S. S. Bazaz vs L. Ishar Das Wadhwa, Plaintiff and another

Harnam Singh, J.—This is an appeal by the defendant-appellant from the decree passed by the Senior Subordinate Judge, Amritsar, on 14th May 1946, in civil Suit No. 316 of 1945, under R. 1 of O. 37, Civil P. C.

The respondent to this appeal is Lala Ishar Dass Wadhwa who instituted the suit out of which this appeal has arisen on 28th May 1945, under summary procedure on negotiable instruments on the basis of cheque No. 2/046846 dated 1st August 1944, drawn by defendant 1 in favour of defendant 2 on the Allahabad Bank Limited for Rs. 10,000. The plaintiff came to Court on the allegation that he was the holder in due course of cheque No. 2/046846 dated 1st August 1944 and that he presented the cheque to the Bank, but the same was returned to him dishonoured.

As the suit was filed under summary procedure on negotiable instruments, the defendant had to take leave to defend the suit under R. 3 of O. 37, Civil P. C.

Rule 3 of Order 37, Civil P. C., reads:

(1) The Court shall, upon application by the defendant, give leave to appear and to defend the suit, upon affidavits which disclose such facts as would make it incumbent on the holder to prove consideration, or such other facts as the Court may deem sufficient to support the application.

(2) Leave to defend may be given unconditionally or subject to such terms as to payment into Court, giving security, framing and recording of issues or otherwise as the Court thinks fit.

Now in the present case defendant 1 in his affidavit in support of the application for leave to defend the suit stated on oath that the defendants had money dealings between them and that on the settlement of accounts on 25th March 1943, a sum of Rs. 24,000 was found due to defendant 2. Defendant 1 failing to pay up the sum of Rs. 24,000 to defendant 2, issued a crossed bearer cheque for Rs. 10,000 in favour of defendant 2 in part payment of that liability. The cheque was post-dated and was to be cashed on 1st August 1944. Defendant 1 then states in his affidavit that at the time of the issue of the cheque, it was agreed between defendants 1 and 2, that the cheque would be presented to the Bank when defendant 1 informed defendant 2 that the money had been arranged for the encashment of the cheque. Defendant 1, however, failing to arrange for money, informed defendant 2 of his inability to do so before 1st August 1944. Defendant 1 goes on to state in that affidavit that defendant 2 in contravention of the aforesaid agreement presented the cheque, but the same, was returned dishonoured with a memo from the bank, showing that defendant 1 had not the requisite amount in the Bank in his account. It is then stated in the affidavit that defendant 2 approached defendant 1 in September 1944 and demanded payment when defendant 1 asked defendant 2 to return to him the above mentioned cheque for Rs. 10,000 dated 1st August 1944. Thereupon defendant 2 assured defendant 1 that the cheque having been dishonoured by the Bank had been destroyed by him. Defendant 1 then states in the affidavit that he issued a new cheque for Rs. 5000 on account, which was duly cashed by defendant 2 on 27th December 1944. A settlement was then arrived at between defendant 1 and defendant 2 whereunder defendant 1 paid to defendant 2 Rs. 20,000 instead of Rs. 19,000 on 17th March 1945 in full and final settlement of his liability. Upon these facts defendant 1 stated in his affidavit that he did not owe to defendant 2 any money under cheque No. 2/046846 dated 1st August 1944.

From the preceding paragraph it appears that defendant 1 in his affidavit disputed the validity of the transfer of the cheque by defendant 2 in favour of the plaintiff. Indeed in para. 19 of that affidavit it is mentioned that the transfer of the cheque was not for consideration and was mala fide. Defendant 1 further maintains in the affidavit that the plaintiff is not a holder in due course of the cheque in suit as there was no consideration for the endorsement, and as the plaintiff became the possessor of the cheque having sufficient cause to believe that there was a defect in the title of defendant 1 from whom he derived his title.

Now ''Holder in due course'' is defined in S. 9, Negotiable Instruments Act, XXVI [26] of 1881. Section 9 provides :

Holder in due course'' means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer or the payee or endorsee thereof if payable to order before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

Clearly the allegations in the affidavit, if proved show that the plaintiff was not a ''holder in due course''. Counsel then relies upon the provisions of S. 46, Negotiable Instruments Act. Clause 3 of that section provides :

As between such parties and any holder of the instrument other than a holder in due course, it may be shown that the instrument was delivered conditionally or for a special purpose only, and not for the purpose of transferring absolutely the property therein.

In case it is found that the plaintiff was not a bolder in due course of the cheque in suit, the defendant will have a valid defence under cl. (3) of S. 46, Negotiable Instruments Act.

