Case Note & Summary
The case arises from a Commercial Summary Suit filed by the respondent/plaintiff (Motilal Laxmichand Salecha HUF) against the appellant/defendant (Mour Marbles Industries Pvt. Ltd.) based on a dishonoured cheque for Rs.1,86,78,313/-. The cheque was issued by the appellant towards repayment of a loan advanced by the respondent. Upon presentation, the cheque was dishonoured with the remark 'exceeds arrangement'. The respondent also filed a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881. The appellant admitted issuance of the cheque but contended that it was a blank cheque given as security and that the amount was filled in without authority. The learned Single Judge, while granting leave to defend the suit, imposed a condition that the appellant deposit the full cheque amount of Rs.1,86,78,313/- within eight weeks. Aggrieved by this condition, the appellant filed the present appeal. The Division Bench of the Bombay High Court, after hearing both sides, observed that the appellant had raised a triable defence regarding the blank cheque, which could not be said to be moonshine or frivolous. The court noted that the condition of depositing the entire cheque amount was disproportionate and could be oppressive. Balancing the interests of both parties, the court reduced the deposit condition to 50% of the cheque amount, i.e., Rs.93,39,156.50, to be deposited within eight weeks. The appeal was accordingly allowed, and the impugned order was modified to this extent. The court directed that the amount deposited be invested in fixed deposits and abide by further orders in the suit.
Headnote
A) Civil Procedure - Summary Suit - Conditional Leave to Defend - Order 37 CPC, Commercial Courts Act, 2015 - The court considered whether the condition of depositing the full cheque amount of Rs.1,86,78,313/- for leave to defend was excessive. The appellant/defendant had raised a triable defence that a blank cheque was issued. The Division Bench held that the condition was disproportionate and reduced it to 50% of the cheque amount, i.e., Rs.93,39,156.50, to balance the interests of both parties. (Paras 1-10) B) Negotiable Instruments - Dishonour of Cheque - Section 138 NI Act - The underlying transaction involved a cheque issued for repayment of a loan, which was dishonoured with remark 'exceeds arrangement'. The appellant did not dispute issuance but claimed it was a blank cheque. The court noted that such a defence raises triable issues, warranting leave to defend on less onerous terms. (Paras 2-4) C) Commercial Law - Summary Suit - Proportionality of Deposit - The court applied the principle that while imposing conditions for leave to defend, the court must ensure they are not oppressive and should be proportionate to the strength of the defence. Reducing the deposit to 50% was deemed just and equitable. (Paras 8-10)
Issue of Consideration
Whether the condition imposed by the learned Single Judge for granting leave to defend, requiring deposit of the full cheque amount, was disproportionate and warranted reduction in appeal.
Final Decision
The appeal is allowed. The impugned order dated 18 April 2018 is modified to the extent that the appellant/defendant is granted leave to defend on condition of depositing 50% of the cheque amount, i.e., Rs.93,39,156.50, within eight weeks. The amount deposited shall be invested in fixed deposits and abide by further orders in the suit.
Law Points
- Conditional leave to defend in summary suit under Order 37 CPC
- Commercial Courts Act
- 2015
- Negotiable Instruments Act
- 1881
- Section 138
- triable issues
- blank cheque defence
- proportionality of deposit condition
