Swatanter Kumar, J.
1. The plaintiff has filed a suit for recovery of Rs.82,37,500/- under the provisions of Order 37 CPC.
2. It is the case of the plaintiff that the plaintiff is `karta' of S.C. Rastogi & Co., a Hindu Undivided Family. Defendant No.1 is carrying on the business of manufacturing and sale of `Papad' under the name and style of M/s Ridhi Enterprises under the brand name `Laziz Papad'. Defendant No. 2 is husband of defendant No.1 and has family relations with the plaintiff. The plaintiff has been the tax consultant of the defendant No.1. In various taxation proceedings, the plaintiff had represented the defendant No.1. Somewhere in the year 1992, defendant No.1 represented to the plaintiff that she had got bulk supply order from Kendriya Bandhar, Nafed and Super Bazar and was not having sufficient money to make payments for these supplies on cash terms. She requested the plaintiff for financial assistance. The plaintiff paid a total sum of Rs.74.50 lakhs. Despite friendly relations, the plaintiff insisted upon written guarantee from defendant No.2 for repayment of the said amount and the written Deed of Indemnity-cum-Guaranty at Delhi was executed. The details of various amounts, which the plaintiff claims to have given to the defendants, have been spelled out in para 7 of the plaint. These amounts were not paid to the plaintiff and it appears that the defendants had deceived the plaintiff and the plaintiff lodged an FIR 113/94 against the defendants on which the defendants were released on bail. Defendant No.1 had issued 5 cheques bearing Nos. 209127, 209128 & 209129 dated 10.10.1993, 24.10.93 and 7.11.1993 respectively, all drawn on State Bank of India, Karol Bagh, New Delhi for Rs.10,00,000/- each, and cheque bearing No.484397 dated 14.2.1994 for Rs.10,00,000/- drawn on State Bank of India, Kamla Nagar, Delhi and cheque bearing No.484398 dated 26.2.1994 for Rs.15,00,000/- drawn on State Bank of India, Kamla Nagar, in favor of the plaintiff. These cheques were towards the part payment and out of them three were dishonoured upon presentation and the plaintiff filed a complaint under Section 138 of Negotiable Instruments Act, which is still pending. Three cheques out of the aforestated five cheques were returned to the plaintiff with the remarks `refer to drawer' and the remaining two cheques were not presented by the plaintiff, the total of which was Rs.27 lakhs. Having failed to recover this amount, the plaintiff has filed the present suit for recovery of Rs.55,00,000/- towards principal amount and Rs.27,37,500/- towards interest @18 p.a. making a total of Rs.82,37,500/-. The cause of action, according to the plaintiff, arose in the year 1992 when the plaintiff had made various payments to the defendants, on 10.10.93, 24.10.93 and 7.11.93 when the defendants issued three cheques of Rs.10 lakhs each towards part payment, on 17th March, 1994 when the cheques were dishonoured and on 31st March, 1994 when the plaintiff had served a notice through his counsel upon the defendants for payment of the said loan. The present suit was filed in October, 1996.
3. To the above claim of the plaintiff, the defendants, having been served, filed appearance and thereafter filed an application being is 4539/97 under Order 37 Rule (3) 5 CPC seeking unconditional leave to defend the suit. This prayer was made by the applicants on the ground that the plaintiff has blackmailed the defendants as he was a tax consultant of defendant No.1 from 1986 to 1993 and was dealing and handling all her Income Tax and Sales Tax matters and other cases relating thereto. It is submitted that during those proceedings, the plaintiff had obtained signatures of defendant No.1 on many papers, receipts, cheques, letter heads and other documents. Some of them were blank and some of them were written on the pretext that the said papers/documents were required immediately while dealing with the authorities concerned. These very documents including the cheques have been misused by the plaintiff. It is stated that the plaintiff has filed number of other suits and all these suits have been transferred to one Court and the suits are based upon false and fabricated documents. It is stated that the address of the Ridhi Enterprises in the bank is that of the plaintiff himself i.e. F-47, Desh Bandhu Gupta Road, Delhi. It has been stated that no documents have been placed by the plaintiff on record so as to justify even prima-facie basis of the claim raised in the plaint. It is also stated that plaintiff is a lawyer and cannot do any other business except practice. It is unethical and unprofessional for the plaintiff to have entered into the alleged loan transactions. It is also stated that in January, 1994 by fraud and misrepresentation, the plaintiff borrowed a Car bearing No. DL2CD 9429 from the answering defendants on the plea that he wanted the same urgently for few days but later did not return the same and for which an FIR was lodged against the plaintiff being FIR No. 262/96 in the Police Station Roop Nagar under Section 406 IPC. According to the defendants, the case of the plaintiff is false and fabricated. There are various litigations pending between the parties wherein claims and counter claims have been raised. It will be appropriate to refer to the following pleas taken in the application for leave to defend :-
22... In the said conversion the plaintiff has admitted in conversation with her employee Rajni that Ridhi Enterprises Account was got opened by him. He had admitted that blank cheques were obtained from the defendant No.1. He has further asked her employee Rajni to sign in proper manner in case any enquiry is conducted herein record to operation of the account of State Bank of Bikaner and Jaipur, where the fictitious account was operated. He has assured that as far as his own signatures are concerned he will look after. In conversation with the defendant No.2 the plaintiff has said that it was in April, 1993 there were entries of Rs.5,00,000/- only which were fictitious and he promised defendant no.2 that he would get them reverse and he did not disclose defendant no.2 of any loan amount given to M/s Ridhi Enterprises. He further admitted that blank papers were got signed from her. He has also assured that the entries relating to G.D. Goyal and his family members shall be got reversed as they were fictitious. He further admitted that the defendant no.2 had not concern whatsoever with the alleged dealings with defendant no.1. He has further admitted in the conversation that defendant no.2 has not signed any documents in favor of the plaintiff. The defendants undertakes to produce the said recording of conversation of the plaintiff as and when the Hon'ble Court directs in this regard.
