Commercial Relations: NOT A GROUND FOR CONDITIONAL LEAVE TO DEFEND

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The Supreme Court in the order dated 15 July 2019, gave the guidelines reversing the order of the High Court and Trial Court for the conditional leave to defend in Summary Suits based on commercial relations.

The guideline so issued was about, Sudin Dilip Talaulikar vs. Polycap Wires Pvt. Ltd.[1]. In this case, the appellant filed an appeal challenging the order against conditional leave to appeal. The main issue here was that whether the materials on record, the discretionary power exercised by the court to grant conditional leave to defend was correct.

In this case, the respondent supplied electrical cables and wires to the appellant and the same transaction was done twice between the years 2010 to 2011, out of which there was a total sum of 36,13,010 was due over the appellant. Against which the respondent instituted prosecution under sec 138(b) read with sec 142 of negotiable instrument act, as the cheque was given to them dishonored due to account block. While in between the pendency of the prosecution case, the respondent filed a summary suit, claiming the amount of Rs.36,13,410/­. Later, the respondent voluntarily withdrew the prosecution case, on-demand of some documents.[2]

Thereafter, after the decision of Trial court and High Court, the appellant filed the appeal in Supreme Court, against conditional leave to defend with unreasoned finding, rather based the contentions solely based on commercial relations between the parties.

The Supreme Court applied, order 37 rule 3 of CPC; which lays down the procedure for summary suits. According to which the Plaintiff files the summary suits, then the summons is sent to the defendant, if the defendant did not present in court or file affidavit in his reply then within 10 days of such receiving, the plaintiff would get his judgment signed by the court. But if in case the defendant appears before the court within 10 days of the service of the summons, the court may grant unconditional or conditional leave to defend, it’s on the discretion of the court depending upon the facts of the case. However, in the summary suits, if the fair and reasonable contentions are presented and the court is satisfied upon such contentions to be true and bonafide then, under those circumstances, the court may grant unconditional leave to defend. And where the court finds that the facts so presented are bonafide, plausible or probable defense and are not sham or moonshine but lefts an impression of doubt due to its non-genuineness then, under those circumstances, the court may grant conditional leave to defend, by restraining the time or the manner of presentation.

In Hubtown Limited case, lays down certain guidelines based on which such discretionary powers of the court can be exercised, which is as follows:

“If the defendant satisfies the court that he has a substantial defense, that is, a defense that is likely to succeed, the plaintiff is not entitled to leave to sign the judgment, and the defendant is entitled to unconditional leave to defend the suit. 17.2. If the defendant raises triable issues indicating that he has a fair or reasonable defense, although not a positively good defense, the plaintiff is not entitled to sign the judgment, and the defendant is ordinarily entitled to unconditional leave to defend.”

Therefore, the Supreme Court based on the facts and record material so submitted granted that the appellant’s should be granted unconditional leave to defend, as according to them the decision of the High Court and the Trial Court was merely depended on the Hubtown Limited case guidelines. According to the Supreme Court, the civil judge and the High Court might have misunderstood the question in this case, as the case doesn’t involve any question relating to commercial relations, but they misunderstood and granted conditional leave to defend. However, in the appeal being filed by the appellant the Supreme Court based on the facts and circumstances held that the appellant should be granted unconditional leave to defend, as the defense so raised by the appellant were neither sham or moonshine and much less frivolous. 

And hence unconditional leave to defend was granted.



[1]CIVIL APPEAL NO(s).5528 OF 2019

[2]https://indiankanoon.org/doc/32242859/



Submitted by-

Sakshi Raje

Student Reporter, INBA