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TMI Blog2018 (1) TMI 1668X X X X Extracts X X X X X X X X Extracts X X X X ..... tiff and payments would be made either through cash or by cheque at the time of delivery of the goods by the Defendants. Orders were placed from time to time by the Defendants and supply of the skimmed milk powder was made by the Plaintiff. Accordingly, various invoices were raised by the Plaintiff and the receipt of the goods were duly acknowledged by the Defendants. The Plaintiff states that it was agreed between the parties that the payment would be made at the time of delivery of goods and in case of any delay, interest @ 18% per annum would be liable to be paid. 3. One such cheque issued for payment by the Defendant to the Plaintiff was Cheque No. 438786 for a sum of Rs. 15,00,000/- (Rupees Fifteen Lakhs) dated 21st November, 2010 drawn on Axis Bank Ltd. (hereinafter, 'Axis Bank'). In view of certain supplies which were made and payments which were outstanding, the Plaintiff deposited the said cheque through its Banker-HDFC Bank Limited, Chandni Chowk Branch, Delhi (hereinafter, 'HDFC Bank'). The same was dishonoured and received back by the Plaintiff with a cheque return memo dated 10th May, 2011 with the remarks 'Insufficient funds'. 4. The Plaintif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was only given as a security. The Defendants claimed that it had supplied dry milk worth Rs. 8,60,000/- to the Plaintiff, for which the payment is yet to be received. Trial court's judgment 6. The Trial court notes that the main issue raised by the parties related to the question of limitation. After noticing Article 35 of the Limitation Act, the Trial court held that the Plaintiff could not have come to the Court prior to the cheque having been dishonoured, inasmuch as, if the cheque had been encashed, no cause of action would have arisen. The Trial court relies upon Article 40 of the Limitation Act. The Trial court holds that the 'right to sue' arose only when the cheque was dishonoured. 7. The Trial court distinguishes the judgments cited by the Defendants and relies upon the decision of this court in Steel Authority of India v. Rohini Strips Ltd. (dated 17th August, 2007 in C.S.(OS) No. 1252/2003) (hereinafter, 'Steel Authority') wherein, a learned Single Judge of this Court held that upon dishonour of the cheque, the period of limitation would start from the date when the cheques are returned to the Plaintiff unpaid. Insofar as the question of payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, may pass any of the following orders: (i) dismiss the leave to defend-and thereby decree the suit; (ii) grant conditional leave to defend upon such conditions as the court deems fit; (iii) grant unconditional leave to defend. 10. The question as to whether leave to defend is to be granted or not depends upon the case set up by the Defendant, both by way of pleadings as well as documents. The Court takes an overall view of the matter at that stage, which is clearly prior to the trial of the suit, to determine whether the Defendant has a triable case or not. Order XXXVII Rule 3 of the CPC uses the terminology that the court would not refuse leave to defend unless "the facts disclosed by the Defendant do not communicate that he has a substantial defence to raise or the defence intended to be put up by the Defendant is frivolous or vexatious". Thus, the proviso to Order XXXVII Rule 3 of the CPC is worded in a double negative and the Defendant has to show a substantial defence which is not frivolous or vexatious. 11. While granting conditional leave to defend, the Court can also insist on the amount admitted by the Defendant, to be deposited or furnishing of security by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the Defendant in court." 12. Coming to the facts of the present case, the Defendant has raised four preliminary defences, each of which are dealt with hereunder: (i) Error in the summons by the Trial court 13. This objection is not directed against the Plaintiff but in fact is directed against the Registry of the Trial court, which may have erroneously issued a summons for judgment, mentioning the wrong amount. The same cannot, in any manner, be construed as an error on the part of the Plaintiff or an objection that would entitle the Defendants to leave to defend. 14. The error by the Registry cannot provide a defence to the Defendants to steal a march on the Plaintiff. This plea is frivolous to say the least. The Defendants were already well aware of the amount for which the Plaintiff had filed the suit as the initial summons in the suit issued on 4th July, 2014, clearly mentions the sum of Rs. 15,00,000/-. The Trial court in para 7 records that the wrong mentioning of the amount was merely a typographical error in the summons, which fact was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intiff commences from the date when the acknowledgment was so signed and which can only be the date of the cheque and not the date of dishonour of cheque. To hold otherwise, would be doing violation to the language of Section 18. Moreover, the cheques subject matter of RFAs No. 209/2016, 210/2016 and 212/2016 were returned with the endorsement of Account Closed." 18. The Defendants also placed reliance on the Division Bench judgment of this Court in A.K. Khurana v. Steelman Industries AIR 2000 Del 336 which differentiates between ante-dated and post-dated cheques and held that in the case of ante dated cheques, the limitation would begin from the date of the cheque and in the case of a post dated cheque, limitation would not begin until it can be presented for encashment. The other judgments relied upon by the Defendants have mostly been discussed in the above two judgments. 