1991 PLP 1897 (CLC)

SPED RAIDER ALI PIRZADA, J.‑‑‑This High Court Appeal arises out of judgment dated 29‑9‑1987 passed in Suit No.236 of 1987 whereby a learned Single Judge of this Court has decreed the suit. The facts leading to the filing of the above appeal are that the above suit was filed for recovery of Rs.10,17,464.36 by the respondents against the appellants under the Summary Chapter provisions of the Code of Civil Procedure. The case of the respondents, as set out in the plaint, was that the appellants purchased cement for the sum of Rs.14,06,250 from the respondents who delivered cement of the said price of the above cement. The appellants issued/handed over a cheque No. B‑368481 for Rs.14,06,250 dated 8‑7‑1986 in favour of respondents drawn on Citi Bank NA. Karachi. It was their further case that on 15‑7‑1986 the said cheque was presented for encashment and collection by them to their bankers namely, Habib Bank Limited, Cochinwala Market Branch, Karachi but the said cheque was returned dishonoured with the remark "not arranged for". The appellants were informed accordingly. It was further their case that the appellants requested them to present the cheque for encashment and as such the cheque was again presented for encashment/collection by the respondents through their bankers on 19‑7‑1986 but the same was again dishonoured by bankers of the appellants for the same reason. The respondents informed the appellants accordingly. The appellants requested the respondents to allow four months time for encashment of cheque and as such it was agreed that the above cheque would be presented by the respondents for encashment on expiry of four months from 20‑7‑1986. As such on 26‑11‑1986 the respondents presented the said cheque for encashment/collection through their bankers but in spite of promise and undertaking of the appellants, the said cheque was again dishonoured. It was the further case of the respondents that on 4‑12‑1986 the appellants paid Rs. 40,094.45 and requested them not to present the said cheque for encashment and the appellants would make arrangement for payment thereof. The respondents sent the cheque through their bankers for encashment/collection on 6‑12‑1986 but the said cheque was again dishonoured by the bankers of the appellants for the reasons mentioned in the memo. It was their further case that the appellants made further payment of Rs. 61,451.60 to the respondents during the period from 21‑12‑1986 to 26‑1‑1987 and on 29‑1‑1987 the appellants also returned 4,200 cement bags worth Rs.2,37,300 to the respondents and thus a balance of Rs.10,67,403.95 remained unpaid towards the said cheque. On 10‑3‑1987 the respondents sent a legal notice to the appellants through their Advocate in respect of the said dishonoured cheque and demanded thereby payment of Rs.14,06,250 within three days of the receipt of notice otherwise the respondents would file a suit or any other legal proceedings according to law. After legal notice, the appellants sent a pay order of Rs.49,939.60 towards the remaining amount of Rs.13,04,705.95. As such a fresh notice was sent on 19‑3‑1987 accordingly demanding thereby a sum of Rs.10,17,464.35 but the appellants failed to pay the amount. Hence the respondents filed the above suit. On receipt of summons, the appellants filed an application under Order XXXVII, Rule 3, C.P.C. for leave to appear and defend the suit. In the affidavit annexed to the application for leave to defend, they raised various defences. After considering the defences taken in the application for leave to defend the suit, the learned. Single Judge held that there was no justification whatsoever to grant leave to defend the suit. In that view of the matter, the application was dismissed and as such the suit was decreed for a sum of Rs.1.0,17,464.35 with interest at the rate of six per cent from the date of the filing of the suit till recovery of the amount and costs of the suit will be borne by the appellants. Aggrieved by that judgment, the appellants have filed the present appeal. We have heard the learned counsel appearing for the parties and have perused the impugned judgment. We have gone through the R & P of the case. The learned Single Judge while rejecting the application seeking leave to defend the suit, had found that "the defendants have admitted to have issued and signed the cheque in favour of the plaintiffs. He has also admitted to have received the consideration. His defence at the most is that the payments made by him were not fully accounted for. The burden of proof that he made payments more than that which were admitted by the plaintiff, was on the defendant himself. Under these circumstances I do not find any justification whatsoever to grant the leave to defend the suit. The application is therefore dismissed". In Abdul Karim Jaffarani v. United Bank Ltd and 2 others (1984 S C M R 568) the Hon'ble Supreme Court held at page 576 as under:‑

