P L D 1986 Karachi 157(2) (PLP)

In the above case the defendants had admitted the execution of a cheque but had pleaded that the cheque 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 each payment. They had contended that the cheque in suit had served its end and should not be returned. This view, therefore, does not help the learned counsel for the defendants. In Messrs Mercantile Engineers and Manufacturers v. Messrs Basic Equipment Corporation (AIR 1977 SC 577), the Supreme Court of India laid down the following principles to be following while considering the question of granting leave to defendants:‑ .. "(a) If the defendant satisfies the Court that be has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and 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 positively good defence the plaintiff is not entitled to sign judgment and 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 to say, although the affidavit does not positively and immediately makes it clear that he had a defence, yet shows such state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security." (d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend. (e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment the Court may protect the plaintiff by only allowing the defence to proceed. if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence." The facts of the above case are that the plaintiff‑respondent alleged that the cheque was given as price of goods supplied. The defendant's‑appellants firm admitted the issue of the cheque by its managing partner, but, it denied any privity of contract with the plaintiff firm. The defendants a ppellants had its own version‑ as to the reasons and purposes for which the cheque was drawn. The trial Court granted unconditional leave. A learned Judge of the High Court of Delhi. on a revision interfered with in order of the trial Court granting unconditional leave. The learned ingle Judge that the defences were not bona fide. On appeal the Supreme court of India observed that "in the case before us, the defendant had denied, inter alia, liability to pay anything to the plaintiff for an alleged apply of goods. It is only in cases where the defence is patently dishonest r so unreasonable that it could not reasonably be expected to succeed at the exercise of discretion by the trial Court to grant leave tin. conditionally may be questioned." In the judgment of the High Court their Lordships were unable to find a ground of interference covered by section 115, C. P. C. The Supreme Court held that "the case does not fall within clause (c) set out consequently the order of the High Court was set aside and restored the order of the trial Court. In Fine Textile Mills Ltd., Karachi v. Haji Umar (PLD1963SC 163), the leave to defend the suit under Order XXXVII was refused by the High Court and in appeal against the refusal of leave the Honble Supreme Court observed that if the affidavits of the defendant disclose the facts which may constitute plausible defence or needs to b: tried or investigated into. the defendants would be entitled to leave to defend. It was, however, further observed that if the defence set up by defendant is vague or unsatisfactory or there be doubt as to its genuineness the defendant should be put on terms either to furnish security or to deposit the amount claimed to the Court. The Hon'ble Supreme Court approved the rule laid down in the case of Kodak v. Alpha Film Corporation ((1930)2KB340), that the stage when the leave to defend is sought "the Judge is not to try the action; he is to see that there is a bona fide allegation of a triable issue, which is not illusory; he need not be satisfied that the defence will succeed; it is enough that such a plausible defence is verified by affidavit." In Abdul Karim Jaffarani v. United Bank Ltd. and 2 others (1984 S C M R 568), the facts of the case were that the respondent United Bank Ltd. filed suit against the petitioner under Order XXXVII of the code of Civil Procedure. . The leave was granted to the petitioner on furnishing security? The petitioner being aggrieved by the imposition of the condition challenged the order in an Intra‑Court Appeal before a Division Bench of the High Court which dismissed his appeal except for modifying the nature of the security. The Hon'ble Supreme Court observed as follows :‑ "In our view, therefore, the imposition of the conditions requiring the petitioner to furnish security to the extent of the entire claim of the contesting respondent would amount to rendering the grant of leave to defend illusory." The learned counsel for the defendants has contended that the telegraphic notice was sent on 30‑1‑1985 and the plaint was presented on the same day. I have perused the telegraphic notice and 1 find that it is dated 26‑1‑1985 and the plaint was presented on 30‑1‑1985. 1n this view of the matter the contention of the learned counsel for the defendants is devoid of force. Under Order XXXVII, rule 3, C. P. C. an order granting leave to, defend may be unconditional or subject to terms. The language of the; ‑rule is word by word the same as that of Order XIV, rule 6 of the rubs of the Supreme Court in England. The rule in England received an authori tative interpretation by the House of Lords to Jacob v. Booth's Distillery A Co. ((1902) 85 L T 262 (50 W R 49)). The principles laid down in that decision for the guidance of the Courts in England in deciding the question when and under what circumstances leave to defend should be granted unconditionally, afford; useful guidance in interpreting rules 2 and 3 of Order XXXVII, C. P. C. Before going into the other contentions, I may briefly deal with the j contention that the suit was not properly instituted. The contention of the ]B learned counsel for the defendants that Shakil Ahmed signed the plain It on behalf of the plaintiff‑Company. It cannot be said that the suit is not maintainable. Air. Shakil held a special power‑of‑attorney from the plaintiff‑Company and the Board of Directors authorised him to sign the plaint by Resolution. dated 1‑1‑1985. The action taken by him can be approved by the Directors. Hence there can be no valid objection to the maintainability of suit. The defence raised according to the decisions of the House of Lord 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 C 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, as was laid down by Boven L. J.. in Blaiherj v. Abrams ((1898)77LT255). The object of the rule that leave to defend should be obtained in suits under summary procedure is to see that in the class of suits to which the Order applies the defendant does not necessarily prolong litigation and the plaintiff from procuring a decree early by raising untenable and frivolous defence. I am of the view that it is not intended, however, by