KAMAL GUPTA & ANR. vs M/S SURGE INDUSTRIES LTD. & ORS.

$~36
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 07th JANUARY, 2025
IN THE MATTER OF:
+ CS(OS) 694/2024 & I.A. 37876/2024, I.A. 40859/2024, I.A. 47990/2024
KAMAL GUPTA & ANR ……Plaintiffs
Through: Mr. Akhil Sibal Sr. Advocate with Ms. Neha Nagpal, Mr. Sparsh Aggarwal Adv. Ms. Yosha Dutt, Ms. Rashi Agarwal and Mr. Aaditya Dhull, Advocates with Plaintiffs in person.
versus
M/S SURGE INDUSTRIES LTD. & ORS ……Defendants

Through: Mr. Goutham Shivshankar (Amicus Curiae), Advocate.
CORAM:
HON’BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT (ORAL)
I.A. 41946/2024
1. The present application has been filed on behalf of the Defendants under Order XXXVII Rule 3(5) CPC for grant of unconditional leave to defend.
2. This Court appointed Mr. Goutham Shivshankar, learned Counsel, as an Amicus Curiae to appear for the Defendants and assist this Court.
3. The present suit has been filed by the Plaintiffs under Order XXXVII CPC for passing a decree for recovery of money in favour of the Plaintiffs for a sum of Rs.3,17,18,750/- along with pendente lite & future interest @ 15% per annum on the decretal amount from 16.08.2024, till the date of repayment.
4. The facts as stated in the plaint are that the Plaintiffs herein are Advocates practicing before this Court. It is stated that Defendant Nos.2 and 3, who are partners in Defendant No.1, had approached the Plaintiffs for a friendly loan @ 15% per annum in December, 2020. It is pertinent to mention that the Defendant No.1 is a partnership firm which is being run by Defendant Nos.2 and 3 and their two sons. The two sons of Defendant Nos.2 and 3 have not been arrayed as Defendants. It is stated that Defendant No.3 is the daughter of paternal aunt of Plaintiff No.1 i.e., cousin sister of Plaintiff No.1 and Defendant No.2 is the brother-in-law of the Plaintiffs, i.e. the husband of Defendant No.3.
5. The plaint reveals that various amounts have been advanced to Defendant No.1 from December, 2020 which is a partnership firm in which Defendant Nos.2 and 3 are partners. It is stated that an Agreement which is termed as “Loan Agreement” was entered into between the parties on 12.04.2024. The relevant portion of the said Agreement dated 12.04.2024 reads as under:
“WHEREAS, the Borrowers have taken Short Term-Loans (2) totaling Rs.2,00,00,000 /- (Rupees Two Crores) from the Lenders; One (1) crore from Mr.Kamal Gupta and One (1) Crore from Mrs.Tripti Gupta, BOTH @ 15% p.a. interest. The borrowers hereby confirm that on reconciliation of accounts the said loan amount totaling Rs. Two (2) crores is still due and payable by them, alongwith balance interest.

AND WHEREAS, on the request of the Borrowers, the Lenders have agreed to continue the loan of Rs.2 crores to the Borrower, which shall be payable on demand, on the following mutually agreed terms and conditions”

(a) That Mr. Deep Narayan Goyal and Mrs. Meena Goyal are the only registered partners of M/s. Surge Industries and have represented to the Lenders that they are in need of money and finances, for the purposes of business.

(b) That the Borrowers hereby confirm the receipt and possession of the Short Term-Loans (2) totaling Rs.2,00,00,000/- (Rupees Two Crores) from the Lenders.

(c) That it has been mutually agreed that the aforesaid entire amount of Rs.2,00,00,000/- (Rupees Two Crores) shall carry an interest @15% p.a. till demand for repayment and thereafter, an additional 15% shall be payable in case of delay/ default in repayment.

(d) That it has also been mutually agreed that the interest shall be payable in advance by the 7th day of every month and in default shall carry additional interest @15% for the period of delay/ default.

(e) That if the Borrowers wish to repay the afore-mentioned amount at any time in the middle of the month, the interest would be payable for the entire
month.

(f) That the Borrowers have also agreed that in case however, the Lenders notify the Borrowers by way of an e-mail at dngoyal@yahoo.com, of the need of the Lenders to receive back the loan amount, the same, shall be repaid by the Borrowers within one month of the receipt of the said email, along with agreed interest.

