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Issues Involved:
1. Whether the trial Judge was right in granting conditional leave to defend the suit based on promissory notes. 2. Whether the promissory notes were merely collateral security and whether the suit fell within the ambit of Order 37, Rule 2 of the Civil Procedure Code. 3. Whether the trial Judge erred in not providing reasons for demanding security from the appellants. Detailed Analysis: Issue 1: Conditional Leave to Defend The appellants contended that the trial Judge should have granted unconditional leave to defend the suit as their affidavit raised a triable issue. The trial Judge granted conditional leave, requiring the appellants to deposit security of Rs. 70,000 against a claim of Rs. 4,05,434.38. The Supreme Court upheld this decision, stating that the discretion lies with the trial Judge to determine whether the defense is genuine or sham. The Court emphasized that the object of Order 37 is to ensure speedy decisions in commercial cases and that the Judge must exercise discretion judiciously to balance the expeditious disposal of cases and the protection of genuine defenses. Issue 2: Nature of Promissory Notes and Suit The appellants argued that the promissory notes were collateral security for an agreement related to the export of pulses, making the suit outside the purview of Order 37, Rule 2. The Supreme Court found that the cause of action for the respondents' claim was independent of the agreement. The right to repayment was absolute and unconditional, as clarified by a subsequent agreement. The Court noted that the respondents' claim for damages under the agreement was in addition to, not in substitution of, the claim based on the promissory notes and the indenture of guarantee. Therefore, the suit was rightly instituted under Order 37, Rule 2. Issue 3: Requirement for Reasons in Demanding Security The appellants contended that the trial Judge's order demanding security was wrong in law as no reasons were provided. They relied on the case of Waman Vasudeo Wagh v. M/s. Pratapmal Dipaji & Co., where the absence of reasons led to the setting aside of an order. The Supreme Court distinguished this case, noting that the order in question was made by the High Court itself, not a subordinate court. The Court also referenced Order 49, Rule 3, Sub-rule (5), which exempts Chartered High Courts from the requirement to provide reasons under Order 20, Rule 4. The Court concluded that the trial Judge's discretion in demanding security was exercised judiciously, considering the need for expeditious resolution of commercial disputes. Conclusion The Supreme Court dismissed the appeal, upholding the trial Judge's order for conditional leave to defend. The Court extended the time for depositing security by two months from the date of judgment. The decision emphasized the balance between expeditious disposal of commercial cases and the protection of genuine defenses, affirming the trial Judge's discretion in imposing conditions for leave to defend.
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