23- That the assessments disclosed in the plaint relating to defendant no.1 admittedly were got done by the plaintiff from his own act, it is clear that that plaintiff was aware that the defendant has no assets or any such loan liabilities in her books of accounts built by him till the year 1993-94. That would go to show that neither there was a business of such a large scale nor there was any loan transaction to the answering defendant there is no Explanationn as to how the plaintiff was kept dark regarding the working of the defendant No.1.
4. Learned counsel appearing for the defendants/applicants while relying upon a judgment of this Court in the case of Goyal Tax Fab. Pvt. Ltd. v. Anil Kapoor, Proprietor Supriya Fashion : AIR2001Delhi341 argued that the defendants has made out an arguable case and has prima-facie created a doubt in the credibility of the claim raised by the plaintiff and triable issues arise in the present case, which would entitle the defendants for grant of unconditional leave. They particularly referred to paragraphs 7 and 8 of the said judgment, which read as under :-
7. Coming to the facts of the present case, it cannot be said that the defense taken by the defendant in leave to defend application is totally sham. There are certain circumstances, coupled with certain facts on the part of the plaintiff which may prima facie raise some doubt about the credibility of its version and may lend some credence to the defense taken by the defendant that the cheques in question were without consideration. Although as per the plaintiff, four cheques were presented to the banker and each time they were dishonoured, not a single letter was written by the plaintiff to the defendant about the return of these cheques as unpaid. Further to the pointed query from the Court, learned counsel for the plaintiff made candid admission to the effect that no notice was served on the defendant before filing the present Suit. Why plaintiff would not send notice of dishonour of the cheque when plaintiff could even file proceedings under Section 138 of the Negotiable Instruments Act, or why plaintiff would not write a single letter or serve notice upon the defendant for payment of the alleged outstanding amount before filing the Suit is baffling to the mind. Now let us examine this aspect further in the context of the submissions made by the defendant on the basis of statement of account filed by the plaintiff itself. As per the statement of account the case of the plaintiff is that the cheques were given against supply of goods by specific bill/challan numbers, particularly whereof are given in para 5 of the plaint. If the Cheques in question were against the supplies made vide these challan, how the plaintiff was receiving payments through cheques as well as in cash also particularly after 5th June, 1998 the details whereof are given in para 2 of the plaint. It is not explained by the plaintiff as to on what account these payments were received if they were in addition to the payments received by means of these cheques against the challan mentioned in para 5 of the plaint. Thus the defendant has raised good defense and triable issue indicating that he has fair and bonafide defense.
8. Moreover, this Court in the case of Suri and Suri Private Limited (supra) has held that when the Suit is filed on the basis of several dishonoured cheques not presented at all for encashment, relief claimed would be outside the scope of Order xxxvII and Suit would not be maintainable under Order xxxvII of the Code of Civil Procedure. In that case plaint will have to be dealt with in ordinary way. No doubt there may be some justification in the stand taken by the plaintiff that when four cheques on presentation by the plaintiff several times were dishonoured on the ground of insufficient fund in the account of the defendant, and plaintiff thereforee did not present remaining cheques. But for filing the Suit under Order xxxvII of the Code of Civil Procedure it was still necessary for the plaintiff to present these cheques to the Bank. Admittedly, 7 out of 11 cheques given by the defendant were not presented for payment. thereforee, the Suit under Order xxxvII would not be maintainable.
