2019 (8) TMI 1 - HC - Indian Laws

Conditional leave to defend upon deposit - dishonored cheques - whether, in the backdrop of the material on record, the learned Judge, City Civil Court, justifiably exercised the discretion to grant conditional leave to defend upon deposit of the amount covered by the dishonoured cheques? HELD THAT - The defence set up in the case at hand needs to be appreciated so as to determine in which of the categories the defence set up by the petitioner falls. Recourse to the impugned order, at this stage, may be apposite. The learned Judge found that the defence of the defendant that he had delivered blank signed cheques is a sham and moonshine defence - The defence set up by the defendant is required to be appreciated in the backdrop of the fact that there is no qualm over the fact that there were transactions of sale and delivery of the goods between the plaintiff and defendant. It is indisputable that the plaintiff delivered the goods and defendant paid for the price of the bills at serial nos.1 to 15. Thus, the quality of defence of misuse of blank signed cheques needs to be evaluated on the anvil of the contemporaneous record and conduct of the defendant. Undoubtedly the plaintiff placed on record the delivery challans after the defendant alleged that there were no documents to evidence the sale and delivery of the goods. However, this fact itself is not sufficient to jettison away the claim of the plaintiff. The fact that the suit was instituted on the basis of the dishonoured cheques cannot be lost sight of. The plaintiff may adduce evidence in proof of underlying transaction of sale and delivery of goods. However, in view of the presumption of law incorporated in Section 118 of the N. I. Act, the Court is enjoined to presume that the cheques were drawn for consideration - The defence raised by the defendant thus fall in the category of a defence which is plausible but improbable - the learned Judge rightly exercised the discretion to grant conditional leave upon deposit of the amount covered by the dishonoured cheques. Petition dismissed.

Issues Involved:
1. Competency of the plaintiff to institute the suit.
2. Territorial jurisdiction of the City Civil Court at Mumbai.
3. Validity of the defendant's claim of having delivered blank signed cheques.
4. Proof of sale and delivery of goods.
5. Discrepancy in the outstanding amount claimed by the plaintiff.
6. Justifiability of the grant of conditional leave to defend upon deposit of the amount covered by the dishonoured cheques.

Issue-wise Detailed Analysis:

1. Competency of the plaintiff to institute the suit:
The defendant contested the plaintiff's competency to institute the suit on behalf of the HUF and as the Proprietor of M/s. Shree Shyam Silk Mills. However, the judgment does not delve deeply into this issue, suggesting that it was not a significant factor in the final decision.

2. Territorial jurisdiction of the City Civil Court at Mumbai:
The defendant argued that the City Civil Court at Mumbai lacked the territorial jurisdiction to entertain, try, and dispose of the suit. This issue was raised but not elaborated upon in the judgment, indicating it was not a pivotal point in the court's decision-making process.

3. Validity of the defendant's claim of having delivered blank signed cheques:
The defendant claimed that the cheques were blank and signed only as security, which the plaintiff misused. The court found this defense to be "sham and moonshine" for several reasons:
- The bill numbers were mentioned overleaf each dishonoured cheque, indicating the liability towards which it was drawn.
- Corrections in the cheques were signed by the drawer, undermining the claim of blank cheques.
- The defendant failed to provide delivery challans for admitted transactions to compare with disputed ones.

4. Proof of sale and delivery of goods:
The defendant contended that there was no proof of sale and delivery of goods. The plaintiff countered by providing delivery challans in a rejoinder. The court noted that the plaintiff's suit was based on dishonoured cheques, and under Section 118 of the N.I. Act, there is a presumption that cheques are drawn for consideration. The court found the plaintiff's evidence (delivery challans) credible and the defendant's late claim of no additional transactions beyond the admitted ones unconvincing.

5. Discrepancy in the outstanding amount claimed by the plaintiff:
The defendant pointed out discrepancies in the amounts claimed in two notices issued by the plaintiff. The court acknowledged this discrepancy but did not find it sufficient to undermine the plaintiff's overall claim, especially given the other evidence presented.

6. Justifiability of the grant of conditional leave to defend upon deposit of the amount covered by the dishonoured cheques:
The core issue was whether the City Civil Court justifiably exercised discretion in granting conditional leave to defend. The court reviewed principles from previous Supreme Court cases, emphasizing that if a defense is frivolous or sham, leave to defend should be refused. If the defense is plausible but improbable, the court may impose conditions, such as deposit of the disputed amount. The court found that the defendant's defense was plausible but improbable and upheld the conditional leave to defend upon deposit of the amount covered by the dishonoured cheques.

Conclusion:
The petition was dismissed, and the conditional leave to defend granted by the City Civil Court was upheld. The court clarified that this decision was solely about the justifiability of conditional leave and did not express any opinion on the merits of the case, which would be determined at trial. The rule was discharged, and no order as to costs was made.

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