.  In         the  case before us, the defendant had denied,  inter  alia,         liability  to pay anything to the plaintiff for  an  alleged

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       supply  of goods.  It is only in cases where the defence  is         patently  dishonest  or so unreasonable that  it  could  not         reasonably  be  expected  to succeed that  the  exercise  of         discretion by the Trial Court to grant leave unconditionally         may be,         (1) [1901] 85 L.T. 262.    (2) [1973] 1 S.C.R. 697.         (3) AIR 1973. SC 76.       (4) [1970] (2) SCR 368.         (5) AIR 1965 SC 1698.         1063         questioned.  In the judgment of the High Court we are unable         to  find  aground  of interference covered  by  Section  115         C.P.C.             In Smt. Kiranmoyee Dassi & Anr. v. Dr. J. Chatterjee(1),         Das. J., after a comprehensive review of authorities on  the         subject,  stated the principles applicable to cases  covered         by order 17 C.P.C. in the form of the following propositions         (at p. 253):                           "(a) If the Defendant satisfies the  Court                       that he has a good defence to the claim on its                       merits the plaintiff is not entitled to  leave                       to sign judgment and 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                       positively  good defence the plaintiff is  not                       entitled to sign judgment and 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 to say, although the affidavit                       does  not  positively  and  immediately   make                       it  clear  that he has a defence,  yet,  shews                       such  a state of facts as leads to the  infer-                       ence that at the trial of the action he may be                       able to establish a defence to the plaintiff’s                       claim  the Plaintiff is not entitled to  judg-                       ment and 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.                           (d) If the Defendant has no defence or the                       defence set up is illusory or sham or  practi-                       cally moonshine then ordinarily the  Plaintiff                       is entitled to leave to sign judgment and  the                       Defendant is not entitled to leave to defend.                           (e) If the Defendant has no defence or the                       defence  is  illusory or sham  or  practically                       moonshine then although ordinarily the  Plain-                       tiff  is entitled to leave to  sign  judgment,                       the  Court may protect the Plaintiff  by  only                       allowing the defence to proceed if the  amount                       claimed  is paid into Court or  otherwise  se-                       cured and give leave to the Defendant on  such                       condition,  and  thereby  show  mercy  to  the                       Defendant  by enabling him to try to. prove  a                       defence".             The  case before us certainly does not fall  within  the         class  (e) set out above.  It is only in that class of  case         that an imposition of  the condition to deposit an amount in         Court before proceeding further is justifiable.         49 C.W.N. 246, 253.         1064             Consequently, we set aside the judgment and order of the

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       High  Court  and  restore that of  the  Additional  District         Judge.  The parties will bear their own costs.         M.R .                                 Appeal allowed.         1065