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Order 37

Code of civil Procedure, 1908

 

SUMMARY PROCEDURE ON NEGOTIABLE INSTRUMENTS

 

1.         Application of Order. This Order shall apply only to the High Court [to the District Court, and to any other Civil Court notified in this behalf by the High Court.

 

Court Decisions

Suit on Negotiable instrument. A suit based upon negotiable instrument in which summons have been issued in Form No. 4 Append 9B of Civil Procedure Code defendant was not entitled to appear or defend suit as a matter of course unless he obtains leave from Court to appear and defend suit. In default of obtaining such leave for appearance and defence, allegations in plaint shall be deemed to be admitted and plaintiffs shall be entitled to decree prayed for. Advantage in adopting procedure prescribed by  O.37, Civil Procedure Code was that defendant is not as a matter of right entitled to appear or to defend, but if he deserves to be heard he must apply to Court for permission to appear and defend within 10 days of service of summons as envisaged by Art. 159 of Limitation Act, 1908. Till such time as leave to defend granted defendant cannot even file interlocutory application in order to agitate point of jurisdiction or to 'question transactions between parties or to challenge validity and legal effect of promissory note and crossed cheque issued by them in favour of plaintiff. PLJ  1997 Kar. 674 = 1997 MLD 1835.

                For purpose of jurisdiction a court is required to accept contents of plaint as correct and legally speaking pleas raised by defendants in rebuttal or otherwise cannot be considered for declining to assume jurisdiction. From averments of case, Court had jurisdiction to proceed with suit for recovery of amount and objection to jurisdiction of Court was without merit.    PLJ 1997 Kar. 674 = 1997 MLD 1835.

 Suit for recovery of money. Defendant being served in Jail. applied for leave to appear and defend within 10 days of service effected. Petition filed before Addl ; Distt: Judge as Distt: Judge was on leave. Distt : Judge dismissed application as not filed within specified time and before proper forum. Distt : Judge forgot that under his own orders passed with reference to section 21 and 22 of Civil Courts Ordinance, 1962. he had already delegated his powers to Additional District Judge who was fully authorised and empowered to receive all such documetns in his behalf. Powers exercised by such delegatee are not confined to any normal or summary powers exercised by District Judge but are related to powers exercised by District Judge simpliciter. All powers exercised under Order 37 CPC are powers of District Judge and do fall under C.P.C. and thus can with all convenience be delegated with reference to section 21 and 22 of Civil Courts Ordinance. Orders of District Judge are patently wrong and he has failed to exercise jurisdiction vested in him. PLJ 1996 Pesh. 305 = 1996 MLD 2167

Banking Companies (Recovery of Loans) Ordinance, Appellant had claimed damages on account of challenged breach of agreement on part of respondents (Bank) in not advancing a loan. which amount appellant intended to recover through summary procedure. High Court, havingjurisdiction as a Special Court under S. 6(1) of Banking Companies (Recovery of Loans) Ordinance, 1979 in respect of a claim filed by Banking Company against a borrower or by a borrower against a Banking Company, in respect of or arising out of a loan. could not have passed a decree straightaway as the claim for damages could not be equated with a suit founded on a negotiable instrument. Plaintiffs/applicants claim for damages could be said to have arisen out of a loan. Supreme Court, further, observed that if it set aside the order of the High Court acting as Special Court on the ground urged in petition for leave to appeal that would – perpetuate injustice as the appellants might get a decree for huge amount of damages without proving the quantum of damages allegedly suffered by them on account of failure on part of respondents to advance a loan.  PLJ 2000 SC 803.

                Plaintiff neither was a borrower or a customer nor he had obtained loan or finance from Bank. Plaint showed that certain sum of money was placed with Defendant-Bank by plaintiff as an investment for which Defendant-Bank issued cheques drawn on Bank's account which were endorsed good for payment, but subsequently were dishonoured. Plaintiff, in circumstances, could not be said to have borrowed money from defendant-Bank. Mere issuance of cheques drawn on account-holder's account and endorsed good for payment by Bank. would not amount to a transaction as contemplated by Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. Suit filed by plaintiff, in circumstances, would proceed as an ordinary suit before original Civil side of High Court based on sunmary chapter of Civil Procedure Code as negotiable instrument as provided under O.37. R. 2, C.P.C. PLJ 1999 Kar. 703 = 1999 CLC 1294.

