Del HC | Leave to defend in recovery suit claimed through cheque granted in light of vital issue of case being a sham, even though no plea raised in affidavit for the leave

Delhi High Court: Rekha Palli, J., without expressing any opinion on merits of the case, allowed an appeal filed by the appellant who was the defendant in a suit for recovery of money, against the order of the trial court whereby the suit was decreed against him without granting him leave to appeal.

The respondent alleged that the appellant borrowed Rs 12 lakhs from him for construction of a house. The money, he alleged, was paid in cash without any receipt. It was further alleged that the appellant issued a post dated cheque drawn on UTI Bank Ltd. for the repayment of the said amount. However, on presentation, the said cheques were returned by the Bank with remark “payment stopped by the drawer”. The respondent filed a complaint under Section 138 of the Negotiable Instrument Act, 1885 against the appellant. However, the said complaint was rejected by the Metropolitan Magistrate. Pursuant thereto, the respondent instituted the present suit under Order 37 CPC claiming recovery of the said Rs 12 lakhs along with interest. The appellant filed n application for leave to defend which was rejected by the Additional District Magistrate, and the suit was decreed against him.

C. Mohan Rao with Lokesh Kumar Sharma, Advocate appearing for the appellant contended that the trial court gravely erred in declining to grant leave to defend to the appellant even though the pleas raised by him clearly showed that his defence was fair and reasonable. Per contra, Rajshekhar Rao, Vinay Kumar and Raghav Kacker, Advocates representing the respondent supported the impugned order.

The High Court noted that the respondent claimed to have given the entire loan amount to the appellant in cash, without obtaining any receipt or acknowledgment reflecting such a  transaction. While the appellant did not dispute either the issuance of the cheque or his signature thereon, he specifically claimed that the cheque was never given to the respondent, but was given to his father in the year 2007 itself, as security for the chit fund amount which stood repaid. It also emerged from the record that the name of UTI Bank Ltd. stood changed to ‘Axis Bank Ltd.’ in 2007 itself, yet the cheque dated in the year 2013 — which the respondent claimed as having been issued by the appellant, was still drawn on a chequebook of UTI Bank Ltd. Coupled with this was the fact that respondent’s complaint filed under Section 138 NI Act was rejected. It was observed: “If the court finds that the defence is a wholly moonshine and sham, then leave to defend is liable to be rejected: but if the defence is found plausible, though not very probable, the Court would be justified in putting the defendant on terms while granting leave to defend.”

In the present case, the Court was of the opinion that the issue raised by the appellant was a plausible one. Thus, despite the fact that the appellant did not raise these vital issues specifically in his affidavit for leave to defend, the Court held that interest of justice demands that he be granted an opportunity to lead evidence in support of his defence, though the same had to be subject to conditions. Accordingly, he was granted leave to defend, subject to his depositing 50% of the principal amount with the trial court. The appeal was allowed and the order impugned was set aside.[Kadhirvel v. Vinod Kumar, 2019 SCC OnLine Del 9057, decided on 08-07-2019]

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