The Delhi High Court allowed the appellant conditional leave to defend a summary suit under Order XXXVII CPC upon deposit of Rs. 5 lakhs, setting aside the Trial Court's dismissal of leave to defend and remanding the matter for trial.
3. Exemption allowed, subject to all just exceptions.
4. The application stands disposed of. RFA 564/2022 and C.M. No. 48774/2022 (stay)
5. The appellant (original defendant) is assailing the judgment & jecree dated 01.09.2022 (impugned judgment) passed by the learned ADJ- 02, Karkadooma District Court, New Delhi in CS No.292/2-22 titled as Smt. Arpana Paliwal Vs Suraj Kumar Sirvaiya, whereby the learned Trial Court was pleased to decree the suit filed by the respondent herein (original plaintiff) under Order XXXVII of the Code of Civil Procedure, 1908 for recovery of Rs. 2,00,000/alongwith pendent lite and future interest @ 125 per annum.
6. With the consent of the parties, the present appeal is taken up for final disposal. Facts relevant for the consideration of the present Appeal are as follows:
7. It is the case of the respondent that the parties are known to each other since the year 2010-2011. The appellant introduced himself as a Government employee and his wife as a Government school teacher. The appellant gave the impression that besides his job, he is into the business of investment of money and is earning good returns out of it.
8. The appellant induced the respondent to invest money with him. The appellant further promised that he would pay fixed monthly profit on the said investment and at the end of the investment scheme, he would return entire principal amount to the respondent. Based on the repeated requests and assurances of the appellant, the respondent agreed to invest a sum of Rs. 5,00,000/- with the appellant. The respondent transferred a sum of Rs. 5,00,000/- on 29.11.2013 through RTGS from her account to the account of Mrs.Geeta Verma, wife of the appellant. As promised by him, the appellant paid fixed profit of Rs. 22,500/- on 15.01.2014, 15.02.2014, 20.03.2014 and 17.05.2014 through RTGS in the account of the respondent towards the fixed monthly profits. The appellant had also refunded the principal amount of Rs. 5,00,000/- to the respondent through two cheques amounting Rs. 2,50,000/- each at the end of scheme period. Since the appellant fulfilled his promise, a relation of trust was established between the parties and the respondent started believing the appellant.
9. It is the case of the respondent that she further invested an amount of Rs.7,00,000/-. The appellant issued post-dated cheque bearing No.000014 dated 31.07.2015 drawn on HDFC Bank Ltd. towards the return of principal amount. It is also the case of the respondent that the parties reduced the terms of their business deal in the form of Memorandum of Understanding dated 30.04.2015.
10. It is also the case of the respondent that the initial period of investment scheme came to an end on 31.07.2015 and the respondent extended the investment for another term. Hence the respondent returned the post-dated cheque bearing No.000014 dated 31.07.2015 to the appellant. The appellant replaced the said post-dated cheque with another post-dated cheque bearing No.000024 dated 30.09.2017.
11. The respondent presented the cheque bearing No.000024 dated 30.09.2017 for encashment on computation of the investment term, however, the bankers returned the said cheque as the name of the respondent was not written correctly. Hence after much persuasion, the appellant issued another cheque bearing No. 000215 dated 27.10.2017 for a sum of Rs.7,00,000/- in lieu of cheque bearing No.000024 dated 30.09.2017.
12. On presentation, the said cheque bearing No. 000215 dated 27.10.2017 was returned by the bank with remark ‘funds insufficient’. On contacting the appellant, he assured to honour the commitment and make payments through RTGS/Demand Draft, however he failed to honour his promise.
13. The respondent issued legal notice dated 09.11.2017 but failed to pay the outstanding amount. Hence the respondent initiated proceedings under Section 138 of the Negotiable Instruments Act against the appellant (CC No.182/2017). The respondent filed the present summary suit under order 37 CPC against the respondent for the outstanding amount.
14. The appellant entered appearance and filed his application for leave to defend before the learned Trial Court. It is the case of the appellant that he never promised for any monthly fixed return on the investment made by the respondent. According to the appellant, he issued post-dated cheques to the respondent as a security for the amount invested with him. The appellant further stated that the respondent had earlier taken security cheques worth Rs. 33 lakhs on 5 different occasions with the assurance that she will not present the said cheques for encashment. The appellant denied the execution of Memorandum of Understanding between the parties. It is the case of the appellant that the respondent forced the appellant to sign blank papers and later they were converted as the alleged ‘Memorandum of Understanding’ without the consent or knowledge of the appellant. The appellant further points out that in the said alleged ‘Memorandum of Understanding’, the dates were mentioned by the respondent without the presence of both the witnesses. It is further the case of the appellant that he had already returned Rs. 5,00,000/- to the respondent towards complete principal amount. According to the appellant, he paid an amount of Rs. 8,43,870/- to the respondent towards the complete principal amount. According to the appellant, he paid Rs.1,28,870/- (Rs. 96,870/- through online transfer and Rs.31,500/- deposited in cash to the Respondent’s account), Rs.6, 40,500/- through cash. In addition, again another sum of Rs.75,000/was paid to the respondent in cash on the eve of ‘Karwa Chouth’ in the year 2017.
