Sharda Rani vs Ganga Ram Gupta And Ors.
2005 Latest Caselaw 988 Del

JUDGMENT

R.C. Jain, J.

IA 7478/2002

1. For the reasons stated in the application, the application is allowed and the delay in filing the application IA 7477/2002 [O.39 R.3(5) of CPC] seeking leave to defend the suit is condoned and the application for leave to defend is taken for consideration.

Application stands disposed of.

IA 7477/2002

1. This is an application under Order xxxvII Rule 3(5) read with Section 151 CPC made on behalf of defendants 1 and 4 seeking leave to defend the summary suit filed by the plaintiff for recovery of Rs. 19,00,424/- and interest based on a bank cheque issued by defendant no. 1 in favor of the plaintiff.

2. The application has been made with the averments and allegations that the plaintiff has filed the present suit by concealing material facts and misrepresenting certain facts before the Court and without any cause of action. It is alleged that as per the normal business practice, the defendant had given advance signed blank cheques to the plaintiff for adjusting the price of goods to be supplied by the plaintiff in due course and though the plaintiff had received the entire amount/price of the goods supplied by him and still after several months they have concocted one blank cheque in the sum of Rs. 19,00,424/-. It is alleged that the goods supplied by the plaintiff were defective and, therefore, an amount of Rs. 6,50,182.74 against bill Nos. 42, 43 and 44 was adjusted towards the defective material returned to the plaintiff; a sum of Rs. 1,50,000/- was paid by Demand Draft to the plaintiff which they adjusted in some other account. It is further alleged that a sum of Rs. 9,54,591/- is the difference in he excise rate which the defendant is entitled to adjustment and after doing so, the plaintiff herself owes a sum of Rs. 18,089.51 to the defendant. The application is supported by the affidavit of defendant no. 1.

3. The application has been opposed on behalf of the plaintiff and a reply has been filed raising preliminary objections that the defendants have relied on certain letters which have been dispatched by various modes on different dates, but none of the letters has been received by the plaintiff and, therefore, the letters are suspicious. It is denied that the defendants are entitled to any leave to defend. Allegations in regard to issuance of blank cheques; the return of the defective goods and adjustment of price thereof as also the adjustment of certain amount on account of the difference of excise duty is denied. It is denied that the defendant has any defense or there arise any friable issue entitling the defendants to any leave to defend.

4. I have heard Mr. K.K. Sharma, learned counsel representing the plaintiff and Mr. Niloy Dasgupta, learned counsel representing defendants no. 1 and 4 and have given my thoughtful consideration to their respective contentions. It may be noticed at the outset that a decree stands already passed against defendants no. 2 and 3 vide an order of this Court dated 9.11.2001 and, therefore, the present application for leave to defend is necessarily concerns only to grant of leave to defendant no. 1 and 4.

5. Learned counsel for defendants no. 1 and 4 has made a vehement plea for grant of leave to defend the suit primarily on the following grounds:

(1) The cheque in question was a blank signed cheque without any consideration at the time of its issue and has been interpolated by the plaintiff by entering the figure of Rs. 19,00,424/-.

(2) The goods worth Rs. 19,00,924/- supplied by the plaintiff to the defendants vide invoice Nos. 42, 43 and 44 were defective and, therefore, were returned to the plaintiff and, consequently, the defendant is entitled to adjustment of a sum of Rs. 6,50,182.74 and the plaintiff cannot make a claim for this amount.

(3) There was a difference in the rate of excise duty leading to a difference of 9,54,591/- in the total amount and that a payment of Rs. 1,50,000/- has been made.

6. It is urged by learned counsel for defendants no. 1 and 4 that it is a common trade practice that when there are regular business dealings between the traders, the purchaser usually issue blank cheques in favor of the seller so as to take care of the price of goods to be supplied by him and that the present case is one of that kind. On the other hand, Mr. Sharma has pleaded that there is no such practice and, in fact, no advance cheques were issued by the defendants in favor of the plaintiff and whatever cheques were issued, were after the receipt of the goods supplied by the plaintiff. It is also urged that the cheque in question was issued by the defendants to clear off the debit balance against them for the goods supplied in the year 1996 and 1997 end that is why the cheque is not of any round figure. On a consideration of the facts and circumstances of the present case, this defense put-forth by the defendants appears to be a sham one because it is almost impossible to believe that the defendants had issued blank cheques to the plaintiff leaving it to the plaintiff's discretion to enter any figure therein and encase the same. The plaintiff has filed a statement of the account of the defendants in regard to various transactions of sale of copperire to the defendants as also receipt of the amount by them towards the price of the said goods. Therefore, prima facie it would appear that the cheque so issued by the defendants was not a specific cheque and was issued for a consideration.

7. In regard to the defense of the defendants about the plaintiff having supplied defective goods worth Rs. 6,50,182.74 and there being some discrepancy in the accounts of the plaintiff on account of difference in the rate of excise duty, this Court is of the opinion that these two defenses, at best, can be said to be probable ones which raise a friable issue which can only be answered if the parties have undergone a full-fledged trial..

8. The law on the question as to whether and under what circumstances a defendant is entitled to leave conditionally or otherwise to defend a summary suit is well settled through a catena of judgments of the Supreme Court and various High Courts and needs no repetition. The principle which governs the grant or refusal of leave to defend have been laid down by the Supreme Court in the case of Michalec Engg. and Mfg. v. Bank Equipment Corporation, which are as follows:

(i) If the defendant satisfies the court that he has a good defense to the claim on merits, the defendant is entitled to unconditional leave to defend.

(ii) If the defendant raises a friable issue indicating that he has a fair or bona fide, or reasonable defense, although not a possibly good defense, the defendant is entitled to unconditional leave to defend.

(iii) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defense to the plaintiff's claim, the court may impose conditions at the time of granting leave to defend-the conditions being as to the time of trial or the mode of trial but not as to payment into court or furnishing security.

(iv) If the defendant has no defense, or if the defense is sham or illusory, or practically moonshine, the defendant is not entitled to leave to defend.

(v) If the defendant has no defense or the defense is illusory or sham, or practically moonshine, the court may show mercy to the defendant by enabling him to try to prove a defense but at the same time protect the plaintiff by imposing the condition that the amount claimed should be paid into court or otherwise secured.

9. Thus having regard to the totality of the facts and circumstances of the case and the legal position, this Court is of the opinion that at best a conditional leave to defend can be allowed to defendants no. 1 and 4 and the defendants should be called upon to deposit, at least, the principal amount claimed in the suit i.e. a sum of Rs. 19,00,424/- in the Court so as to safeguard the interest of the plaintiff in case she succeeds in her suit.

10. In the result, the application is allowed and the leave to defend the suit is granted to defendants no. 1 and 4, subject to these defendants depositing a sum of Rs. 19,00,424/- in the Court within a period of four weeks from today. Needless to record that observations made herein above are for the purpose of disposal of the present application and shall not amount to expression of opinion on the merits of the case at any stage of the trial.

CS(OS) 1505/1999

At the request of counsel for the parties, the envelope was opened in the Court. The same may be sealed before the concerned Assistant Registrar.

List on 10th November, 2005.