R.K. Chakravarthy vs S. Shantharaj

Padmini Jesudurai, J.—The order of the IV Judge, Court of Small Causes, Madras under Order 37, Rule 2 of the Presidency Small Causes

Court Act, 1882, imposing a condition of a cash deposit, while granting leave to defend the suit, is challenged by the second defendant/petitioner in

this revision petition.

Facts briefly are: The respondent filed Suit No. 1633 of 1986 before the Court of Small Causes, Madras against the petitioner and another for

recovery of a sum of Rs. 1,360 and future interest, due on a promissory note, jointly executed by the petitioner and the co-defendant in favour of

the respondent on 23.6.1983 for a sum of Rs. 1,000. On receipt of summons, the petitioner filed M.P. No. 747 of 1986 under Order 37, Rule 2

of the Presidency Small Causes Court Act, 1882 seeking leave to defend the suit, on the ground that the promissory note had been discharged by

him, by periodical payments to the respondent through cheques drawn on the State Bank of India, Madras-2 and also on the ground that no

interest was stipulated in the promissory note, while, in the suit claim included interest.

The respondent filed a counter admitting the payments through cheques, but contended that the petitioner had executed another promissory note

in his favour on 10.8.1982 for a sum of Rs. 2,000 and the cheque payments had been credited by him towards the earlier promissory note and that

the suit promissory note, therefore, remained undischarged.

The petitioner filed a reply statement contending that the earlier promissory note dated 10.8.1982 had been fully discharged by cheque

payments and that he would produce these cheques at the appropriate time that the payments referred to by him, in his petition for leave to defend,

were actually made towards the suit promissory note which had, therefore, been discharged.

Learned trial Judge held that the plea of discharge put forward by the petitioner was a triable for which necessitated grant of leave to defend, but

that, in view of the fact that the petitioner had failed to produce the cheques relating to the discharge of the earlier promissory note, a condition for

leave to defend sought to be impugned and granted leave subject to the condition, that the petitioner should deposit a sum of Rs. 500 towards the

suit. The imposition of this condition, is challenged by the petitioner in this revision petition.

Thiru K.N. Subramaniam, learned Counsel for the petitioner, contended that having found that the plea of discharge was a triable issue, the trial

Court was in error, in imposing a condition of payment into Court. According to the learned Counsel, though interest was not stipulated under the

promissory note the suit claim included interest at the rate of 12%. Under these circumstances, there was no justification for the trial Court to

impose a condition, while granting leave to defend, Learned Counsel placed reliance upon certain decisions, which I would refer to presently.

For contra, Thiru F. Mahabeebjan, learned Counsel for the respondent, contended that even under the Negotiable Instruments Act interest was

payable and that, therefore, the respondent was justified in claiming interest.

The question that arises for consideration is, whether requiring the petitioner to make a cash deposit while granting leave to defend, can be

sustained?

The Supreme Court in Milkhiram (India) Private Ltd. and Others Vs. Chamanlal Bros., , while requiring judicious exercise of discretion by

Courts when imposing condition, while granting leave to defend, observed as follows:

Care must be taken to set that the object of the rule to assist the expeditious disposal of commercial causes to which the order applies is not

defeated. Care must also be taken to see that real and genuine triable issues are not shut out by unduly severe orders as to deposit. In a matter of

this kind, it would be undesirable and inexpedient to lay down any rule of general application.

In a later decision, the Supreme Court in Mechelec Engineers and Manufacturers Vs. Basic Equipment Corporation, , quoted with approval

the following propositions laid down in the decision of the Calcutta High Court in Smt. Kiranmoyee Dasi v. Dr. J. Chatterjee (1945) 49 Cal. W.N.

246:

(a) if the defendant satisfies the Court that he has a good defence to the claim on its merits, the plaintiff is not entitled to leave to sign judgment and

the defendant is entitled to unconditional leave to defend.

(b) if the defendant raises a triable issue indicating that he has a fair or Bona Fide or Reasonable Defence Although not a Positively good defence,

the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.

(c) if the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively

and immediately make it clear that he had a defence, yet shows such a state of facts as lands to the inference that at the trial of the action he may

be able to establish a defence to the plaintiff''s claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend, but in

such a case the Court may in its discretion impose conditions as to the time or made of trial, but not as to payment into Court or furnishing security.

(d) if the defendant has no defence or the defence set up is illusory or sham practically meanshine, then ordinarily the plaintiff is entitled to leave to

sign judgment and the defendant is not entitled to leave to defend.

(e) if the defendant has no defence or the defence is illusory or sham or practically meanshine, then although ordinarily the plaintiff is entitled to

leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed, if the amount claimed is paid into Court or

otherwise occurred and give leave to the defendant on such condition and thereby show mercy to the defendant by enabling him to try to prove a

defence.

On the basis of the above propositions, the Supreme Court held that the case before them, did not fall within Cl.(e) set out above and there was no

justification for imposing a condition.

M.M. Ismail, J. of this Court (as he then was) in V. Kamalanathan Vs. E.I.D. Parry Limited, , following the above decision of the Supreme

Court, struck down, the condition of deposit of Rs. 10,000 imposed by the trial Judge, while granting leave to defend a suit for recovery of money

due as a promissory note, on the ground that the trial Judge was clearly of the opinion that the defence, that the suit promissory note had been

obtained under coercion and compulsion raised a triable issue, and yet the trial Judge had given no reason for imposing the condition.

It has now to be seen, whether the reason given by the learned trial Judge, for imposing the condition, is legally sustainable. The only reason

put forward by the learned trial Judge for not granting leave, without condition is, that, the petitioner had failed to produce the documents, relating

to the discharge of the earlier promissory note. Here again, I am bound by the decision of the Supreme Court placed before me, by the learned

Counsel for the petitioner. In Santosh Kumar Vs. Bhai Mool Singh, , the Supreme Court was testing the legality of the conditional order, granting

leave is defend. The plaintiff had instituted a suit for Rs. 60,000 on the basis of a cheque that had been dishonored. The defendant, though be

admitted having issued the cheque pleaded that it was only given as a collateral security for the price of goods supplied by him and that the goods

were paid for, by cash and other cheques and that therefore, the original cheque stood discharged. The trial Court was convinced, that the defence

raised a triable issue, but held that, in view of the fact, that the defendant, had failed to produce the documents on the basis of which, the plea of

discharge was put forward, the leave could be granted, only an condition of his giving security, to the extent of the suit amount and the costs of the

suit. Setting aside the condition in the above order, the Supreme Court held that the stage of proof by producing the documents, could came in,

only if the defendant had been allowed to enter appearance and defend the suit, and that at the stage, when the question of granting leave to defend

was being considered, the nature of the defence had to be determined, by the facts stated in the affidavit. Court had only to determine, whether if

the facts alleged by the defendant, if duly proved, would afford a good, or even a plausible answer to the plaintiff''s claim and if the Court was

satisfied about that, leave could not be withheld and no question about imposing conditions could arise.

In the instant case, the only reason given by the learned trial Judge, for requiring cash deposit as a condition precedent to grant of leave to

defend, is that the petitioner had not produced the documents relating to the discharge of the earlier promissory note. In view of the decision of the

Supreme Court, referred to in the preceding paragraph, this cannot be argued for imposing condition. The condition has therefore to be set aside.

In the result, the revision is allowed and the order of the learned trial Judge in so far as it relates to imposing a condition requiring the deposit of

Rs. 500 on or before 4.3.1987, is set aside. No costs.