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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

 

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