(g) That the Borrowers also confirm the issuance and handing over to the Lenders 2 undated cheques bearing Nos.835912 and 835913 drawn on their account bearing No.7644038250 maintained with Indian Bank for a sum of Rs. 1,00,00,000/- (Rupees One Crore only) EACH (Totaling two (2) crores), one in the name of Mr. Kamal Gupta and another in the name of Mrs. Tripti Gupta, and as a security for repayment of agreed sums.

(h) That the Borrowers agree and acknowledge that in accordance with the provisions of the Negotiable Instruments Act, the Lenders as the holders of the aforementioned undated cheques, shall have unconditional and irrevocable authority to fill them up and present the same for payment, if the payment along with the interest mentioned hereinabove, is not credited to the account of the Lenders, in time as mentioned herein. The Borrowers, have collectively/jointly/ severally/ individually agreed, assured, declared and undertaken that they shall keep the account on which the said cheques have been drawn, adequately funded and ensure at all times that the aforementioned undated cheques are honoured promptly as and when presented by the Lenders. They have further undertaken to be absolutely bound, as the principal borrowers, drawers and guarantors of the said cheques, so as to ensure that the cheques are honoured on their presentation for payment. It is further agreed and acknowledged that the dishonour of the said cheques would make the Borrowers personally liable for repayment, including being liable under the provisions of Section 138 of the Negotiable Instruments Act.” (emphasis supplied)

6. The Defendants have also filed a copy of the Agreement dated 01.09.2022 which indicates that prior to 01.09.2022, the Defendants had taken a short term loan from the Plaintiffs for a sum of Rs.90 lakhs at an interest rate of 15% per annum.
7. It is pertinent to mention that though the above Agreement dated 12.04.2024 indicates that two cheques were issued by the Defendants for payment of 2,00,00,000/-, however, the plaint indicates that four cheques were issued by the Defendants for payment of Rs.2,90,00,000/-. The details of the said cheques have been mentioned in the plaint which are being reproduced as under:

8. It is stated that the cheques deposited by the Plaintiffs have been returned as dishonoured.
9. It is stated that the Defendants have not paid the amount and therefore, the instant suit has been filed by the Plaintiffs under Order XXXVII based on (a) a written Loan Agreement dated 12.04.2024 signed by the Plaintiffs and the Defendants admitting the cheques; (b) the cheques issued by the Defendants that have been dishonoured; and (c) WhatsApp chats and recorded conversations acknowledging the debt. Along with the suit, the Plaintiffs also filed an application under Order XXXVII Rule 3(4) CPC seeking issuance of Summons of Judgment to the Defendants.
10. Summons in the suit were issued on 30.08.2024. This Court vide Order dated 30.08.2024 restrained the Defendants from creating any third party interest in their share of properties mentioned in paragraph no.9 of the application of stay, till further orders.
11. The Defendants entered appearance on 10.09.2024. Thereafter, the defendants filed the present applicant for grant of leave to defend on 28.09.2024.
12. In the application for leave to defend, the Defendant has stated that the Suit is maintainable as the amount is to be paid only by 31.03.2029. It is also stated that the interest was being paid on the principal amount and the rate of interest has been reduced to 9% per annum.
13. A reply to the present application was filed by the plaintiffs on 08.10.2024 stating that the Plaintiffs had no knowledge about the business of the Defendants’ partnership firm i.e Defendant No.1. The plaintiffs further stated that the Defendants had represented to the plaintiffs and also to others that they manufacture remote controls but it has now come to light that Defendants’ account statements were forged, fabricated and fudged to show higher sales figures and were made of fictitious transactions between Defendants and their accomplices of alleged trading of unrelated goods. It was further stated that the Defendants defrauded the plaintiffs and similarly placed banks into granting loans and never had any capacity to return them. The Plaintiffs stated that it was never agreed that the principal amount under the loan agreement was to be repaid by 31st March, 2029. According to the Plaintiffs, the rate of interest was reduced to 9% till 31st March, 2023 and after the said date, 15% rate of interest was to apply. The plaintiffs stated that the defendants have paid Rs. 10 lakhs in two parts on 23.12.2023 after which they have not paid anything. The plaintiffs stated that there is no proof of interest being paid on the loan upto 30.06.2024 as claimed by the Defendants. The Plaintiffs also stated the Defendant No.3 claims to have no involvement or knowledge of the transactions of Defendant No.1 firm however, Defendant No.3’s signature on the cheques makes her liable to debt claim as she was the direct beneficiary.
14. A rejoinder to the reply filed by the Plaintiffs was also filed by the Defendants whereby the Defendants submitted that the loan was not a friendly loan and is hit by the Punjab Money Lender’s Act, 1938. The Defendants submitted that the loan Agreement dated 12.04.2024 was signed by the Defendants under duress as the plaintiffs had been threatening the defendants for a while. The Defendants also submitted there are outstanding dues of Rs.99,72,500/- to each of the Plaintiff which was to be repaid by March, 2029. The Defendants further submitted that the interest rate of 15% is not certain or admitted prima facie, and therefore, evidence is needed to support the said claim. Additionally, the Plaintiffs have been accepting TDS on a 9% rate of interest since 01.10.2022. The Defendants also submitted that the Agreement dated 12.04.2024 is barred under the Stamp Act and the Registration Act. The defendants also submitted that certain undated cheques that were also given on 12.04.2024 under duress as a security instrument to ensure payment till 31st March, 2029. The Defendants submitted that the Agreement dated 12.04.2024 makes no mention of any unpaid interest since January 2024.
15. Learned Counsel appearing for the Defendants/Applicant states that the following trialable issues have been raised:
“1. Whether the loan is to be considered a “friendly loan” and consequently, whether the Suit is barred by Section 3 of the Punjab Money Lender’s Act, 1938?

