2015 (10) TMI 2707 - SC - Indian Laws

Whether the Courts below were right in decreeing the Summary Suit without granting the relief of leave to defend to the defendant/appellant as envisaged under Order 37 Rule 3 C.P.C.? Held that - in cases where the defendant has raised a triable issue or a reasonable defence the defendant is entitled to unconditional leave to defend. Leave is granted to defend even in cases where the defendant upon disclosing a fact though lacks the defence but makes a positive impression that at the trial the defence would be established to the plaintiff s claim. Only in the cases where the defence set up is illusory or sham or practically moonshine the plaintiff is entitled to leave to sign judgment. Insofar as the question of maintainability of the Suit in question under Order 37 CPC is concerned this Court has in Neebha Kapoori Vs. Jayantilal Khandwala 2008 (1) TMI 961 - SUPREME COURT OF INDIA observed that where the applicability of Order 37 itself is in question grant of leave to defend may be permissible. The Court before passing a decree is entitled to take into consideration the consequences therefor. In the case on hand we have perused the material on record including the FIR dated 9th August 1999 registered by the CBI at the instance of Chief Vigilance Officer SBH and also the Charge Sheet filed by the CBI. The charge sheet indicated the involvement of Mr. Sudhir Behra Chief Manager of the appellant Bank at Burra Bazar Branch Calcutta. Acting at the requests of representatives from the Indian clients of the respondent s constituent the Chief Manager had induced some officers of the appellant Bank who were In-charge of Foreign Exchange Department to issue tested telex messages of co-acceptance - the defendant/appellant has made out a prima facie case of triable issues in the Suit which needs to be adjudicated. Therefore the defendant is entitled to grant of unconditional leave to defend the Suit. The appellant/defendant is granted unconditional leave to defend the Summons for Judgment in Summary Suit No. 1586 of 2001 - appeal allowed.

Issues Involved:
1. Maintainability of the Summary Suit under Order 37, CPC.
2. Alleged lack of a written contract and acceptance of Bills of Exchange.
3. Alleged delay and negligence in prosecuting the suit.
4. Allegation of fraud and internal mismanagement within the appellant Bank.
5. Entitlement to leave to defend under Order 37 Rule 3, CPC.

Issue-wise Analysis:

1. Maintainability of the Summary Suit under Order 37, CPC:
The appellant argued that the suit did not qualify under Order 37, CPC due to the absence of a "written contract" and that the plaintiff's averment was regarding an "agreement." The court noted that the applicability of Order 37 itself was in question, and in such cases, leave to defend may be permissible. The court emphasized that summary trials should be handled carefully, considering the interests of both parties and ensuring that the defendant raises a real issue rather than a sham one.

2. Alleged Lack of a Written Contract and Acceptance of Bills of Exchange:
The appellant contended that there was no written contract as the Bills of Exchange did not bear the acceptance by the appellant Bank as required under the Negotiable Instruments Act. The court acknowledged that the appellant had not endorsed its acceptance on the Bills of Exchange. Despite this, the High Court had ruled that the appellant had agreed to pay the amount due even without the Bills of Exchange, which was sufficient to grant a decree in favor of the respondent.

3. Alleged Delay and Negligence in Prosecuting the Suit:
The appellant highlighted a delay in prosecuting the suit, noting that the plaintiff had initially filed a suit in 2001, withdrew it in 2003, and only after four years, in 2007, sought amendments and refiled the suit. The court recognized this delay and the appellant's argument that it indicated negligence and an abuse of the legal process.

4. Allegation of Fraud and Internal Mismanagement within the Appellant Bank:
The appellant alleged that the transactions were fraudulent, involving collusion between the plaintiff's constituent and some officials of the appellant Bank. The court noted the pending CBI inquiry and the charge sheet indicating the involvement of the appellant Bank's officials. The court found that these allegations raised triable issues that warranted further investigation and adjudication.

5. Entitlement to Leave to Defend under Order 37 Rule 3, CPC:
The court referred to established legal principles that if a defendant raises a triable issue or a reasonable defense, they are entitled to unconditional leave to defend. The court found that the appellant had made out a prima facie case of triable issues, including the alleged fraud and lack of proper acceptance of the Bills of Exchange. Consequently, the court concluded that the appellant was entitled to unconditional leave to defend the suit.

Conclusion:
The Supreme Court allowed the appeal, setting aside the judgments of the lower courts and granting the appellant unconditional leave to defend the suit. The case was remanded to the learned Single Judge of the High Court to deal with all issues afresh, without any influence from the observations made by the Supreme Court in this judgment.

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