 

2.         Institution of summary suits upon bills of exchange, etc. (1) All suits upon bills of exchange, hundies or promissory notes, may, in case the plaintiff desires to proceed hereunder, be instituted by presenting a plaint in the form prescribed; but the summons shall be in Form No. 4 in Appendix B or in such other form as may be from time to time prescribed.

(2)        In any case in which the plaint and summons are in such forms, respectively the defendant shall no appear or defend the suit unless he obtains leave from a Judge as hereinafter provided so to appear and defend, and, in default of his obtaining such leave or of his appearance and defence in pursuance thereof, the allegations in the plaint shall be deemed to be admitted, and the plaintiff shall be entitled to a decree:-

(a)        for the principal sum due on the instrument and for interest calculated in accordance with the provisions of section 79 or section 80, as the case may be, of the Negotiable Instruments Act, 1881, up to the date of the institution of the suit or for the sum mentioned in the summons, whichever is less, and for interest up to the date of the decree at the same rate or at such other rate as the Court thinks fit; and

(b)        for such subsequent interest, if any, as the Court may order under section 34 of this Code ; and

(c)        for such sum for costs as may be prescribed: Provided that, if the plaintiff claims more that such fixed sum for costs the costs shall be ascertained in the ordinary Way.

(3)        A decree passed under this rule may be executed forthwith.

 

Court Decisions

Principles for grant of leave to defend suit .The following are the principles for grant of leave to defend the suit:-

(a)           If the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and 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 positively good defence the plaintiff is not entitled to sign judgment and 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 to say, although the affidavit does not positively and immediately make it clear that he had a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.

(d)           If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.

(e)           If the defendant has no defence or the defence is illusory or sham or practically moonshine then, although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition and thereby show mercy to the defendant by enabling him to try to prove a defence. 2001 CLC 653

 

Leave to defend the suit, grant of—Suit for recovery of money on the basis of negotiable instruments—Dispute was with regard to dishonoured cheques—Issuance of the cheques and the same being without consideration required evidence to be led—For the purpose of determining as to whether the disputed cheque was issued without consideration leave to appear and defend the suit was granted—Such leave was granted subject to the defendant, furnishing security, of the amount mentioned on the face of the cheques—Application for leave to defend the suit was disposed of accordingly, 2001 CLC 1156

                Court, while granting leave to defend suit, was required to examine all the questions, which could arise by way of defence as deducible on the plea raised by the defendant. 2001 CLC 653

Issuance of the cheques and the same being without consideration required evidence to be led—For the purpose of determining as to whether the disputed cheque was issued without consideration leave to appear and defend the suit was granted—Such leave was granted subject to the defendant, furnishing security, of the amount mentioned on the face of the cheques—Application for leave to defend the suit was disposed of accordingly, 2001 CLC 1156

Summary procedure had been provided in cases where leave to defend was to be granted on very cogent reason which should be sufficient to satisfy the Court to the effect that applicant had made out a case for obtaining leave to defend. 2001 CLC 645

 

Where Defendant failed to perform the condition: — If leave to defend the suit was granted conditionally and defendant failed to perform the condition, that would tantamount as if no leave to defend the suit had been given, 2001 MLD 711

PLD 1987 Lah.. 101; 1990 CLC 1119; PLD 1996 SC 749; PLD 1990 SC 497 and PLD 1995 SC 362 ref.

                Defendant was granted leave to defend suit and to file written statement subject to his furnishing security within ten days, but the defendant had failed to furnish the security within stipulated period—Order granting leave to defend suit, was rightly recalled by the Court and such order not suffering from any error of law, could not be interfered with. 2001 MLD 1630

                Condition attached to leave to defend is fully justified and legally sound. Discretion has been properly exercised. PLJ 1989 Lah. 435.