2. What is the principal amount of loan advanced?

3. Till when has interest been serviced on the loan?

4. When is the loan amount due to be repaid?

5. What is the interest amount payable on the loan?

6. What is the status of written contract between the parties?

7. What is the status of five cheques relied upon by Plaintiffs?”

16. Learned Counsel for the Defendant/Applicant submits that the Defendants should be granted unconditional leave to defend. He states that the Defendants have put up a substantial defence and are likely to succeed. He states that it is stated in the plaint that the Plaintiffs have advanced a friendly loan to the Defendants. He states that the fact that the Plaintiffs are charging a 15% rate of interest is sufficient to demonstrate that the loan was anything but friendly. He states that 15% interest is normally charged by moneylenders and the Plaintiffs are in the business of money lending. He, therefore, states that the suit is barred by Section 3 of the Punjab Money Lender’s Act, 1938.
17. It is further submitted by the learned Counsel for the Defendants/Applicant that a bare reading of the plaint and the affidavit in support of the leave to defend shows that loans were being advanced periodically. He states that what was the total amount paid and how much interest was received has not been clearly mentioned in the plaint. He states that even the last Agreement dated 12.04.2024 entered into between the parties indicates that the total amount which according to the Plaintiffs themselves is due and payable is Rs.2,00,00,000/- whereas the four undated cheques of Rs.2,90,00,000/- have been gotten signed by the Defendants. He, therefore, states that there is a complete mismatch between the amount given in the Agreement and in the undated cheques which have been gotten signed by the Defendants. He states that a decree cannot be granted only on the basis of vague facts and there is a doubt on the principal amount itself and unconditional leave to defend must be granted. He states that even according to the plaint, the interest has been paid till 30.06.2024. He states that it has been positively stated in the application for leave to defend and in the affidavit in support thereof that interest has been paid till 30.06.2024. He states that without there being any reconciliation of accounts, the suit cannot be tried as a summary suit and a decree cannot be passed only based on the averments made in the plaint.
18. It is further submitted by the learned Counsel for the Defendants/Applicant that the loan amount is due and payable only on 31.03.2029. He states that if the interest rate of 15% is calculated, a sum of Rs.2,90,00,000/- would become due and payable only in March 2029 and, therefore, the suit is premature and the Plaintiffs are not entitled to a decree as claimed in the plaint or not.
19. It is further submitted by the learned Counsel for the Defendants/Applicant that in the application for leave to defend and in the affidavit in support thereof it is stated that there is a dispute regarding rate of interest that is to be paid by the Defendants. He states that earlier loans were taken @ 15% per annum. However, an Agreement was entered into between the parties in September 2022 wherein it was agreed that the further amount would be returned only with 9% interest rate per annum. He states that the Defendants were put under tremendous pressure and they were forced to sign the Agreement by the Plaintiffs. He states that the Plaintiffs and the Defendants are related to each other and in fact, the Plaintiffs are the legal advisors to the Defendants and they were being paid a monthly retainer.
20. Learned Counsel for the Defendants further submits that in the plaint it is stated that the Defendants had given the Plaintiffs, four fully filled up but undated cheques drawn on Indian Bank, Shantiniketan with details as Cheque No. 835912 for Rs.1 Crore, Cheque No. 835913 for Rs.1 Crore, Cheque No. 835914 for Rs.45 Lakhs and Cheque No. 835915 for Rs.45 Lakhs. It is stated that the Plaintiffs claim that the above 4 cheques totalling to Rs.2,90,00,000/- signify the principal amount of Rs.2,90,00,000/-, that the Plaintiffs allege to be the outstanding principal amount. It is stated that in addition, the Plaintiffs also claim that Defendants handed over a blank Cheque No.835916 drawn at the same account at Indian Bank, Shanti Niketan Branch and the Plaintiffs claim that this additional cheque was given in order to secure the amount due and payable towards the interest of the principal sum. It is stated by the learned Counsel for the Defendant that two cheques of Rs. 45 Lakhs each, totalling to 90 Lakhs were given as security towards interest amount and as regards the fifth cheque as stated by the Plaintiffs, the Defendants have averred that this cheque was never handed over to the Plaintiffs and rather the said cheque was given to one Mr. Rajesh Bansal on 30.04.2024 who was known to both the Plaintiffs and the Defendants and as such it has no relation to the transaction between the Plaintiffs and the Defendants.
