Chander Mohan v. Tejinder Singh

5. Since the Appellant failed to deposit the amounts directedto be deposited by the Trial Court as a condition for leave to defend and the review applications filed by them were also dismissed,the Trial Court passed the impugned decrees against theAppellant and in favour of the Respondents.

6. Assailing the impugned orders and the decrees,learned counsel for the Appellant reiterated the arguments raised before the Trial Court.Additionally,it was contendedthat: (a) It is a settled law that if the Defendant discloses facts which constitute a fair and reasonable defence, unconditional leave to defend must be granted by the Court. [Ref.: Sudin Dilip Talaulikar v. Polycap Wires Private Limited and Others, (2019) 7 SCC 577]. The rule of law is that on a disclosure of valid defence or triable issue if the leave is not granted unconditionally,the grant of leave may be illusory. [Ref.: State Bank of Hyderabad v. Rabo Bank, (2015) 10 SCC 521 and Sunil Enterprises and Another v. SBI Commercial & International Bank Ltd., (1988) 5 SCC 354]. This Court in Babbar Vision India Pvt. Ltd. v. Rama Vision Ltd., 2002 SCC OnLine Del 766 and Mahesh Kumar Wadhwa v. Bimal Luthra, 2008 SCC OnLine Del 1330, has held that when the Defendant raises a triable issue, leave must be granted unconditionally, whether the defence is legal or equitable and even though ultimately it may not turn out to be a good defence. (b) The Trial Court failed to call for the income tax returns, source of income of the Respondents, which would have reflected that they did not have the financial means to be capable of extending the huge cash loans as alleged by them. In his cross examination,Respondent/Tejinder Singh, in another matter being Ct.Case No. 19899/2016, had stated before the Court that he earnedabout Rs.2-2.5lakhs per month from his vocation/businessand was filing ITRs. He also stated that he had about Rs.30-40 lakhs cash in his house. Moreover the standard of living of the Respondents is also evidence of the fact that no loan of the amounts alleged could have been advanced to the Appellant. Respondentsdid not place their bank accounts showing withdrawal of the amounts allegedly advanced and thisCourt hasheld in Satish Kumar v. State of NCT of Delhi and Anr., 2013 SCC OnLine Del 2963 that failure on complainant’s part to prove any entry in the bank account showing withdrawal duringthe relevant period creates a reasonable doubt on the cheque in question.

(c) Appellant had consistently and categorically denied enteringinto any transactions with the Respondents or signing any Agreements and there was thus no question of admitting that any loan was taken. Reliance on the alleged admission by the Trial Court in para 29 of the leave to defendapplication was in contravention of the order dated 16.03.2018, whereby an application filed by the Respondents under Order 12 Rule 6 CPC was dismissed in the absence of any admission by the Appellant.

(d) Trial Court overlookedthat several police complaints and reminders were made with the concerned Police Station for lost cheques as well as against the Respondents for having the documents andcheques signedat gun point in the year 2012 i.e. even before the alleged transactions. (e) Appellant does not have thefinancial capacity to deposit the amounts directed by theTrial Court as a condition for leave to defend and therefore the grant of leave to defend was merely illusory. By review applications Appellant had brought to the notice of the Trial Court that he shall not be in a position to comply with the onerous conditions and this would virtually amountto denial of leave to defend,to which the Appellant has been otherwiseheld entitled to.

7. Per contra, learned counsels for the Respondents contended that: (a) Leave to defend applications were conditionally allowed on 21.05.2019 but the Appellant did not challenge the said orders and instead filed review applications. Appellant had a remedy of challengingthe orders but waited for the decree to be passed and the order dated 21.05.2019 having attained finality cannot be challenged at thisstage.Oncethe leave to defendwas granted conditionally and the conditions were not complied with the Trial Court rightly passed thedecree as the provisions of Order 37 Rule 3(6) CPC are mandatory which is evident from the useof the word ‘shall’ by the Legislature. (b) The defences raised by the Appellant are selfcontradictory inasmuch as on one hand it is stated that the documents are forged and fabricated, on the other hand it is stated that the cheques were lost and thethird stand is that the signatures were obtained under a life threat on a gun point. Interestingly, it is also the stand of theAppellant that he had not known or met the Respondents before the filing of the suit and therefore, it is not understood how the allegations of life threats were meted out by the Respondents.

(c) It is incorrect that the suits were not based on any written contract since the Respondents have filed two written agreements and five cheques which were dishonoured on presentation with the Banks.

