P L D 1959 (W (PLP)

KAIKAUS, J.‑This is an appeal against the order of Muhammad Bakhsh Memon, J. awarding to the respondent the International. Express Co. Ltd., a decree for Rs. 45,326‑7‑8, which sum represents a conversion into Pakistani rupees of 4882‑5‑10, against the appellant M. A. Shaikh, a person carrying on business in the name of the Continental Syndicate of Trade. The Continental Syndicate of Trade is also a party to the proceedings but as it is only a name under which M. A. Shaikh has been carrying on business reference in this judgment will henceforth be only to M. A. Shaikh as the appellant. The suit out of which this appeal arises had been filed under Order XXXVII, rule 1, C. P. C. on the basis of promissory notes and a sight draft. Admittedly the plaintiff‑respondent was the purchasing agent of the defendant appellant in the United Kingdom who was entitled to charge a commission of 3‑5% on the purchases. A number of consignments had been sent by the respondent to the appellant. While the appellant M. A. Shaikh was in London, the parties entered into an agreement, on 9th April 1951, by which the appellant agreed to pay to the respondent a sum of 3500 out of which 1500 were to be paid immediately, 1800 in six monthly instalments of 300 each and the remaining 200‑ on the 1st December 1951. The appellant at the same time executed 8 promissory notes in favour of the respondent to cover this liability. The respondent, in consideration of this settlement, agreed to release four consignments. mentioned in the agreement on payment of the full invoice value plus all charges if and when the appellant paid the sum of 1500. The appellant on his part undertook to clear the goods of the above said four consignments immediately. The appellant did not pay the whole amount of 1500 but only 1300. In spite of this the respondent expressed his willingness to allow the appellant to take delivery of the goods in the four consign ments on payment of the invoice value and the charges. How ever, the appellant took delivery of only 3 out of 4 consignments. With respect to the fourth consignment the plaintiff presented a sight daft for 2682‑5‑

10. The appellant refused to pay the amount of the draft stating that he would pay only when the dispute between him and the respondent was settled. At this the respondent filed the present suit under Order XXXVII, C. P. C. claiming the balance of the promissory notes i.e., 2200 as well as the amount of the sight draft i.e , 2682‑5‑

10. The appellant applied under Order XXXVII, rule 3, C P. C. to be allowed to defend the suit. The allegations in this application were (1) that the respondent got the agreement and the promissory notes executed on a representation that the various amounts mentioned in the agreement and the annexure to the agreement were correct according to the accounts but that in fact these amounts were not correct and the appellant was not in a position to know whether they were correct as his accounts were in Pakistan (2) that as appeared from a letter sent by the solicitors of the respondent to the appellant on the 13th of March 1951 the claim of the respondent in respect of the goods for which the appellant executed promissory notes of the value of 3500 was only for 2800, (3) that it had been brought to the knowledge of the appellant that while making purchases in the United Kingdom the respondent had been receiving commission from his sellers but of this commission he had not given any benefit to the appellant who was entitled to deduct this commission out of the purchase price ; (4) that there was one consignment which was included in the consignments for which the appellant had executed promissory notes which had not been delivered to him when he executed the promissory notes and which in fact had not been delivered to him at all ; (5) that he had not accepted the sight draft ; (6) that the claim was fraudulent ; and (7) that the promissory notes were not for consideration. The last two pleas are really not independent pleas but simply refer to the pleas which go before. Of this application notice was given to the respondent but the respondent did not file any reply. The application had been supported by an affidavit. The learned single Judge did give leave to defend but made such leave conditional on the appellant furnishing security for the whole amount of the claim within a fortnight. The appellant brought a surety but he was rejected by the Nazir. The appellant applied for extension of time and time was extended but no security was furnished within the extended time and the learned single Judge passed the following order :‑ "Security not furnished. Suit decreed with Costs." There was an application for setting aside the ex parte decree on the ground that the appellant was prevented by sufficient cause from appearing on the date fixed. This application was dismissed by the learned Judge. Before us learned counsel for the appellant has attacked the order of the learned Judge granting conditional leave to the defendant. It is urged by learned counsel that in the circumstances unconditional leave ought to have been granted. The application which the appellant submitted for leave to defend had, as already stated, been supported by ate affidavit and no reply to this application and no counter affidavit had been filed by the respondent. The appellant had in the application made allegations which, if true, would be a defence, partial or total, to the suit and it is obvious that leave to defend should have been granted. However, leave was granted and the question is whether the exercise of the discretion by the learned Judge in making the leave conditional on furnishing security was so opposed to the principles of justice as to call for interference in appeal. It would not be sufficient that we ourselves would not have made the order conditional. It should be shown that the order was under the circumstances unjust, arbitrary or unreasonable or that it violated some principle which should govern the exercise of discretion. If the defendant had prima facie a good case lie should not be deprived of an opportunity of defence merely because he was, for some reason, unable to furnish security. If on the other hand the material on the record disclosed only an arguable case :a would be quite a proper exercise of a discretion to call for security before leave to defend was granted. We have heard learned counsel for the respondent as to the allegation in the application for leave and have examined the record with care. We are of the opinion that apart from an objection relating to the sight draft there is nothing in the application of the appellant which necessitated the grant of unconditional leave. The plea relating to the sight draft however did call for an unconditional order. The appellant had stated that he had not accepted the sight draft. In the plaint it was not even alleged that the sight draft had been accepted. We reproduce the relevant para graph :‑ "