21. Per contra, learned Senior Counsel appearing for the Plaintiffs contends that all the contentions raised by the Defendants are only vague contentions. He states that no triable issues have been raised by the Defendants. He states that there are whatsapp chats and telephonic conversations which categorically prove that the Defendants have admitted and acknowledged the debts. He states that the case put up by the Defendants that they were forced to sign the Agreement has no basis. He states that the Agreement was entered into between the parties in April, 2024 and the suit was filed in August, 2024. He states that had the Defendants been forced to sign the Agreement or forced to issue the undated cheques, they would have gone to police station and filed an FIR. He states that this is a mere ipse dixit that the Defendants were pressurised to sign the Agreement and the same cannot be accepted.
22. Learned Senior Counsel appearing for the Plaintiffs has taken this Court through the income tax returns which have been filed by the Plaintiffs along with their documents to show that even the book of accounts shows that a sum of Rs.2,00,00,000/- is due and payable. He states that in any event, the Defendants have accepted that a sum of Rs.99,72,500 lakhs is due to each of the Plaintiffs therefore, decree for a sum of Rs.2,00,00,000/- has to be passed in favour of the Plaintiffs.
23. Heard learned Counsel appearing for the Parties and perused the material on record.
24. There is no dispute that the present suit is maintainable under Order XXXVII of CPC. The suit is based on the loan Agreement dated 12.04.2024 entered into between the parties and cheques have been issued by the Defendants. The short question that is to be decided in the present application is whether the Defendants have made out their case for a grant of leave to defend or not.
25. Order XXXVII of CPC provides for a summary procedure in respect of certain suits. The purpose of Order XXXVII is that the Defendant is not, as in an ordinary suit, entitled to the right to defend the suit and must apply for leave to defend within the prescribed period of ten days from the date of service of summons on him and leave to defend in that suit is granted only if the affidavit filed by the Defendant discloses such facts as the Court may deem sufficient to grant the leave. The object underlying the summary procedure is to prevent unreasonable obstruction by the Defendant who has no defence. The procedure of summary procedure applies to suits upon bills of exchange, hundies and promissory notes and suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest which arises out of a written contract or on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt or a guarantee, where the claim is against the principle in respect of debt or liquidated demand only.
26. The law for adjudicating an application for leave to defend under Order XXXVII of CPC prior to its amendment was first laid down by the Calcutta High Court in Kiranmayi Dasi v. J. Chatterji, AIR 1949 Cal 479. Five propositions were laid down in the said Judgment which reads as under:
“(a) If the defendant satisfied 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 has a defence yet shews 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 the Court may in its discretion impose condition 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, there 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 allow the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on condition and thereby show mercy to the defendant by enabling him to try to prove a defence.”

27. The aforesaid Judgment was quoted with approval by the Apex Court in Mechelec Engineers & Manufacturers v. Basic Equipment Corporation, (1976) 4 SCC 687. In the said Judgment, since the Court felt that since the case did not fall within the aforesaid sub-para – (e) of Kiranmayi Dasi (supra), unconditional leave to defend was granted.
28. Order XXXVII of CPC was amended in the year 1976. A question arose before the Apex Court as to whether the Judgment of Mechelec Engineers (supra) which has been subsequently followed in a number of judgments should be followed even after amendment in the year 1976 or not. The Apex Court in IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568 answers the said issue and held that the law laid down in Mechelec Engineers (supra) would stand superseded in view of the amendment of Order XXXVI Rule 3. The Apex Court in the said Judgment observed as under:
“17. Accordingly, the principles stated in para 8 of Mechelec case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687] will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case [Milkhiram (India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1698 : (1966) 68 Bom LR 36] , as follows:

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.”

