Appeal No 508 of 1976
Appeal by Special Leave from the Judgment and Order dated 27 10 1975 of the Delhi High Court in Civil Revision No 11575
SN Andley Urea Dutta and TC Sharma for the appellant
KC Agarwala and MML Srivastava for the respondent
The plaintiff respondent alleged to be a regis tered partnership firm filed a suit on 25th April 1974 through Smt
Pushpa Mittal shown as one of its partners for the recovery of Rs 2126528 as principal and Rs 7655  as interest at 12 per annum
according to law and Mercantile usage on the strength of a cheque drawn by the defendant on 12th May 1971 on the State Bank of India which on presentation was dishonoured
The plaintiff alleged that the cheque 1061 was given as price of goods supplied
The defendant appel lant firm admitted the issue of the cheque by its Managing partner but it denied any privity of contract with the plaintiff firm
The defendant appellant had its own version as to the reasons and purposes for which the cheque was drawn
The suit was instituted under the provisions of Order 37 Civil Procedure Code so that the defendant appellant had to apply for leave under Order 37 Rule 2 of the Code to defend
This leave was granted unconditionally by the Trial Court after a perusal of the cases of the two sides
Order 37 Rule 3 Civil Procedure Code lays down  1  The Court shall upon application by the defendant give leave to appear and to defend the suit upon affidavits which dis close such facts as would make it incumbent on the holder to prove consideration or such other facts as the Court may deem sufficient to support the application
2 Leave to defend may be given uncondi tionally or subject to such terms as to payment into Court giving security framing and recording issues or otherwise as the Court thinks fit
A learned Judge of the High Court of Delhi had on a revision application under Section 115 Civil Procedure Code interfered with the order of the Additional District Judge of Delhi granting unconditional leave after setting out not less than seven questions on which the parties were at issue
The learned Judge had after discussing the cases of the two sides and holding that triable issues arose for adjudication nevertheless concluded that the defences were not bona fide
He therefore ordered For these reasons I would allow the revision petition and set aside the order of the trial Court
Instead I would grant leave to the defendant on their paying into Court the amount of Rs 2126528 together with interest at the rate of 6 per cent per annum from the date of
suit till payment and costs of the suit Only court fee amount at this stage and not the lawyer s fee
The amount will be deposited within two months
There will be no order as to costs of this revision
The only question which arises before us in this appeal by special leave Could the High Court interfere in exercise of its powers under section 115 Civil Procedure Code with the discretion of the Additional District Judge in granting unconditional leave to defence to the defendant appellant upon grounds which even a perusal of the order of the High Court shows to be reasonable  Santosh Kumar vs Bhai Mool Singh1 was a case where a cheque the execution of which was admitted by the defend ant had been dishonoured
The defendant had set up his defences for refusal to pay
11958 SCR 1211 1215
1062 This Court noticed the case of Jacobs vs Booth s Distill ery Company1 where it was held that whenever a defence raises a really triable issue leave must be given
Other cases too were noticed there to show that this leave must be given unconditionally where the defence could not be shown to be dishonest in limine
This Court observed there at p 1215 The learned Counsel for the plaintiff respondent relied on Gopala Rao vs Subba Rao AIR  Manohar Lal vs Nanhe Mal AIR  and Shib Karan Das vs Mohammed Sadiq AIR 1936 Lah 584
All that we need say about them is that if the Court is of opinion that the defence is not bona fide then it can impose conditions and is not tied down to refusing leave to
defend
We agree with Varadachariar J in the Madras case that the Court has this third course open to it in a suitable case
But it cannot reach the conclusion that the defence is not bona fide arbitrarily
It is as much bound by judicial rules and judicial procedure in reaching a conclusion of this kind as in any other matter On general principles relating to the exercise of jurisdiction of High Courts under section 115 Civil Proce dure Code several cases were cited before us by Mr Andley ML Sethi vs
RP Kapur2 The Managing Director MIG Hindustan Aeronautics Ltd Balanagar Hyderabad  lint
vs Ajit Prasad Tarway Manager Purchase  Stores Hindustan Aeronautics Ltd Balanagar Hyderabad3 DLF Housing  Construction Co Pvt
Ltd New Delhi vs Sarup Singh  Ors
4 Milkhiram India Pvt Ltd  Ors
