# SUDIN DILIP TALAULIKAR v. POLYCAP WIRES PVT. LTD. AND OTHERS

- **Citation:** [2019] 9 S.C.R. 279
- **Court:** Supreme Court of India
- **Decided:** 2019-07-15
- **Case number:** Civil Appeal No.5528 of 2019
- **Bench:** Ashok Bhushan, Navin Sinha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sudin-dilip-talaulikar-v-polycap-wires-pvt-ltd-and-others-34245
- **Pages:** 10

## Headnote

Code of Civil Procedure, 1908: Or. XXXVII, r.3(5) - Summary
suit filed against appellant for recovery of Rs.64.18 lacs - Prior to
filing of summary suit, the respondent had filed criminal case under
s.138 of N.I. Act for the same dues which case he had unconditionally
withdrawn - However, while the prosecution under the N.I. Act was
pending, the respondent instituted the instant summary suit for
Rs.36.13 lacs being total sum of two dishonoured instruments with
an additional claim for Rs.28.05 lacs as interest - Conditional leave
to defend was granted to appellant-defendant with a finding based
on existence of a commercial relationship - Grievance of appellant
was that under the second proviso to sub-rule 5 of r.3 of Or. XXXVII,
the condition for deposit of Rs.30 lacs could not have been ordered
in absence of any admissible dues and he denied any dealings with
respondents after 2011 and stated that there was no occasion for
him to issue a cheque in the year 2014 for any alleged dues of the
year 2011 - Held: According to the plaint of the respondent,
commercial dealings between the parties ended on 03.06.2011 -
The respondent did not state any reason as to why outstanding
payment in respect of the same was made by cheque as late as
01.03.2014 - Although respondent had option to institute a summary
suit at the very inception of the dispute, but it consciously opted for
a prosecution under the N.I. Act which undoubtedly was a more
efficacious remedy for recovery of any specified amount of a
dishonoured instrument raising a presumption against the drawer,
as in a summary suit the possibility of leave to defend could not be
completely ruled out, in which case the recovery gets delayed and
protracted - The court, on 29.10.2015, in the prosecution instituted
by the respondent under the Act, required the respondent to file
certain additional documents because the appellant had denied the
existence of legal liability for any sum due - It was only thereafter
[2019] 9 S.C.R. 279
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that the summary suit was instituted on 24.11.2015 - The prosecution
under the Act was subsequently unconditionally withdrawn on
14.12.2015 - This coupled with the specific contention of the
appellant, not denied by the respondent, that it had returned defective
goods and paid the balance dues of Rs.5 lacs, the conclusion to
grant leave to defend was perfectly justified - But the defence raised
by appellant in background was certainly not a sham much less
frivolous and neither could it be called improbable - Appellant had
raised a substantial defence and genuine triable issues - The fact
that there may have been commercial relations between the parties
was the ground for the institution of the summary suit but could not
per se be the justification for grant of conditional leave sans proper
consideration of the defence from the materials on record - The
impugned orders granting conditional leave to defend were
unsustainable and liable to be set aside - Appellant is granted
unconditional leave to defend - Negotiable Instruments Act,
1881 - s.138.
Code of Civil Procedure, 1908: Or. XXXVII - Object of
summary suit - Grant of unconditional leave to defend -
Discretionary power of the court - In a summary suit, if the
defendant discloses such facts of a prima facie fair and reasonable
defence, the court may grant unconditional leave to defend - This
naturally concerns the subjective satisfaction of the court on the
basis of the materials that may be placed before it - However, in an
appropriate case, if the court is satisfied of a plausible or probable
defence and which defence is not considered a sham or moonshine,
but yet leaving certain doubts in the mind of the court, it may grant
conditional leave to defend - In contradistinction to the earlier
subjective satisfaction of the court, in the latter case there is an
element of discretion vested in the court - Such discretion is not
absolute bu

## Text

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SUDIN DILIP TALAULIKAR
v.
POLYCAP WIRES PVT. LTD. AND OTHERS
(Civil Appeal No.5528 of 2019)
JULY 15, 2019
[ASHOK BHUSHAN AND NAVIN SINHA, JJ.]
