http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: SANTOSH KUMAR

       Vs.

RESPONDENT: BHAI MOOL SINGH

DATE OF JUDGMENT: 05/02/1958

BENCH: BOSE, VIVIAN BENCH: 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  0. 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  0. 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

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.

JUDGMENT: 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-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

"  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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

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.