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2007 (4) TMI 748 - HC - Indian LawsSuit for recovery - Order XXXVII of Code of Civil Procedure 1908 - Inconsistencies or conflicts in judgments of learned Single Judges and of the Division Benches - Whether a suit based on a writing or a receipt or an acknowledgement of liability or honoured cheque or a settled account is maintainable as a summary suit - Order XXXVII Rule 2 (Summary Suit) in cases where the S uit is based i) On a settled account duly confirmed by the Defendants; ii) On a settled account which is not confirmed by the Defendants; iii) On an acknowledgment of liability; iv) On honoured cheque; and v) On a mere writing or a receipt; HELD THAT - We must note that there must be the following requirements before a summary suit would lie (1) There must be a concluded contract; (2) The contract must be in writing; (3) The contract must contain an express or implied promise to pay. There is no dispute in respect of the first two predicates. The only issue is in respect of the third predicate. As we have noted we are not concerned here with an implied contract but an implied term in a written contract. The Defendants would be right to contend that an implied contract is not a written contract. Is a summary suit maintainable on an implied term in a written contract with an implied term to pay. We have noted that the expression implied term is used in different senses. In some contract it would not depend on actual intention of the parties but on a rule of law such as the terms warranties or conditions which if not expressly excluded the law imports as for instance under the Sale of Goods Act Marine Insurance Act Master and Servant and Landlord and Tenant. To imply a term in the contract as implied term in our opinion the test laid down by Kim Lewison in Interpretation of Contract would be relevant. At the same time the Court would have to note that the general presumption is however against the implying of terms into a written contract. It is therefore again not possible to lay down a general Rule as to when an implied term in a contract can be the subject matter of a summary suit. The issue before us is limited to an implied promise to pay. That would necessarily depend on the facts of each case. The two issues as formulated may now be answered. In so far as the settled account is concerned it is no doubt true as noticed by the learned single Judge that the various judgments adverted to for holding that the summary suit would lie on a settled account either of the Privy Council or of the Supreme Court did not arise from suits filed as summary suits. However after the judgment of the Privy Council (Elvira L. Rodrigues) Sequeira which has been considered by the Supreme Court in Hiralal Ors. 1953 (3) TMI 36 - SUPREME COURT a summary suit on a settled account duly confirmed by the Defendant is maintainable as it is an acknowledgement by the Defendant in the ledger in which mutual accounts have been entered and the accounts settled between them. Such settling of accounts gives rise to a written contract on a fresh cause of action with an implied promise to pay the amount settled. A summary suit would therefore lie on Settled accounts duly confirmed by the defendants. Issue (1) is answered accordingly. In so far as acknowledgements writing or receipt are concerned considering the various judgments adverted to earlier on behalf of the plaintiffs and Defendants and the discussion it is not possible to lay down any precise test as to when a Summary Suit would lie on an acknowledgement writing or receipt. That would depend firstly on the document itself the practice usage and customs of the trade as also the facts of each case. By so holding it is not as if the Defendant is denuded of his defences when he applies for leave to defend. The Supreme Court in Machalec Engineering and Manufacturers v. Basic Equipment Corporation 1976 (11) TMI 194 - SUPREME COURT has laid down the tests which thereafter have been reiterated by the Supreme Court in Sunil Enterprises v. S.B.I. Commercial and International Bank Ltd. 1998 (4) TMI 556 - SUPREME COURT . The tests laid down are as under (a) If the defendant satisfies the Court that he has a good defence to the claim on merits the defendant is entitled to unconditional leave to defend. (b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a possibly good defence the defendant is entitled to unconditional leave to defend. (c) If the defendant discloses such facts may be sufficient to entitle him to defend that is if the affidavit discloses that at the trial he may be able to establish a defence to the plaintiffs claim the Court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or mode of trial but not as to payment in to Court or furnishing security. (d) If the defendant has no defence or if the defence is sham or illusory or practically moon-shine the defendant is not entitled to leave to defend. (e) If the defendant has no defence or the defence is illusory or sham or practically moon-shine the Court may show mercy to the defendant by enabling him to try to prove a defence but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into Court or otherwise secured. Thus the issues referred to us are accordingly answered. The Registry to place the matters before the Learned Bench assigned to hear the matters - In the circumstances of the case there shall be no orders as to costs.
Issues Involved:
1. Whether a suit based on a settled account duly confirmed by the Defendants is maintainable as a summary suit. 2. Whether a suit based on a settled account which is not confirmed by the Defendants is maintainable as a summary suit. 3. Whether a suit based on an acknowledgment of liability is maintainable as a summary suit. 4. Whether a suit based on an honoured cheque is maintainable as a summary suit. 5. Whether a suit based on a mere writing or a receipt is maintainable as a summary suit. Issue-Wise Detailed Analysis: 1. Settled Account Duly Confirmed by the Defendants: The court concluded that a summary suit on a settled account duly confirmed by the Defendant is maintainable. This is based on the principle that such a settled account gives rise to a written contract on a fresh cause of action, with an implied promise to pay the amount settled. The court referenced the Privy Council's judgment in Elvira Rodrigues v. Godnicalo Hypolito Construction and the Supreme Court's judgment in Gordon Woodroffe & Co. (Madras) Ltd. v. Shaikh M.A. Majid & Co., which support the notion that a settled account, when confirmed, constitutes a written contract with an implied promise to pay. 2. Settled Account Not Confirmed by the Defendants: The court held that a summary suit would not lie on a settled account which is not confirmed by the Defendant. The reasoning is that without confirmation, there is no mutual agreement or acknowledgment that could constitute a written contract, thus failing to meet the requirements under Order XXXVII. 3. Acknowledgment of Liability: The court noted that it is not possible to lay down a precise test as to when a summary suit would lie on an acknowledgment of liability. This would depend on the document itself, the practice, usage, and customs of the trade, as well as the facts of each case. The court stressed that the acknowledgment must contain an express or implied promise to pay. While an acknowledgment alone is not sufficient, if it implies a promise to pay, it could potentially be the basis for a summary suit. 4. Honoured Cheque: The court concluded that a summary suit is not maintainable on an honoured cheque. The rationale is that a suit for recovery of a loan advanced by a cheque is not a suit upon a cheque or bill of exchange. The court referenced the judgment in Purnima Jaitly v. Ravi Bansi Jaisingh, which clarified that a suit upon a cheque means a suit to recover money due on a cheque drawn by the defendant, which is dishonoured. 5. Mere Writing or Receipt: The court held that it is not possible to lay down a general rule as to when a summary suit would lie on a mere writing or receipt. This would depend on the specific document, the context of its usage, and the facts of each case. The court emphasized that the writing or receipt must indicate a concluded contract in writing with an express or implied promise to pay. Additional Considerations: The court also discussed the legislative history of Order XXXVII and the amendments made over time, which emphasize that a summary suit can only be filed if there is a written contract. The court highlighted the distinction between an implied contract and an implied term within a written contract, noting that while an implied contract is not sufficient, an implied term within a written contract that includes a promise to pay could be the basis for a summary suit. The court also addressed the issue of documents not being duly stamped, noting that while certain documents can be admitted in evidence upon payment of penalty, bills of exchange and promissory notes that are not duly stamped cannot be admitted in evidence at all. Conclusion: The court provided a nuanced analysis of when summary suits are maintainable under Order XXXVII, emphasizing the need for a written contract with an express or implied promise to pay. The answers to the issues reflect a careful consideration of legal principles, legislative history, and judicial precedents.
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