8. The sight draft for 2682‑5‑10 mentioned in para. 6 above was also presented but no payment was made ; it was protested and notarial certificate obtained." A suit under Order XXXVII lies only on the basis of a negotiable instrument. The sight draft is a bill of exchange The appellant would be liable either if he was the drawer of the bill of exchange or its acceptor. In the present case the drawer 'of the bill of exchange is the respondent and the drawee is the appellant. The bill runs thus :‑‑ "At sight pay to our order the sum of two thousand six hundred and eighty two pounds five shillings and ten pence ( 2,682‑5‑10) value received." This is signed on behalf of the respondent and had been endorsed in favour of the Lloyds Bank. It was presented to the appellant on more than one date but learned counsel for respondent referred only to the presentation on 7‑1‑1952. The note of the Notary Public on the draft on the 7th January 1952 runs:‑ "Dishonoured this day by non‑payment on presentment for payment for the Lloyds Bank Ltd., Karachi to Messrs M. A. Shaikh of Continental Syndicate of Trade Karachi their No. B. C. 0780 for L. 300‑0‑0 who refused to pay and said, "the matter about this promissory note is under dispute and unless a settlement is reached at, we cannot make payment about this promissory note ". " Whether this endorsement would make the appellant an acceptor even if it was signed by him is a question but it is not signed by the appellant. Under section 7 of the Negotiable Instruments Act‑no person becomes an acceptor unless he signs the bill of exchange in token of his assent. This endorsement not being signed by the appellant he is obviously not an acceptor and if he is not an acceptor no suit lies against him under Order XXXVII, C. P. C. It appears that the attention of the learned single Judge was not drawn to this defect otherwise it was an obvious matter and we do not think leave would not have been granted unconditionally at least in respect of that part of the claim which related to the sight draft. We should mention here that the absence of signature of the appellant has two effects. The first is that the appellant should under the circumstances have been granted leave to defend unconditionally in respect of this part of the claim and the second is that even if leave had not been granted a decree for this sum should not have been allowed. The only effect of the defendant not being granted leave to defend is that the allegations in the plaint are to be regarded as correct. But assuming that the whole plaint was correct, a decree could not have been passed by this Court acting under Order XXXVII, C. P. C. in respect of this sight draft. As already stated, there was no allegation in the plaint that the defendant was an acceptor of this bill of exchange, but even if there was such an allegation, the bill which was attached to the plaint showed that the signature of the defendant did not appear on it. The defendant was therefore not an acceptor and a decree could not be passed. We come then to the conclusion that the demand of security was improper with respect to that part of the claim which relates to the sight draft. The defendant‑appellant can claim, that the suit under Order XXXVII, in so far as it related to the sight draft, being unmaintainable security in respect of this part of the claim could not have been demanded. The order demanding security for the full amount of the claim must be held to be improper. We set aside the decree in so far as it relates to 2682‑5‑10 the amount of sight draft: The suit will now proceed only ill respect of 2200 i.e., Rs. 20,517‑3‑

0. The appellant shall be allowed to defend the suit on furnishing security for Rs. 20,517‑3‑0 Court‑fee on this appeal shall be refunded. There is no order, however, as to costs of the appeal. A. H. Order accordingly.