Santosh Kumar v Bhai Mool Singh (1958)

Summary procedure takes away, for a defined class of commercial claims, the ordinary right of a defendant to appear and defend as of right. That is a large inroad, and the whole law on Order XXXVII is about keeping the inroad within its purpose. This case supplies the governing test — is the issue raised real or sham? — and it decides the question that most often arises in practice: whether the defendant must prove his defence at the stage of applying for leave.

The answer is that he need not. He must state a defence which, if proved, would answer the claim. Proof comes after leave, not before it.

The plaintiff sued on a cheque for Rs 60,000 drawn by the defendants, Santosh Kumar and the Northern General Agencies, in his favour, which was dishonoured on presentation. The suit was brought in the court of the Commercial Subordinate Judge, Delhi, under Order XXXVII. The defendants applied for leave to defend.

Their defence was specific. They admitted execution of the cheque but said that it had been given only as collateral security for the price of goods supplied by the plaintiff to them; that those goods had been paid for by cash payments made from time to time and by other cheques; and that the cheque in suit had therefore served its purpose and should be returned. They set out the exact dates of the payments and the numbers of the cheques.

The trial judge held that the defence did raise a triable issue, but also held that the defendants had placed nothing on the file to show that the defence was bona fide; in the absence of the documents, he said, the defence seemed vague and consisting of indefinite assertions. He therefore granted leave to defend on condition that the defendants gave security to the extent of the suit amount and the costs. A review failed; a petition under Art. 227 to the Delhi Circuit Bench of the Punjab High Court failed; special leave was granted under Art. 136.

The court sets out the scheme as a sequence of narrowing and widening:

1. At first blush the Order drastically curtails the litigant's normal right to appear and defend as of right, because the defendant shall not appear or defend unless he obtains leave. 2. The rigour is softened by the rule which makes it obligatory on the court to grant leave where the conditions are fulfilled — on affidavits disclosing such facts as would make it incumbent on the holder to prove consideration, or such other facts as the court may deem sufficient. 3. The discretion is then enlarged again, because 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.

Where the court finds that the defence raises a triable issue, may it nevertheless impose the condition of security because the defendant has not produced, with his affidavit, the documents that would prove his defence?

No. The appeal was allowed, the orders of the High Court and the trial judge set aside, and the case remanded to the first court for trial of the issues raised by the defendants.

The object of the special procedure. The object is to see that the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining an early decree by raising untenable and frivolous defences, in a class of cases where speedy decisions are desirable in the interests of trade and commerce.

The test. Taken by and large, the test is whether the defence raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good, or even a plausible, defence on those facts. The court adopts the rule in Jacobs v Booth's Distillery Co. (1901) that whenever the defence raises a triable issue leave must be given, and notes the later cases holding that in such a case it must be given unconditionally, otherwise the leave may be illusory.

The third course. Where the court is of opinion that the defence is not bona fide, it may impose conditions and is not tied down to refusing leave; the court has this third course open to it in a suitable case. But it cannot reach the conclusion that the defence is not bona fide arbitrarily; it is as much bound by judicial rules and judicial procedure in reaching such a conclusion as in any other matter.

Why the trial judge was wrong. The facts in the affidavit were clear and precise and the defence could hardly have been clearer. It is difficult to see how a defence which is clear on its face becomes vague simply because the evidence by which it is to be proved is not brought on file at the time the defence is put in. The judge failed to see that the stage of proof can only come after the defendant has been allowed to enter an appearance and defend, and that the nature of the defence is to be determined at the time the affidavit is put in. At that stage all the court has to determine is whether, if the facts alleged are duly proved, they will afford a good or even a plausible answer to the claim. Once the court is satisfied of that, leave cannot be withheld and no question of imposing conditions can arise; once leave is granted, the normal procedure of a suit as to evidence and proof obtains.

The limits of the power to impose conditions. It is an error to think that conditions may be imposed even where the defence is good and valid. The power exists to ensure a speedy trial. If there is reason to believe that the defendant is trying to prolong the litigation and evade a speedy trial, conditions may be imposed. But that conclusion cannot be reached simply because the defendant has not adduced his evidence before he is even told that he may defend the action.

Interference with discretion. The court does not doubt the decisions holding that an appeal will ordinarily not be entertained against an exercise of discretion along sound judicial lines. But if the discretion is exercised arbitrarily, or is based on a misunderstanding of the principles governing its exercise, interference is called for where there has been a resultant failure of justice. There is an obvious failure of justice if judgment is entered against a man who, if allowed to prove his case, cannot but succeed.

For any Order XXXVII problem, give the scheme first — the classes of suit, the ten-day period to enter appearance, the summons for judgment, the ten-day period to apply for leave, and the two provisos to Rule 3(5) — and then apply this test: if the facts alleged by the defendant were proved, would they answer the claim? If yes, leave follows, and unconditionally unless bad faith is shown.

Pair the case with Mechalec Engineers, which turns the same reasoning into five graded propositions, and with IDBI Trusteeship Services, which restates the graded scheme in modern form.

The finding that a defence is not bona fide, which alone justifies imposing terms, is a judicial finding requiring reasons of the ordinary kind, not an impression. The trial judge's error was not that he imposed a condition; it was that he inferred bad faith from the absence of documents which the defendant was not yet obliged to produce.