Mr. Chiranjiva Lal Agarwal then contends that the holder of a negotiable instrument, who has acquired it after dishonour, whether by non-acceptance or non-payment, with notice thereof, or after maturity, has only as against the other parties the rights thereon of his transferor. Reliance is placed in this connection upon the provisions of S. 59, Negotiable Instruments Act.

From the above discussion it appears that the contesting defendant wishes to raise at the trial defences under Ss. 9, 46 and 59, Negotiable Instruments Act of 1861.

The sole question for determination, therefore, is whether the case of the contesting defendant is covered by R. 3 of O. 37, Civil P. C. A similar matter came up in Jacobs v. Booth''s Distillery Co, (1901) 85 L. T. 262, (50 W. R. 49). In that case Lord Chancellor said:

I am somewhat surprised at the decision which has been arrived at by the Tribunals before whom this question has come. I think that if this is an example of the mode in which O. 14 is administered, it would be desirable for the Legislature to consider whether that order should continue to be put in force. People do not seem to understand that the effect of O. 14 is that, upon the allegation of one side or the other, a man is not to be permitted to defend himself in a Court; that his rights are not to be litigated at all. There are some things too plain for argument; and where there were pleas put simply for the purpose of delay, which only added to the expense, and where it was not in aid of justice that such things should continue, O. 14 was intended to put an end to that state of things; and to prevent sham defenses from defeating the rights of parties by delay, and at the same time causing great loss to plaintiffs who were endeavouring to enforce their rights.

Lord Macnaghten agreed with the judgment prepared by Lord Chancellor. Lord James of Hereford, however, added :

I only wish to make it very clear that in giving judgment in accordance with that which has been proposed by Lord Chancellor, there is no expression of opinion upon the merits of this case. The view which I think ought to be taken of O. 14 is that the Tribunal to which the application is made should simply determine, Is there a triable issue to go before a jury or a Court? It is not for that Tribunal to enter into the merits of the case at all. It ought to make the order only when it can say to the person who opposes the order, you have no defence.

In the Yearly Practice of the Supreme Court for 1939 the effect of the judgment of the House of Lords in Jacobs v. Booths Distillery Co., (1901) 85 L. T. 262: (50 W. R. 49) is stated in the following terms:

If the defendant by his affidavit or otherwise shows that there are facts which, if true, constitute a defence to the claim, he should be given unconditional leave to defend.

Now the High Courts in India have accepted the rule laid down by the House of Lords in Jacobs v. Booths Distillery Co., (1901) 85 L. T. 262: (50 W. R. 49) and there are numerous cases cited in books which lay down that the defence set up need only show that there is & triable issue for permission to defend the suit. In the present case as stated above, the contesting defendant has raised defences in the application supported by his affidavit under Ss. 9, 46 and 59, Negotiable Instruments Act. The trial Court has, however, found that the affidavit of the contesting defendant did not disclose such facts as would make it incumbent on the holder to prove consideration or such other facts as the Court may deem sufficient to support the application. No reasons are, however, given in the judgment under appeal to show as to why facts set out in the affidavit are not sufficient to support the application, if, as is stated above, the defences raised seem to fall under Ss. 9, 46 and 59, Negotiable Instruments Act.

Mr. Amar Nath Grover, learned counsel for defendant 2 does not challenge the applicability of the rule laid down in Jacobs v. Booths Distillery Co., (1901) 85 L. T. 262; (50 W. R. 49) to cases arising under R. 3 of O. 27, Civil P. C. He, however, urges that the affidavit does not disclose that a triable issue arose in the case in the sense that if the facts alleged in the affidavit were established there was a tenable defence. For reasons given above I do not accept the contention raised by Mr. Grover.

Mr. Grover then urged that leave to defend should not be allowed unconditionally. The suit, as stated above, was instituted on 28th May 1945, and considering that the defences raised are likely to result in a protracted trial, I would grant leave to defendant to defend the suit on the condition that he would furnish security to the satisfaction of the trial Court for the due performance of such decree as may ultimately be binding on him. The security is to be furnished by defendant 1 within two months from this date. In the event of default in furnishing security within the specified period, defendant 1 would not be entitled to put in his defence at the trial and the suit shall stand decreed with costs.

Costs of proceedings in this Court will abide the event and the court-fee paid on memorandum of appeal shall be refunded to the appellant.

Before parting with this judgment I wish, to point out that the power to give summary judgment under O. 37, Civil P. C., is intended only to apply to cases where there is no reasonable doubt that a plaintiff is entitled to judgment, and where therefore it is inexpedient to allow a defendant to defend for mere purposes of delay. Indeed the rule is that leave to defend must be given unless it is clear that there is no dispute as to facts or law which raises a reasonable doubt that the plaintiff is entitled to judgment.

Kapur, J.

I agree.