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2024 DIGILAW 474 (TS)

Priya Daniel v. Jayam Nagesh

2024-07-15

T.VINOD KUMAR

body2024
ORDER : 1. This Civil Revision Petition is filed aggrieved by the order dated 12.09.2023 in I.A. No. 70 of 2022 in O.S. No. 2033 of 2022 passed by the I Additional Senior Civil Judge, Medchal-Malkajgiri District, at Malkajgiri. 2. Heard Sri. V.V.S. Satyanarayana, learned Counsel for the petitioner, Sri. C. Haripreeth, learned Counsel for the respondent and perused the record. 3. The petitioner herein is the defendant in the said suit filed by the respondent as plaintiff for recovering of money of Rs.25,20,000/-. The respondent herein had filed the underlying suit as a summary suit under Order 38 Rule 5 of CPC. 4. On receiving the summons in the suit, the petitioner herein had filed the underlying application under Order XXXVII Rule 3 (5) of the Code of Civil Procedure, 1908 (for short ‘the Code’) seeking leave to defend herself in the main suit. The Court below on hearing the parties had dismissed the application. Aggrieved by the same the present revision is filed. 5. Learned Counsel for the petitioner herein contends that the Trial Court had erroneously held that no substantial issues were raised, when the respondent herein had denied the existence of a legally enforceable debt. 6. Per contra, learned Counsel for the respondent herein contends that the underlying application was rightly dismissed as the petitioner herein had raised vexatious and baseless allegations as her defence. It is further contended that if this Court were to grant the petitioner an unconditional leave to defend, the respondent would suffer irreparable loss, as the petitioner herein not only intends to delay the proceedings in the underlying suit, but was also planning to alienate her house. It is contended that in the event of such sale taking place, it would be impossible for the respondent to recover the money owed to him. 7. I have taken note of their respective contentions. 8. Order XXXVII Rule 3 of the Code, provides the procedure to be followed for appearance of a defendant in a summary suit. Sub-Rule (5) therein provides that a defendant may apply for leave to defend within (10) days from the service of summons for judgment. The First Proviso to sub rule (5) of Rule 3 mandates that leave to defend cannot be refused except under two circumstances viz. Sub-Rule (5) therein provides that a defendant may apply for leave to defend within (10) days from the service of summons for judgment. The First Proviso to sub rule (5) of Rule 3 mandates that leave to defend cannot be refused except under two circumstances viz. (1) when no substantial defence is raised by the defendant and (2) when the defence raised is either frivolous or vexatious. 9. The Hon’ble Supreme Court in IDBI Trusteeship Services Ltd. Vs. Hubtown Ltd. (2017) 1 SCC 568 , by extensively discussing the law on rejecting leave to defend had laid out the following guiding principles: “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. 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.” (Emphasis supplied) 10. The Hon’ble Supreme in B.L. Kashyap and Sons Ltd. Vs. JMS Steels and Power Corporation and Ors. (2022) 3 SCC 294 , while reiterating the aforesaid principles had further expounded that granting leave to defend is the rule and denying the same is an exception. The relevant observations are as under: “17. It is at once clear that even though in the case of IDBI Trusteeship, this Court has 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, 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 is an exception. Putting it in other words, generally, the prayer for leave to defend is to be denied in such cases where the Defendant has practically no defence and is unable to give out even a semblance of triable issues before the Court. 17.1. As noticed, if the Defendant satisfies the Court that he has substantial defence, i.e., a defence which is likely to succeed, he is entitled to unconditional leave to defend. In the second eventuality, where the Defendant raises triable issues indicating a fair or bonafide or reasonable defence, albeit not a positively good defence, he would be ordinarily entitled to unconditional leave to defend. In the second eventuality, where the Defendant raises triable issues indicating a fair or bonafide or reasonable defence, albeit not a positively good defence, he would be ordinarily entitled to unconditional leave to defend. In the third eventuality, where the Defendant raises triable issues, but it remains doubtful if the Defendant is raising the same in good faith or about genuineness of the issues, the Trial Court is expected to balance the requirements of expeditious disposal of commercial causes on one hand and of not shutting out triable issues by unduly severe orders on the other. Therefore, the Trial Court may impose conditions both as to time or mode of trial as well as payment into the Court or furnishing security. In the fourth eventuality, where the proposed defence appear to be plausible but improbable, heightened conditions may be imposed as to the time or mode of trial as also of payment into the Court or furnishing security or both, which may extend to the entire principal sum together with just and requisite interest. 17.2. Thus, it could be seen that in the case of substantial defence, the Defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the Defendant is ordinarily entitled to unconditional leave to defend. In case of doubts about the intent of the Defendant or genuineness of the triable issues as also the probability of defence, the leave could yet be granted but while imposing conditions as to the time or mode of trial or payment or furnishing security. Thus, even in such cases of doubts or reservations, denial of leave to defend is not the rule; but appropriate conditions may be imposed while granting the leave. It is only in the case where the Defendant is found to be having no substantial defence and/or raising no genuine triable issues coupled with the Court's view that the defence is frivolous or vexatious that the leave to defend is to be refused and the Plaintiff is entitled to judgment forthwith. Of course, in the case where any part of the amount claimed by the Plaintiff is admitted by the Defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the Defendant in the Court. 