5. It is settled rule of law that wherever the defense put forth by the applicant/defendant is bonafide, raises triable issues and is not a moonshine, the applicant/defendant would be entitled to leave to defend conditional or unconditional depending upon the facts and circumstances of each case. In this regard reference can be made to the judgment of this Court in the case of Rashtriya Mahila Kosh v. Youth Charitable Organisation and Ors. (IAs. 5879/2005, 5880/2005, 372/2005 & 46/2005 in CS (OS) No. 442/2004 decided on 8th September, 2005) wherein the Court held as under :-.At this stage, reference can be made to a recent judgment of this Court in the case of Car-O-Liner AB v. TTC Laser Machines Pvt. Ltd. (CS (OS) No. 630/2004) delivered on 4th August, 2005 where this Court had discussed in some detail the circumstances and principles which would govern grant and/or refusal of leave to defend a suit.
6. In the case of Mrs. Ramesh Rani v. Harish Malhotra 1999 (3) PLR 453, the court held as under :
7. This rule vests pervasive judicial discretion in the Court to grant, refuse or grant conditional leave to defend, the suit, by the defendant. This discretion, of course, has to be exercised in accordance with settled principles of law. Where the Court exercises its discretion either way, it must have a direct nexus and relation to the contents and specific pleadings of the parties. Leave has to be granted in relation to the subject matter of the claim in the suit and normally not in relation to part thereof, unless such severance is called for in the given facts and circumstances of each case.
8. For example, where the Court finds that part of the claim raised in the suit by the plaintiff at least prima facie seems to be satisfied on the basis of a valid counter claim or other documentary evidence, which would show partial satisfaction of the amount.
9. Obviously, there is dual purpose sought to be served under the specific provisions of Order 37 of the Code of Civil Procedure. One is to provide expeditious disposal of the claim of the party by adopting recourse to summary procedure, while the other is to provide a safeguard to the interest of the plaintiff by granting or refusing or granting additional leave to defend to the other party. In other words, if the Court is satisfied with the claim of the plaintiff and the fact that the defendant has only sham or moonshine defense, the Court may refuse to grant leave to defend and pass the decree forthwith. But in some cases depending on the nature of the defense, the Court may grant leave with or without condition. This would obviously depend on the facts and circumstances of each case. The Court strikes a balance between the case of the plaintiff and the defense raised by the defendant. The interest of justice demand that interest of no party should be jeopardised. Where the interest of the plaintiff is to be secured there defendant should also have a fair chance to prove his defense.
10. In a case titled as Sunil Enterprises and Anr. v. SBI Commercial & International Bank Ltd. J.T. 1998 (3) S.C. 641, the Hon'ble Supreme Court reiterated the principles enunciated in the case of Santosh Kumar v. Mool Singh : [1958]1SCR1211 and spelt out the factors and circumstances, which the Court must consider while granting leave to defend the suit. The principles stated are as under :-
4. The position in law has been explained by this Court in Santosh Kumar v. Mool Singh : [1958]1SCR1211 , Milkhiram (India) Private Ltd. v. Chaman Lal Bros. : AIR1965SC1698 and Michalec Eng. & Mfg. v. Bank Equipment Corporation 0043/1976 : [1977]1SCR1060 . 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 defense to the claim on merits, the defendant is entitled entitled to unconditional leave to defend.
(b) If the defendant raises a triable issue indicating that he has a fair or bonafide or reasonable defense, although not a possibly good defense, the defendant is entitled to unconditional leave to defend.
(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defense to the plaintiff's claim, the court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or mode of trial but not as to payment into Court or furnishing security.
(d) If the defendant has no defense, or if the defense is sham or illusory or practically moonshine, the defendant is not entitled to leave to defend.
(e) If the defendant has no defense or the defense is illusory or sham or practically moonshine, the court may show mercy to the defendant by enabling him to try to prove a defense but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into Court or otherwise secured.
In fact in identical matters on the file of the said High Court in summary suit No.2963 of 1990 Dena Bank v. Sunil Enterprises and Summary suit No. 1153 of 1989 Bank of India v. Mahendra Sarabhai Choksi, leave to defend had been granted to defendants.
11. The Hon'ble Apex Court noticed that unless the defense raised was totally defenseless or moonshine or illusory, the Court may grant conditional or even unconditional leave.
12. In the case of International Computer's Consultants v. Home Computers Services (P) Ltd. 1997 (3) P.L.R. 10, a Division Bench took the view that once triable issues are raised with bonafide and firm defense, leave should be granted. But if the defense is frivolous or vaxatious, leave should be refused. Where there is reasonable doubt and the Court feel it just reasonable, the Court may impose such condition while granting the leave, as it may deem fit and proper.
