Ankit Chauhan v. Rekha Devi

Delhi High Court · 09 Feb 2023 · 2023:DHC:1084

Jyoti Singh

RFA 110/2023

2023:DHC:1084

civil appeal_dismissed Significant

AI Summary

The Delhi High Court upheld the dismissal of leave to defend in a summary suit under Order 37 CPC where the defendant's defence was found to be frivolous and no substantial triable issue was raised.

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Neutral Citation Number: 2023/DHC/001084

RFA 110/2023
HIGH COURT OF DELHI
Date of Decision: 09th February, 2023

RFA 110/2023
ANKIT CHAUHAN ..... Appellant
Through: Mr. Sohan Lal, Advocate with Appellant-in-person.

VERSUS

REKHA DEVI ..... Respondent
Through: Mr. Sanjay Gupta, Advocate.

CORAM:

HON'BLE MS. JUSTICE JYOTI SINGH

JUDGMENT

JYOTI SINGH, J.

(ORAL)

CM APPL. 6309/2023 & 6311/2023 (Exemption)

1. Allowed, subject to all just exceptions.

2. Applications stand disposed of. CM APPL.6310/2023 (delay in re-filing)

3. Present application has been preferred on behalf of the Appellant seeking condonation of delay of 45 days in re-filing the appeal.

4. For the reasons stated in the application, the same is allowed.

5. Delay of 45 days in re-filing the appeal is condoned.

6. Application is disposed of. RFA 110/2023 & CM APPL. 6308/2023 (stay)

7. By way of the present appeal, Appellant lays challenge to the impugned judgment and decree dated 02.09.2022 whereby application filed by the Appellant seeking leave to defend has been dismissed albeit by a separate order of the same date, application for condonation of delay in filing the leave to defend application has been allowed. Appellant before this Court is the Defendant before the Trial Court and Respondent is the Plaintiff and parties are referred hereinafter by their litigating status before the Trial Court.

8. Factual matrix necessary for disposal of the appeal is that the Plaintiff filed a suit under Order 37 CPC for recovery of Rs.5,45,500/against the Defendant wherein it was averred that the Defendant along with his employee Sh. Sanjeev Kumar Sharma, the brother-in-law of the Plaintiff, approached the Plaintiff representing himself to be a proprietor/authorized signatory of M/s. Surender Kumar & Sons seeking a loan of Rs.5,00,000/- for two months as he was in dire need of money for his business. Keeping in view the relationship the Plaintiff had with Sh. Sanjeev Kumar Sharma, who was employed with the Defendant, Plaintiff advanced a loan of Rs.5,00,000/- in cash to the Defendant on 20.09.2018, for a period of two months for his alleged bona fide need.

9. Plaintiff further avers that Defendant executed a Pronote dated 20.09.2018 in favour of the Plaintiff in respect of the said loan and also handed over a cheque bearing No. 012475 dated 27.11.2018, for a sum of Rs.5,00,000/- drawn on ICICI Bank, Azadpur Branch, Delhi for the loan amount, in favour of the Plaintiff. Defendant also promised that he would pay interest on the loan amount @ 24 % per annum w.e.f. 20.09.2018. When the period expired, Plaintiff demanded the said amount and pursuant thereto, Defendant requested the Plaintiff on 27.11.2018 to present the cheque, assuring that he had sufficient funds in the bank to meet the liability and the cheque will be honoured.

10. It is the case of the Plaintiff that on presentation of the cheque, the same was dishonoured on 03.12.2018 for the reason ‘Payment stopped by drawer’. Constrained by the fact that the Defendant was not repaying the loan, a legal notice was sent by the Plaintiff followed by filing a complaint under Section 138 of NI Act and the present suit.

11. Upon service of summons, Defendant filed his Memo of Appearance and after being served with summons for judgment, filed an application for leave to defend albeit with an application for condonation of delay. The grounds put forth for grant of unconditional leave to defend were: (a) Suit was not maintainable having been filed on false and frivolous facts since Defendant had never taken loan from the Plaintiff; (b) Sh. Sanjeev Kumar Sharma was working with the Defendant as Munshi and blank signed cheques and documents of the Plaintiff were kept in his custody, which he did not return while leaving the job and in collusion with the Plaintiff, misused them; and

12. Plaintiff filed a reply to the application and contested the grant of leave to defend. After hearing the parties, the Trial Court dismissed the application for leave to defend and decreed the suit in favour of the Plaintiff, leading to filing of the present appeal.

