2019 (7) TMI 818 - SC - Indian Laws

Grant of conditional leave to defend - whether on basis of the materials on record, whether their has been just and proper exercise of the discretion to grant conditional leave to defend by deposit of ₹ 30,00,000/after consideration of all material and relevant factors? - HELD THAT - The fact that there was commercial dealing between the parties was not in issue at all. According to the plaint of the respondent, commercial dealings between the parties ended on 03.06.2011. It stands to reason why outstanding payment in respect of the same came to be made by cheque as late as 01.03.2014. It does not appeal to logic or reason much less to the usual practice in commercial dealings. In any event the respondent has not furnished any explanation with regard to the same. At this stage it becomes necessary to notice the contention of the appellant that the signatures and the contents of the cheques are in different writings. Significantly on 29.10.2015, in the prosecution instituted by the respondent under the Act, the court required the respondent to file certain additional documents because the appellant denied the existence of any legal liability for any sum due. It is only thereafter that the Summary Suit was instituted on 24.11.2015. The prosecution under the Act was subsequently unconditionally withdrawn on 14.12.2015. These facts are not in dispute and are clearly discernible from the records. This coupled with the specific contention of the appellant, not denied by the respondent, that it had returned defective goods and paid the balance dues of ₹ 5,00,000/, we find the conclusion to grant leave to defend as perfectly justified - But the defence raised by the appellant in the aforesaid background was certainly not a sham or a moonshine much less frivolous or vexatious and neither can it be called improbable. The fact that there may have been commercial relations between the parties was the ground for the institution of the summary suit but could not per se be the justification for grant of conditional leave sans proper consideration of the defence from the materials on record. The impugned orders granting conditional leave to defend are held to be unsustainable and are set aside - Appeal allowed.

Summary

Issues Involved:
Grant of conditional leave to defend in a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 for recovery of dues inclusive of interest based on commercial transactions between the parties and withdrawal of prosecution under Section 138 of the Negotiable Instruments Act.

Detailed Analysis:

Issue 1: Grant of Conditional Leave to Defend
The appellant contested the grant of conditional leave to defend in a summary suit, arguing that the condition for deposit of a specified amount could not have been ordered without admissible dues. The appellant emphasized that all legitimate dues had been paid, defective goods were returned, and no further transactions had taken place between the parties. The appellant relied on a legal precedent to support their argument.

Issue 2: Commercial Transactions and Outstanding Dues
The respondent filed a summary suit for recovery of outstanding dues related to goods supplied to the appellant, citing commercial transactions. The respondent maintained that the withdrawal of the criminal prosecution under the Negotiable Instruments Act was irrelevant to the suit and that the appellant needed to prove during the trial that payment for the goods had been made. The respondent relied on the absence of documentary evidence from the appellant's side to support their claim.

Issue 3: Procedural Compliance and Legal Principles
The summary suit detailed the supply of electrical cables and wires to the appellant, along with outstanding dues and interest claims. The court examined the procedural aspects of the case, including the withdrawal of the prosecution under the Negotiable Instruments Act and the subsequent institution of the summary suit. Legal principles governing the grant of leave to defend in summary suits were outlined, emphasizing the need for a fair and reasonable defense to justify unconditional leave.

Issue 4: Exercise of Discretion and Justification for Conditional Leave
The court analyzed the exercise of discretion in granting conditional leave to defend, focusing on the presence of a plausible defense and genuine triable issues. The court highlighted the appellant's defense as substantial and not frivolous or vexatious, leading to the conclusion that conditional leave was not justified. The court found that the commercial relationship between the parties alone was not sufficient grounds for granting conditional leave without proper consideration of the defense presented.

Conclusion:
The Supreme Court held that the orders granting conditional leave to defend were unsustainable and set them aside, granting the appellant unconditional leave to defend. The court emphasized the need for a proper assessment of the defense based on the materials on record and concluded that the appellant had raised a substantial defense and genuine triable issues, justifying unconditional leave to defend in the summary suit.