Triable Issues in Loan Recovery Suit Against Legal Heirs Justify Conditional Leave to Defend Under Order XXXVII CPC: Delhi High Court - 2025-09-10

Delhi High Court Grants Conditional Leave to Defend in ₹7.75 Crore Loan Recovery Suit, Citing Triable Issues

New Delhi: In a significant ruling on summary suit procedures, the Delhi High Court has granted conditional leave to defend to the legal heirs of a deceased borrower in a recovery suit for over ₹7.75 crores. Justice Purushaindra Kumar Kaurav, while acknowledging the plaintiff's documentary evidence, held that the defendants' conflicting narrative raised bona fide triable issues that could not be dismissed without a full trial.

The court directed the defendants to deposit ₹3 crores with the Registrar General within six weeks as a condition for defending the suit, thereby balancing the plaintiff's financial interests with the defendants' right to a fair trial.

Background of the Dispute

The suit was initiated by Rama Luthra, a 75-year-old senior citizen, for the recovery of ₹7,75,21,689/- from the legal heirs of the late Mr. Surender Malik. According to the plaint, Ms. Luthra had advanced several loans to Mr. Malik starting in August 2021, which were formalized through loan agreements and promissory notes carrying a 12% annual interest.

After Mr. Malik's demise in June 2023, some partial repayments were allegedly made by his wife, Defendant No. 1, Deepali Malik. However, with significant dues still outstanding, Ms. Luthra, claiming dependency on the loan interest for her livelihood, filed a summary suit under Order XXXVII of the Code of Civil Procedure (CPC) for expeditious recovery.

Conflicting Arguments of the Parties

Plaintiff's Submissions: Senior Advocate Gautam Narayan, representing the plaintiff, argued that the defendants' defence was frivolous and intended to delay justice. He presented substantial documentation, including:

- Executed loan agreements and promissory notes signed by the late Mr. Malik.

- Records of payments and a "Renewed Term Sheet" extending the loan tenure.

- WhatsApp chats and voice notes where the defendants allegedly assured repayment.

- It was contended that the defendants had failed to raise any genuine triable issue and, having admitted the transactions in material particulars, should be denied leave to defend.

Defendants' Defence: Senior Advocate Sandeep Sharma, appearing for the defendants, presented a starkly different version of events. His key arguments were:

- The transactions were not loans but investments facilitated by the late Mr. Malik, who acted merely as an intermediary.

- The loan agreements were created as a formality for accounting and tax purposes, without establishing a true borrower-lender relationship.

- There was no privity of contract between the plaintiff and the legal heirs.

- The suit was based on a mischaracterization of facts, and the plaintiff had suppressed material information.

Legal Principles Applied by the Court

Justice Kaurav conducted a thorough review of the legal framework governing Order XXXVII of the CPC, which provides for a summary procedure in specific suits. The court emphasized that the grant of leave to defend is the rule, and its denial is an exception reserved for cases with frivolous or vexatious defences.

Citing landmark Supreme Court judgments like IDBI Trusteeship Services Ltd. v. Hubtown Ltd. and B.L. Kashyap & Sons Ltd. v. JMS Steels & Power Corporation , the court reiterated the established principles:

- If a defendant shows a substantial or fair defence, unconditional leave should be granted.

- If the defence raises triable issues but its genuineness is doubtful, the court may impose conditions like depositing a certain amount.

- Leave is refused only when the defence is patently sham, illusory, or practically moonshine.

The court also considered the maintainability of a summary suit against legal representatives, noting that while personal obligations of the deceased cannot be enforced, monetary claims can proceed against the estate inherited by the heirs.

Pivotal Excerpts from the Judgment

In its analysis, the court observed that the two conflicting narratives struck at the core of the plaintiff's case. Justice Kaurav noted:

"The rival submissions of the parties manifest two entirely conflicting narratives regarding the nature of the impugned transactions. The aforementioned rival narratives strike at the very foundation of the Plaintiff’s cause of action and thus make the dispute unsuitable for summary determination at this stage."

The court further highlighted the need for evidence to be tested at trial:

"It is also pertinent to observe that the evidentiary material relied upon by the Plaintiff, namely WhatsApp conversations and audio recordings... cannot be treated as conclusive proof at the present juncture... their admissibility and evidentiary value must necessarily be tested in accordance with the strict mandate of the extant laws."

Final Decision and Its Implications

Concluding that the defence could not be "brushed aside as illusory or sham," the court found that the defendants had raised substantive and bona fide issues. However, given the documentary evidence presented by the plaintiff, the court deemed it appropriate to grant conditional leave to safeguard the plaintiff's interests.

The court ordered the defendants to:

1. Deposit a sum of ₹3,00,00,000/- with the court's Registrar General within six weeks.

2. File an affidavit disclosing their assets.

3. Cooperate in the expeditious disposal of the suit without seeking unnecessary adjournments.

This judgment reinforces the judicial principle that summary procedures, while designed for speed, cannot shut out defendants who raise plausible and triable defences. The imposition of a substantial deposit condition serves as a crucial balancing act, protecting the plaintiff from potential prejudice caused by protracted litigation while allowing the defendants their day in court.