HON'BLE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA LPA No.6 of [SECTION]019 alongwith LPAs No.3, 4, 5, 7 & 8 of [SECTION]019 Reserved on: [SECTION]7.11.[SECTION]019 .
Decided on: 10.1[SECTION].[SECTION]019.
LPA No.6 of [SECTION]019:
[ENTITY] and another Appellants Versus M/s [ENTITY] Respondent LPA No.3 of [SECTION]019:
[ENTITY] and another Appellants Versus M/s [ENTITY] Respondent LPA No.4 of [SECTION]019:
[ENTITY] and another Appellants Versus M/s [ENTITY] Respondent LPA No.5 of [SECTION]019:
[ENTITY] and another Appellants Versus M/s [ENTITY] Respondent LPA No.7 of [SECTION]019:
[ENTITY] and another Appellants Versus M/s [ENTITY] Respondent LPA No.8 of [SECTION]019:
[ENTITY] and another Appellants Versus .
M/s [ENTITY] Respondent Coram:
Hon'ble Mr. Justice [ENTITY], Chief Justice. Hon'ble Ms. Justice [ENTITY], Judge.
Whether approved for reporting?1 For the appellants : Mr. [ENTITY], Advocate, in all appeals.
For the respondent :
Mr. [ENTITY], Sr. Advocate, with Mr. [ENTITY] and Mr. N.K. r Bhalla, Advocates, for the respondents, in all appeals.
[ENTITY], Judge.
The respondent-plaintiff instituted a summary civil suit under [SECTION] of the [ACT]. Leave to defend this summary civil suit instituted by the respondent-
plaintiff has been declined to the appellants-defendants by learned Single Judge vide order dated [SECTION]0.11.[SECTION]018. Hence, instant appeal has been preferred.
[SECTION]. Since similar questions of law and facts are involved in all the Letter Patent Appeals, therefore, with the consent of learned counsel for the parties, the same are taken up together for disposal.
Whether reporters of Local Papers may be allowed to see the judgment? Yes.
For convenience, facts of LPA No.6 of [SECTION]019, originating from Civil Suit No.[SECTION][SECTION] of [SECTION]016, are referred to hereinafter. Parties are referred to here-in-below as they were .
before learned Single Judge.
3. Facts:
3(i). The facts of the case may be noticed as under:-
A summary civil suit was filed by respondent-
plaintiff under [SECTION] of the [ACT] against the appellants-defendants for recovery of Rs.54,60,[SECTION]41/-
alongwith interest at the rate of 18% per annum, on principal amount till realization.
3(ii). The basis for filing the civil suit was:-
(a). Plaintiff was a Cooperative Society, registered under [ACT];
(b). Defendant No.1 was Member of plaintiff/ Cooperative Society as well as Director of defendant No.[SECTION]. He received loan in person for his business operations from plaintiff-Society. Loan was to be repaid alongwith interest. For repayments of loan, defendants issued cheques after adding interest component in total loan amount;
(c). Cheque No.6445[SECTION]5, dated 06.11.[SECTION]016, .
drawn on State Bank of India, Solan, amounting to Rs.47,00,000/-, was issued by defendant No.1 from the account of defendant No.[SECTION]. This cheque was issued in discharge of defendants existing debt liability towards plaintiff;
(d).r The cheque was presented by the plaintiff for encashment. It was dishonoured on the ground that "Drawer Sign not as per Mandate". The notice demanding payment of cheque amount in terms of [SECTION] of the [ACT], was issued by the plaintiff on 07.0[SECTION].[SECTION]017. After complying all the legal and codal formalities, a complaint was filed by the plaintiff against the defendants, which is pending adjudication before learned Judicial Magistrate, 1st Class, Court No.[SECTION], Solan, District Solan;
(e). The cheque could not be encashed by the plaintiff because of dishonest and wrongful acts attributable to the .
defendants, who did not sign the cheque as per required mandate to discharge their existing liability;
(f). On 10.06.[SECTION]016, the defendants issued a notice to the plaintiff admitting that whatever amounts used to be taken as r loan, was shown in the cheques.
However, the defendants have started taking contradictory and false pleas for usurping the loan amount.
With the aforesaid pleas, summary civil suit was filed under [SECTION] & [SECTION] of [ACT] by the plaintiff through its Secretary and Principal Authorized Officer Sh. [ENTITY].
