1998 (4) TMI 556 - SC - Indian Laws

Summary

Issues involved:
The issues involved in the judgment are the grant of leave to defend in a summary suit filed under Order 37 of the Civil Procedure Code (C.P.C) and the examination of whether the defense raised is genuine or illusory.

Grant of Leave to Defend:
The appeal arose from an order by the High Court of Bombay affirming a Trial Judge's order in a summary suit under Order 37 of C.P.C, where summons for Judgment were issued against the appellants. The suit was based on bills of exchange, with the appellants being the acceptors and M/s. Khanna Sales Corporation being the drawers. The respondent bank filed the suit as the amounts under the bills were not paid within the stipulated time. The Trial Judge refused leave to defend, but the Division Bench held that the bills were not supported by consideration as no goods were actually sold to the appellants. The Division Bench found the appellants' defenses of fraud and collusion unsubstantiated, leading to the decree against them.

Legal Principles for Granting Leave to Defend:
The Court referred to previous decisions to explain the legal principles for granting leave to defend. It was stated that a defendant with a good defense on merits is entitled to unconditional leave to defend. Even if the defense is fair or reasonable, the defendant should be granted leave. If the defendant discloses facts that may entitle them to defend at trial, conditions may be imposed. However, if the defense is illusory or sham, the defendant may not be entitled to leave to defend.

Decision and Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's order and granting unconditional leave to the defendant to defend the suit. The Court found that the defense raised was not entirely defenseless or illusory, contrary to the High Court's view. Therefore, the appellants were granted leave to defend, and the summons for Judgment were dismissed. The Court emphasized the importance of examining the genuineness of the defense at the stage of granting leave to defend.