Code of Civil Procedure, 1908: Or. XXXVII, r.3(5) - Summary
suit filed against appellant for recovery of Rs.64.18 lacs - Prior to
filing of summary suit, the respondent had filed criminal case under
s.138 of N.I. Act for the same dues which case he had unconditionally
withdrawn - However, while the prosecution under the N.I. Act was
pending, the respondent instituted the instant summary suit for
Rs.36.13 lacs being total sum of two dishonoured instruments with
an additional claim for Rs.28.05 lacs as interest - Conditional leave
to defend was granted to appellant-defendant with a finding based
on existence of a commercial relationship - Grievance of appellant
was that under the second proviso to sub-rule 5 of r.3 of Or. XXXVII,
the condition for deposit of Rs.30 lacs could not have been ordered
in absence of any admissible dues and he denied any dealings with
respondents after 2011 and stated that there was no occasion for
him to issue a cheque in the year 2014 for any alleged dues of the
year 2011 - Held: According to the plaint of the respondent,
commercial dealings between the parties ended on 03.06.2011 -
The respondent did not state any reason as to why outstanding
payment in respect of the same was made by cheque as late as
01.03.2014 - Although respondent had option to institute a summary
suit at the very inception of the dispute, but it consciously opted for
a prosecution under the N.I. Act which undoubtedly was a more
efficacious remedy for recovery of any specified amount of a
dishonoured instrument raising a presumption against the drawer,
as in a summary suit the possibility of leave to defend could not be
completely ruled out, in which case the recovery gets delayed and
protracted - The court, on 29.10.2015, in the prosecution instituted
by the respondent under the Act, required the respondent to file
certain additional documents because the appellant had denied the
existence of legal liability for any sum due - It was only thereafter
[2019] 9 S.C.R. 279
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that the summary suit was instituted on 24.11.2015 - The prosecution
under the Act was subsequently unconditionally withdrawn on
14.12.2015 - This coupled with the specific contention of the
appellant, not denied by the respondent, that it had returned defective
goods and paid the balance dues of Rs.5 lacs, the conclusion to
grant leave to defend was perfectly justified - But the defence raised
by appellant in background was certainly not a sham much less
frivolous and neither could it be called improbable - Appellant had
raised a substantial defence and genuine triable issues - The fact
that there may have been commercial relations between the parties
was the ground for the institution of the summary suit but could not
per se be the justification for grant of conditional leave sans proper
consideration of the defence from the materials on record - The
impugned orders granting conditional leave to defend were
unsustainable and liable to be set aside - Appellant is granted
unconditional leave to defend - Negotiable Instruments Act,
1881 - s.138.
Code of Civil Procedure, 1908: Or. XXXVII - Object of
summary suit - Grant of unconditional leave to defend -
Discretionary power of the court - In a summary suit, if the
defendant discloses such facts of a prima facie fair and reasonable
defence, the court may grant unconditional leave to defend - This
naturally concerns the subjective satisfaction of the court on the
basis of the materials that may be placed before it - However, in an
appropriate case, if the court is satisfied of a plausible or probable
defence and which defence is not considered a sham or moonshine,
but yet leaving certain doubts in the mind of the court, it may grant
conditional leave to defend - In contradistinction to the earlier
subjective satisfaction of the court, in the latter case there is an
element of discretion vested in the court - Such discretion is not
absolute but has to be judiciously exercised tempered with what is
just and proper in the facts of a particular case - The ultimate
object of a summary suit is expeditious disposal of a commercial
dispute - The discretion vested in the court, therefore, requires it to
maintain the delicate balance between the respective rights and
contentions by not passing an order which may ultimately end up
impeding the speedy resolution of the dispute.
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Allowing the appeal, the Court
HELD: Both the Civil Judge and the High Court posed
unto themselves the wrong question and therefore misdirected
themselves in application of the principles for discretion laid down
in Hubtown Limited by granting conditional leave to defend
without properly adverting and referring to the facts of the case
and the materials on record. According to the plaint of the
respondent, commercial dealings between the parties ended on
03.06.2011. At this stage, it was necessary to notice the contention
of the appellant that the signatures and the contents of the cheques
were in different writings. The respondent had the option to
institute a summary suit at the very inception of the dispute. But
it consciously opted for a prosecution under the Act which
undoubtedly was a more efficacious remedy for recovery of any
specified amount of a dishonoured instrument raising a
presumption against the drawer, as in a summary suit the
possibility of leave to defend could not be completely ruled out,
in which case the recovery gets delayed and protracted. The
appellant had raised a substantial defence and genuine triable
issues. The failure both by the Trial Judge and the High Court to
notice and consider the said issues did not justify grant of
conditional leave to defend. The fact that there may have been
commercial relations between the parties was the ground for the
institution of the summary suit but could not per se be the
justification for grant of conditional leave sans proper
consideration of the defence from the materials on record. The
impugned orders granting conditional leave to defend are held
to be unsustainable. The appellant is granted unconditional leave
to defend. [Paras 14, 16 and 17] [287-A-D, G-H; 288-A-B]
IDBI Trusteeship Services Limited v. Hubtown Limited
(2017) 1 SCC 568 : [2016] 11 SCR 660 - referred to.