3(iii) Upon service of notice of the summary suit, the defendants put in appearance and moved an application under [SECTION] of the [ACT], seeking leave to defendant the suit. The leave was sought on following grounds:-
(i). At no point of time, any loan amount was advanced to the defendants in cash by the plaintiff. Plaintiff is a registered .
Cooperative Society. It is not expected to transact or advance loan in cash nor it is authorized to advance any loan amount in cash to anyone. No resolution has been passed in that regard by the Society. The defendants had not taken r any loan amount from the plaintiff in cash;
(ii) Loan transactions were made between plaintiff and defendant No.1. Loan was remitted by plaintiff to defendant No.1 through banking transactions and not in cash. The entire loan amount received by defendant No.1 was duly returned by him to plaintiff through valid banking transactions. Finally, statement of account was issued by plaintiff, whereunder, upto 31.03.[SECTION]016 zero balance was shown by the plaintiff. The statement of account was appended alongwith the application;
(iii). There was no outstanding loan amount .
due from defendants to the plaintiff. The defendants also alleged that cheque in question was forged by the plaintiff. The amount in cheque was neither advanced as loan by plaintiff nor received by defendants. Plaintiff has not appended r any books of account or any document to prove that loan under cheque was ever advanced to the defendants;
(iv). One of the blank security cheques handed over by the defendants to Sh.
[ENTITY] before March [SECTION]016, has been forged by him to
pressurize defendant No.1. The details on the back side of cheque are also forged;
(v). The complaint filed under [SECTION] of the [ACT], was baseless. No amount is outstanding and due from defendants to the plaintiff;
(vi). Cheque No.407804 of State Bank of India, Solan, was misused by Sh.
[ENTITY], in connivance .
with his son Mr. [ENTITY], for extracting money from defendants. This cheque amounting to Rs.9 lacs was presented by Sh. [ENTITY] in his bank account, i.e. State Bank of India, Jaunaji Branch, for encashment of M/s r A.R. Associates. After acquiring knowledge about misuse of this cheque, defendant No.1 objected the transaction and the same was got cancelled.
Defendants, thereafter, issued notice to the plaintiff on 10.06.[SECTION]016, requesting for returning of all the signed blank cheques and for not misusing these cheques in any manner whatsoever.
Despite receipt of this notice, the plaintiff acted with malice and instead of returning the security cheques, starting misusing the same by forging them as per its own sweet will;
(vii). The defendants also took an objection to the jurisdiction of Civil Court by submitting that in terms of [SECTION] of .
[ACT], the dispute raised in the summary suit was required to be referred to the Arbitrator and further that [SECTION] of the Act barred the jurisdiction of the Civil Court to entertain the dispute in r question and therefore, summary suit was not maintainable.
4. The application for leave to appeal was opposed by the plaintiff on the ground that defence, which was raised in the application, had never been raised earlier; the defence was implausible; in case the accounts were settled, then the defendants would have taken back the cheques allegedly issued by way of security. It was reiterated that suit has been filed on the basis of [ACT], therefore, application seeking leave to defend, was opposed.
5. After hearing the parties, learned Single Judge declined to grant leave to defendant vide order dated [SECTION]0.11.[SECTION]018. Feeling aggrieved, defendants have preferred instant Letter Patent Appeal.
6. We have learned counsel for the parties and gone through the record.
6(a). Since the defendants' application for leave to .
defend under the provision of [SECTION] of [ACT] has been dismissed, therefore, it will be appropriate to first extract this provision:-
"[SECTION]. The defendant may, at any time within ten days from the service of such summons for judgment, by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the court or judge to be just:
PROVIDED that leave to defend shall not be refused unless the Court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defence to raise or that the defence intended to be put up by the defendant is frivolous or vexatious:
PROVIDED FURTHER that, where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit shall not be granted unless the amount so admitted to be due is deposited by the defendant in court."
6(b). While deciding the application for leave to defend, parameters required to be considered, have been determined by Hon'ble Apex Court in following judgements:-
6(b)(i). In AIR 1958 SC 3[SECTION]1, titled [PRECEDENT], Hon'ble Apex Court held as under:-
"11. 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.
