2018 (11) TMI 680 - HC - Indian Laws

Dishonor of Cheque - recovery of loan given - proof of debt - Section 138 of the Negotiable Instruments Act, 1881 - prayer for grant of unconditional leave to defend - Held that - In case the defence is found to be frivolous or vexatious or not raising a triable issue, thus leave to defend cannot be granted. In any case, the respondent/plaintiff has stated in the cross-examination in the case under Section 138 of N.I. Act that he had arranged amount by himself and also that he borrowed some amounts from his father and a close friend, and which in my opinion is sufficient justification for the respondent/plaintiff to have moneys for being granted as a loan to the appellant/defendant. In fact the appellant/defendant seems to have a belief that money borrowed is money earned. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Condonation of delay in filing and re-filing the appeal.
2. Appeal against the judgment of the Trial Court dismissing the Leave to Defend application.
3. Consideration of defense raised by the defendant regarding the dishonored cheque and loan transaction.
4. Application of legal principles for granting leave to defend under Order 37 Rule 3 CPC.
5. Analysis of the Trial Court's decision to refuse leave to defend and its reasoning.
6. Examination of the defendant's contentions regarding fraud, misuse of the cheque, and absence of legal actions taken.
7. Interpretation of Section 118 of the Negotiable Instruments Act and its impact on the case.

Analysis:

1. The judgment addressed applications for condonation of delay in filing and re-filing the appeal, where delays of 27 days and 31 days were respectively condoned. The court allowed the exemptions subject to just exceptions.

2. The appeal was filed under Section 96 of the CPC against the Trial Court's judgment, which dismissed the Leave to Defend application and decreed the suit for recovery of a dishonored cheque amounting to ?4.38 lakhs. The defendant contested the loan transaction and the dishonored cheque in the application.

3. The defendant argued in the Leave to Defend application that the cheque was given as security for a loan taken by another individual, not for the loan allegedly taken by the defendant. The defendant also raised issues regarding the genuineness of the loan transaction and the misuse of the cheque.

4. The court referred to legal principles from the Supreme Court's judgment in IDBI Trusteeship Services Ltd. v. Hubtown Limited for granting leave to defend. The principles emphasized the need for a substantial defense or triable issues to grant unconditional leave to defend.

5. The Trial Court refused leave to defend, considering the defendant's acknowledgment of the loan in a receipt, the service of a Legal Notice, and the pending case under Section 138 of the N.I. Act. The court found the defense frivolous and vexatious.

6. The judgment analyzed the defendant's failure to take legal actions against alleged fraud or misuse of the cheque, highlighting the absence of complaints or notices. The court emphasized the presumption of consideration under Section 118 of the N.I. Act and the defendant's burden to prove misuse.

7. The court dismissed the appeal, affirming the Trial Court's decision and reasoning. The judgment concluded that the defendant's arguments lacked merit, especially considering the legal presumptions and absence of proactive steps against alleged fraud or misuse of the cheque.