Case Note & Summary
The Supreme Court considered an appeal against an order granting conditional leave to defend in a summary suit filed by Polycab Wires Pvt. Ltd. against Sudin Dilip Talaulikar for recovery of Rs.64,18,609/-. The respondent had supplied electrical cables and wires to the appellant between 2010 and 2011, and claimed outstanding dues. Two cheques dated 01.03.2014 were dishonoured, leading to a prosecution under Section 138 of the Negotiable Instruments Act, 1881. The respondent later unconditionally withdrew the prosecution and filed a summary suit under Order XXXVII CPC. The appellant contended that all dues were paid, defective goods were returned, and the withdrawal of the prosecution indicated no liability. The trial court and High Court granted conditional leave to defend requiring deposit of Rs.30,00,000/-. The Supreme Court held that both courts misdirected themselves by focusing on the existence of a commercial relationship rather than the specific defences raised. The appellant raised triable issues, including the unconditional withdrawal of the criminal prosecution and the lack of explanation for cheques issued long after the dealings ended. Applying the principles from IDBI Trusteeship Services Limited vs. Hubtown Limited, the Court found that the appellant was entitled to unconditional leave to defend. The appeal was allowed, the impugned orders were set aside, and the appellant was granted unconditional leave to defend the suit.
Headnote
A) Civil Procedure - Summary Suit - Conditional Leave to Defend - Order XXXVII Rule 3(5) CPC - Discretion - The court must consider whether the defendant has a substantial defence or raises triable issues; if so, unconditional leave should ordinarily be granted. Conditional leave is only justified when there is doubt about the defendant's good faith or genuineness of triable issues. In this case, the appellant raised triable issues including the unconditional withdrawal of a prosecution under the Negotiable Instruments Act, 1881 for the same dues, and the lack of explanation for cheques issued long after the commercial dealings ended. The courts below misdirected themselves by focusing on the existence of a commercial relationship rather than the specific defences raised. Held that the appellant was entitled to unconditional leave to defend (Paras 12-16). B) Negotiable Instruments Act, 1881 - Summary Suit - Withdrawal of Prosecution - Relevance - The unconditional withdrawal of a prosecution under Section 138 of the Negotiable Instruments Act, 1881 for the same dues is a relevant factor in assessing the defendant's defence in a summary suit. It indicates that the complainant may not have been able to substantiate the claim, and the defendant is entitled to rely on this to show that there are no dues payable. The courts below erred in treating the withdrawal as irrelevant (Paras 7, 15).
Issue of Consideration
Whether the grant of conditional leave to defend by deposit of Rs.30,00,000/- was a just and proper exercise of discretion under Order XXXVII Rule 3(5) CPC, given the facts and materials on record.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned orders of the Civil Judge and the High Court, and granted unconditional leave to defend to the appellant in Summary Suit No. 1289 of 2015.
Law Points
- Summary suit
- conditional leave to defend
- Order XXXVII CPC
- triable defence
- discretion
- IDBI Trusteeship Services Limited vs. Hubtown Limited
