2019 (7) TMI 392 - HC - Indian Laws

Dishonor of Cheque - Rejection of leave to defend the summary suit preferred by the respondent/plaintiff - Order XXXVII Rule 3 (5) CPC - loan was gib ven without receipt of the same - HELD THAT - The fact remains that the appellant s application and supporting affidavit filed under Order XXXVII Rule 3 (5) CPC for leave to defend neither refers to any so-called chit fund committee run by the respondent s father, nor does it refer to the fact that the name of UTI Bank Ltd. had undergone a change in the year 2007 itself - which pleas have been raised for the first time before this Court. Nevertheless, the said affidavit states, in no uncertain terms, that the transaction of loan set up by the respondent was concocted and fabricated, and that nothing had been pointed out as to why the appellant would take such a huge amount of loan from the respondent or as to why the respondent had advanced such loan to him, that too, without any receipt/acknowledgment of the same. When I consider the defence raised by the appellant viz. the respondent s claim that the entire purported loan amount was given by him to the appellant in cash without taking any receipt/acknowledgement from him, as also the fact that the respondent s criminal complaint filed under Section 138 of the NI Act, 1881 stands rejected in respect of the same cheque, I am unable to agree with the learned Trial Court that the appellant does not have any defence whatsoever or that his defence is wholly vexatious. It cannot be said that merely because the appellant failed to take the specific pleas, as urged before this Court, in his application/ affidavit for leave to defend, that such omission should disentitle him altogether from being granted leave to defend when the said affidavit clearly shows that he had, in no uncertain terms, stated that the whole transaction as set out by the respondent was concocted, fabricated and that no money had been exchanged between the parties. It is a settled legal position that the discretion to be exercised, while considering a prayer for grant of leave to defend the suit, would depend on the peculiar facts of each case and that the same cannot be put in any straitjacket formula. If the Court finds that the defence is wholly moonshine and sham, then leave to defend is liable to rejected; but if the defence is found plausible, though not very probable, the Court would be justified in putting the defendant on terms while granting leave to defend. Thus, even though the appellant s defence may not be very probable, yet the same cannot be said to be wholly vexatious - the decision of the learned Trial Court declining to grant leave to defend to the appellant cannot be sustained - The appellant is granted leave to defend, subject to his depositing 50% of the principal amount with the learned Trial Court within eight weeks from today. The matter is remitted to the learned Trial Court for consideration of the matter afresh, in accordance with law - appeal allowed.

Summary

Issues Involved:
1. Validity of the loan transaction
2. Issuance and dishonoring of the cheque
3. Leave to defend application
4. Contradictory defenses and police complaints
5. Trial Court's decision on the defense being frivolous

Detailed Analysis:

1. Validity of the Loan Transaction:
The respondent claimed to have advanced a friendly loan of ?12 lakh to the appellant for constructing a house, provided in cash on various dates between December 2010 and December 2012. The appellant denied taking any loan from the respondent, asserting that the bank transactions cited were between the respondent and his family members, not involving the appellant. The appellant also highlighted the absence of any receipt or acknowledgment for such a significant loan, questioning the necessity and the lack of documentation.

2. Issuance and Dishonoring of the Cheque:
The respondent alleged that the appellant issued a post-dated cheque for ?12 lakh, which was dishonored with the remark "payment stopped by the drawer." The appellant countered this by claiming the cheque was given as security to the respondent’s father for a chit fund, which had already been settled. The appellant also pointed out that the cheque was drawn on UTI Bank Ltd., which had been renamed Axis Bank Ltd. in 2007, suggesting the cheque was outdated.

3. Leave to Defend Application:
The appellant sought leave to defend the summary suit, arguing that the defense was fair and reasonable. The Trial Court rejected this application, deeming the defense as sham and frivolous, leading to the decree in favor of the respondent for ?12 lakh with interest.

4. Contradictory Defenses and Police Complaints:
The appellant had filed a police complaint alleging misuse of a blank cheque given to the respondent’s father. The Trial Court noted contradictory defenses by the appellant in different proceedings, including the police complaint and the leave application. The appellant’s police complaint mentioned borrowing ?3 lakh from the respondent, conflicting with his claim in the leave application of not taking any loan.

5. Trial Court's Decision on the Defense Being Frivolous:
The Trial Court concluded that the appellant’s defense was frivolous and groundless, as he neither denied issuing the cheque nor his signatures on it. The appellant’s contradictory statements and failure to explain why the cheque was handed over to the respondent further supported this conclusion. Consequently, the Trial Court decreed the suit in favor of the respondent.

High Court’s Analysis and Decision:
The High Court examined the appellant’s defense and found that, despite not being very probable, it was plausible and not wholly vexatious. The Court noted the appellant’s illiteracy and employment as a Class-IV employee, considering these factors in the context of his defense. The Court highlighted the absence of specific pleas in the leave to defend application but emphasized the need for justice and the opportunity for the appellant to lead evidence.

Conclusion:
The High Court set aside the Trial Court’s decision, granting the appellant leave to defend subject to depositing 50% of the principal amount with the Trial Court within eight weeks. The matter was remitted to the Trial Court for fresh consideration, emphasizing the need for a fair trial and the opportunity for the appellant to present his defense. The appeal was allowed, and the suit was directed to be tried expeditiously within a year.