               

Unconditional leave to defend suit—Defendant had raised plausible defence by asserting question of fact and law-to be tried or investigated into, more particularly whether any business transaction existed between the plaintiff and the defendant and whether cheques were without consideration—Defendant having raised the triable issues indicating that he had fair and reasonable defence, though not a positively good defence, was entitled to unconditional leave to defend suit. 2001 CLC 653

 

Claiming of interest under S.79 of the Negotiable Instruments Act, Plaintiffs had prayed for a decree in the sum of Rs.5,22,000 towards the amount of four dishonoured cheques and also a sum of Rs.15,660 towards interest at the rate of 6% per annum under S.79 of the Negotiable Instruments Act, 1881— Where neither the amount of four dishonoured cheques issued by the defendants was in dispute nor the fact that uptil the institution of the suit no amount had been paid, the plaintiffs in view of S.79 of the Negotiable Instruments Act, 1881 were entitled to claim 6% per annum interest—Suit of the plaintiffs was decreed in the sum of Rs.5.37,660 with cost and also 12% per annum mark- up from the date of institution of suit till realization of decretal amount from the defendants accordingly. 2002 CLD 107 

 

Summary suit for recovery of money—Plea raised by the defendants was that after return of cheques by the Bank with refusal memo., the plaintiff should have again presented the cheques for encashment or should have immediately served notice on the defendant instead of serving such notice after more than eight months—Validity-When intention of defendants for non-payment of the sum mentioned in the cheques was visible to the plaintiffs from their conduct, the plaintiffs were under no legal obligation to present the dishonoured cheques to the drawee Bank again or to have immediately served notice to the defendants. 2002 CLD 107

 

Mark Up :– Plaintiffs had prayed for a decree in the sum of Rs.5,22,000 towards the amount of four dishonoured cheques and also a sum of Rs.15,660 towards interest at the rate of 6% per annum under S.79 of the Negotiable Instruments Act, 1881— Validity—Where neither the amount of four dishonoured cheques issued by the defendants was in dispute nor the fact that uptil the institution of the suit no amount had been paid, the plaintiffs in view of S.79 of the Negotiable Instruments Act, 1881 were entitled to claim 6% per annum interest—Suit of the plaintiffs was decreed in the sum of Rs.5.37,660 with cost and also 12% per annum mark-up from the date of institution of suit till realization of decretal amount from the defendants accordingly, 2002 PLD 107

 

3.         Defendant showing defence on merits to have leave to appear. (1) The Court shall, upon application by the defendant, give leave to appear and to defend the suit, upon affidavits which disclose such facts as would make it incumbent on the holder to prove consideration, or such other facts as the Court may deem sufficient to support the application.

(2)        Leave to defend may be given unconditionally or subject to such terms as to payment into Court, giving security, framing and recording issues or otherwise as the Court thinks fit.

(3) The provisions of Section 5 of the Limitation Act, 1908 (IX of 1908) shall apply to applications under sub-rule (1)].

 

Court Decisions

Leave to appear and Defend :– Court, while granting leave to defend suit, was required to examine all the questions, which could arise by way of defence as deducible on the plea raised by the defendant. 2001 CLC 653

Issuance of the cheques and the same being without consideration required evidence to be led—For the purpose of determining as to whether the disputed cheque was issued without consideration leave to appear and defend the suit was granted—Such leave was granted subject to the defendant, furnishing security, of the amount mentioned on the face of the cheques—Application for leave to defend the suit was disposed of accordingly, 2001 CLC 1156

Impugned order granting leave conditionally to agents to defend suit, is legal and proper and no exception can be taken to it. PLJ 1992 SC 261.

                Where there were  plausible grounds and disputed questions of fact which cannot be overlooked. Unconditional leave to appear and defend suits was  granted. PLJ 1991 Kar. 351.

                There being no application under Section 5 of Limitation Act, question of condoning delay does not arise. PLJ 1990 Kar. 332.