Case Law Reference
[2016] 11 SCR 660
 referred to
Para 3
SUDIN DILIP TALAULIKAR v. POLYCAP WIRES PVT. LTD.
AND OTHERS
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SUPREME COURT REPORTS
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5528
of 2019
From the Judgment and Order dated 27.02.2018 of the High Court
of Judicature at Bombay in Writ Petition No. 13155 of 2017
Varun Singh, Gaurav Nair, Akash S. Acharya, Ms. Pranati
Bhatnagar, Advs. for the Appellant.
Ms. Sanjana Saddy, Ms. Sanyat Lodha, T. Mahipal, Advs. for the
Respondents.
The Judgment of the Court was delivered by
NAVIN SINHA, J.
1. Leave granted.
2. The appellant is aggrieved by grant of conditional leave to defend
in Summary Suit No. 1289 of 2015 filed against him, by the respondent
under Order XXXVII of the Code of Civil Procedure, 1908 (hereinafter
referred to as "the Code") for recovery of Rs.64,18,609/-, inclusive of
interest.
3. Learned counsel for the appellant submitted that under the
Second Proviso to sub-Rule 5 of Rule 3 of Order XXXVII of the Code,
the condition for deposit of Rs.30,00,000/- could not have been ordered
in absence of any admissible dues. The fact that there may have been a
commercial transaction between the parties in the past, cannot ipso
facto be construed as an admission of debt merely because the
respondent may have so claimed in the suit. The respondent had
unconditionally withdrawn the prosecution instituted by him earlier under
Section 138 of Negotiable Instruments Act (hereinafter referred to as
"the Act"), for the same dues. All legitimate dues have been paid. The
defective goods were returned, the balance of five lacs was also paid,
and the accounts cleared, after which no further transactions had taken
place between the parties. Reliance was placed on IDBI Trusteeship
Services Limited vs. Hubtown Limited, 2017(1) SCC 568.
4. Learned counsel for the respondent submitted that the summary
suit had been instituted for recovery of outstanding dues with regard to
goods supplied to the appellant. It was for the appellant to demonstrate
that he had paid for goods. The impugned orders notice that the appellant
had placed no documentary evidence in his reply. The reference to the
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admitted commercial transaction between the parties has been made in
that context. The withdrawal of the criminal prosecution was irrelevant.
It was no bar to the maintainability of the summary suit. It is for the
appellant to prove during the trial of the suit that he had in fact paid for
the goods as claimed. The impugned orders are based on sound exercise
of discretion in the facts of the case and merit no interference.
5. A brief recapitulation of facts would bring the matter in proper
perspective for appreciation of issues involved. The respondent supplied
electrical cables and wires to the appellant between 09.05.2010 to
03.06.2011. Acknowledging some payments they claimed outstanding
dues of Rs.34,24,633/-. Likewise, for supplies between 01.04.2010 to
10.03.2011 they claimed dues of Rs.1,88,377/-. A notice was given to
the appellant under Section 138(b) of the Act after the cheques dated
01.03.2014 and 01.03.2014 were dishonored, as the account was blocked.
The respondent then instituted a prosecution under Section 138 read
with Section 142 of the Act lodged for Rs.34,24,633/- on 30.04.2014
with regard to the former instrument and on 01.08.2014 with regard to
the latter instrument. Different dates have been mentioned in different
documents placed before us.
6. While the prosecution under the Act was pending, the respondent
instituted the present summary suit on 24.11.2015 for a cumulative sum
of Rs.36,13,410/-, being the total amount of two dishonored instruments,
with an additional claim for Rs.28,05,199/- as interest at the rate of 18%
per annum amounting to a total of Rs.64,18,609/-. The Suit expressly
referred to the pendency of the prosecution under the Act.