13. Arguing on behalf of the Appellant, learned counsel contends that the Trial Court failed to appreciate that the Defendant had raised various triable issues in the application and leave to defend ought to have been granted. Defendant had not borrowed any money from the Plaintiff and there was thus no occasion to issue a cheque in respect thereof, as alleged by the Plaintiff. Signed cheques and other documents of the Defendant remained in the custody of his Munshi, Sh. Sanjeev Kumar Sharma as a matter of routine and in the ordinary course of business. Sh. Sharma, while leaving the job of the Appellant, took away the blank signed cheques and other documents and misused the cheques. Plaintiff and Sh. Sharma colluded with each other and filled the cheque and presented the same for encashment with the Defendant’s banker. Trial Court erred in not appreciating that issues regarding the advancing of the loan to the Defendant, misuse of cheques by the Plaintiff in collusion with Defendant’s clerk, fraud committed by the Plaintiff in presenting the cheque were triable issues and once the Defendant had set up a substantial defence, which was not frivolous or moonshine, he was entitled to grant of leave to defend the suit as a matter of right.

14. I have heard the counsel for the Defendant and examined the impugned order passed by the Trial Court.

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15. The principles for deciding an application seeking leave to defend are well-settled and I may allude in this respect to a judgment of the Supreme Court in IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568, relevant paras of which are as under:-

“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 raises triable 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 conditions as 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.

17.6. If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court.”

16. In B.L. Kashyap and Sons Ltd. v. M/s. JMS Steel and Power Corporation & Ors., (2022) 3 SCC 294, the Supreme Court has recently held as follows:-

“33. It is at once clear that even though in IDBI Trusteeship [IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568 : (2017) 1 SCC (Civ) 386] , this Court has observed that the principles stated in para 8 of Mechelec Engineers case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687] shall stand superseded in the wake of amendment of Rule 3 of Order 37 but, on the core theme, the principles remain the same that grant of leave to defend (with or without conditions) is the ordinary rule; and denial of leave to defend is an exception. Putting it in other words, generally, the prayer for leave to defend is to be denied in such cases where the defendant has practically no defence and is unable to give out even a semblance of triable issues before the court. 33.1. As noticed, if the defendant satisfies the Court that he has substantial defence i.e. a defence which is likely to succeed, he is entitled to unconditional leave to defend. In the second eventuality, where the defendant raises triable issues indicating a fair or bona fide or reasonable defence, albeit not a positively good defence, he would be ordinarily entitled to unconditional leave to defend. In the third eventuality, where the defendant raises triable issues, but it remains doubtful if the defendant is raising the same in good faith or about genuineness of the issues, the trial court is expected to balance the requirements of expeditious disposal of commercial causes on one hand and of not shutting out triable issues by unduly

severe orders on the other. Therefore, the trial court may impose conditions both as to time or mode of trial as well as payment into the court or furnishing security. In the fourth eventuality, where the proposed defence appears to be plausible but improbable, heightened conditions may be imposed as to the time or mode of trial as also of payment into the court or furnishing security or both, which may extend to the entire principal sum together with just and requisite interest.

33.2. Thus, it could be seen that in the case of substantial defence, the defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the defendant is ordinarily entitled to unconditional leave to defend. In case of doubts about the intent of the defendant or genuineness of the triable issues as also the probability of defence, the leave could yet be granted but while imposing conditions as to the time or mode of trial or payment or furnishing security. Thus, even in such cases of doubts or reservations, denial of leave to defend is not the rule; but appropriate conditions may be imposed while granting the leave. It is only in the case where the defendant is found to be having no substantial defence and/or raising no genuine triable issues coupled with the court's view that the defence is frivolous or vexatious that the leave to defend is to be refused and the plaintiff is entitled to judgment forthwith. Of course, in the case where any part of the amount claimed by the plaintiff is admitted by the defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the defendant in the court.

33.3. Therefore, while dealing with an application seeking leave to defend, it would not be a correct approach to proceed as if denying the leave is the rule or that the leave to defend is to be granted only in exceptional cases or only in cases where the defence would appear to be a meritorious one. Even in the case of raising of triable issues, with the defendant indicating his having a fair or reasonable defence, he is ordinarily entitled to unconditional leave to defend unless there be any strong reason to deny the leave. It gets perforce reiterated that even if there remains a reasonable doubt about the probability of defence, sterner or higher conditions as stated above could be imposed while granting leave but, denying the leave would be ordinarily countenanced only in such cases where the defendant fails to show any genuine triable issue and the court finds the defence to be frivolous or vexatious.”