(d) Reliance was placed by the Respondents on the judgment of the Supreme Court in Southern Sales and Services and Others v. Sauermilch Design and Handles GMBH, (2008) 14 SCC 457, wherein the Supreme Court held that where the High Court does not lack thejurisdiction to pass an order with regard to the subject matter of the dispute there is little scope for interference in an order directingdeposit of the admitted dues as a pre-condition to grant of leave to defend the suit. (e) Appellant has not denied in the entire leave to defend application that he had taken any amounts from the Respondentsand the onlystand was that no amount was due. Signatures on the cheques and the Agreements were also not denied by the Appellant and the receipt of the loan amounts under the said Agreements was also not disputed. The only assertion in the applications was that the documents were fabricated which did not inspire the confidence of the Trial Court at that stage andtherefore,conditional leave to defend was granted. While the Appellant is strenuously contending before this Court that he does not have thefinancial capacity to pay the amounts directedby the Trial Court,no such stand was taken in the leave to defend application.In B.L. Kashyap and Sons Limited v. JMS Steels and Power Corporation and Another, (2022) 3 SCC 294, the Supreme Court has held that even if there remains a reasonable doubt on the probability of defence, stern conditionscan be imposed while granting leave to defend and denying leave wouldbe ordinarily countenanced only when no triableissue is at all set up by the Defendant. (f) In Nitin Aggarwal v. Praveen Sharma, 2018 SCC OnLine Del 12361, this Court has held that a person who takes a loan and gives a chequeto securethe same, cannot argue that the lendermust prove that he hadthe financial capacity to give the loan.

8. I have heard the learned counsels for theparties and examined their rival contentions.

9. Before proceeding to examinethe correctness or otherwise of the orders/decrees passed by theTrial Court,it would be important to refer to the law laid down with regard to the grant of leave to defend in a summarysuit under Order 37 CPC. In order to avoid prolixity, I may only refer to a judgment of the Supreme Court in IDBI Trusteeship Services Limited v. Hubtown Limited, (2017) 1 SCC 568, wherein the following principles havebeen culled out:- “17. Accordingly, the principles stated in para 8 of Mechelec case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687] will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case [Milkhiram(India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1698: (1966) 68 Bom LR 36], as follows:

17.1. If the defendant satisfies the court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit.

17.2. If the defendant raisestriable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend.

17.3. Even if the defendant raises triable issues, if a doubt is left with the trial Judge about the defendant's good faith, or the genuineness of the triable issues, the trial Judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.

17.4. If the defendant raises a defence which is plausible but improbable, the trial Judge may impose conditionsas to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.

17.5. If the defendant has no substantial defence and/or raises no genuine triable issues,and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith. …”

10. In Sudin Dilip Talaulikar (supra), relying on the judgment in IDBI Trusteeship Services Limited (supra), the Supreme Court reiterated the principles that if the Defendant disclosessuch facts of a prima facie fair and reasonable defence, Court may grant unconditional leave to defend. This concerns the subjective satisfaction of theCourt on thebasis of materials placed before it. It was further held that in appropriatecases if the Court is satisfied of a plausible or probable defence and which is not a sham or moonshine defence yet leaving certain doubts in the mind of the Court, it may grant conditional leave to defend. In contradistinction to the earlier subjective satisfaction of the Court, in the latter case there is an element of discretion vested in the Court,which is not absolute but has to be judiciously exercised tempered with what is just and proper in the facts of a particular case. The ultimateobject of a summary suit is expeditious disposal of a dispute and the discretion therefore must maintain a delicate balance between the respective rights by not passing an order which mayultimately endup impeding the speedy resolution of the dispute.

11. The question that thus arises before this Court is whether the Trial Court has correctly exercised the discretion by granting conditional leave requiring theAppellant to deposit certain amounts in the Court in theform of Fixed Deposits.From the impugnedorders, it is evident that the Trial Court has taken pains to examinethe defence set up by the Appellant in the leave to defendapplications. It is noted that Appellant hasnot denied the receipt of money under the Loan Agreements or the signatures appended on them. Material contradictions in the stand taken by the Appellanthave been brought forth in the impugned orders. At one place the Appellant has stated that the documents were forged and fabricated to extort money and signatures were obtained at the gun point under a life threat. At anotherplace it is stated that thepartieswere unknown to each other and had never met prior to the filing of the suits. Insofar as the cheques are concerned, the Trial Court notes that in one of the complaints made to the Police it was stated that blank cheques containing signatures of the Appellant were lost while in another complaint written by the Appellant’s brother it was stated that the blank cheques were forcibly taken from the Appellant.