15. Learned Trial Court examined the rival contentions of both the parties and vide impugned Judgment, dismissed the appellant’s application for leave to defend. The relevant portion of the impugned judgment, reads, inter alia, as follows:
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“11. Though in the case of IDBI Trusteeship, Hon'ble Apex Court observed that the principles stated in paragraph 8 of Mechelec Engineers' case shall stand superseded in the wake of amendment of Rule 3 of Order XXXVII but, on the core theme, but 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 being an exception. Thus, the prayer for leave to defend cannot allowed in such cases where the defendant has practically no defence or is unable to give out even a semblance of triable issues before the Court. 12. Applying the principles aforesaid to the factual matrix of the instant case, it is observed that the plaintiffs case is based upon one cheque bearing no. 000215 dated 27.10.2017 of Rs.7 lakhs, drawn upon HDFC Bank. It is noticeable that the plea of Defendant is that her husband gave blank signed cheques as security alongwith blank documents which were converted into alleged MOUs of Defendant in a mischievous manner. The plea further is that Defendant was paid major part of principal amount and thereafter had no concern with Plaintiff. I observe that the pleas are completely baseless and thus untenable. So are the pleas taken in the application for leave to defend which are unsupported by any document. The xerox of one letter dated 03.07.2018 purportedly from Zonal Officer, Ghaziabad, Sahibabad is filed to show the alleged fraud committed by Plaintiff. The said letter in fact shows the complaint filed by Plaintiff’s husband against Defendant's fraudulent acts. No document has been filed by defendant in support of
application. Therefore, I observe that the pleas of the defendant are illusory and sham. No reasonable or plausible defence has been raised by the defendant warranting allowing of the application. What steps were taken by Defendant after he came to know of the alleged acts of Plaintiff of forged documents are not mentioned in application.
13. The amount claimed is a liquidated amount emerging from the cheque in question which is subject matter of Order 37 CPC. Having observed thus, I find that the grounds/ defence taken by the defendant are non-substantive and unfounded. The defendant has no triable issues established on record nor is there some fact that need to proved contrary to the facrts established on record by the plaintiff of its claim of the outstanding amount payable against the defendant which require any adjudication through trail as an ordinary suit.
14. Consequently, the application of defendant under Order 37 Rule 3(5) CPC for grant of leave to defend the suit stands dismissed. Accordingly, the plaintiff is entitled for a judgment/decree of the claim prayed for. Plaintiff is entitled to a money decree for an amount of Rs. 7,00,000/- (Rupees Seven Lakhs) along with an interest @ 8% per annum from the date of filing till its realization. Plaintiff is also entitled to the costs. Decree sheet be prepared and file be consigned to record room after due compliance as per rules”.
16. This Court heard the arguments advanced by both the parties and examined the documents placed on record by the appellant.
17. Before adverting to the rival contention of the parties, it is important to examine the law laid down by the Hon’ble Supreme Court in IDBI
Trusteeship Services Ltd Vs Hubtown Ltd reported as 2017 (1) SCC
568.
“18. Accordingly the principles stated in paragraph 8 of Mechelec's
case will now stand superseded, given the amendment of Order
XXXVII Rule 3, and the binding decision of four judges in
Milkhiram's case, as follows:
a. 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; b. 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; c. 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; d. 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. e. 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; f. 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."
18. Learned counsel for the appellant further submits that in the present case, the appellant has raised triable issues and has never admitted his liability towards respondent.
19. A perusal of the record shows that the appellant disputed the liability of Rs.7,00,000/- towards the respondent. It is the case of the appellant that he repaid a sum of Rs. 96,870/- through online transfer and balance through cash. The appellant denied the execution of the
Memorandum of Understanding between the parties. It is further the case of the appellant that the respondent had earlier taken security cheques worth Rs. 33 lakhs on 5 different occasions with the assurance that she will not present the said cheques for encashment.
20. This court is of the considered view that all these issues raised by learned counsel for the appellant are disputed question of facts which can only be proved by leading evidence.
21. Learned Trial Court also noted the well settled principle of law, i.e, ‘grant of leave to defend (with or without conditions) is the ordinary rule and denial of leave to defend is an exception’. However, learned Trial Court failed to appreciate that the appellant has a defence and in order to prove the said defence, evidence is required. In the present case, the appellant raised a triable issue. This Court is of the view that the defense raised by the appellant is plausible but improbable and hence, the appellant is entitled for conditional leave.
22. Hence in view of the detailed discussions herein above, the impugned judgment is set aside. The appellant is entitled to defend the suit filed by the respondent on deposit of an amount of Rs. 5 Lakhs with such deposit, the Registry is directed to put the said amount in an interest-bearing FDR with auto renewal facility.
23. With these observations, the appeal is allowed and all the pending applications are disposed of. The matter is remanded back to the learned Trial Court for further proceedings. No order as to costs.
24. Parties are directed to appear before the learned Trial Court on 05.12.2022.
25. If the appellant fails to deposit the amount of Rs. 5 Lakhs within the stipulated time, the respondent will be at liberty to initiate proceedings against the appellant in accordance with law.
GAURANG KANTH, J NOVEMBER 24, 2022
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