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K.R. Kesavan Vs. the South Indian Bank, Ltd. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtChennai
Decided On
Reported in(1949)2MLJ70
AppellantK.R. Kesavan
RespondentThe South Indian Bank, Ltd.
Cases ReferredEbrahim Sait v. South India Industrials
Excerpt:
.....laid down by buven, l. it is not intended however, by that rule to deprive a man of his right of defending the suit in court if he has a good defence but at the same time a man by raiding a sham defence or unreal defence should not be allowed to delay the action. all that the court has to be satisfied to quote the words of lord james of hereford is 'the view which i think ought to be taken of order xiv is that the tribunal to which the application is made should simply determine 'is there a triable issue to go before a jury or a court. on which side the chances of success are it is not for this house to determine but thinking as i do that there is a fair issue to be tried by a competent tribunal it seems to me to be perfectly clear that the order of the court of appeal ought to be..........negotiable instrument.3. as the suit was filed under summary procedure the defendant had to obtain leave to defend the suit under order 7, rule 6, original side rules and for this purpose he made an application to the master, application no. 3010 of 1947. the main defences raised by him in that application were that the plaintiff was not a holder in due course as there was no consideration for the endorsement and secondly that the plaintiff had no cause of action to sue for the recovery of the amount as no notice of dishonour was given to the defendant until 26th may, 1947, which according to him was wholly an unreasonable notice as considerable time had elapsed from the date of dishonour. 4. the master was of opinion that as the payee endorsed the cheque in reduction of his previous.....
Judgment:

Satyanarayana Rao, J.

1. This is an appeal by the defendant against the decision of our learned brother, Yahya Ali, J., dismissing the appeal perferred against the order of the Master.

2. The respondent to this appeal is the South Indian Bank, Ltd., which instituted a suit, C. S. No. 480 of 1947, for recovery of a sum of Rs. 10,310-10-0 from the defendant. The suit was instituted under summary procedure provided under Order 7, Rule 6 of the Original Side Rules and under Order 37, Rule 2 of the Civil Procedure Code. The claim was based on a cheque for a sum of Rs. 10,000 dated 12th April, 1947, drawn by the appellant on the Indian Bank, Ltd., Thyagarayanagar, in favour of one K.C.M.C. Rathnasabapathi Nadar and Sons. The drawee of the cheque negotiated it to the plaintiff bank and it was alleged in the plaint that it was endorsed to it for valuable consideration and that the plaintiff is a holder in due course. The cheque was presented to the Indian Bank by the plaintiff but it was dishonoured on 16th April, 1947. The plaintiff, therefore, claims that he is entitled to recover the suit amount from the defendant on the basis of the negotiable instrument.

3. As the suit was filed under summary procedure the defendant had to obtain leave to defend the suit under Order 7, Rule 6, Original Side Rules and for this purpose he made an application to the Master, Application No. 3010 of 1947. The main defences raised by him in that application were that the plaintiff was not a holder in due course as there was no consideration for the endorsement and secondly that the plaintiff had no cause of action to sue for the recovery of the amount as no notice of dishonour was given to the defendant until 26th May, 1947, which according to him was wholly an unreasonable notice as considerable time had elapsed from the date of dishonour.

4. The Master was of opinion that as the payee endorsed the cheque in reduction of his previous liability and also to provide a margin for future advances the endorsement was supported by consideration and that, the plaintiff was, a holder in due course. To get over the plea of unreasonable delay in issuing a notice the plaintiff pleaded that after the cheque was dishonoured by the Indian Bank on 16th April, 1947, the defendant was informed of the same but the defendant requested the plaintiff to present the cheque again. Twice it was 'presented and twice it was dishonoured and therefore it was alleged that there was oral notice of dishonour immediately after the cheque was dishonoured by the Indian Bank on 16th April, 1947. For these reasons he was of opinion that though there was a triable issue the defence was not bona fide. He, therefore, granted conditional leave to defend the suit the condition being that the defendant should within four weeks from the date of this order deposit into Court a sum of Rs. 10,000 or furnish security for that sum within that period.

5. Against this order there was an appeal which was disposed by Yahya Ali, J. The learned Judge agreed with the conclusion of the Master and confirmed the order granting conditional leave to defend the suit.

6. In this appeal against that order the learned advocate for the appellant raised . the contention that as it was found by the Master as well as by the learned Judge that there were triable issues arising on the defence unconditional leave should have been granted and that the question of bona fide nature of the defence should not have entered into consideration in view of the finding that triable issues were raised in the defence.

