2006 (2) TMI 691 - HC - Indian Laws

Summary

Issues Involved:
1. Application for leave to defend under Order 37 Rule 3 of the Code of Civil Procedure, 1908.
2. Validity of the cheques as the basis for the summary suit.
3. Material alteration of cheques under Section 87 of the Negotiable Instruments Act, 1881.
4. Principles for granting leave to defend as per Supreme Court guidelines.

Issue-wise Detailed Analysis:

1. Application for leave to defend under Order 37 Rule 3 of the Code of Civil Procedure, 1908:
The defendant applied for leave to defend the summary suit instituted by the plaintiff. The plaintiff alleged that the defendant had engaged its services for conducting market research surveys in India concerning the sale of Canadian Gold Coins and had not paid for these services. The plaintiff's case was primarily based on four cheques amounting to Rs. 1,34,32,500/-, which were issued by the defendant but not honored.

2. Validity of the cheques as the basis for the summary suit:
The plaintiff's claim was based on four cheques issued by the defendant, two of which were dated 12.09.2000 and two were undated. The defendant argued that since the suit was based on cheques that were never presented, it should not be maintainable under Order 37 and should be treated as an ordinary suit for recovery of money. The court noted that the plaintiff had presented only the two undated cheques, which were returned with the endorsement 'Attachment Order,' while the other two cheques were not presented within their validity period.

3. Material alteration of cheques under Section 87 of the Negotiable Instruments Act, 1881:
The defendant contended that the undated cheques were subsequently dated by the plaintiff, constituting a material alteration under Section 87 of the Negotiable Instruments Act, 1881, which would render the cheques void. The court examined whether the alterations were made with the consent of the defendant or in furtherance of a common intention. The court found that the plaintiff presented the cheques without the defendant's confirmation, indicating no consent to the alteration, thus prima facie rendering the cheques void.

4. Principles for granting leave to defend as per Supreme Court guidelines:
The court referred to the principles set out in the Supreme Court decision in M/s Mechelec Engineers & Manufacturers v. Basic Equipment Corporation, which outlines conditions under which leave to defend should be granted. The court concluded that the defendant raised a friable issue regarding the validity of the cheques, warranting unconditional leave to defend. The court emphasized that the matter required a full trial to determine the validity of the cheques and the plaintiff's claim for recovery of money.

Conclusion:
The court allowed the defendant's application for leave to defend, stating that the defendant had raised a reasonable defense concerning the validity of the cheques. The observations made were of a prima facie nature, and the case would proceed to a full trial to resolve the issues. The application for leave to defend was thus disposed of.