that rule to deprive a man of his right of defending the suit in Court if he has a good defence but at the same time a man by raising a sham defence or unreal defence should not be allowed to delay the action. In the latter case leave would life granted only conditionally. In this connection I may refer to the following observations of Devlin, L. J. to Fieldrank Ltd. v. Steen ((1961)3 AER681). "The broad principle, which is founded on Jacobs v. Booth's Distillery Co. is summarised on p. 266 of the Annual Practice 1962 Edn. in the following terms: "The principle on which. the Court acts is that where the defendant can show by affidavit that there is a bona fide triable issue, he is to be allowed to defend as to that issue without condition." If that principle were mandatory, then the concession by counsel for the plaintiffs that there is here a triable issue would mean at once that the appeal ought to be allowed: but counsel for the plaintiffs has drawn our attention to some comments that have been made on Jacobs v. Booth's Distillery Co. They will be found at pages 251 and 267 the Annual Practice, 1962. It is suggested (See page 251) that possibly the case, if it is closely examined, does not go as far as it has hitherto been thought to go: and on the top of page 267 the learned editors of the Annual Practice have this note: "The condition of payment into Court, or giving security, is nowa days more often imposed than formerly, and not only where the defendant consents but also where there is a good ground in the evidence for believing that the defence set up is a sham defence and the master `is prepared very nearly to give judgment for the plaintiff'." It is worth nothing also that in Lloyd's Banking Co. v. Ogle in a dictum which was said to have been overruled or qualified by Jacobs v. Booths Distillery Co., Bramewell, B., had said that those conditions ( of bringing money into Court or giving security should only be applied when there is something suspicious in the defendants mode of presenting his case. I should be very glad to see some relaxation of the strict rule in Jacobs v. Booth s Distillery co. I think that any judge who has sat in chambers in R. S. C. Order XIV summonses has had the experience of a case in which although he cannot say for certain that there is not a triable issue. Nevertheless he is left with a real doubt the defendants good faith and would like to protect the plaintiff especially if there is not grave hardship on the defendant is being made to pay money into Court. I should be prepared to accept that there has been a tendency in the last few years to use this condition more often than it has been used in the past and I think that is a good tendency. In the present case the defence set up is that the plaintiff supplied last consignment of 50 bales to the defendants an subsequently some of the bales were opened in the defendant's factory, the defendants used parts of the goods and found that the goods are defective and/or its quality is deficient. Thereupon on 13‑5‑1984 the defendants wrote to the plaintiffs drawing their attention to the inferior quality of the third consign ment and requested the plaintiff to depute a representative to check the fibre supplied and to replace the same. On 17‑5‑1984 a reminder was sent to the plaintiffs and warned that if no action to replace is taken, then the defendants would have to claim the compensation. The copy of this letter is annexed to the application, The copy of the letter shows that its copy was also sent to the broker. The plaintiffs kept on making verbal promise that they would look into the matter. ‑Eventually on 24‑5‑1984 the defendants again wrote to the plaintiff on the subject warning them that if no action was taken to remedy the wrong, the defendants would be left with no option but to request the defendant's bankers to stop the payment of cheque. As the plaintiffs did not make any positive response to the last letter as a result of which the defendants did not make it necessary to make arrangement with their bankers for their cheque to be encashed. The plaintiffs filed counter‑affidavit wherein it is averred that the false story of defective goods being delivered to the defendants by the plaintiffs is not only dishonestly motivated but is on the face of it fraudulent. The letters, dated 13‑5‑1984. 17‑5‑1984 and 24‑5‑1984 are fictitious documents manufactured to tailored the erstwhile needs of the defendants. It is also averred that the letters were not received either by them or by the broker. The broker by his letter also denied that the copies were not delivered to him. It is pertinent to note that the defendants did not file any affidavit in rejoinder. Now it is obvious that if it was true that fibre of the last consign ment was defective and the defendants sent three letters to the plaintiffs then nothing prevented the defendants from saying so in reply to the telegraphic notice of demand sent to them on the 26th of July, 1985, by the Advocate for the plaintiffs. As regards the plea that the plaintiffs supplied the defective goods in view of the allegation in the application, prima facie I am unable to hold that even this plea has any substance in it. Mazhar Elahi did not deny the contents of para. 8 of the counter‑affidavit. In the application for leave to defend, the defendants admitted that when they drew the cheque they were expected to furnish the necessary funds to their bankers in order to enable .the cheque to be cashed It cannot, therefore, be said that by reason of want of notice of dishonored they suffered any prejudice and in these circumstances they would not be entitled to notice as the case falls under section 98(b) of Negotiable Instruments Act. The defendants was suffered no damage and, therefore, would not be entitled to any notice as they never deposited any money in the bank. Apart from this legal objection the plaintiffs sent telegraphic notice of demand on 2o‑I‑198.). The plea, therefore, for want of notice of dishonor the facts as disclosed in the application, is not a real defence at all. Of course, I am not expressing any opinion on the merits of the case and I am not finally deciding any of the questions which have been raised in the application for leave to defend. Prim facie I am satisfied that the defence raised by the defendants in hi application and the affidavit in support of the application raises no real issue in the case so as to entitle them to unconditional leave to defend. I, therefore, grant. conditional leave to defend the suit. The condition being that the defendants should within four weeks from the date of this order deposit into Court a sum of Rs. 5,86,000, or furnish security for that sum within that period. I allow six weeks time for filing written statement. A. A. Leave to defend suit granted.