7. Under Order 7, Rule 6, Original Side Rules, an order granting leave to defend may be unconditional or subject to terms.. The language of the rule is word for word the same as that of Order 14, Rule 6 of the rules of the Supreme Court in England. The rule in England received an authoritative interpretation by the House of Lords in Jacobs v. Booth's Distillery Co. (1901) 85 L.T. 262 The principles laid down in that, decision for the guidance of the Courts in England in deciding the question when and under what circumstances leave to defend should be granted subject to conditions and when it should be granted unconditionally, afford useful guidance in interpreting Rule 6 of Order 7 of the Original Side Rules and Rule 2 of Order 37, Civil Procedure Code. The defence raised, according to the decisions of the House of Lords should not be a sham one but should raise a fair issue to be tried by a competent Tribunal. By sham defence is meant that the facts alleged in the defence even if true would not amount to a valid defence in law, and a fair issue has been interpreted to mean a plausible issue in the sense that if the facts alleged are established there would be a tenable defence. In coming to a conclusion whether such a test is satisfied or not the Court should take into consideration all the circumstances of the case as disclosed in the plaint and in the affidavits and other material that is available as was laid down by Buven, L.J. in Blaiberg v. Abrahams 77 L.T.J.O. 255 (C.A.). The question was considered in our Court after the decision of the House . of Lords (Jacobs v. Booth's Distillery Co.(1901) 85 L.T. 262) by Schwabe, C.J., and Ramesam, J., in Periya Miyana Marakayar v. Subramania Aiyar : AIR1924Mad612 , and it was explained in that decision that by the expression ' triable issue ' is meant a plea which at least is plausible. The defence must not be as pointed out by Lord Chancellor Halsbury in Jacobs-v. Booth's Distillery Co. (1901) 85 L.T. 262 an attempt merely to delay the the trial of the action.

8. The object of the rule requiring that leave to defend should be obtained in suits under summary procedure is to see that in the class of suits to which the order applies the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining a decree early by raising untenable and frivolous defence. It is not intended however, by that rule to deprive a man of his right of defending the suit in Court if he has a good defence but at the same time a man by raiding a sham defence or unreal defence should not be allowed to delay the action. In the latter case leave would be granted only conditionally. As pointed out by the Lord Chancellor in Jacobs v. Booth's Distillery Co. (1901) 85 L.T. 262 in his speech.

People do not seem to understand that the effect of Order XIV is, that, upon the allegation of the one side or the other a man is not to be permitted to defend himself in a Court; that his rights are not to be litigated at all. There are some things too plain for argument; and where there were pleas put in simply for the purpose of delay which only added to the expense and where it was not in aid of justice that such things should, continue Order XIV was-intended to put an end to that state of things and to prevent sham defences from defeating the rights of parties by delay and at the same time causing great loss to the plaintiffs who, were endeavouring to enforce their rights.

9. Lord James of Hereford in the same case stated as his opinion that in a proceeding to obtain leave to defend, the Court is not called upon to consider the merits of the case. All that the Court has to be satisfied to quote the words of Lord James of Hereford is ' the view which I think ought to be taken of Order XIV is that the Tribunal to which the application is made should simply determine ' Is there a triable issue to go before a jury or a Court.' It is not for the Tribunal to enter into the merits of the case at all. It ought to make the order only when it can say to the person who opposes the order ' You have no defence. You could not by general demurer, if it were a point of law, raise a defence here. We think it impossible for you to go before any Tribunal to determine the question of fact.'. We are not expressing any opinion whatever upon the merits of the case. It appears to me that there is a fair issue to be tried. On which side the chances of success are it is not for this House to determine but thinking as I do that there is a fair issue to be tried by a competent Tribunal it seems to me to be perfectly clear that the order of the Court of appeal ought to be reversed.'

10. The principle in Jacobs v. Booth's Distillery Co. (1901) 85 L.T. 262 and the principle of the decision in Periya Miyana Marakayar v. Subramania Aiyar (1923) 46 M.L.J. 255 were again applied by this Court in Sundaram Chettiar v. Valliammal (1934) 68 M.L.J. 16 : I.L.R. 58 Mad. 116. According to the learned Chief Justice (Sir Owen Beasley) the test is to quote his words:

If the defendant sets up a defence in his affidavit in support of his application for leave to defend which, if he should succeed in proving, would entitle him to succeed in the suit, then the Master or the Court before whom the application comes has no discretion whatever in the matter and unconditional leave to defend must be granted. A triable issue in such a case has been raised by the defendant and it is not open to the Master or anybody else other than the trial Judge to go into the merits and discover whether that case is a true one.

In the yearly Practice of the Supreme, Court for 1939 the effect of the judgment of the House of Lords in Jacobs v. Booth's Distillery Co.(1901) 85 L.T. 262, is stated in the following terms:

If the defendant by his affidavit or otherwise shows that there are facts which, if true, constitute a defence to the claim, he should be given unconditional leave to defend.