                Defendant in his application for leave to defend suit had made vague and general averments, therefore. District Judge had rightly found that he had failed to make out case for leave to defend suit. Grant of leave to defend suit was not a matter of course or right. To be oblige for such benefit defendant was liable to show such facts which would warrant proving of consideration by plaintiff" to disclose plausible defence which might give rise to triable issues. Leave would be refused if no defence worth the name was made out on facts or in law in application for leave to defend suit. Leave would also be refused where defence disclosed on affidavits was sham or colourable or imaginary and was not to give rise to triable issues. Defendant had neither been able to put forward any defence nor he had been able to raise any triable issues in his application for grant of leave to defend suit. District Judge had thus, rightly rejected defendants' application to defend suit. PLJ 2000 Pesh. 33 = 2000 CLC 199.

                Plaintiff although was in possession of documentary evidence in shape of cheques which were dishonoured by concerned Banks yet defendant had specifically denied his signature on the same and had raised plea that his signatures had been manufactured by plaintiff. Defendant had also raised plea that amount in question was paid in cash and he had produced receipts for payment of amount. Defendant had raised legal as well as factual pleas which could only be decided by allowing parties to lead evidence. Defendant had, thus, made out prima facie case for leave to defend suit. PLJ 1997 Kar. 891 = 1997 CLC 766.

                Law requires that .each day of delay should be explained but no such explanation was offered in application for seeking permission to defend suit'. Nothing was stated in petition for condonation of delay as to how such delay occurred except that Civil Courts were closed in those days being month of August. Courts remain open for urgent matters, however, apart from that Courts having opened for regular work with effect from 1.9.1998. Petition for leave to defend was filed on 15.9-1998 without showing any reason as to what prevented defendant to move such application belated by.. Trial Court was. thus. justified to hold that there was no good ground" for allowing leave to defend suit. Trial Court having acted in judicial manner and without exercising jurisdiction vested in it arbitrarily, impugned order did not suffer from any legal or factual defect so as to call for interference in revisional jurisdiction. PLJ 1999 Lah. 471 = 1999 MLD 2182.

                Leave to defend suit was granted to petitioner provided he furnished bank guarantee equal to amount which was to be recovered through suit. Validity. Defendnat had no right to defend suit without grant of leave by Court. Such relief being discretionary, same has to be exercised judicially on basis of affidavits which must sufficiently support application. Grant of leave could be unconditional or subject to term like security etc. which Court deemed fit. Test of allowing defendant leave to defend suit; would not be on basis that defendant would ultimately succeed. Party concerned must give his case arguable look and grounds raised by him should be in shape of plausible defence so as to displace refutable presumption attached to documents on account of which such more efficacious remedy was sought. Where Court finds that claim of plaintiff was prima facie frivolous or untenable, or where triable issues were raised or where that was question of limitation, leave has to be granted un-conditionally. Court has to satisfy its conscience that there were plausible reasons for allowing leave to defend conditionally or un­conditionally. Perusal of affidavit showed that proper defence had not been taken and same was not in accordance with  O. 37 R. 3 C.P.C. and High Court Rules. Requirement of furnishing of bank guarantee without reasons, imposed harshness to order of leave to defend. High Court in its visitorial jurisdiction substituted words "furnishing of reliable security for the amount involved" instead of words "furnishing of bank guarantee". Case was sent back to Trial Court for proceeding further in the matter. Defective affidavit having been filed by petitioner, he was directed to submit additional affidavit in accordance with requirements of law before Court, failing which it would be deemed that there was no affidavit and, therefore, no petition for leave to defend.  PLJ 2000 Lah. 648 = 2000 CLC 913.

Question raised by defendant which S.C of Pakistan had considered to be of sufficient importance so as to grant leave ..to consider same‑‑Held, grant of leave by S.C by itself was a valid rather binding consideration to hold that defence disclosed raised a triable issue for purposes of grant of leave to defend a suit. P L D 1987 Lah. 290

 

Leave to defend suit conditionally. Petitioner allegedly gave cheque for giving loan to respondent but cheque was dismissed and was not paid by bank as petitioner had no money in his account. Petitioner neither filed any suit for cancellation of cheque nor informed bank to stop payment. Obviously, he has set up very weak defence. Presumption though rebuttable is that cheque in question is for consideration and onus is on petitioner-defendant to prove lack of consideration. In such case imposition of condition of Bank Guarantee cannot be said to be perverse or capricious.  PLJ 1998 Lah. 481 = 1998 CLC 961.