13. Applying the said principle to the present case, I have no hesitation in affirming the view taken by the learned trial court though not dealt with in detail in the impugned judgment, that the defendant may have raised triable issue but it lacks bonafide. It was for the defendant-applicant to explain and show that the claim of the plaintiff in relation to the giving of loan by cheque was fictitious and as such cheques were not encased in their account.
14. Judicial discretion to be exercised by the Court has to create a balance so that none of the parties to the lis suffer avoidable prejudice. The learned trial court had granted conditional leave to the defendant-applicant in which I see no error of the jurisdiction. But a question that remains to be answered is whether the condition imposed while granting the leave is fair and equitable? Answer to this has to be in the negative in the facts and circumstances of the present case.
15. Above principles of law are well enunciated and accepted principles.
16. Learned counsel appearing for the plaintiff- applicant has relied upon a judgment of Court in the case of 106 (2003) DLT 304 to contend that this Court has jurisdiction and complete case of the applicant is a shame defense, thus, leave prayed for should be rejected.
17. This case is of no help to the plaintiff on the facts of the present case. In that case the Court had held as a matter of fact that the conclusion of the contract was enacted between the parties at Delhi and the payment of commission was also payable at Delhi within the territorial jurisdiction of this Court.
18. Let us examine the facts of the present case in light of the above judgment now.
19. The plaintiff has filed on record photocopy of three cheques, original of which have not been filed. He has also filed on record a photocopy of the notice dated 31st March, 1994 allegedly sent to the defendants for payment of Rs.30 lakhs with interest @24% per annum. It is strange that the stand taken by the plaintiff in the notice is at complete variance to the claims made in the plaint. The loan transactions referred to in the plaint did not find a mention in the notice. In the plaint, the claim is based upon 5 cheques while the notice only refers to three cheques. The inconsistency in the stand taken by the plaintiff in his notice and plaint at least prima-facie creates a dent in the case of the plaintiff and lends credibility to the stand taken up by the defendants. It is not disputed that plaintiff was working as tax consultant of the defendant No.1 for a considerable time. It is also not in dispute that there are various civil and criminal litigations pending between the parties involving similar transactions or even the same transactions. Nothing has been placed on record by the plaintiff, who is a taxation lawyer like balance-sheet, copy of the books of accounts to show that the said huge sum of Rs.55 lakhs alleged to have been borrowed by the defendants from the plaintiff was duly reflected in the records particularly when such payments is stated to have been made in cash. Why would an Income Tax consultant not even get a receipt acknowledging the payment of such amount particularly when they are being made in cash. There is no justification stated on record as to why the plaintiff has not filed on record the two cheques, which were not even presented to the bank for encashment. There cannot be a presumption of a fact in favor of the plaintiff that those two cheques on presentation would have been dishonoured. The averments made by the plaintiff are not founded on any prima-facie cogent and reliable evidence. Non-production of two cheques on record would by itself provide a defense to the defendant that the suit is not covered under Order 37 of the Code of Civil Procedure. Furthermore, the plaintiff has claimed interest prior to the institution of the suit, pendente lite and future @18% p.a. What is the basis of this claim is not even stated in the plaint. Claim of interest unsupported by any written contract/agreement would not ex-facie be covered under the provisions of Order 37 CPC. This, itself, is a matter of serious legal and factual controversy in the present case, which would require adjudication by the Court. The stand taken by the defendants certainly raises triable issues as they have made averments that the plaintiff being a taxation consultant of the defendant has misused the papers given in good faith and furthermore relies upon some tape conversation between the parties. Another plea, which would require consideration by the Court is that books of accounts, which were in power and possession of the plaintiff clearly reflected a sad financial state of affairs of the defendant, thus, the very story of advancing 55 lakhs cash loan would have to be gone into and determined only when the parties lead oral and documentary evidence in support of their claim during the trial of the suit. At this stage even prima-facie it cannot be said that the applicants/defendants have not been able to raise triable issues. In fact they have been able to show some serious lacunae in the claim of the plaintiff.
20. For the reasons afore-recorded, is 4539/97 is allowed. The defendants/applicants are granted unconditional leave to contest the suit on merits.
CS (OS) No. 2739/96
21. As the defendants have been granted unconditional leave to defend, the defendants would file written statement within four weeks from today with advance copy to counsel for the plaintiff, who may file replication thereto within two weeks thereafter. The parties would file original documents in their power and possession along with their pleadings now. The case shall be listed before the Joint Registrar for admission and/or denial of documents on 13-2-2006 and before the Court on 28-2-2006 for framing of issues.