Important Point
Where in a summary suit under Order 37 CPC on Bills of Exchange by a Bank, acceptor sought leave to defend alleging execution without consideration and fraud etc. between officers of Bank and drawer, the view taken by High Court that appellants have absolutely no prima facie case, may not be correct, more so, when in fact in identical matters leave to defend had been granted to defendants. In such a case court should grant unconditional leave to defend.

Judgment

Rajendra Babu, J.-Leave granted.

2. This appeal arises out of an order made by the High Court of Bombay affirming an order made by the Trial Judge in a summary suit filed under Order 37 or C.P.C. whereby the Trial Judge had issued summons for judgment and made it absolute against the appellants and conse­quently passed a decree against them for a sum of Rs. 37,51,519.43 with interest and certain other incidental charges. A suit was brought by the respondents on the basis of bills of exchange in respect of which the appellants are the acceptors. M/s. Khanna Sales Corporation are the drawees of the bill who have Local Bill Discounting facility with the respondents. Under the said facility, M/s. Khanna Sales Corporation discounted the bills of exchange. The respondent bank made payments to M/s. Khanna Sales Corporation on the basis of the bills of exchange. Since the amounts under the Bills of Exchange were not paid and received by the respondent bank when they were presented within the stipulated time and since demand did not come forth despite notice of demand, the respondent bank filed a summary suit as aforesaid. Nine bills of exchange had been drawn by M/s. Khanna Sales Corporation. The appellants before us sought leave to defend themselves contending that the Bills of Exchange were executed without consideration as neither the goods were sold nor supplied in the transaction in question. The appellants alleged fraud, collusion and connivance between the offi­cers of the respondent and M/s. Khanna Sales Corporation. The learned Trial Judge refused the leave to defend the suit. On appeal, the Division Bench considered the matter and held that the undisputed position is that the appellants are the acceptors of the Bills of Exchange in question and that no goods were supplied or actually sold by M/s. Khanna Sales Corporation to the appellants and, therefore, the Bills of Exchange were not supported by consideration. Section 43 of the Negotiable Instruments Act saves the right of the holder in due course like the respondent to claim the amount of Bill of Exchange. In certain other instances the Bills of Exchange had been negotiated through the bank without any difficulty and, therefore, Division Bench was of the view that there is no logic in the submission made on behalf of the appellants. If any fraud has been alleged that could be reflective on their conduct and, therefore, it would be too much for the respondent bank or their officers to be instrumental in perpetra­tion of such a fraud by the appellants and M/s. Khanna Sales Corpora­tion and, therefore, the appellants cannot escape their liabi­lity and responsibility under the Bills of Exchange in question. On that basis they took the view that pleas raised by the appellants were frivolous and have no substance and merits in their defence.

3. In this appeal it is contended that what should be examined at the stage of grant of leave to defend is whether there was a real or a sham defence and whether the facts alleged by the appellants if estab­lished would be a good defence and the trial Court should not go into the question whether the facts alleged were true or not, as that situation would arise only after leave was granted and at the trial. That a condition as to security could be imposed if the Court was of the opinion that the defence was put forward with a view to prolong this suit.

4. The position in law has been explained by this Court in Santosh Kumar v. Mool Singh1. Milkhiram (India) Private Ltd. v. Chaman Lal Bros.2 and Michalec Eng. & Mfg. v. Bank Equipment Corporation3. The propositions laid down in these decisions may be summed up as follows:-

(a) If the defendant satisfies the Court that he has a good defence to the claim on merits, 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 possibly