The judgment emphasizes the importance of establishing a substantial and genuine defence within the prescribed period of limitation in a leave to defend application in an Order XXXVII suit.

VALMIKI J. MEHTA, J.

CM No.7503/2018 (condonation of delay in filing) & CM No. 7504/2018 (delay in re-filing)

For the reasons stated in the application, delays in filing and re-filing are condoned.

CMs stand disposed.

RFA No. 206/2018 & CM No. 7502/2018 (stay)

1. This Regular First Appeal is filed under Section 96 of the Code of Civil Procedure, 1908 (CPC) by the defendant in the suit impugning the judgment of the trial court dated 16.8.2017 by which the trial court has dismissed the application filed by the appellant/defendant seeking leave to defend in an Order XXXVII suit.

2. The facts of the case are that the respondent/plaintiff filed the subject suit for recovery of the loan amount of Rs.7 lacs given to the appellant/defendant and which was secured by the appellant/defendant by a cheque bearing no. 069288 drawn in the name of Bank of Maharashtra as also a written document dated 15.5.2015 acknowledging the factum of receipt by the appellant/defendant of a loan of Rs.7 lacs. Since the cheque given by the appellant/defendant in favour of the respondent/plaintiff was dishonoured on payment, hence, the subject suit was filed after serving a legal notice dated 18.4.2016 and which was replied to by the appellant/defendant vide his reply dated 28.4.2016.

3. The trial court has dismissed the leave to defend application by arriving at the following conclusions:-

(i) Appellant/defendant claimed that he had given three blank cheques as security to the respondent/plaintiff bearing cheque nos. 069287, 069288 and 069289, however, appellant/defendant failed to prove that three cheques were given and not two cheques as was the case of the respondent/plaintiff. One cheque was the cheque towards returning of loan and another cheque for Rs.1000/- was given by the appellant/defendant to be encashed for ensuring that the bank account of the appellant/defendant was operative and existed in the name of the appellant/defendant.

(ii) The case of the respondent/plaintiff was that the appellant/defendant beside issuing the subject cheque which was dishonoured had also signed an agreement dated 15.5.2015 admitting to receipt of the loan of Rs.7 lacs, however, in the leave to defend application it is not denied by the appellant/defendant that the agreement dated 15.5.2015 was not executed by the appellant/defendant.

(iii) The case of the appellant/defendant carries no credibility that he returned the loan amount in cash inasmuch as not only there is no document evidencing the alleged repayment of loan but also there was no reason as to why if the loan was returned by the appellant/defendant to the respondent/plaintiff then the appellant/defendant would not have taken back the subject cheque (which was dishonoured) from the respondent/plaintiff.

4. I may note that now law with respect to grant of leave to defend in an Order XXXVII suit has now been crystallized in a recent judgment of the Supreme Court reported as IDBI Trusteeship Services Limited Vs. Hubtown Limited (2017) 1 SCC 568 and the relevant paras of this judgment read as under:-

“17. Accordingly, the principles stated in paragraph 8 of Mechelec's case will now stand superseded, given the amendment of Order XXXVII Rule 3, and the binding decision of four judges in Milkhiram's case, as follows:

17.1 If the defendant satisfies the Court that he has a substantial defence, that is, a defence that is likely to succeed, the Plaintiff is not entitled to leave to sign 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 defence, although not a positively good defence, the Plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend.

17.3 Even if the defendant raises triable issues, if a doubt is left with the trial judge about the defendant's good faith, or the genuineness of the triable issues, the trial judge may impose conditions