17. It is trite that in case the Defendant is able to set forth a substantial defence, he is entitled to leave to defend, which may be conditional or unconditional, depending upon the facts and circumstances of each case and on the principles laid down in IDBI Trusteeship (supra).

18. From a holistic reading of the application seeking leave to defend, the case of the Defendant is that he had kept blank signed cheques with his employee, who upon leaving the job did not return them and later colluded with the Plaintiff and misused the cheques. Significantly and as rightly noted by the Trial Court, Defendant has never denied and rather admitted his signatures on the cheque in question, which when presented by the Plaintiff was dishonoured. In this context, I may refer to a judgment of this Court in Suresh Kumar Verma v. Dilip Kumar Gupta, 2013 SCC OnLine Del 4253, where a decree passed by the Trial Court for recovery of loan amount was challenged. In the said case, a suit was instituted by the Plaintiff under Order 37 CPC for recovery of Rs.5,04,000/- advanced as loan to the Defendant in cash and in consideration of which the Defendant had executed a promissory note-cum-receipt. Leave to defend was denied by the Trial Court and the suit was decreed. The case of the Defendant was predicated on denial of signatures on the Pronote. Even in such circumstances where signatures were denied, the Court held as follows while dismissing the appeal:-

“23. I am unable to agree. A mere denial of signatures on the document on the basis of which the suit is filed cannot be a ground for grant of leave to defend, converting a suit of the nature for which a summary procedure has been provided in law, into an ordinary/regular suit. If the same were to be done, considering the manner in which pleas are taken in the Courts, no claim can be allowed under the summary procedure. Whenever a defendant in a suit under Order 37 of the CPC denies his signatures, he has to satisfy the Court that such denial is bona fide. The appellant/defendant in the present case, in the face of the documents filed along with the suit, ought to have explained as to how the respondent/plaintiff came into possession of his photograph and the copies of the documents of his identity. No error can thus be found in the judgment of the learned Addl. District Judge. In addition thereto I may add that it was the express plea of the respondent/plaintiff of there being an earlier loan transaction also between the parties and in support whereof the dishonoured cheque of Rs. 1 lac was filed. The said pleas remained uncontroverted in the leave to defend

application and are to be deemed to have been admitted by the appellant/defendant. The counsel for the appellant/defendant has today in Court expressly admitted the signatures on the dishonoured cheque of Rs. 1 lac and has further stated that the said amount was subsequently paid by the appellant/defendant to the respondent/ plaintiff in cash. The same fortifies that there were other transactions, in cash between the parties and which also satisfies the judicial conscience of this Court as to the claim of the respondent/plaintiff.”

19. The present case stands on a better footing insofar as the Plaintiff is concerned for the reason that the Plaintiff has categorically referred to and relied upon the Pronote dated 20.09.2018 having been executed by the Defendant, on the day he took loan from her and the Defendant has not denied this fact. Pertinently, it is not the case of the Defendant that the ‘blank signed cheques’ or ‘documents’ allegedly taken by his employee included a ‘blank signed Pronote’. Even in law, the two instruments i.e. a cheque and a Pronote, cannot be read interchangeably.

20. Significantly and conspicuously, as rightly noted by the Trial Court, Defendant has failed to furnish even the bare minimum details with respect to the length of service/nature of employment, education qualifications etc. of his employee Sh. Sanjeev Kumar, whom he trusted to the extent that he had handed over the custody of blank signed cheques. There is not a whisper on when and why he left the job, assuming that he was a very trusted employee. Defendant has been unable to shed any light on the nature of its business which would entail handing over blank signed cheques to an employee, which undoubtedly has the attendant risk of the cheques being lost or stolen. It is thus clear that the defence sought to be set up by the Defendant in the application seeking leave to defend was absolutely moonshine, vexatious, frivolous and did not entitle the Defendant leave to contest the suit on merits.

21. Hence, there is no legal infirmity in the decision of the Trial Court, declining grant of leave to defend the suit and the impugned judgement and decree. The appeal is accordingly dismissed, being devoid of merit, along with the pending application.

Ankit Chauhan v. Rekha Devi

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