11. In Ebrahim Sait v. South India Industrials, Ltd. : AIR1938Mad962 , in an action by a company for recovery of a large amount overdrawn by the defendant from the company the defendant applied for leave to defend and stated as his grounds of defence that the plaintiff, managing director who instituted the suit on behalf of the company had no proper authority to sue, that he was entitled to set-off against the claim of the company, the bonus and dividends due to him from the company and also to set-off the amount which he might receive from the company in the liquidation proceedings. He also raised the plea of limitation. It appeared, however, that there was an acknowledgment by him of his liability to the company which saved the suit from the bar of limitation. In respect of the set-off the plaintiff produced .a letter whereunder the defendant released his claim unconditionally-to the bonus and dividends due to him from the company. He was not entitled in law to claim set-off against the company, a sum which might become due to him upon the winding up of the company as against the moneys due by him to the company until the money due by him to the company was paid. On these defences the Master before whom the application came for hearing thought that leave to defend should be granted conditionally on his furnishing security for a sum of Rs. 25,000 within a period of two months. The order was confirmed on appeal by Gentle, J., (as he then was) and against that order of the learned Judge an appeal was preferred which came up for hearing before Madhavan Nair, O.C.J., and Krishnaswami Aiyangar, J. The learned Judges considered the matter and the decisions on the points including the decision in Jacobs v. Booth,s Distillery Co. (1901) 85 L.T. 262, and held that the decision of Gentle, J., was correct and that the defendant was not entitled to an unconditional leave to defend. At page 41 of the report, however, there are certain observations of the Honourable the Officiating Chief Justice which go to indicate that in order to entitle a defendant to unconditional leave he should satisfy the Court not only that there was a triable issue but also that his defence was bona fide. The decision in Sundaram Chetti v. Valliammal (1934) 68 M.L.J. 16 : I.L.R. 58 Mad. 116. was also doubted. The decision in Sundaram Chetti v. Valliammal (1934) 68 M.L.J. 16 : I.L.R. 58 Mad. 116. did lay down the broad proposition that the defence should not only raise a triable or real issue or a plausible issue but that it should also be a bona fide one. If the issue raised is a real one no further question of the consideration of the bona fide nature of the defence arises. The very fact that the defence is real indicates that it is bona fide. The learned Judges, when they referred to the triable issue and bona fide defence at page 41 in Ebrahim Sait's case : AIR1938Mad962 must have meant by those observations to indicate, that it is not enough to have an issue whatever be its nature and substance but that it should be real and substantial. The defence must raise a plausible case for trial and if established a sufficient answer to the claim. We do not think that the decision in Ebrahim Sait v. South India Industrials, Ltd. : AIR1938Mad962 , is intended to lay down a rule which is contrary to the decision of the House of Lords in Jacobs v. booth's Distillery Co. (1901) 85 L.T. 262, and is in conflict with what was laid down in the earlier decisions of this Court. On the facts of that case the defence was really not a bona fide one and there was no plausible issue for trial. We think that the only test to be applied is whether the defence -raised a real issue and not a sham issue in the sense that if the facts alleged by the defendant are established there would be plausible defence on those facts.

12. The finding of the learned Judge in the present case amounts, in our opinion, to no more than that the defence is a sham one and does not raise a triable issue. In the affidavit filed in support of the application for leave to defend the defendant admitted that when he drew the cheque he expected the drawee to furnish the necessary funds to the Indian Bank in order' to enable the cheque to be cashed and that the cheque was issued by him only as an accommodation cheque. It cannot, therefore, be said that by reason of want of notice of dishonour he suffered any prejudice and in those circumstances he would not be entitled to notice as the case falls under Section 98(b) of the Negotiable Instruments Act. He is a person who suffered no damage and therefore would not be entitled to any notice as he never deposited any money in the bank. The plea, therefore, for want of notice of dishonour on the facts as disclosed in the affidavit, is not a real defence at all. As regards the other plea that the plaintiff is not a holder in due course in view of the-allegation in the affidavit, we are unable to hold that even this plea has any substance: in it. Even according to the defendant the cheque was issued only as an accommodation cheque and therefore must have necessarily been intended to Constitute the endorsee a holder in due course. The drawee wanted the cheque to be drawn, in his favour with a view to enable him to discharge or meet the liability he owed to the Bank. The endorsement, therefore, was supported by valuable consideration and the plaintiff unless the presumption under Section 118 of the Negotiable Instruments Act is rebutted would prima facie be holder in due course. Of course, we-are not expressing any opinion on the merits of the case and we are not finally deciding any of the questions which have been raised in the application for leave-to defend. Prima facie we are satisfied that the defence raised by the defendant: in his affidavit raises no real issue in the case so as to entitle him to unconditional leave to defend. For these reasons we think that the decisions of the learned-Judge is correct.

13. It is, however, represented to us on behalf of the. appellant that he had already given an undertaking not to alienate his immoveable properties which are Outside this city pending disposal of this appeal. He is willing and undertakes not to-alienate the properties until security as directed by the order of the Master i s furnished.. The undertaking will, therefore, continue, until the security is furnished as directed. Time fixed for giving security expired but we extend it by one month from this, date. The respondent has no objection to the appellant's tendering as security his immoveable properties situated in the mofussil to the satisfaction of the Second Assistant Registrar, Original Side.

14. In the result, the appeal is dismissed with costs of the respondent. Time for filing written statement is extended to two weeks after security is furnished.


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