7. In Summons for Judgment No. 105 of 2016 dated 16.03.2016,
in the summary suit the respondent relied upon the extracts of accounts
of the appellant to support its claim for unpaid dues. The prosecutions
under the Act were withdrawn on 14.12.2015. The order withdrawing
the prosecution under the Act is unconditional in nature and is a suomoto action.
8. The appellant in its defence to the summons for judgment relied
upon the institution of the prosecution under the Act prior to the suit and
its unconditional withdrawal to contend that there were in fact no dues
payable. The appellant further relied upon an order dated 29.10.2015
passed in the prosecution under the Act requiring the respondent to
produce certain original documents materials to the complaint and only
SUDIN DILIP TALAULIKAR v. POLYCAP WIRES PVT. LTD.
AND OTHERS [NAVIN SINHA, J.]
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subsequent to which, without producing the said documents the
prosecution under the Act was unconditionally withdrawn. Denying any
dealings with the respondents after 2011, the appellant questioned that
there was no occasion for it to issue a cheque in the year 2014 for any
alleged dues of the year 2011. It was further contended that different
inks had been used in the instruments for the signatures and its contents.
Defective goods on the consignment had been returned and the balance
of Rs.5,00,000/- paid, facts which were not disputed by the respondent.
9. The Civil Judge by order dated 20.07.2017 recorded the
satisfaction of a triable defence but granted conditional leave to defend
with an unreasoned finding based on the existence of a commercial
relationship between the parties. The High Court acknowledged that
there was no admission by appellant about its liability to repay any amount,
but because the appellant had not disputed a commercial relationship
and purchase of goods from the respondent, and in absence of any
material to show sufficient payment, the order for conditional leave to
defend required no interference.
10. Order XXXVII, Rule 3 of the Code dealing with the procedure
for summary suit, in the relevant extract provides as follows:
"3. Procedure for the appearance of defendant
XXXXX
(4) if the defendant enters an appearance, the plaintiff shall
thereafter serve on the defendant a summons for judgement
in Form No. 4A in Appendix B or such other Form as may be
prescribed from time to time, returnable not less than ten days
from the date of service supported by an affidavit verifying
the cause of action and the amount claimed and stating that
in his belief there is no defence to the suit.
(5) The defendant may, at any time within ten days from the
service of such summons for judgement, by affidavit or
otherwise disclosing such facts as may be deemed sufficient
to entitle him to defend, apply on such summons for leave to
defend such suit, and leave to defend may be granted to him
unconditionally or upon such terms as may appear to the Court
or Judge to be just:
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Provided that leave to defend shall not be refused unless the
Court is satisfied that the facts disclosed by the defendant do
not indicate that he has a substantial defence to raise or that
the defence intended to be put up by the defendant is frivolous
vexatious:
Provided further that, where a part of the amount claimed by
the plaintiff is admitted by the defendant to be due from him,
leave to defend the suit shall not be granted unless the amount
so admitted to be due is deposited by the defendant in Court.
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11. In a summary suit, if the defendant discloses such facts of a
prima facie fair and reasonable defence, the court may grant
unconditional leave to defend. This naturally concerns the subjective
satisfaction of the court on basis of the materials that may be placed
before it. However, in an appropriate case, if the court is satisfied of a
plausible or probable defence and which defence is not considered a
sham or moonshine, but yet leaving certain doubts in the mind of the
court, it may grant conditional leave to defend. In contradistinction to the
earlier subjective satisfaction of the court, in the latter case there is an
element of discretion vested in the court. Such discretion is not absolute
but has to be judiciously exercised tempered with what is just and proper
in the facts of a particular case. The ultimate object of a summary suit
is expeditious disposal of a commercial dispute. The discretion vested in
the court therefore requires it to maintain the delicate balance between
the respective rights and contentions by not passing an order which may
ultimately end up impeding the speedy resolution of the dispute.
12. The controversy in the facts of the present case is therefore
not with regard to any dues admitted by the appellant or not, and the
requirement to deposit the same. The issue for adjudication is whether
on basis of the materials on record, whether their has been just and
proper exercise of the discretion to grant conditional leave to defend by
deposit of Rs.30,00,000/- after consideration of all material and relevant
factors.