(11A). 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 produced writings and documents which they said were in their possession and which they asserted would prove that the cheques and payments referred to in their defence were given in payment of the cheque in suit; and he said "In the absence of those documents, the defence of the defendants seems to be vague consisting of indefinite assertions "
This is a surprising conclusion. The facts given in the affidavit are clear and precise, the defence could hardly have been clearer. We find it difficult to see how a defence that, on the face of it, is clear becomes vague simply because the evidence by which it is to be proved is not brought on file at the time the defence is put in."
1[SECTION]. The learned Judge has failed to see that the stage of proof can only come after the defendant has been allowed to enter an appearance and defend the suit, and that the nature of the defence has to be determined at the time when the affidavit is put in. At that stage all that the Court has to determine is whether " if the facts alleged by the defendant are duly proved " they will afford a good, or even a plausible, answer to the plaintiff's claim. Once the Court is satisfied about that, leave cannot be withheld and no question .
about imposing conditions can arise; and once leave is granted, the normal procedure of a suit, so far as evidence and proof go, obtains."
6(b)(ii). In [PRECEDENT], titled [PRECEDENT], Hon'ble Apex Court held as under:-
"3. In this appeal it is contended that what should be examined at the stage of grant of leave to defend is whether there was a real or a sham defence and whether the facts alleged by the appellants if established would be a good defence and the trial court should go into the question whether the facts alleged were true or not, as that situation would arise only after leave was granted and at the trial. That a condition as to security could be imposed if the Court was of the opinion that the defence was out forward with a view to prolong this suit.
4. The position in law has been explained by this Court in [PRECEDENT] and [PRECEDENT]. The propositions laid down in these decisions may be summed up as follows:-
(a) If the defendant satisfies the Court that he has a good defence to the claim on merits, 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 possibly food defence, 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, if the affidavit disclosed that .
at the trial he may be able to establish a defence to the plaintiff claim, the court may impose conditions at the time of granting leave to defend- the conditions being as to time of trial or mode of trial but not as to payment into Court or furnishing security.
(d) If the defendant has no defence, or if the defence is sham or illusory or practically moonshine, the defendant is not entitled to leave defend.
(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine, the Court may show mercy to the defendant by enabling him to try to prove a defence but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into Court or otherwise secured. In fact in identical matters on the file of the said High Court in summary suit No. [SECTION]963 of 1990 Dena Bank vs. M/s. Sunil Enterprises and [PRECEDENT], leave to defend had been granted to defendants."
6(b)(iii). All the Principles for granting leave to defend have been culled out by the Hon'ble Apex Court in ([SECTION]017) 1 SCC 568, titled [PRECEDENT], holding as under:-
"17.1. If the defendant satisfies the Court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit.
17.[SECTION]. If the defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend.
17.3. Even if the defendant raises triable issues, if a doubt is left with the trial judge about the defendant's good faith, or the genuineness of the triable issues, the trial judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.
17.4. If the Defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.
17.5. If the Defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith.
17.6. If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even 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."
6(c). In the light of above legal position, facts in the instant case, particularly the defence taken by the defendants, needs examination, vis-a-vis, the case set up by the plaintiff to .
determine whether the defendants are entitled for leave to defend:-
(i). As per defendants:- No transaction ever took place between the plaintiff and defendants in cash. Neither any loan amount was given by the plaintiff in cash r to the defendants nor defendants received any loan amount from the plaintiff in cash;
(ii). Plaintiff being a registered Cooperative Society could not have sanctioned or granted any loan amount to the defendants in cash. There was no resolution on behalf of the Members of Society authorizing grant any loan amount in cash to the plaintiff;
(iii). All transactions between the parties took place through valid banking transactions, i.e. through cheques, RTGS etc.;
(iv). Blank cheques were issued by the defendants as security to the plaintiff prior to March [SECTION]016. By 31.03.[SECTION]016, the .
defendants had repaid the entire loan amount due from them to the plaintiff and had discharged their entire loan liability. It is for this reason, on 31.03.[SECTION]016, statement of account was issued by the plaintiff showing nil r balance due from the defendants;
(v). One cheque bearing No.407804 was misused by Sh. [ENTITY], in connivance with his son Sh. [ENTITY], by presenting the same to their bank account in SBI, Janunji Branch.