19. On the other hand, the Respondent relied upon the judgment of the Division Bench of this court in Rohini Strips v. Steel Authority of India Limited (dated 28th September, 2007 in FAO(OS) 380/2007) (hereinafter, 'Rohini Strips'). The Court was dealing with a suit under Order XXXVII of the CPC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of action for filing of the suit arose. In a case like the present one, where there were a series of transactions between the parties and some amount remained outstanding, the giving of the cheque, which was given as a security, would not by itself construe the cause of action. It is only when the payment is not made and the person in whose favour, the cheque has been issued, seeks to encash the cheque and it is thereafter dishonoured, that the right to sue itself arises. Until and unless the cheque is dishonoured, the Plaintiff cannot maintain a suit under Order XXXVII of the CPC in case of a cheque. There could be a situation where a cheque which has been issued as security for a future payment would be presented only when amounts become due and payable in future. The law of limitation has been designed not to reject claims of parties but to only ensure that old claims are not re-agitated and there is a finality after a particular period. 22. In Rohini Strips (supra), the Court was dealing with an Order XXXVII suit where cheques were issued for price of goods. It is in the said context that the Division Bench of this Court clearly upheld the finding that the cause of acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit is without cause of action because the plaintiff already received the money against the cheque in question and on which the present suit is being filed by the plaintiff. It is pertinent to mention here that the plaintiff and defendants were in business relation and plaintiff used to sale milk powder to the defendant and also used to purchase milk powder from the defendants. In the present case cheque in question was issued on 21.11.2010 as security and after issuing cheque plaintiff have already received the payment in following manner: Cheque No. Date Amount 370190 03.11.2011 5,00,000/- 370306 06.01.2011 3,50,000/- 370308 07.01.2011 3,50,000/- All drawn on HDFC Bank, New Delhi Other than this defendants have supplied dry milk to the plaintiff worth Rs. 8,60,000/- which is still to be recovered from the plaintiff. After receiving the payment the plaintiff deposited the cheque exactly two days before the cheque was expiring i.e., 08.05.2011. Meanwhile, plaintiff received the payment against cheque in question and also during this period the defendant supplied milk powder to the plaintiff." 26. There seems to be a typographical error in the aforementioned para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases where speedy decisions are desirable in the interests of trade and commerce. In general, therefore, the test is to see whether the defence raises a real issue and not a sham one, in the sense that, if the facts alleged by the defendant are established, there would be a good, or even a plausible, defence on those facts. Now, what is the position here? The defendants admitted execution of the cheque but pleaded that it was only given as collateral security for the price of goods which the plaintiff supplied to the defendants. They said that those goods were paid for by cash payments made from time to time and by other cheques and that therefore the cheque in suit had served its end and should now be returned. They set out the exact dates on which, according to them, the payments had been made and gave the numbers of the cheques. This at once raised an issue of fact, the truth and good faith of which could only be tested by going into the evidence and, as we have pointed out, the learned trial Judge held that this defence did raise a triable issue. But he held that it was not enough for the defendants to back up their assertions with an affidavit; they should also have produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fide is that the defendant did not prove his assertions before he was allowed to put in his defence; and there is an obvious failure of justice if judgment is entered against a man who, if he is allowed to prove his case, cannot but succeed. Accordingly, interference is called for here." 29. Though the above judgement of the Supreme Court was prior to the amendments in 1976 to Order XXXVII of the CPC, the issue that is addressed by the Supreme Court is the standard of proof required for the defendant to be eligible for leave to defend. On this issue, the amendments have no bearing. The Supreme Court has categorically held that an affidavit with the particulars of payments is sufficient to grant leave to defend at this stage, subject to establishing the factum of the said payments having been made, at trial. All issues are, thus, left open. 30. Defendants are accordingly, entitled to conditional leave to defend, subject to depositing a sum of Rs. 3,00,000/- (Three Lakhs) in the Trial court within 10 days, which is the difference in the amount of the cheque of Rs. 15,00,000/- and the amounts claimed to have been paid by the Defendants. If the said deposit of Rs. 3 lakhs is not made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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