13. In Hubtown Limited (supra), this court has laid down the
principles which should guide exercise of such discretion as follows :
SUDIN DILIP TALAULIKAR v. POLYCAP WIRES PVT. LTD.
AND OTHERS [NAVIN SINHA, J.]
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"...17.1. If the defendant satisfies the court that he has a
substantial defence, that is, a defence that is likely to succeed,
the plaintiff is not entitled to leave to sign judgment, and the
defendant is entitled to unconditional leave to defend the suit.
17.2. If the defendant raises triable issues indicating that he
has a fair or reasonable defence, although not a positively
good defence, the plaintiff is not entitled to sign judgment,
and the defendant is ordinarily entitled to unconditional leave
to defend.
17.3. Even if the defendant raises triable issues, if a doubt is
left with the trial Judge about the defendant's good faith, or
the genuineness of the triable issues, the trial Judge may
impose conditions both as to time or mode of trial, as well as
payment into court or furnishing security. Care must be taken
to see that the object of the provisions to assist expeditious
disposal of commercial causes is not defeated. Care must also
be taken to see that such triable issues are not shut out by
unduly severe orders as to deposit or security.
17.4. If the defendant raises a defence which is plausible but
improbable, the trial Judge may impose conditions as to time
or mode of trial, as well as payment into court, or furnishing
security. As such a defence does not raise triable issues,
conditions as to deposit or security or both can extend to the
entire principal sum together with such interest as the court
feels the justice of the case requires.
17.5. If the defendant has no substantial defence and/or raises
no genuine triable issues, and the court finds such defence
to be frivolous or vexatious, then leave to defend the suit
shall be refused, and the plaintiff is entitled to judgment
forthwith.
17.6. If any part of the amount claimed by the plaintiff is
admitted by the defendant to be due from him, leave to defend
the suit, (even if triable issues or a substantial defence is
raised), shall not be granted unless the amount so admitted
to be due is deposited by the defendant in court."
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14. In our opinion, both the Civil Judge and the High Court have
posed unto themselves the wrong question and have therefore misdirected
themselves in application of the above principles by granting conditional
leave to defend without properly adverting and referring to the facts of
the case and the materials on record. The fact that there was commercial
dealing between the parties was not in issue at all. According to the
plaint of the respondent, commercial dealings between the parties ended
on 03.06.2011. It stands to reason why outstanding payment in respect
of the same came to be made by cheque as late as 01.03.2014. It does
not appeal to logic or reason much less to the usual practice in commercial
dealings. In any event the respondent has not furnished any explanation
with regard to the same. At this stage it becomes necessary to notice
the contention of the appellant that the signatures and the contents of
the cheques are in different writings. The respondent had the option to
institute a summary suit at the very inception of the dispute. But it
consciously opted for a prosecution under the Act which undoubtedly
was a more efficacious remedy for recovery of any specified amount of
a dishonoured instrument raising a presumption against the drawer, as in
a summary suit the possibility of leave to defend could not be completely
ruled out, in which case the recovery gets delayed and protracted.
15. Significantly on 29.10.2015, in the prosecution instituted by
the respondent under the Act, the court required the respondent to file
certain additional documents because the appellant denied the existence
of any legal liability for any sum due. It is only thereafter that the
Summary Suit was instituted on 24.11.2015. The prosecution under the
Act was subsequently unconditionally withdrawn on 14.12.2015. These
facts are not in dispute and are clearly discernible from the records.
This coupled with the specific contention of the appellant, not denied by
the respondent, that it had returned defective goods and paid the balance
dues of Rs.5,00,000/-, we find the conclusion to grant leave to defend as
perfectly justified.
16. But the defence raised by the appellant in the aforesaid
background was certainly not a sham or a moonshine much less frivolous
or vexatious and neither can it be called improbable. The appellant had
raised a substantial defence and genuine triable issues. The failure both
by the Trial Judge and the High Court to notice and consider the aforesaid
issues as discussed by us hereinbefore leaves us satisfied that there was
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no justification to grant conditional leave to defend. The fact that there
may have been commercial relations between the parties was the ground
for the institution of the summary suit but could not per se be the
justification for grant of conditional leave sans proper consideration of
the defence from the materials on record.
17. In the result, the impugned orders granting conditional leave
to defend are held to be unsustainable and are set aside. The appellant
is granted unconditional leave to defend.
18. The appeal is allowed.
Devika Gujral
 Appeal allowed.