12. The Trial Court has also returned a finding that the Loan Agreements were witnessed by four witnesses and were backed by four cheques,which were dishonoured and in respect of which the Respondents have initiated proceedings under Section 138 of the Negotiable Instruments Act, 1881. Judgment in the case of Mahesh Kumar Wadhwa (supra) was distinguishedby the Trial Court on the ground that in the said case discrepancies were found in the revenue stamps as also the fact that the transactions were in cash.As far as the objection that the suits were not based on written contracts was concerned,the Trial Court observed that the Loan Agreements would come within the definition of written contracts and the cheques relied upon by the Respondentsare instruments on which suit under Order 37 CPC can be premised.Havingcome to theaforesaid findings, the Trial Court was of the view that since the Appellant has issued a numberof cheques and maynot havea substantial defence yet in the interest of justice leave to defend be granted,however,since the case of the Appellant falls in para 17.[3] of the IDBI Trusteeship Services Limited (supra) case and there is doubt on the good faith of the Appellant the conditional leave to defend be granted.

13. Having examined the order dated 21.05.2019in the light of the principles elucidated by the Supreme Court in IDBI Trusteeship Services Limited (supra), this Court finds no illegality in the said order. The Trial Court has painstakingly noted serious contradictions in the stand of theAppellant with regard to the execution of the Loan Agreements as well as the blank signed cheques.It is also correct that the Appellant never disputed thereceipt of the amounts and the only defence in the applications for leave to defend was that nothing was due towards the Respondents. In light of the defence taken by the Appellant the Trial Court has rightly observed that though a triable issue may arise, however,a doubt is left about the good faith of the Appellant or the genuineness of thetriableissues and therefore,rightly relied on para 17.[3] of the judgment in IDBI Trusteeship Services Limited (supra) and imposed conditions for grant of leave to defend. Looking at the factsand circumstances,this Court is unable to come to a conclusion that the Trial Court has incorrectly exercised the discretion vested in it or there is any perversity or infirmity in the findings.

14. Pertinent it is also to note that the leave to defend applications were decided by the Trial Court on 21.05.2019 wherein the conditional leave was granted. TheAppellant did not challenge the orders and instead filed review applications. While much has been argued before thisCourt on the financial condition of the Appellant to contendthat imposition of such an onerouscondition makes the grant of leave to defend illusory as theAppellant will be unableto pay such huge amounts,interestingly and significantly, there is not a whisper either in the review applications or before this Court as to what is the vocation/jobprofile/business carried out by the Appellant. It is not disclosed as to what are the monthly earnings of the Appellant enablingthis Court to cometo any conclusion of the alleged financial crunch.In para 15 of the review applications,all that was stated was that the Appellantdid not possess themeans to pay a hefty sum and reliance was placed on a judgmentin the criminal jurisprudence where the bail conditions were reducedby the Court keeping in mind the financial condition of theaccused. Even during the course of hearing, there was not a whisper on the source of livelihood of the Appellant except for a bald assertion that the amounts are exorbitant and the Appellant is unable to pay thesame.Therefore,this Court is unable to find any legal infirmity in the Trial Court decreeing thesuits for want of deposits as a pre-condition to grant of leave to defend.

15. At this stage, it is pertinent to mention that at the start of the hearing of the appeals and even during the course of the hearing, repeatedly the Court had asked thelearnedcounsel for the Appellant if the Appellant was ready and willing to deposit the amounts directed by the Trial Court while granting the conditional leave to defend, if further time is granted to do so. However, the learned counsel flatly refused to accept theoffer and submitted that he would contest the case on merits.

16. Another argument raised by the Appellant was that the Respondentsdo not havethe financial capacityto have advanced the huge sumsof loan as alleged. As an afterthought andfor the first time, the Appellant hasplaced on record of this Court the ITRs filed by the Respondent/Tejinder Singh for the years 2011 to 2016. Thisargument, in my view, cannot be accepted and does not aid the Appellant. Firstly, none of these ITRs were placed before the Trial Court and secondly, it is a settled law, as rightly contended by the Respondents that if a person acceptsloan from a lender, he cannot place the onus on the lenderto prove that he had the financial capacity to advance the loans and in this context,reliance has been correctly placed by the Respondentsin Nitin Aggarwal (supra).

17. For all the aforesaidreasons, there is no merit in the appeals and the same are dismissed along with pendingapplications.