29. The aforesaid Judgment IDBI Trusteeship Services Ltd. (supra) was relied upon by the Apex Court in Sudin Dilip Talaulikar v. Polycap Wires (P) Ltd., (2019) 7 SCC 577 wherein the Apex Court observed as under:
“10. 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.”

30. In B.L. Kashyap & Sons Ltd. v. JMS Steels & Power Corpn., (2022) 3 SCC 294, the Apex Court relied on IDBI Trusteeship Services Ltd. (supra) and observed as under:
“33. It is at once clear that even though in IDBI Trusteeship [IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568 : (2017) 1 SCC (Civ) 386] , this Court has observed that the principles stated in para 8 of Mechelec Engineers case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687] shall stand superseded in the wake of amendment of Rule 3 of Order 37 but, on the core theme, the principles remain the same that grant of leave to defend (with or without conditions) is the ordinary rule; and denial of leave to defend is an exception. Putting it in other words, generally, the prayer for leave to defend is to be denied in such cases where the defendant has practically no defence and is unable to give out even a semblance of triable issues before the court.

33.1. As noticed, if the defendant satisfies the Court that he has substantial defence i.e. a defence which is likely to succeed, he is entitled to unconditional leave to defend. In the second eventuality, where the defendant raises triable issues indicating a fair or bona fide or reasonable defence, albeit not a positively good defence, he would be ordinarily entitled to unconditional leave to defend. In the third eventuality, where the defendant raises triable issues, but it remains doubtful if the defendant is raising the same in good faith or about genuineness of the issues, the trial court is expected to balance the requirements of expeditious disposal of commercial causes on one hand and of not shutting out triable issues by unduly severe orders on the other. Therefore, the trial court may impose conditions both as to time or mode of trial as well as payment into the court or furnishing security. In the fourth eventuality, where the proposed defence appears to be plausible but improbable, heightened conditions may be imposed as to the time or mode of trial as also of payment into the court or furnishing security or both, which may extend to the entire principal sum together with just and requisite interest.

33.2. Thus, it could be seen that in the case of substantial defence, the defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the defendant is ordinarily entitled to unconditional leave to defend. In case of doubts about the intent of the defendant or genuineness of the triable issues as also the probability of defence, the leave could yet be granted but while imposing conditions as to the time or mode of trial or payment or furnishing security. Thus, even in such cases of doubts or reservations, denial of leave to defend is not the rule; but appropriate conditions may be imposed while granting the leave. It is only in the case where the defendant is found to be having no substantial defence and/or raising no genuine triable issues coupled with the court’s view that the defence is frivolous or vexatious that the leave to defend is to be refused and the plaintiff is entitled to judgment forthwith. Of course, in the case where any part of the amount claimed by the plaintiff is admitted by the defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the defendant in the court.

33.3. Therefore, while dealing with an application seeking leave to defend, it would not be a correct approach to proceed as if denying the leave is the rule or that the leave to defend is to be granted only in exceptional cases or only in cases where the defence would appear to be a meritorious one. Even in the case of raising of triable issues, with the defendant indicating his having a fair or reasonable defence, he is ordinarily entitled to unconditional leave to defend unless there be any strong reason to deny the leave. It gets perforce reiterated that even if there remains a reasonable doubt about the probability of defence, sterner or higher conditions as stated above could be imposed while granting leave but, denying the leave would be ordinarily countenanced only in such cases where the defendant fails to show any genuine triable issue and the court finds the defence to be frivolous or vexatious.” (emphasis supplied)