"With all respect to the learned Judge of the High Court we are unable to agree that conditions could be imposed merely because of an initial presumption that a negotiable instrument is made for consideration under section 118 of the Negotiable Instruments Act since this presumption is rebuttable presumption. As held in the Fine Textile Mill's case the question was not whether the presumption should be raised or not but whether the defendant's plea that the instrument was not issued for consideration as mentioned in the document was a plausible defence in the circumstances of the case." Section 118 of the Negotiable Instruments Act lays down a special rule of evidence applicable to negotiabld instruments. The presumption is one of law and thereunder the Court shall presume, inter alia, that the negotiable instrument was made for consideration. In fact it throws the burden of proof on failure of consideration on the maker of the note. The burden initially rests on the plaintiff who has to prove that the cheque was issued by the defendant or pronote was executed by the defendant. As soon as the issuance of cheque or the execution of a pronote is proved, the rule of presumption laid down in Section 118 of the Negotiable Instruments Act helps him to shift the burden to the other side. The defendant may adduce direct evidence to prove that cheque was not supported on consideration, and, if he adduces acceptable evidence, the burden again shifts to the plaintiff, and so on. The dictum laid down in the above case is applicable to the facts of the instant case that the defendants/appellants' plea that the cheque was not issued for consideration was a plausible defence in the circumstances of the case. The principles which have to be followed while considering an application seeking leave to defend the suit, are well settled. In Messrs Kohinoor Textile Mills Ltd v. Messrs Gharo Textile Mills Ltd. (P L D 1986 Karachi 157 (2)) one of us (Syed Haider Ali Pirzada) has reaffirmed them as follows:‑-- "The defence raised according to the decisions of the House of Lords and according to the decisions of superior Courts in Pakistan, should not be a sham one but should raise a fair issue to be tried by a competent Court. By sham defence is meant that the facts alleged in the defence even if true would not amount to a valid defence in law, and a fair issue has been interpreted to mean a plausible issue in the sense that if the facts alleged are established there would be a tenable defence. In coming to a conclusion whether such a test is satisfied or not, the Court should take into consideration all the circumstances of the case as disclosed in the plaint and 'in the affidavits and other material that is available ...." The finding by the learned single Judge that "his defence at the most is that the payments made by him were not fully accounted for. The burden of proof, that he made payments more than that which were admitted by the plaintiff, was on the defendant himself. Under these circumstances I do not find any justification whatsoever to grant the leave to defend the suit', even if upheld, as a defence, the Court may protect the plaintiff by only allowing the defendants to proceed if the amount claimed is paid in Court or otherwise secured and give leave to defend on such condition and thereby show mercy to the defendant by enabling him to try to prove the defence. The defence may seem to be illusory or sham or practically moonshine, still the defendant can be granted leave on terms. We agree' with Mr. Munir A. Malik, learned counsel for the defendants./appellants that on dishonouring of the cheque four times, the cheque was obviously dishonoured as the defendants/appellants did not have sufficient funds to the bank and that is why the endorsement on the memo by the Bank is 8 "not arranged for" Nevertheless the defence being put forth that the cheque was given as security, may seem to be illusory but the defendants in the facts of the present case ought to be able to prove it. Mr. Syed Ishtiaque Ali has fairly conceded that he has no objection if this Court grants leave to the defendants to defend the suit on the condition that they should finish, security in the sum of Rs.10,17,464.35. We accordingly grant leave to the defendants/appellants to appear and defend the suit on the condition that they furnish security to the satisfaction of the Nazir of this Court for the sum of Rs.10,17,464.35 within a month from today. The result is that the impugned order dated 29‑9‑1987 of the learned Single Judge and. the consequent decree for Rs.10,17,464 35 in favour of the plaintiffs (respondents herein) and against the defendants (appellants herein) are set aside but with no orders as to costs. The parties are directed to appear before the Additional Registrar on 2‑4‑1991. A.A./B‑194/K Appeal accepted.