After acquiring knowledge about the misuse of the blank signed cheque, the defendants stopped the transaction and thereafter issued notice to the plaintiff on 10.06.[SECTION]016. In the notice dated 10.06.[SECTION]016, the defendants asked the plaintiff for return of all the blank signed cheques issued as security with further request not to misuse the same;
(vi). Cheque bearing No.6445[SECTION]5, dated .
06.11.[SECTION]016, amounting to Rs. 47 lacs, on the basis of which, summary suit was filed, was forged by the plaintiff subsequent to the issuance of legal notice dated 10.06.[SECTION]016. The cheque, according to the defendants, was forged r as it was allegedly issued towards satisfaction of amount allegedly loaned to him in cash, whereas, he never received any loan amount in cash from the plaintiff. The endorsements at the back of cheque in handwriting with regard to payment of amount in cash do not bear the signatures of the defendants. The details of loan amount mentioned on the back side of the cheque allegedly issued to defendants in cash, are forged.
7. Learned Single Judge, while denying the leave to defend, has relied upon the Legal Notice dated 10.06.[SECTION]016 issued by the defendants and observed that in this legal notice the defendants have admitted that cheques were issued by them to satisfy loan amounts and this amounts to admission of .
their loan liability. Relevant extracts from the legal notice are:-
" In order to secure repayment of loans taken on different dates Shri [ENTITY] being officials of the Society and company used to take blank cheques signed by my said client and without filling the name of the Society, company or any individual. However, whatever amounts used to be taken as loan was shown in the said cheques. My client also issued blank cheques duly signed by him in his individual capacity from his saving account which were handed over to Shri [ENTITY] aforesaid. Further blank stamp paper duly signed by my client as partner of the aforesaid concerns and also in his individual capacity were obtained by your Society and company and handed over to Shri [ENTITY] official of the Society and company."
8. Leave to defend has been denied on the ground that the defendants had admitted in the above extracted para of legal notice that amount filled in the cheque was towards the loan liability. However, the legal notice, has to be read in its entirety. On reading of the legal notice, as a whole, it becomes apparent that the notice dated 10.06.[SECTION]016 was issued by the defendants, pointing out that the blank cheques signed by the defendants without filling the name of plaintiff or any individual, were issued by them as security towards the amount loaned to them. It is also borne out from this notice that according to the defendants their entire loan liability towards the plaintiff was discharged. Still thereafter, a cheque No.407804 to the tune of Rs.9 lacs had been misused by the plaintiff on 09.06.[SECTION]016, necessitating the defendants to issue .
the legal notice in question. It was also stated in this legal notice that no amount was due to the plaintiff from the defendants, therefore, retention of blank signed cheques were uncalled for and therefore, the cheques be returned and be not misused.
9. The defendants had also placed on record the statement of account showing nil balance due from them to the plaintiff as on 31.03.[SECTION]016. Cheque No.407804 was presented thereafter leading to issuance of legal notice dated 10.06.[SECTION]016. The summary civil suit was filed on the basis of Cheque No.6445[SECTION]5 dated 06.11.[SECTION]016.
10. The defendants have also raised a question of jurisdiction of the Civil Court to entertain the dispute raised in summary civil suit in lieu of provisions of [SECTION] read with [SECTION] of the [ACT], to entertain the complaint.
11. Various questions of facts have been raised by the defendants disputing their liability to pay any amount to the plaintiff under the cheque in question. There are triable questions. Claim of the plaintiff cannot be decided merely on the basis of cheque allegedly issued by defendants.
Additionally, questions of law have also been raised by the defendants in respect of the very jurisdiction of the Civil Court .
to try the dispute raised by the plaintiff, a registered Co-
operative Society. Leave to defend in the facts and circumstances deserves to be granted to the defendants.
1[SECTION]. In light of above discussion, the appeals are allowed and the order dated [SECTION]0.11.[SECTION]018, passed in OMP No.175 of [SECTION]018 in Civil Suit No.[SECTION][SECTION] of [SECTION]018, is quashed and set aside. Accordingly, leave to defend the civil suit is granted to the appellants-defendants. Pending miscellaneous application(s), if any, shall also stand disposed of.
[ENTITY]) Chief Justice ([ENTITY]) December 10, [SECTION]019 Judge ([ENTITY])