 

Leave granted with condition to furnish bank guarantee. Petitioner having denied issuance of cheques in favour of respondent, its independent 'provisions have been made side by side in Constitution, one authorising President to enhance, from time to time, pension payable to such class of Judges whose length of service is not less than five years and other authorising him to determine rights and privileges in respect of pension payable to every other Judge of High Court. Therefore, P.O. 2 of 1993 serves duel purpose by determining rates of pension admissible to both. In absence of dear intention being spelt out the Article 2(2) of P.O. No. 2 of 1993 is not to extend to such Judges who have not put in less than five years of service, provisions of said Act cannot be interpreted to disadvantage of petitioner. Rights and privileges admissible to petitioner in respect of his pension are now governed under President's Order No. 2 of 1993.  PLJ 1995 Kar. 208 = PLD 1995 Kar. 223.

                Words "otherwise as court thinks fit" gives court a discretion to grant leave to defend to its satisfaction, therefore, there is no legal imfirmity in order of learned trial court for furnishing bank guarantee against subject matter of suit.   PLJ 1997 Lahon- 425 = 1997 MLD 409.

 

Limitation—Limitation period for filing application to defend suit would start running from the day when the copy of the plaint was supplied to the defendant/applicant— Application filed within ten days of receipt of copy of plaint, was within time. 2001 CLC 653.

PLD 1984 Kar. 252 and 1991 CLC 1261 ref.

Failure to issue summons to the defendant in Form 4, Appendex 'B', C.P.C.— Effect—Limitation prescribed for to appear and defend the case did not start running against such defendant, 2001 CLC 1065

 

4.         Power to set aside decree. After decree the Court may, under special circumstances, set aside the decree, and if necessary stay or set aside execution, and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the Court so to do, and on such terms as the Court, thinks fit.

 

Court Decisions

Ex-parte decree. Contention that service was not effected on defendants and they came to know about ex pate decree through private sources, is not tenable and is a frivolous defence. Admittedly all three modes of service namely (1) by publication, (2) by registered post and (3) by bailiff. were adopted and completed and defendant No. 1 was regularly represented but other defendants intentionally and deliberately kept out with a view to come at a later stage to obstruct grant of final decree. Service by all three modes was duly effected and defendants have deliberately avoided to defend suit. PLJ 1995 Kar. 198 = NLR 1995 CLC 790 = PLD 1995 Kar 162.

 

Petition filed before Addl; Distt: Judge as Distt: Judge was on leave. Distt : Judge dismissed application as not filed within specified time and before proper forum. Distt : Judge forgot that under his own orders passed with reference to section 21 and 22 of Civil Courts Ordinance, 1962. he had already delegated his powers to Additional District Judge who was fully authorised and empowered to receive all such documetns in his behalf. Powers exercised by such delegatee are not confined to any normal or summary powers exercised by District Judge but are related to powers exercised by District Judge simpliciter. All powers exercised under Order 37 CPC are powers of District Judge and do fall under C.P.C. and thus can with all convenience be delegated with reference to section 21 and 22 of Civil Courts Ordinance. Orders of District Judge are patently wrong and he has failed to exercise jurisdiction vested in him. PLJ 1996 Pesh. 305 = 1996 MLD 2167.

 

5.         Power to order bill, etc., to be deposited with officer of Court. In any proceedings under the Order the Court may order the bill, hundi or note on which the suit is founded to be forthwith deposited with an officer of the Court, and may further order that all proceedings shall be stayed until the plaintiff gives security for the costs thereof.

 

6.         Recovery of cost of noting non-acceptance dishonoured bill or note. The holder of every dishonoured bill of exchange or promissory note shall have the same remedies for the recovery of the expenses incurred in nothing the same for non-acceptance or non-payment, or otherwise, by reason of such dishonour, as he has under this Order for the recovery of the amount of such bill or note.

 

7.         Procedure in suits. Save as provided by this Order, the procedure in suits hereunder shall be the same as the procedure in suits instituted in the ordinary manner.

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