Judgment :- This revision is preferred against the order of VI Additional Judge, City Civil Court, Chennai, made in I.A.No. 3512 of 1999 in O.S.No. 2405 of 1998, dated 28-11-2001, dismissing the petition filed under Or. 37 R.4 C.P.C. declining permission to defend the suit. The Defendants are the Revision Petitioners. 2. The case of the Plaintiff is that the Defendants had entered into an agreement with the Plaintiff on 10-11-1994. Under the terms of the agreement, the Plaintiff agreed to arrange a loan of Rs.4,85,000/- for the Defendants. The loan was for a period of 12 months and 10 days at the rate of interest of 22% per annum payable quarterly. The loan was repayable on 19-11-1995. The Defendants and the Plaintiff had executed the agreement on 10-11-1994. Thereafter, the Plaintiff had advanced a sum of Rs.4,85,000/-, deducting service and documentation charges by two cheques of Rs.2,04,250/- and Rs. 2,68,125/- dated 10-11-1994 and 21-11-1994 respectively. The Defendants had also executed a demand promissory note in favour of the Plaintiff promising to repay the loan amount jointly and severally together with interest at 22% per annum. The loan fell due on 19-11-1995. Even then, the Defendants have not paid the loan amount and the arrears of interest. Hence,the Plaintiff was constrained to pay the amounts to the lenders as per the terms of the agreement and therefore, the Plaintiff is entitled to recover the amount from the Defendants. Hence, the Plaintiff has filed the suit to direct the Defendants to pay a sum of Rs.6,51,500/- jointly and severally and also service charges at 2.5 % per quarter on the principal amount of Rs.4,85,000/-. 3. The Defendants have filed I.A.No. 3512 of 1999 in O.S.No. 2405 of 1998 seeking the permission of the Court to defend the suit. In the affidavit, the Defendants have briefly stated the circumstances under which they signed in the agreement and the promissory notes. According to the Defendants, they approached the Plaintiff on 10-11-1994 for a loan of Rs.2,10,000/-. The Plaintiff agreed to arrange for the loan on condition that the first Defendant is to sign an agreement and also Power of Attorney in favour of the Plaintiff and also to give shares worth Rs.5 to 6 lakhs and giving power to the Plaintiff to deal with the same. The Plaintiff agreed to arrange for the loan on condition that the first Defendant is to sign an agreement and also Power of Attorney in favour of the Plaintiff and also to give shares worth Rs.5 to 6 lakhs and giving power to the Plaintiff to deal with the same. Accordingly, the first Defendant is alleged to have signed in the blank and unfilled Agreement Form and also the Power of Attorney on 10-11-1994. Further, the Defendants have also pleaded that the real beneficiary is one Sundar and that the Defendants have executed the promissory notes as additional security for the loan amount mentioned in the agreements dated 10-11-1994 and 21-11-1994. The Defendants have set forth the plea that the suit promissory note is not supported by consideration. Stating that they have substantial defence to offer, the Defendants have filed I.A.No. 3512 of 1999 seeking the permission of the Court to defend the suit. 4. The Application was dismissed by the trial Court finding that the Defendants have adopted inconsistent plea – that the Defendants approached the Plaintiff for a loan and pursuant there to executed the agreement and Power of Attorney. The Defendants have also adopted the inconsistent plea stating that they have executed the promissory notes as security for the loan obtained by one Sundar. Finding that the Defendants have admitted their signature in the impugned documents and that they have set forth inconsistent plea, the learned VI Additional Judge dismissed the petition refusing to grant leave to defend the suit. 5. Aggrieved over the dismissal of the petition, the Defendants have preferred this revision. The learned counsel for the Revision Petitioners has contended that the leave to defend has got serious consequences. Submitting that once the leave to defend is dismissed it has got serious consequences amounting to admission of allegations in the plaint, in support of her contention the learned counsel for the Revision Petitioners has relied upon the decision reported in S.K.BHARDWAJ Vs. M.L.GUPTA (AIR 1977 DELHI 226). It is further submitted that the Defendants have elaborately explained the circumstances under which they happen to sign in the agreement and the promissory notes and any differential stand adopted by them cannot be the reason for declining leave to defend. M.L.GUPTA (AIR 1977 DELHI 226). It is further submitted that the Defendants have elaborately explained the circumstances under which they happen to sign in the agreement and the promissory notes and any differential stand adopted by them cannot be the reason for declining leave to defend. It is further submitted that at the stage of considering the application for leave to defend the Court is not to test the veracity of the defence. In support of this contention the learned counsel has relied upon the decision reported in PRABHAKARAN Vs. MANAGER, CITIBANK N.A., CHENNAI ( (2001) 3 M.L.J. 540 ). 