1986 PLP 45 (MLD)

(c) Civil Procedure Code (V of 1908)‑‑ ‑‑‑O.XXXVII, R.3‑‑Suit for recovery of bank money‑‑Leave to defend suit‑‑Defence raised by defendant prima facie agitating a real issue in case so as to entitle it to unconditional leave to defend‑‑Leave to defend suit granted. A.R. Akhtar for Plaintiff. Liaquat Merchant for Defendants. Messrs Muslim Commercial Bank Ltd. has filed this suit for recovery of Rs.47,88,716.83. The suit is instituted under summary procedure provided under Order XXXVII, Civil Procedure Code. The claim as set out in the plaint is that at the request of defendant No.2, defendant No.1 opened an irrevocable documentary credit of U.S. 10,00,000 in favour of Messrs INTERICE LTD. 17, Berkley Street, London being letter of credit No. 51679/6, dated 11‑11‑1981 covering a shipment of pulses from Thailand and/or European ports to Karachi The said credit was modified from time to time by defendants 1 and 2, ultimately being of U.S. $ 505, 000 (instead of U.S. $ 10, 00, 000) and was made available against Bills of Exchange drawn by the said beneficiaries on defendant No.1 at 45 days D/A to be negotiated against shipping documents within 15 days of the dote of Bill of Lading. The said Messrs Interice had drawn two Bills of Exchange negotiated the same to plaintiff alongwith documents and had lodged the same with the plaintiff for negotiating under the said L/C for their process or realization to be adjusted towards outstanding bills in the account Messrs Interice Ltd. due to the plaintiff. The plaintiff, therefore, holding the said documents under him for the said outstanding amounts tendered the documents to the defendants for negotiation. The plaintiffs' London office had tendered sets of shipping documents to Messrs Companfina Bank alongwith two bills of exchange drawn by the said beneficiaries on defendant No.2 for U.S1 6,35,

000. On receipt of these documents, defendant No.1 has indicated some discrepancies in them and the plaintiff tried to persuade defendant No.1 that the documents taken as a whole were in order and could not be said to have discrepancies such as would not conform with the letter of credit and insisted that they must honour the drafts. The said beneficiary seeing the adamance of defendant No.1 in unduly withholding their tender had on 1‑6‑1982 notified the substitution of existing documents by fresh documents. As fresh documents were submitted the defendant No.1 remitted of sum of U.S. $ 360,000 and U.S.$ 75,000 totalling to U.S3 436,000 through defendant No.3 to plaintiff's office. As the plaintiff pressed for payment of balance amount, the defendant No.1 averred that the documents have been utilized by openers, the defendant No.2. The defendant No.1 again took a somersault and their London Office by letter, dated 29‑1‑1984 alleged that L/C for U.S.$ 6,35,000 was opened on Messrs Compafina Banque, defendant No.3, who had negotiated the documents and as the goods were lost in transit, the openers had negotiated a settlement with the Insurance company and the said defendant No.3 had accepted the sum of Rs.4,35,000 in full and final settlement. The plaintiff's contention is that the defendants 1 and 2 are liable to pay the plaintiffs jointly and severally the sum of U.S.$ 200,000 equivalent to Pak Rs.3,209,360 together with interest amounting to Rs.15,79,356.83 aggregating in all to Rs.47,88,716.83. The defendant No.1 has filed this application for obtaining leave to defend the suit. The main defence raised in this application are that of contract between the plaintiff and the defendant No.1 as the letter of credit was transmitted through Banque De Commerce and was to be transmitted to the beneficiaries through the defendant No.3. The suit under Order XXXVII, is misconceived and not maintainable. The said Compafina Banque found that the documents forwarded to them had discrepancies and declined to negotiate the same and merely sent the documents to defendant No.1 on "collection basis" is not based on the Bill of Exchange but on the letter of credit established in favour of Messrs Interice Ltd., who are not a party to the suit. Under Order XXXVII, Rule 3 of the Code of Civil Procedure an order granting leave to defend may be unconditional or subject to terms. The defence raised, according to the decision of the Superior Courts, should not be a sham one but should raise a fair issue to be tried by a 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 l the case as disclosed in the plaint and in the affidavits and other material that is available on the record. The object of the rule requiring that leave to defend should be obtained in suits under summary procedure is to use that in that class of suits to which the order applies the defendant does not unnecessarily prolong litigation and prevent the plaintiff from obtaining a decree early by raising untenable and frivolous defence. 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 affidavit in support of the application for leave to defend, the defendant No.1 stated that the plaintiff sent drafts and documents for negotiation to defendant No.3. The said defendant No.3 declined to negotiate the same and merely sent the documents to defendant No.1 on collection basis. The plaintiff filed counter‑affidavit and stated therein "the said defendant should have, and in fact on being insisted by the beneficiaries, had tendered the same documents to B.C:C.I. The Compafina had no right to hold the documents received by it for negotiation and payment by B . C . C . I . to treat it on "collection basis: " "The plea that the documents were treated on "collection basis" is a real defence. The other defence is that the suit was not filed on bills of exchange. The plaintiffs filed counter‑affidavit stating therein that the suit is based on bills of exchange and the letter of credit. The annexures to the plaint are letters of credit and copy of the collection order, dated 26‑1‑1982. The bills of exchange have not been annexed to the plaint. There is a triable issue to go before a Court. It is not for me to enter into the merits of the case. It appears to me that there is a false issue to be tried. Prima facie I am satisfied that the defence raised by the defendant No .l in its affidavit raises a real issue in the case so as to entitle it to unconditional leave to defend. In the result, the application is granted and the defendant No.1 is granted unconditional leave to defend the suit. The defendant No. 1 is directed to file written statement within three weeks from today. H . B . T .???????????????????????????????????????????????????????????????????????????????????????????? Petition allowed.