17.3. Of course, in the case where any part of the amount claimed by the Plaintiff is admitted by the Defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the Defendant in the Court. 17.3. Therefore, while dealing with an application seeking leave to defend, it would not be a correct approach to proceed as if denying the leave is the Rule or that the leave to defend is to be granted only in exceptional cases or only in cases where the defence would appear to be a meritorious one. Even in the case of raising of triable issues, with the Defendant indicating his having a fair or reasonable defence, he is ordinarily entitled to unconditional leave to defend unless there be any strong reason to deny the leave. It gets perforce reiterated that even if there remains a reasonable doubt about the probability of defence, sterner or higher conditions as stated above could be imposed while granting leave but, denying the leave would be ordinarily countenanced only in such cases where the Defendant fails to show any genuine triable issue and the Court finds the defence to be frivolous or vexatious.” (Emphasis supplied) Therefore, it is clear that leave to defend ordinarily ought to be granted even when there is a reasonable doubt about the probability of the defence raised. 11. The facts at hand shall now be examined on the aforesaid principles. 12. It is the case of the respondent in the plaint, that he along with his friend one Mr. Gangula Srinivas Reddy carry on business of providing assistance for availing loans from banks, in the name and style of M/s. SRS Capital LLP. During the course of their business, it is contended that the petitioner herein along with her husband had approached the respondent with a proposition to provide outsourcing agents on a commission basis. Thereafter it is claimed that the petitioner herein had approached the respondent for a hand loan of Rs. 15,00,000/- to complete interior works in her house; and that the respondent herein considering their working relationship had lent the said amount as a hand loan. It is alleged that the said amount was transferred in two RTGS transactions i.e., 1. Rs. 4,75,000/- on 15.11.2019 and 2. Rs. 9,50,000/- (after deduction of TDS) on 16.11.2019, to the petitioner’s account maintained with RBL Bank. It is alleged that the said amount was transferred in two RTGS transactions i.e., 1. Rs. 4,75,000/- on 15.11.2019 and 2. Rs. 9,50,000/- (after deduction of TDS) on 16.11.2019, to the petitioner’s account maintained with RBL Bank. It is stated that in lieu of her liability the petitioner herein had executed a promissory note along with a filled and signed blank cheque vide No. 868855 drawn on State Bank of India. 13. Thereafter, it is alleged that the petitioner herein kept postponing the repayment of the loan amount; that due to the persistence of the respondent, the petitioner herein had executed a Memorandum of Final Commitment for Repayment of Loan Liability dated 19.02.2022 along with a promissory note; that initially on the instructions of the petitioner herein, the respondent had presented the cheque bearing No. 868855 for Rs.22,25,000/- on 15.03.2022. It is alleged that since the said cheque was invalid, the respondent herein on 18.03.2022 had issued another cheque bearing No. 000028 drawn on HDFC Bank. However, it is claimed that as the said cheque was dishonored due to insufficient funds, the petitioner herein had issued another cheque bearing No. 000029 dated 20.08.2022 drawn on HDFC Bank; and that since even the aforesaid cheque was dishonored, the underlying suit was preferred. 14. While so, the petitioner herein has raised a defence that she was informed by the respondent and his friend that the firm was in practice of retaining blank signed cheques for security purposes from outsourcing persons they engaged on a commission basis; and that such cheques would be returned to them when the petitioner herein was leaving the firm. Hence, the petitioner herein claims that she had issued blank signed promissory notes and cheques to the respondent herein for security purposes. It is also contended that though the petitioner herein had left the respondent’s firm in 2020, her blank signed cheques, promissory notes and other documents were not returned despite several requests. 15. From the aforesaid facts, it is seen that the petitioner herein is in no unambiguous terms denying the existence of a legally enforceable debt. Therefore, this Court is of the view that the petitioner herein has certainly raised triable issues. 16. 15. From the aforesaid facts, it is seen that the petitioner herein is in no unambiguous terms denying the existence of a legally enforceable debt. Therefore, this Court is of the view that the petitioner herein has certainly raised triable issues. 16. Conversely, it appears that the Trial Court has arrived at a conclusion that the petitioner herein had borrowed money from the respondent solely from the fact that they are known to each other and have also worked together. The Trial Court has further observed that the admission of issuing signed cheques establishes the respondent’s case. Curiously enough, the Trial Court had found it completely acceptable that the blank cheques were signed, whereas the Memorandum of final commitment for repayment of loan liability dated 19.02.2022 contained the alleged thumb impression of the petitioner. 17. The aforesaid conclusions apart from being assumptive in nature, also reveal that the Trial Court had adjudicated the issue with a view that leave to defend is to only be granted in exceptional circumstances. Therefore, this Court is of the view that the impugned order is liable to be set-aside. 18. However, since the Trial Court had expressed concern over the probability of the defence raised and the good faith of the petitioner herein, and since this Court does not have the benefit of the entire record, this Court deems it appropriate to leave the issue of imposing appropriate conditions on the respondent, open to the Trial Court. 19. Accordingly, this Civil Revision Petition is allowed. The order dated 12.09.2023 in I.A. No. 70 of 2022 in O.S. No. 2033 of 2022 passed by the Trial Court is set-aside. The Trial Court is at liberty to impose appropriate reasonable conditions on the petitioner herein with respect to the amount claimed by the respondent. 20. Consequently, miscellaneous petitions pending if any shall stand closed. No order as to costs.