6. Countering the arguments, the learned counsel for the Respondent/Plaintiff has drawn the attention of the Court to the averments in the written statement. The learned counsel pointing out that the Defendants have admitted their signature in the promissory notes and that they have set forth an inconsistent plea would submit that the trial Court has rightly considered the same and declined to leave to defend and that the impugned order warrants no interference. 7. Upon consideration of the contentions of both parties, the impugned order and other materials on record, the only point that arises for consideration is :- "Whether the suit based on the agreement and in the light of the defence set forth by the Defendants, the trial Court was right in declining leave to defend and decree the suit?" 8. The suit has been filed for recovery of a huge amount of Rs.6,51,500/- and that the amount is jointly and severally payable by the Defendants. The Defendants have raised the plea regarding the maintainability of the suit instituted as a Small Cause Suit. According to the Defendants, the suit ought to have been instituted as a regular Suit. In the light of the defence put forth by the Defendants, the contentious points urged in this revision is to be considered. The Supreme Court in a decision reported in MECHALEC ENGINEERS & MANUFACTURERS Vs. BASIC EQUIPMENT CORPORATION (AIR 1977 SUPREME COURT 577) has elaborately laid down the principles to be followed, while considering the application under Or.37 R.3 C.P.C.- leave to defend, which reads: (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 has a defence, yet, shews such a state of facts as leads 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 mode 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 or practically moonshine 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 moonshine 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 secured 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. " 9. Refusal to grant leave to defend has got serious consequences. If the application "leave to defend is dismissed" the same would amount to admission of the claim. The effect of dismissal of application under Or.37 R.3 C.P.C. is elucidated in the Division Bench judgment of the Delhi High Court in AIR 1977 DELHI 226 (S.K.BHARDWAJ Vs. M.L.GUPTA) which reads: "When leave is refused to the Defendant to appear and defend a suit under Or.37 C.P.C. the effect of the refusal of leave to appear and defend is that the allegations in the plaint by a deeming provision stand admitted. The allegations in the plaint being admitted, a decree has to follow. M.L.GUPTA) which reads: "When leave is refused to the Defendant to appear and defend a suit under Or.37 C.P.C. the effect of the refusal of leave to appear and defend is that the allegations in the plaint by a deeming provision stand admitted. The allegations in the plaint being admitted, a decree has to follow. This means that the decree follows as a consequence of the earlier order of refusal to grant leave to appear and defend. When a subsequent order, even if it be a decree, is a consequential order to an earlier order and the earlier order is set aside the later order must also fall and directions to that effect have to be given." 10. In the light of the above decisions it is to be considered, whether the trial Court was right in declining leave to defend. By careful consideration of the plaint averments, it is seen that the cause of action refers to the agreement dated 10-11-1994 and that the Defendants have signed the agreements dated 10-11-1994 and 21-11-1994. Further, the cause of action refers to the dates 10-11-1994 and 21-11-1994, on which dates, the two cheques of Rs.2,04,250/- and Rs. 2,68,125/- were said to have been issued by the Defendants. By a careful consideration of the averments in the plaint and the cause of action, it is seen that the suit is based not merely on the Bills of Exchange, but the claim is based on the bundle of causes of action, namely – execution of the Agreement, promissory notes and the subsequent issuance of the cheques. 11. The Defendants have set forth the plea stating that one Sundar is the main beneficiary and that he had obtained the loan and that the Defendants have signed in the promissory notes only as additional security for the loan amount mentioned in the agreements dated 10-11-1994 and 21-11-1994. The Defendants have also set forth their plea that the Plaintiff gave no amount to the Defendants against the promissory notes and the promissory notes are not supported by separate consideration. Apart from the above defence, the Defendants have also adopted the defence that they approached the Respondent/Plaintiff on 10-11-1994 for a loan of Rs.2,10,000/-. The Defendants have also set forth their plea that the Plaintiff gave no amount to the Defendants against the promissory notes and the promissory notes are not supported by separate