31. The present suit is based on four undated cheques that were issued by the Defendants. Section 138 of the Negotiable Instrument Act creates a presumption that cheques were issued by the Defendants in discharge of debts. A Division of Bombay High Court in Rajesh Laxmichand Udeshi v. Pravin Hiralal Shah, 2012 SCC OnLine Bom 2181 has observed as under:
“14. When a summary suit instituted is based on a cheque which is dishonoured, effect of Sections 138 and 139 of Negotiable Instruments Act raising statutory presumption that the cheque was issued in discharge of a liability, is a relevant consideration to be kept in mind. The said Sections cast a burden upon the defendant to rebut the presumption. Summary suits instituted on cheques which are dishonoured will, therefore, stand on a higher footing than summary suits instituted on the basis of other documents. In such cases, the Court will have to take into consideration the statutory presumption which is raised when the cheques are dishonoured. The object behind providing a statutory presumption under the Negotiable Instruments Act has to be kept in mind while judging the credibility of a defence raised by the defendant in summary suit. Thus, the test of more than “shadowy” and less than “probable” as adverted to by the Apex Court cannot apply in cases where the law requires a person to explain certain state of affairs. The judgments which are relied upon by the learned counsel do not consider the effect of the statutory presumptions raised under the Negotiable Instruments Act when a cheque is dishonoured. In our opinion, when a cheque is dishonoured, the Court is enjoined with the duty to scrutinize the defence put up by the defendant with a much higher degree of care and circumspection. Such summary suits cannot be treated as on par with the cases instituted on contracts or invoices etc. where such statutory presumptions do not operate.”

32. Applying the aforesaid law laid to the facts and circumstances of the case, it can be seen that the loan advanced by the Plaintiffs was anything but a friendly loan as normally friendly loans do not carry a 15% interest, However, this observation would have no bearing on the issue as to whether leave to defend is to be granted or not. The plaint discloses that periodical loans were advanced and interest was being paid periodically as well. The ledger account has not been produced by the Plaintiffs to demonstrate as to how much amount was advanced and how much interest has been returned. The list of documents filed by the Defendants gives the ledger of Defendant No.2 which indicates that as on 30.06.2024, a sum of Rs.99,72,500/- was due and payable to each Plaintiff Nos.1 and 2. An Agreement dated 12.04.2024 was entered into between the parties wherein it is stated that a sum of Rs.2,00,00,000/- is due and payable on the day when the Agreement was signed. For a sum of Rs.2,00,00,000/-, four undated cheques for Rs.2,90,00,000/- were taken by the Plaintiffs from the Defendants and, therefore, there is certainly a mismatch between the amount due and the amount for which cheques were issued by the Defendants. There is some force in the contention of the learned Counsel for the Defendants that if interest is calculated @15% per annum then the amount of Rs.2,90,00,000/- would become due and payable in March, 2029 only. This does raise an issue to be considered in trial.
33. The ledger filed by the Defendants and the income tax returns indicate that approximately Rs.2,00,00,000/- is due and payable. As per the laid down by the Apex Court in B.L. Kashyap & Sons Ltd. (supra) leave to defend is the ordinary rule and denial of leave to defend is an exception. Considering the fact that the Defendants themselves acknowledge the debt of Rs.2 Crores that is due and payable for which cheques were issued, this Court is inclined to grant conditional leave to defend to Defendants, subject to the Defendants furnishing security for a sum of Rs.2 Crores either in the form of movable or immovable property or in the combination of both to the satisfaction of the Registrar General of this Court within a period of four months from today.
34. This Court appreciates the efforts taken by Mr. Goutham Shivshankar, learned Counsel, who was requested by this Court to appear for the Defendants. Mr. Goutham Shivshankar has assisted this Court remarkably well.
35. With these observations, the application is disposed of.
CS(OS) 694/2024 & I.A. 37876/2024, I.A. 40859/2024, I.A. 47990/2024
36. Let the Plaint be registered as a Suit.
37. Let the Written Statement(s) to the plaint be positively filed within the time prescribed under the Delhi High Court (Original Side) Rules, 2018 along with the affidavit(s) of admission/denial of the documents of the Plaintiff, without which the Written Statement(s) shall not be taken on record.
38. Liberty is given to the Plaintiff to file the Replication within the time prescribed under the Delhi High Court (Original Side) Rules, 2018 along with the affidavit(s) of admission/denial of documents of the Defendants, without which the Replication(s) shall not be taken on record.
39. The Defendant, who is present in Court, states that he wants that Mr.Goutham Shivshankar, learned Counsel, must continue to represent him. It is made clear that Mr. Goutham Shivshankar, learned Counsel, is discharged as Amicus Curiae. It is open to the Defendant to engage Mr.Goutham Shivshankar, learned Counsel, as his lawyer in his professional capacity on payment of fees as agreed between them.
40. List before the concerned Joint Registrar on 31.01.2025.

SUBRAMONIUM PRASAD, J
JANUARY 07, 2025
S. Zakir

CS(OS) 694/2024 Page 1 of 22