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SANTOSH KUMAR V. BHAI MOOL SINGH, AIR 1958 SC 321 (VIVIAN BOSE, J.)

SANTOSH KUMAR V. BHAI MOOL SINGH, AIR 1958 SC 321 (VIVIAN BOSE, J.)

 

FACTS

  • The plaintiff filed the suit under Order 37 on the basis of a cheque for Rs. 60,000 drawn by the defendants (Santosh Kumar and Northern General Agencies) in favour of the plaintiff and which, on presentation to the Bank, was dishonoured. The defendant applied for leave to defend the suit under O 37 R 3.
  • The defendants admitted execution of the cheque but pleaded that it 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 by cash payments made from time to time and by other cheques and that therefore the cheque in suit had served its end and should now be returned. They set out the exact dates on which, according to them, the payments had been made and gave the numbers of the cheques.
  • The trial court held that “the defence raised by the defendants raises a triable issue,” but he went on to hold that the defendants “have not placed anything on the file to show that the defence was a bona fide one.”
  • Accordingly, he permitted the defendants “to appear and defend the suit on the condition of their giving security to the extent of the suit amount and the costs of the suit.”
  • The defendants applied for a review but failed. They then applied under Art. 227 of the Constitution to the Delhi Circuit Bench of the Punjab High Court and failed again.
  • As a result, they applied before the Supreme Court under Art. 136 and were granted special leave.
  • Plaintiff contended that the discretion so conferred by R. 3(2) is unfettered and that as the discretion has been exercised by the trial court, no appeal can lie against it unless there is a “grave miscarriage of justice or flagrant violation of law”.

 

ISSUE

Whether the trial court in its discretion was right in imposing the condition and whether such discretion is unfettered?

 

 

HELD

The discretion exercised by the Trial Court was arbitrary and the conditions imposed under R.3(2) on defendants to defend were not required. The power to impose conditions is only there to ensure that there will be a speedy trial. If there is reason to believe that the defendant is trying to prolong the litigation then conditions can be imposed. But the defendant cannot be expected to adduce his evidence even before he is told that he may defend the action. Hence, the SC allowed the appeal and set aside the orders of the Trial Court and the High Court.

 

  • Laws of procedure are grounded on a principle of natural justice which requires that men should not be condemned unheard, that decisions should not be reached behind their backs, that proceedings that affect their lives and property should not continue in their absence and that they should not be precluded from participating in them.
  • Though the Court is given a discretion it must be exercised along judicial lines, and that in turn means, in consonance with the principles of natural justice that form the foundations of our laws.
  • In Jacobs v. Booth’s Distillery Co. [(1901) 85 LT 262], it was observed that whenever the defence raises a “triable issue”, leave must be given, and later cases say that when that is the case it must be given unconditionally; otherwise the leave may be illusory
  • It is always undesirable, and indeed impossible, to lay down hard and fast rules in matters that affect discretion. But it is necessary to understand the reason for a special procedure of this kind in order that the discretion may be properly exercised.
  • The object is explained in Kesavan v. South India Bank Ltd. [AIR 1950 Mad. 226], and is examined in greater detail in Sundaram Chettiar v. Valli Ammal. It is to see that the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining an early decree by raising untenable and frivolous defences in a class of cases where speedy decisions are desirable in the interests of trade and commerce.
  • In general, therefore, the test is to see whether the defence raises a real issue and not a sham one, in the sense that, if the facts alleged by the defendant are established, there would be a good, or even a plausible defence on those facts.
  • The assertions made by the defendant raised an issue of fact, the truth and good faith of which could only be tested by going into the evidence. The stage of proof can only come after the defendant has been allowed to enter an appearance and defend the suit, and the nature of the defence has to be determined at the time when the affidavit is put forth.
  • At that stage, all that the Court has to determine is whether “if the facts alleged by the defendant are duly proved” they will afford a good or even a plausible answer to the plaintiff’s claim. Once the Court is satisfied about that, leave cannot be withheld and no question about imposing conditions can arise; and once leave is granted the normal procedure of a suit, so far as evidence and proof go, obtains.
  • The appeal is allowed and the case is remanded to the first Court for trial of the issues raised by the defendants.

 

 

COMMENTARY

The discretionary power conferred upon the court under Order 37 should be exercised judicially, judiciously and on well-settled principles of natural justice. Wherever defence raises a "triable issue", leave should be granted unconditionally. If it is not done, leave may become illusory.