consideration. Apart from the above defence, the Defendants have also adopted the defence that they approached the Respondent/Plaintiff on 10-11-1994 for a loan of Rs.2,10,000/-. The Respondent acting as Agents of Financiers agreed to arrange for the loan on condition that the Defendants should sign in the agreement and execute an irrevocable Power of Attorney giving the Plaintiff the powers to deal with the shares worth about Rs.5 to 6 lakhs given as security for the loan. Thus, the Defendants have adopted two stands regarding the suit transaction. Such two different plea set forth by the defendants seems to have weighed in the mind of the trial Court in declining to grant leave to defend and dismissing the application. This approach of the lower Court cannot be endorsed with. 12. Normally, the Court where the suit is filed shall not decline leave to defend unless on prima facie view it is satisfied that the facts disclosed by the Defendants in their application for leave to defend do not indicate that they have any substantial defence to raise or if where the defence raised by them is such frivolous or vexatious or practically unacceptable or is such that even if leave is granted to them conditionally no purpose would be served by doing so. If the Defendants satisfies the Court that they have a good defence to the claim on merits, the Defendants are entitled to unconditional leave to defend. By consideration of the defence set forth, it is clear that the Defendants have substantial defence to offer. Considering the defence set forth, the trial Court ought to have granted leave to defend. 13. In explaining the circumstances under which they happened to sign in the suit documents, as stated above, the Defendants have set forth two different plea. The learned trial Judge dismissed the application refusing to grant leave pointing out the inconsistent plea adopted by the Defendants. The finding of the trial Court reads : The above finding of the trial Court cannot be countenanced. In the stage of considering the application to grant leave to defend, the Court should not go into the merits or otherwise of the defence adopted by the Defendants. The finding of the trial Court reads : The above finding of the trial Court cannot be countenanced. In the stage of considering the application to grant leave to defend, the Court should not go into the merits or otherwise of the defence adopted by the Defendants. The Court is not called upon to test the veracity of the defence set forth. By stating that the Defendants have adopted inconsistent plea, the learned trial Judge has only tested the sustainability or other wise of the defence, which is an erroneous approach and unsustainable. In a decision reported in PRABHAKARAN Vs. MANAGER, CITIBANK N.A., CHENNAI ( (2001) 3 M.L.J. 540 ), while considering the similar question Prabha Sridevan,J has held: "In an application for grant of leave to defend, the Petitioner is not bound to prove, to the Court, his case. The Court is also not called upon at that juncture to test the veracity of the defence set up by the Petitioner. What the Court must do is to find out whether the Applicant has raised triable issues and whether defence is not sham or illusory and whether the Petitioner has raised such issues which if proved at the time of trial, will result in dismissal of the suit. If so, he is entitled to be given leave to defend. In this case, the Petitioner has provided enough materials before the Court to show that triable issues arise in this case. Therefore, the Petitioner herein is entitled to leave to defend without any condition regarding payment or furnishing security. The order of the Court below requiring the Petitioner to deposit a sum of Rs.2,00,000/- is set aside." This Court is in respectful agreement with the view of Prabha Sridevan,J. 14. The learned trial Judge erred in going into the merits of the defence set forth by the Defendants. The order dismissing the application and refusing leave to defend suffers from material irregularity and cannot be sustained. The impugned order is liable to be set aside and this revision is to be allowed. 15. For the foregoing reasons, the order made in I.A.No. 3512 of 1999 in O.S.No. 2405 of 1998, dated 28-11-2001 by the learned VI Additional Judge, City Civil Court, Chennai, is set aside and this revision is allowed. Consequently, the connected C.M.P.No. 16678 of 2002 is closed. 15. For the foregoing reasons, the order made in I.A.No. 3512 of 1999 in O.S.No. 2405 of 1998, dated 28-11-2001 by the learned VI Additional Judge, City Civil Court, Chennai, is set aside and this revision is allowed. Consequently, the connected C.M.P.No. 16678 of 2002 is closed. In the circumstances of the case, there is no order as to costs. The suit is of the year 1998. The learned VI Additional Judge is directed to afford opportunity to the Defendants to file their written statement and he is further directed to expedite the trial of the suit and dispose of the same within a period of four months from the date of receipt of a copy of this order.