vs Chamanlal Bros5 We need not dilate on the well established principles repeatedly laid down by this Court which govern jurisdiction of the High Courts under section 115 CPC
We think that these principles were ignored by the learned Judge of the High Court in interfering with the discretionary order after a very detailed discussion of the facts of the case by the learned Judge of the High Court who had differred on a pure question of fact whether the defences could be honest and bona fide
Any decision on such a question even before evidence has been led by the two sides is generally hazard ous
We do not think that it is fair to pronounce a cate gorical opinion on such a matter before the evidence of the parties is taken so that its effects could be examined
In the case before us the defendant had denied inter alia liability to pay anything to the plaintiff for an alleged supply of goods
It is only in cases where the defence is patently dishonest or so unreasonable that it could not reasonably be expected to succeed that the exercise of discretion by the Trial Court to grant leave unconditionally may be 1 2  3 4  5 AIR 1965 SC 1698
1063 questioned
In the judgment of the High Court we are unable to find aground of interference covered by Section 115 CPC
In Smt
Kiranmoyee Dassi  Anr
vs Dr J Chatterjee1 Das
J after a comprehensive review of authorities on the subject stated the principles applicable to cases covered by order 17 CPC in the form of the following propositions at p 253 a If the Defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the Defendant is entitled to unconditional leave to defend
b If the Defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the Defendant is entitled to unconditional leave to defend
c If the Defendant discloses such facts as may be deemed sufficient to entitle him to defend that is to say although the affidavit does not positively and immediately make it clear that he has a defence yet shews such a state of facts as leads to the infer ence that at the trial of the action he may be able to establish a defence to the plaintiff s claim the Plaintiff is not entitled to judg ment and the Defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security
d If the Defendant has no defence or the defence set up is illusory or sham or practi cally moonshine then ordinarily the Plaintiff is entitled to leave to sign judgment and the Defendant is not entitled to leave to defend
e If the Defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the Plain tiff is entitled to leave to sign judgment the Court may protect the Plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise se cured and give leave to the Defendant on such condition and thereby show mercy to the Defendant by enabling him to try to
prove a defence
The case before us certainly does not fall within the class e set out above
It is only in that class of case that an imposition of the condition to deposit an amount in Court before proceeding further is justifiable
 253
1064 Consequently we set aside the judgment and order of the High Court and restore that of the Additional District Judge
The parties will bear their own costs
Appeal allowed


Summary:
The appellant issued the respondent a cheque which was dishonoured
The respondent alleged that the cheque was the consideration for goods supplied
The appellant admitted issuing the cheque but denied by privity of contract
The respondent filed a suit under order 37 CPC and the appellant applied for the required leave to defend which was granted by the trial Court unconditionally
On revision under section 115 CPC the High Court held that triable issues arose for adjudication
 but it considered the defence to be dishonest
If allowed the revision petition and gave conditional leave to defend on the ground that the defences were not bona fide
Allowing the appeal the Court HELD It is only in cases where the defence is patently dishonest or so unreasonable that it could not reasonably be expected to succeed that the exercise of discretion by the Trial Court to grant leave unconditionally may be questioned
In other cases it is not fair to pronounce a categorical opinion on such a matter before the evidence of the parties is taken so that its effects could be examined
High Court s interference under sec
115 CPC with the correct exercise of its discretion by the trial Court was patently erroneous
11062 Santosh Kumar vs Bhai Mool Singh  at 1215 Jacobs vs Booth s Distillery Co followed
Kiranmoyee Dassi and another vs Dr J Chatterjee at 253 distinguished
ML Sethi vs
RP Kapur  The Managing Director MIG Hindustan Aeronautics Ltd Bulana gar Hyderabad  A nr
vs A Ajit Prasad Tarway Manager Purchase and Stores
Hindustan Aeronautics Ltd Balanagar Hyderabad AIR  DLF Housing  Construction Co Pvt Ltd New Delhi vs Sarup Singh  Ors
1970 2
SCR 368 and Milkhiram India P Ltd and Ors
vs Chamanlal Bros AIR 1965 SC 1998 referred to